Monday, April 18, 2011

Entrepreneurial Excess

My recent article 4 Indulgences Your Business Can't Afford must have really struck a chord with the readers of American Express OPEN Forum®. It ranked in the top five of all articles for the week in total visits, unique visitors, and more. The point of the article was that too much focus on 4 specific parts of your business, without being balanced by other important things, will hurt or even kill your company. Here is a quick analysis of what you need in place to properly discipline an attitude of "excess" in the areas of product, marketing, overhead, and competitors.

Product Infatuation, or focusing only on how great your product is, must be balanced with an even greater focus on the needs of your customers.

Marketing Worship, or becoming consumed with a lot of spending on "branding" activites that do little or nothing to actually help your business grow, needs to be disciplined with rigorous ROI calculations to determine which marketing activities bring the most customers per dollar spent, not which activities stroke your entrepreneurial ego with unnecessary exposure. I refer to "Branding" in quotes because the entire concept of branding is something big companies with big marketing budgets do. Entrepreneurs don't have time to wait for branding pay off, they need to spend all their marketing resources on getting customers now.

Overhead Abundance, or spending lavishly on unnecessary, non-revenue-generating activities, must be countered with displined, exacting controls on the growth in overhead spending. For example, if your company grew 20% last year while your overhead spending grew by 50%, you probably have some abundance in your overhead. I'm not suggesting you don't invest in the systems, infrastrucutre, people, and processes of your business, but I am suggesting that some entrepreneurs have a tendency to allow their overhead growth to get a little ahead of what it should be.

Competitor Obsession, or spending too much time thinking about and stewing over your competitors, needs to be put in check with a focus on improving your own company. Strengthening your points of differentiation, your unique selling proposition, and the breadth and depth of the needs and buying motivations of your customers will always bring more value to your company than spending too much time wondering what the competition is up to.

The most interesting observation I have from this brief analysis is that all of these tendencies have to be kept in balance, avoiding extremes one way or the other. For example, trying to keep overhead too low can hurt the company's ability to grow just like not putting any thought into the competitive landscape of your industry will hurt you as well.