“The business enterprise has two — and only two — basic functions: marketing and innovation. Marketing and innovation produce results; all the rest are costs”. — Peter Drucker:
SMEs Chat with Phillip Chichoni
“Is the economic climate safe enough to start up a brand new business in Zimbabwe? If so in what sector, roughly?”
That is a question which was raised recently by Chiedza Chimombe on the SME Association of Zimbabwe discussion forum on LinkedIn. Many people contributed to this debate, from both inside and outside Zimbabwe. However, the comment I liked best was the one by Simba Takawira, who quoted the Bible verse of Ecclesiastes 11:4, which says “He who is watching the wind will not get the seed planted, and he who is looking at the clouds will not get in the grain.” He went on to explain that even in the midst of calamity, there are opportunities, giving examples of mining, energy and agriculture as probably the most attractive areas for business.
Entrepreneurs are always starting new businesses, whatever the prevailing circumstances. Some of the ventures succeed and grow into big businesses. Others do not do so well and eventually fail. The failure rate, if one follows the traditional approach to entrepreneurship, is quite high. By the traditional approach I mean, where one drafts a business plan, gets funding, produces a product and starts selling it.
If sales pick up and the business gains adequate traction, it will be a successful venture. If the sales and cash flows do not escalate fast enough to sustain and grow the business, we would consider the venture a failure.
A new way of startup thinking was introduced by Eric Ries. It resonates with what I have always advocated in this column, that one can start a business without needing a lot of capital. You start small, work hard, use guerilla marketing strategies and grow the business.
Eric called his concept “the lean startup”. He started preaching about this strategy after two of his ventures, Catalyst Recruiting and There Inc, suffered expensive failures. His approach gained so much popularity among entrepreneurs that when he launched his book, The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses in 2011, it went straight to number two on the New York Times Bestseller List.
The lesson you can learn from the lean approach is to focus more on customers’ needs and wants than on making your product or developing your service. It used to be that if you build a better mouse trap, customers would beat a path to your doorstep. However, with the increase in competition and developments in information technology, there are now more suppliers and a large variety of products that customers can choose from.
Many startups start with a product idea they think customers want and spend months developing it without showing it to prospective customers. I have been guilty of doing that as well. One instance is when I acquired a business training package after assuming that many of the small business owners around needed it and would rush to take it up. I discovered a few months later, after trying hard to sell it, that many of the people I had targeted had no time to undertake the training, nor the desire and ability to pay. I knew then that this package was not viable in my target market at that moment.
Using the lean startup strategy, you develop a small quantity of your product, which Ries calls the minimum viable quantity and quickly get it out into the marketplace in pursuit of paying customers. You then ask customers what they think about the product. Their responses will let you know if they like it as it is or if you need to make changes somewhere. You tweak your product until enough customers are happy with it to enable you to increase the quantities. By not focusing on supplying big quantities from the start, you reduce the magnitude of loss in the event that you don’t get enough customers.
Thus, instead of working forward from your product to the customer, you work backwards from the customer’s wants to your product offering.
Customer intimacy is important in the lean business strategy. Because customer feedback is your guide in developing suitable offerings, you need to develop ways of getting that feedback quickly and easily. The internet and social media platforms play a big role in connecting with current and prospective customers.
So yes, you can start a business in Zimbabwe right now, using the lean approach to minimise the risk of failure.
If you want to get fresh ideas on how to apply the lean strategy to get more value from a limited marketing budget, which I am sure is true for most businesses right now, do not miss the BusinessLink Networking breakfast meeting on Wednesday February 26.
Entrepreneur, marketing expert and founder of Business Setup Group, Max Soutter will share some top tips on the lean marketing strategy. Visit http://smebusinesslink.com for more information.
Phillip Chichoni is a business development consultant who works with SMEs and entrepreneurs. You may contact him by email: firstname.lastname@example.org. You can also visit: http://smebusinesslink.com