Business and Leadership

Business leadership can be hard to define but it is a title many aspire to regardless of company size or industry. But is business management different to business leadership and which of these traits (leadership or management) is the most valued when promoting someone to a senior role. Is the term “business leader” being overused to the extent that it is rendered nearly meaningless?

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business leadership

The press and online articles are full of sound bites and quotes from business leaders. What are these so called business leaders?. Business leadership was once deemed to be a wealth generator, someone who took a risk, set up a business to create wealth while generating employment or was instrumental in delivering huge growth for a company. So are the real business leaders people like Bill Gates,Michael Dell, Larry Ellison or Steve Jobs to name but a few right down to the heroes of a local economy, small business people who create opportunity and employment for their local area.

Anyone with a Twitter account and a blog is a Business Leader.

It is important to state that titles are an important aspect of any organisation, business or company. They indicate a certain level of achievement, authority and responsibility. However leadership used to mean something specific. High level executives. Leaders of industry. Time was you would never call a middle manager or a front-line supervisor, a leader. Today it seems when anyone kind of picks up the ball and runs with it are called people or business leaders. What we’re really talking about here are people who are engaged in the business. So we have become accustomed to seeing the term business leadership being used in a very broad sense.

This is probably the reason middle or senior managers in large multi-nationals often get referred to as “business leaders” in press articles. Most do not define business strategy, how the business operates, the culture  or the direction of the business. So the business leaders we often see quoted in the press in most cases are business managers (even if they do have the title VP or director they are in reality managers). Title inflation, self-proclaimed titles, and title overexposure are the cause of dumbing down leadership titles. When titles are overused or abused, they lose their meaning.

Business leadership has nothing to do with titles. A C-level title, does not automatically make someone a “business leader.” In fact no one really needs a title to lead. The reality is anyone can be a leader in their community, sports club, in family, all without having a formal title.

There are lots of business managers who aspire to be business leaders but lots more do not. Having an MBA with a C level title while working within the cushion of a large organization does not a business leader make. The role of these business managers is to “Implement”. That is to take the pre-defined strategy and Business goals and implement them whether its sales,marketing,finance or product. They may lead the unit or division from a tactical stance but they do not lead the business.

The world seems to fallen in love with titles and in a centralised decision making business world maybe bigger titles such as VP or Country Manager are a way of compensating for the true role a manager is expected to perform.

Business Leadership has nothing to do with level of seniority or someone’s position in the hierarchy of a company. Too often in business, when we discuss the company’s leadership we are most likely referring to the most senior executives in the organisation. They are just that, senior executives or business managers. Leadership does not automatically happen when you reach a certain pay level. Hopefully business managers can work to earn the title business leader but there are no certainties.

If you are reading this article hopefully you love business and business strategy, the cut and trust of sales,marketing, trying to win a customer, managing people to deliver higher results but this does not make us a business leader. Knowing ones place in the business world is healthy and honest. First and foremost “Know Thyself”. No need to perfume the pig, a great manager is a great manager, no need to embellish it with titles that do a disservice to the title “business leader”, a title many aspire to but only a small portion ever really earn the right to be called it.

Not everyone in business sees themselves as a potential leader.  Maybe it is really about being the best at their job they can be.

However for people who want to continue the business leadership journey, then maybe it is a process of influence, which stimulates and maximises the efforts of others, towards the achievement of a goal. Real business leadership stems from influence, not title, authority or power

A few tips to build up a leadership profile includes (A) they learn to act like a leader: to manage their image in a genuine, authentic way. (B) They are straightforward; they tell people what they stand for, and then stand for it. (C) They are inspirational and learn what motivates people. They are optimistic and use emotion in their communication. (D) They know the people they are leading and help them develop and (E) They stimulate people, make people think and make them take responsible  but always with the positive support of a business leader knows they must provide.

A Strategy for Business Success

The strategy for business success are built around three pillars: The Product, The Market and The Team. Each pillar or a combination will most likely determine the success or failure of a business. The core pillar or strategy to focus on is “the product to market fit”. In business schools they say that a business fails for two reasons, lack of funding or lack of strategy execution. Strategy execution should centre on getting the product and market fit right. If the product to market strategy execution by the leadership team is not right, the cost to fund the business for customer acquisition, sales, marketing and product development increase to the point where value cannot be captured.

What causes business success?

