Excerpt

CHAPTER 1

Agility in Turbulent

Times

In the past, most successful entrepreneurs possessed a

single-minded focus that served them well. Sometimes obstinate

and other times obsessive, they drove toward their goals with

unwavering commitment. This approach to business—effective

in a time of relatively slow change, moderate complexity, and

more local than global competition—helped them overcome

obstacles and seize opportunities.

While entrepreneurs still benefit from being driven and

single-minded, such a mindset can also be a major handicap in

our current environment of great volatility and unpredictability.

Technological breakthroughs, economic shifts, and other changes

occur seemingly every week. There’s the adage Man plans, God

laughs. Substitute entrepreneur for man and you understand why

it’s no longer possible for entrepreneurs to lock unwaveringly onto

a product, a marketing approach, a business plan, a funding

mindset.

Agility is essential for entrepreneurial success. I’ll share two

stories that demonstrate why this is so.

Though Steven Jobs was an extraordinary and unique business

pioneer, he was also a classic entrepreneur in many senses.

Early on, he was obsessed with creating the best possible personal

computer, and his drive resulted in some remarkable products.

But when he returned to Apple after years of exile, he recognized

that things had changed. Plenty of people were still buying personal

computers, but the market had topped out. He noticed the

emerging mobile computing consumer segment, though, and was

able to shift his thinking—and the direction of the company—to

serve this market (among others). Jobs’s flexibility enabled Apple

to dominate the space for several years.

Arsen Avakian founded Argo Tea, a retail tea seller, in 2003

and now is the head of a 27-store chain with $20 million in revenue.

Initially, Avakian’s vision was to make Argo stores the tea

equivalent of Starbucks. This hugely ambitious vision, however,

did not fit with changing market and economic realities. It also

didn’t jibe with Starbuck’s acquisition of tea retailer Teavana and

the coffee company’s plan to open tea bars. So instead of trying to

become a giant in the industry or do battle with one, Avakian

shifted gears. In a September 9, 2013, article in the Chicago

Tribune, he was quoted as saying that Argo wanted to be the

“Apple of tea . . . where you will fall in love with the brand.” To

that end, Argo has started a bottled-tea business in addition to

their retail establishments.

Making these shifts sounds easier on paper than it is in reality.

Entrepreneurs often fall in love with their business ideas, their

visions for a business, and their theory of how to make their companies

successful. To let go of something they love and believe in

is difficult; to change it in any way seems disloyal, fickle, and even

weak.

Yet letting go requires strength; it’s an acknowledgment of a

new reality for an entrepreneur. Agility facilitates movement from

the tried-and-true past to the changing present.

NOTHING STAYS THE SAME FOR LONG

It’s not just that the pace of change has been accelerating, but the

types of changes are expanding as well. From the economy to

technology to the global marketplace, everything is evolving at a

fast clip. More than that, many of these changes aren’t predictable.

Mobile technology, big data analytics, and social media

may seem as if we should have seen them coming, but in fact only

hindsight makes it appear that way. Ten years ago, when people

used cell phones for traditional phone-to-phone communication,

few would have predicted the widespread use of smart phones in

ways that make phone conversations a secondary or tertiary function.

And until the economic downturn of 2008, the majority of

small businesses that required financing sought loans. Who could

have predicted that these loans would become almost impossible

for many startups to obtain?

In the face of these rapid and widespread changes, entrepreneurs

have no choice but to be flexible. If entrepreneurs are

unable to shift direction and find new sources of funding, or if

they can’t reformulate their products when a Chinese company

brings out a similar one at half the price, they’re out of luck. But

before we look at what agility means and how it translates into

specific business behaviors, let’s review some of the types of

changes that make agility imperative:

- Funding. It’s not just that banks have tightened their purse

strings, but that venture capital firms have diminished in number;

and those that remain are more selective about who they fund.

We’ve seen the rise of angel investors—wealthy individuals or

groups who fund ventures in exchange for a share of ownership.

We’ve also witnessed the rise of what I refer to as “startups for

sale”—cash-strapped entrepreneurs who launch companies on a

shoestring with the hope of becoming acquired by a large company.

