When considering what line of business to start or enter, can you make the exit strategy a consideration? When I refer to the exit strategy, I'm talking about more than just - let me build the business until it gets to x in annual sales or y in profit. I'm talking about designing a business model with a particular buyer in mind - either a particular company or a particular industry.
On the face of it, the idea of designing a business with a particular buyer in mind makes a lot of sense. My concerns are: By the time you're ready to sell, the prospective acquirer may decided it no longer considers that particular the one where it wants to grow and perhaps more importantly, the demand from consumers may not be there. I think its better to be nimble and, at least to some extend, let the market decide for you what business you're really in and if you read the market well enough and respond to the demand with products and services that meet the needs / desires of the market, you'll have a business someone wants to buy. It may not be the buyer you anticipated, but its one that seems to understand the value proposition you've created
Sunday, May 4, 2008
Thoughts on entering a new line of business or starting a business
A recent NY Time article about Kodak included some interesting points. It quoted an electrical engineer who said: "When I joined, I knew my salary came from film sales. But I knew that I would eventually produce paychecks for others." The article then went on to speak about how Kodak hired senior exectives from HP who "exited a mainstay business, health imaging, and took the company back into inkjet printing. And they mined the patent archives for intellectual property, a step that is yielding well above $250 million a year in licensing fees."
I was particularly intrigued by a statement about the approach Kodak was taking as it reentered the inkjet printing business: "We were entering an entrenched market, so we went after the biggest dissatisfier for consumers, the cost of ink".
What I take from the last quote is that, as business people consider new businesses to launch, or companies consider entering new lines of business, they would be well served to aim at the biggest dissatisfier. And if they have intellectual property or business experience they can apply, they'll probably be more successful faster than entering without any background.
What are big dissatisfiers? What industries, products or services aren't meeting the consumer's needs adequately? This can be measured by price, by hassle, etc.
In a scale of dissatsifiers I would imagine the current selection of cars is on the highly satsifying end of the scale - with the selection of cars available to the consumer, I can't imagine there is as much room to grab significant market share as in say personal computers, which I would place at the other end of the spectrum. With personal computers, I don't think the issue is price as much as its hassle - the amount of time each of us spends managing his/her computer is huge - fixing problems with the operating system, lost files, backing up data or dealing with the consequences of not having backed up data etc.. Some of the new, very inexpensive computers seem to begin to address some of the hassles but I think there's a big opportunity to address this particular dissatisfier.
A simplier digital camera to address the frustration associated with learning all the functions. Could a camera manufacturer customize a camera to align with someone's needs? I take 4 kinds of pictures: landscape, portrait, group, night landscape. I don't need a video option on my camera.
I was particularly intrigued by a statement about the approach Kodak was taking as it reentered the inkjet printing business: "We were entering an entrenched market, so we went after the biggest dissatisfier for consumers, the cost of ink".
What I take from the last quote is that, as business people consider new businesses to launch, or companies consider entering new lines of business, they would be well served to aim at the biggest dissatisfier. And if they have intellectual property or business experience they can apply, they'll probably be more successful faster than entering without any background.
What are big dissatisfiers? What industries, products or services aren't meeting the consumer's needs adequately? This can be measured by price, by hassle, etc.
In a scale of dissatsifiers I would imagine the current selection of cars is on the highly satsifying end of the scale - with the selection of cars available to the consumer, I can't imagine there is as much room to grab significant market share as in say personal computers, which I would place at the other end of the spectrum. With personal computers, I don't think the issue is price as much as its hassle - the amount of time each of us spends managing his/her computer is huge - fixing problems with the operating system, lost files, backing up data or dealing with the consequences of not having backed up data etc.. Some of the new, very inexpensive computers seem to begin to address some of the hassles but I think there's a big opportunity to address this particular dissatisfier.
A simplier digital camera to address the frustration associated with learning all the functions. Could a camera manufacturer customize a camera to align with someone's needs? I take 4 kinds of pictures: landscape, portrait, group, night landscape. I don't need a video option on my camera.
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