In business which strategy pillars contributes the most to success of the enterprise, the team, the product or the market? Or put another way “what is the biggest cause of success”? Also which is the weakest link: a bad team, a weak product, or a bad market?

Let us briefly dig a little deeper into these three pillars. Investors and venture capitalists often say they don’t invest in businesses they invest in people, so the team can be defined as the potential effectiveness of the CEO, co-founders and senior staff relative to the market opportunity. Can the team execute against the market opportunity they have identified, will their effectiveness overcome any lack of experience, and has the team the ability to deal with the “never seen it before” obstacles.

The product can be defined as to what problem is it solving and how impressive is the product to any customer or user who actually uses it: How easy is the product to install/set up and use? How feature rich is it? How fast can the benefits be seen? How transformational is it? How well-crafted is it? How has it been tested and what were the results?

The market is the size, number, predictions and growth rate, of those addressable customers or users for the product.

One other pillar that has to be planned for is “the Cost of Customer Acquisition”; meaning that the cost of acquiring a customer is lower than the revenue or profit that customer will contribute. The rate of customer acquisition has to do with execution and the ability of the team to move enough prospects through the sales funnel. Remember also that product quality will not create market size; Steve Jobs learned that lesson with his NeXT business. What a business needs is a desirable product, a big enough market and an economical way to target it.

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So which pillar is the Number.1 building block for business success?

If anyone conducted a survey amongst business people on the question of which is the most important factor in business success, they probably would get three different answers.  Some will say team, some on the product, while others will choose the size of the market.

As written about earlier in this article, if you ask entrepreneurs or VCs which of team, product, or market is most important, many will say team. This is an obvious answer because most of their knowledge and reference points in the beginning is the team as the product may not be built or ready to market plus the market will not have been fully evaluated yet.

Marketing and techies will say the product is the most important factor. The business is product driven, creates great products, then markets buy and use the products. The most valuable companies today are brands such as Apple and Google because they build the best products and without the product there is no company. Right? Try building a great team and having no product, or a great big market and having no product.

This leaves “The market”, where researchers, students of business success and business leaders will tell us that the market is the most important factor in a business success or failure. The argument is that in a big market (fragmented market or badly served by existing solutions), a market with lots of real identifiable customers, then the market needs will pull products out of the business. The market is ripe for change, has an appetite that needs feeding and the market will consume, viable products that will feed it. Maybe the product doesn’t need to be the greatest; it just needs to work. And, the market doesn’t care how good a team the business has, as long as the team can produce those viable products.

Has history shown us that the No.1 business killer is lack of market?

To expand on this a little further, maybe the business killer is not just lack of market, but more importantly a lack of product to market fit. Could the building blocks for a successful business be about being in a sizeable market with a product that can satisfy enough of that market to make profits?  Is being in business about “making things that people want and will pay for”

Take the example of search engines, smartphones, online marketplaces even cars, when there is a growing, sizeable market with an appetite for change. Is this the story of telephone directories morphing to the web as search engines, the evolution of the telephone into people’s pockets, the buying and selling of goods being streamlined online or the transportation of people becoming about journeys.

The flip-side is in a market with little appetite for change, a business can have the best product in the world and super leadership team, and it may not matter, the business is going to fail. A business can spend a heap of money digging for years trying to find customers willing to pay for a product, little reward for a lot of effort and the team eventually will disintegrate, and the business folds.

Has history shown us that the No.1 business success factor is market?

When a great business team meets a stagnant market, market wins. When an average business team meets a great market, market wins. But when a great business team meets a great market, then something really special happens. Now this is not to say a business can’t screw up a great market, it has been done many times, but assuming the team is effective and the product is accepted in the market, a great market will tend to return success for the business and a poor market will tend to return failure to the business. So does Market matter most?

A few things worth remembering

Great products are really, really hard to build. So surround yourself with a great team, as a great team will always beat a mediocre team, given the same market space and product appeal.”

Great products can sometimes create new markets. Product that are so transformative to business or consumers it creates a whole new big market and the business becomes a gorilla. Think Microsoft.

The team needs to know how and on what battle ground it will take on and beat the competition to gain market share.

As a business leader or start-up, what should you do next? Focus on the thing that matters; get the product to market fit right. Product to market fit means getting into a good sizeable market with a product that can satisfy that market and capture value for your business. Do whatever is required to get to product to market fit. Seek out people who can help build your vision, change the product, change the sales model, move to a different market, tell customers you need some customer validation for the product, whatever is required.