In this way, they gain the finances and other resources necessary

to grow their idea into a profitable enterprise; “startups for

sale” has become the dream goal of many entrepreneurial Internet

companies. And then there’s the crowdfunding movement—people

who use the Internet to launch their ideas for new businesses

and attract financial backing from individuals who see potential in

that idea; Kickstarter is the most well-known example. We’ll focus

on funding options that have arisen in recent years in Chapter 5,

but as this brief description indicates, the environment is completely

different from how it was as little as ten years ago.

- Technological. New technologies impact entrepreneurs

in every field in countless ways, and they require all types of

adaptations. On the most basic level, technological innovations

have caused entrepreneurs to change the way they conduct daily

business. For instance, Texas Instruments introduced handheld

calculators around 1967 and IBM introduced its first personal

computer around 1981. In 1973, a scientist working for Motorola

successfully made the first portable handset, and by 1987, over 1

million cell phones were in use in the United States. These

devices are now part of our daily existence while the older technologies

are phasing out. In the 1990s, the fax was the dominant

mode of communication in business. Today, it is quickly going

the way of the electric typewriter, as email and other Internet

forms of communication have become dominant.

The social media demand that entrepreneurs rethink customer

relationships; and information technology necessitates that

competitors and potential competitors know about your product

breakthrough almost immediately after you achieve it. Virtual

meetings across continents routinely take place on Skype and

other sites. New technologies are being introduced every day, and

today’s smart phone will be tomorrow’s fax machine.

Entrepreneurs who aren’t able to adjust their businesses to capitalize

on these technological changes will be left behind.

- Regulatory. The EPA, FDA, USDA, and SEC are just

some U.S. agencies that have been active in altering their regulations

in recent years—and aggressively pursuing those who fail to

comply. Any small business that has grappled with the SEC

regarding 2002’s Sarbanes-Oxley legislation is well aware of how

regulatory changes require all sorts of new policies and procedures.

Many times, agility is required just in terms of time and

resources allocated to respond to those changes. In other

instances, entrepreneurs may need to make major shifts in their

business operations. New environmental regulations, especially,

can create all sorts of issues for small companies: the material

you’ve been planning to use to manufacture your product has just

been ruled an environmental hazard, the FDA decides to create

new nutrition regulations, or the Department of Energy places

greater restrictions on nuclear energy creation and use.

- Market-by-Market. Entire industries are being transformed

through global, virtual, and other means. In the medical

field, increased scrutiny by insurers is cutting into medical business

revenues. The ability to reduce hospital re-admission rates

and the shift toward personalized medicine are causing healthcare

professionals to alter the way they do business. Small medical

practices have aligned with other groups to create larger

medical practices in order to have greater clout with insurers. In

other fields ranging from agribusiness to software to beverages to

retailing, transformations are also taking place. While big corporations

in these fields are affected, the entrepreneurs often are

the ones who must be the most agile. Big companies have the size

and resources to change more slowly and still survive; smaller

entrepreneurs must adapt or perish.

- Competition. Until relatively recently, some entrepreneurs

could occupy a market niche and expect minimal or at most

moderate competition. Today, competition has heated up to the

point that this is no longer possible. In a world where everyone is

in global competition and technology makes it much easier for

companies to knock off products, services, and unique selling

propositions, entrepreneurs must be nimble enough to fend off

competitors. This may mean coming up with a new pricing strategy,

redesigning your packaging, changing product formulations,

or myriad other responses.

Consider a small, entrepreneurial pharmaceutical company

that is developing a new cancer drug. They’re planning on investing

$50 million in its development and are testing the drug with

patients who have not been helped by other therapies. They’re

tremendously excited by initial results—the drug seems to produce

a 24 percent improvement in survival rates—and the company

begins working toward FDA approval. Then, news arrives

that an Australian pharmaceutical company has gained approval

for a similar product. It may be that this competitor’s new product

makes it impossible to continue development. More likely,

however, is that this competitor’s success simply means that

adjustments must be made. It could be that the Australian company’s

product will open up a new market, and there’s a strategy

to piggyback on their initial efforts. It may be that there’s the possibility

of a merger. It may be that the entrepreneur’s product will

deliver superior results during testing. The entrepreneur needs to

be open to and assess all possibilities and then adjust the development

strategy accordingly.