Wednesday, August 10, 2016

Starting Up Your Own Is Not Enough

Given the destruction of the last 40 years for having gone off even gold-standard lite, it is no longer enough to just start up your own.  You must also assist the other players in your value chain to succeed.  And this makes your more competitive.

Recall there is a value chain from extraction to raw materials processing to materials trade and wholesaling and retailing.  And then there are two tracks, commodity and specialty.  For example one seminar participant was an ophthamologist who did sculpture in marble on the side.  What caused him to suffer was commodity marble dealers (from quarry to processors to marble dealers to wholesalers to retailers/installers) sourced from quarries that used dynamite to section of slabs.  Dynamite put in hidden fissures which is OK for countertops an building surfaces, since the installers simply fill in problems with special glue.  Artists no can do, and to work 100 hours only to unveil a fissure is rather painful.  this doctor found joy in sourcing hand sectioned marble far away from the dynamite; far more costly, but artists don't care.  Startups find joy in solving problems.  Just think of this poor guy...

Image result for michelangelo's unfinished sculptures

Back in the 1960s, a start-up importer did not have to help a retailer retail, or an exporter overseas export, or anyone on either side wherever one is in the value chain*.  Today, we have lost at least two, probably three generations of entrepreneurs.  There are too few players along the line in any given field you might enter, and so helping out by sharing knowledge is imperative, and a competitive advantage.

Say you plan to import leaves.  Your customers are retailers who ought to be writing up buy-plans, with open-to-buy.  If not, you'll need to teach them, or refer them here.  Do they have a plan for expansion, then you need to introduce them to tools that help them find their next market.  Certainly 60 years ago to ask a potential customer what his open-to-buy was for testing new products would not be untoward, but to have suggested to teach him how to write one up would have been insulting. You now need to know something about retail in order to grow your business, and retailers need to know something about yours to grow theirs.

Just as it does not matter who gets elected for the economic problems at hand, it does not matter what the big box stores do at this point.  Offering Sriracha sauce on Big Mac will not save Mickey D, as a matter of fact, there is nothing that can be done to save McD.  But they are right, people want better burgers, but the McD infrastructure cannot be repurposed to deliver it.  Cheaper to start a Five Guys, and more money to be made by fewer people doing less work.  McD can make a pretty picture, but a good burger worth the money (although they are cheapest, the cost too much for what you get.)

What was seen as what Charlie Sheen would call "winning" in the 80s and 90s, the consolidation of businesses, the roll-up of the corner hardware store by the Pay-N-Pak, the Pay-N-Pak by Eagle, and then Eagle by Lowes.  Pick any industry, and that is the progression, what was called "roll-up."  Whoever borrowed the most credit one the game.  As the founder of Home Depot recently remarked, he could not build his business today.  I hope not.  Now what is going on is the reverse, and that is Sports Authority's (now shut down) dwindling customer base shops Big Five, and as Big Five dies out they shop smaller, and people are shifting back from consumerism to materialism, which benefits startup specialty.

Specialty startup needs the other players in the chain to achieve escape velocity and thrive.  We won't have he new products and services emerge if there is not sufficient players along the chain to hand-off the innovation and return the feedback.

We simply do not have enough entrepreneurs to do all the work, but then, that means there is all the work we can stand available.  And we need share expertise so those who are working.

*The value chain concept as popularized by Porter presumes processes in place; entrepreneurs work with the unseen, so I am using the term to describe the landscape, not a process.

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