Lastly, build a team that can make the product to market fit happen.  A team that can go out and get customers buying the product. Next get product usage growing across a wide range of paying customers.  Customer acquisition and market acceptance of the product means the team has got the product to market fit right which means the business can grow by hiring marketing,product, sales and customer support staff. The strategy for business success will always be the product,the market and the team.  So the business plan and go to market strategy needs to address all three.

Customer Acquisition Strategy

This is a guide to a customer acquisition strategy. For many start-ups and new companies the customer acquisition strategy and financial cost of customer acquisition is a critical factor in business survival and often underestimated in a growing business. The cost of getting customers can be the difference between success and failure no matter how good a business believes its product to be.  I once read that the goal of any business is to acquire, develop and maintain customers at a profit. The develop and maintain aspects are more clear forward but let’s focus on the cost associated with acquiring new customers regardless of the channel.  

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Every business needs to acquire new customers to make products and businesses work. Whether the product is aimed at enterprises paying big money or getting thousands of visitors to a website, how a business gets and the cost of getting customers are the important part.

The Definition of Customer Acquisition Strategy could be defined as “The process of persuading someone to purchase a company’s goods or services”. The cost associated with the customer acquisition process is a critical measure for a business to evaluate in tandem with how much value having each customer brings to the business.

 

Is The Business Ready for Customer Acquisition?

Paper never refuses ink and this saying has been true in many a business or sales plan when it comes to putting a cost on customer acquisition. The cost is not just the marketing or sales cost but the time and resource cost to getting new customers. Has the business planned for the sales cycle, the demos, the travel, product trials or has a website planned for the cost from free signups to paid, customer or product support prior to a customer making a purchase. In other words, can a business survive while potential customers go through the acquisition cycle? While a quote like “move fast and break things” is exciting in a company start-up situation, it may not be the best advice when it comes to customer acquisition. The decision to start spending investor or shareholder money taking a product to market and begin acquiring new customers should be given the weight it deserves. Entrepreneurs or a business might have spent months or years developing the product, so the execution of the customer acquisition strategy has to be thought out very carefully.

Even before you spend a cent on customer acquisition ask the questions “is the product ready for some/many customers”? Are there still bugs that will make the customer interaction with the product flawed? While the saying “done is better than perfect” to avoid feature creep is practical; it would be a mistake to launch a broken product and fall at the first hurdle.

To take a step back into the business plan around customer acquisition strategy, can a business tick the box on questions like; how many sales calls per day do you expect the salesperson to make, do they have a target list of suspects and prospects, how much activity on the website can the servers handle? Do you have the customer support with the knowledge required to respond to the questions from new customers? Does the product value proposition the salesperson has to sell make sense to people outside the company? In other words, have you done customer validation? These are the type of questions that you need to answer before committing money to a launch.

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Being Prepared Always Matters

Any customer acquisition process is not straight forward or predictable but especially so for new companies, but that doesn’t mean a plan is not useful or necessary. The customer acquisition process is far from an exact science. There are many things that can (and do) go wrong, however there are some things that any business can do to mitigate risk and improve the chances of successfully acquiring new customers. Be clear with your team what “Cost to Acquire Customers” (CAC) means, is it paying customers, trial customers, engaged prospects or even website registrations.  In the long run it should only mean the cost to acquire a paying customer.

Estimate the Cost of Customer Acquisition

Money for new product or new business launches is hard won. The budget and time for a start-up may be tight, so the business needs to estimate “worst case scenario” the cost to acquire customers (CAC) before beginning the marketing or sales process. A businesses CAC is loosely defined as the cost of ALL the sales and marketing expenses over a given period of time, divided by the number of customers the business plans to acquire in that time frame. While no business can have a firm sense of the CAC until they begin acquiring customers, having an estimate will help the business leaders prepare to act accordingly.

Logic rules, no matter how excited a business is about getting it out there, do not underestimate the impact of starting the customer acquisitions spend before the product is ready. The greatest risk apart from alienating potential customers by launching a flawed product is the money a business can burn through before it realises it got something in the product wrong.  Every business should ask, what is the baseline product I am willing to “show” potential customers and in what target markets?

Thread carefully in the world of social media and PR, spending time and money on journalists to line up business or product coverage of your launch, only to find out that the product is delayed or has issues, can put the business credibility in jeopardy . Journalists lose interest pretty quickly and are never your friends.

Do Realistic CAC calculations

While a business waits for SEO efforts to kick in, a business may utilise Google Ad Words to drive traffic for (a) for lead generation or (b) sales. Take a look at this example. The cost per click works out at 50 cents, the resulting 1000 website visitors converting to a trial rate of 5% (50) at a cost of €500. These 50 trials are then converting to paid customers at the rate of 10% which is 5. So each customer is costing €100 in just lead generation expense excluding sales/product/support costs. For many companies in the B2C space or in the B2B space with software using the web as their main acquisition channel, it can be hard to get the consumer to pay more than €100 for the product or service

Many business underestimate or do not budget for a realistic CAC, if we take the above example the cost of customer acquisition can climb rapidly if leads require a sales person to convert them. This human interaction can be as simple as email follow ups right up to inside sales people doing multiple sales calls and demos. Depending on the trial/registration rate along with sales conversation rates the cost can vary from €400 to over €5,000 per new customer acquired, depending on the level of interaction needed.

Another CAC calculation is to look at the cost of a field sales force. The fully loaded cost of a field sales executive with travel, car, expenses and salary can push the CAC into over €10,000 in enterprise sales.

In trying to address the single most important early-stage question – customer acquisition – it is easy to waste a lot of money in the wrong channels and on the wrong customer acquisition tactics (lots of companies in the graveyard from just this one failure), especially the new companies that went  toe-to-toe with the big guys and can got blown away.

Every business has to execute in a different way

A business will only thrive by marketing and selling smart; acquiring customers in an economic way and in a way that differentiates the business from the crowd. To goal is to build a customer acquisition strategy for paying customers the business does not have to keep paying for every month.

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Create Demand

In larger companies with deeper pockets while the customer acquisition isn’t exactly simple, they do have more resources. The process of customer acquisition is more challenging for newer companies. Established business’s will utilise bigger budgets, have greater brand awareness, and an ever growing community of influencers. Most new businesses will not launch with a partnership with an established brand like Microsoft, Apple or Google where the demand for the product already exists. Instead a new business has to allocate sales resources and money wisely to fight (and a fight it is) to let potential customers or audiences know that you exist, explain to them why they should show interest, and initially even offering to go the extra mile by holding their hand through the sales process.

The focus of everyone in a new business is not only to create the brand but also the demand. Sales and marketing are not two different departments,  the person leading the marketing drive needs control spend on brand marketing and really understand how to execute lead nurturing, content marketing, web demand generation programs and work hard at marketing efforts that require time but not money. Marketing and sales need to work at the hip to generate a steady, growing stream of leads each and every month.”

Acquiring new customers means understanding what makes your customers tick and investing in inbound marketing strategies such as content and quality articles, got onto the forums, become a subject matter expert and invest in search engine optimization (SEO) as a longer term tactic.

The Business Model

Business model viability, in the majority of new companies, will come down to balancing two things:

Cost to Acquire Customers (CAC)

The ability to extract value from customers, or LTV (Lifetime Value of a Customer)

Web based companies have long understood these metrics as they have a much easier easy way to measure them. However there are huge benefits for all businesses to look at these same metrics.

To repeat the message from a few paragraphs back, to calculate the cost to acquire a customer, CAC, a business needs to take the entire cost of sales and marketing over a given period, including salaries and other headcount related expenses, and divide it by the number of customers that a business has acquired in that period.  (In pure web plays where the headcount does not need to scale as customer acquisition scales, it is also very useful to look customer acquisition costs with/without the headcount costs.)

To compute the Lifetime Value of a Customer(LTV), you would look at the margin that you would expect to make from that customer over the lifetime of your relationship. Margin should take into consideration any support, installation, and servicing costs.

Manage Optimism with Reality

To be in business requires huge optimism, and in a belief in how much customers will want to buy your product. Unfortunately this can lead businesses to believe that customers will be kicking down the doors to purchase the product. This has the effect of grossly underestimating the cost it will take to acquire customers. In too many companies there is little or no focus on how much it will cost to acquire customers. Vague strategies along the lines of web marketing, and/or viral growth with no numbers is not what you call business!

 

To finish, a well thought out CAC plan outlines the need to acquire customers through a series of steps like SEO, SEM, PR, Social Media Marketing, direct sales, channel sales, etc. with the cost of each step worked out. This planning brings honesty to the real cost of customer acquisition.

 

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