In our podcast episode, The Role Of The Entrepreneur, Peter Klein presents us with the idea of Entrepreneurial Empathy – the notion that entrepreneurs can get into the customer’s mind, understand and identify their needs and wants from their perspective and in their perception.
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The tool we’ve created is designed to give you a framework for conducting and analyzing in-depth interviews that will help you discover important bits about the customer’s experience by hearing about it in their own words. Use the first page to guide you through the process of conducting an interview and to help identify what might be the most important questions to ask in order to get valuable answers. Use the second page to help you identify entrepreneurial opportunities that might be embedded in your interviewee’s answers about their experiences.
In our podcast episode on Entrepreneurial Specialization, Bob Luddy explains his path to entrepreneurship in detail, and uses the “Effectuation” model as a lens to describe the start of his entrepreneurial career.
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Effectuation is a theory of entrepreneurship that starts with self-identity and self-resourcing. The “problem to be solved” emerges later in the process. The diagrammed tool we created is designed to help you understand the steps of the Effectuation process and how it might be applied to thinking about your own entrepreneurial business, using Bob Luddy’s path to entrepreneurship as an example.
It’s a fallacy for an entrepreneur to believe in chasing the biggest possible audience or the largest possible market. Why? Because your business will get pulled in the direction of “all things to all people”, and you may end up pleasing none.
The opposite rule applies: identify and gather specialized knowledge, and apply it in a specialized market to a select group of customers. Aim to be the best in your specialization. To do so requires discipline, application, and—as we discovered when we talked to Bob Luddy—time.
Bob is the founder and CEO of CaptiveAire, a business specializing in commercial kitchen ventilation systems. It’s a fast growing business, now generating hundreds of millions of dollars in revenue and hailed by its customers as best-in-class. It didn’t get there overnight, and it didn’t get there without some difficult moments along the way. Bob shares his experience with us on Economics For Entrepreneurs.
Your first business may not be your ultimate business. Bob started in the fire suppression business. He aimed to be the best in that niche, but realized that there was a better opportunity in kitchen ventilation, so he made the switch. The new business was a slower build, but in a more fruitful market.
He felt a positive tipping point in year 9. He obtained a commercial bank loan — prior to that he had been short on capital. Now he felt he could accelerate growth. That didn’t mean he had “made it”, but that he was on slightly firmer footing. Nine years is a long time to find firmer footing — be patient! It takes a long time to build a great business.
Patient specialization is a critical component of success. So-called “serial entrepreneurs” never spend enough time to be the best at the business they’re engaged in. By being patient, Bob was able to identify weaknesses in the market on which he could capitalize: long lead-times (shorten them!), high prices (lower them!), imperfect performance (improve!), and poor service levels (invest in service!). These were innovations a new entrant could bring.
Be the best in your specialization — not all things to all people. Bob’s specialization methodology has been to create the highest industry standards for the products and services he sells, and then don’t deviate. Don’t make “wild” sales promises that are not standard. Keep to a tight range of products so as to drive down costs, and shorten execution times. Competitors who try to be “All things to all people” go out of business. Specialization is a basic economic concept that is key to success.
Systems thinking brings growth to specialization. Thinking like a customer means systems thinking: what is the complete solution the customer is seeking? Specialization does not mean being a tiny piece of the solution. By integrating the entire system, you become more valuable to the customer. The future of entrepreneurship is in integrating systems, and defining integration is the job of the entrepreneur. A business can keep growing by advancing towards greater integration.
Innovation is ephemeral — you never stop. Innovation is important, but don’t think of it as an event. It’s an activity that is continuous. Every single innovation will be competed away. You’ve just got to keep on doing it, and always be alert to new ideas, new combinations of existing ideas, and changes in customers wants and needs.
All decisions are subject to re-evaluation. None of us gets it right every time. Most decisions are made with incomplete information. But that’s necessary — an entrepreneur needs to make high velocity decisions. If they are wrong, own up to it, fix the consequences and re-evaluate based on new information.
The purpose of a business is profit. With no profit, there is no business, no jobs for employees, and no innovation. Make profit in a fair and moral way. And make profit in the long term, not necessarily maximizing profit in the short term. Everyone — the whole society — benefits.
Entrepreneurs don’t plan: they execute a vision. Entrepreneurs have a vision they are working towards. They have aspirational goals for sales or revenues. But they know they can’t plan the future. It’s hard to plan a month or even a day, let alone five years. What they can do is execute with excellence. The key question is, did you get it done today? As the world of business closes in on real time, execution is primary.
The winning entrepreneurial trait is brute determination. Sometimes, all you have is your own determination to succeed. You define what are the things that MUST be done, and you execute with no exceptions. Vision is good, but execution is hard. Doing the hard things, correctly and consistently, is what makes an entrepreneur.
https://hunterhastings.com/wp-content/uploads/2019/02/e4e-long-1.jpg3001000Hunter Hastingshttps://hunterhastings.com/wp-content/uploads/2021/03/hh-logo-blk.svgHunter Hastings2019-03-12 14:15:262020-01-22 14:25:134. Bob Luddy on Entrepreneurial Specialization
In our podcast episode, The Role Of The Entrepreneur, Per Bylund stresses the importance of starting the entrepreneurial process with the customer in mind.
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There are many techniques to help you formalize the consumer-first process, and one particularly useful one is Customer Journey Mapping (sometimes called Customer Experience Mapping).
This technique decomposes a customer’s purchase and usage of a service into a series of stages, and asks the question, “What is the customer doing, thinking, experiencing and feeling at each stage?”
This is sound Austrian Economics. It starts with human action – what is the observed behavior; then asks about motivation (why did they act?); then examines the consequences of the action –customer experience; then tries to probe the emotional benefit, defined as feeling.
The process enables the kind of negative feedback that is most useful in the service improvement process. What if the experience is below expectations, or is less liked than the one delivered by a competitor? What if the customer’s feeling is disappointment or frustration? All of these challenges can be addressed if the data is available.
The Rail Europe Experience Map example is well-known in marketing circles and is widely available on the internet. It’s a good example of the process.
Do this for your business by breaking down the customer journey stages across the top horizontal axis of the map.
On the vertical axis, map out what the customer is doing, thinking, feeling and experiencing at every stage (as well as what your service is doing, or presenting to the customer at that stage).
Fill in the blank boxes at the intersections of the horizontal stages and vertical activities with research or intuition.
Label a section called Opportunities for ways to improve.
At Economics For Entrepreneurs, we are going to combine theory and thought leadership about how entrepreneurship works, with practical advice and shared experience from those who have achieved entrepreneurial success. This week we featured Per Bylund. He is an economist who observes what entrepreneurs actually do, rather than analyzing the statistics of GDP growth and macro-economic trends. He’s a research fellow in entrepreneurship at Mises Institute, a teacher of entrepreneurship at Oklahoma State University, a writer of books about firm-level economics and of a regular series of articles in Entrepreneur magazine, and he himself has been a serial entrepreneur. He has a lot to share.
Show Notes
Below are some of the highlights from the show, and the corresponding Customer Journey Map tool is posted here and available for download in PDF form below.
Economics can’t help entrepreneurs much by talking in abstractions about economic growth and economic systems. That’s not what you as an individual entrepreneur are engaged in. You are trying to make a living, and you are trying to create value for others via new or different services. Economics can help with applications of sound principles that help entrepreneurs build better-performing businesses.
What you are doing as an entrepreneur is not for you. It’s for the customer. They decide what is value. It’s not enough to generate an idea. The entrepreneur must ask, with objective honesty, is this valuable? For whom? How is it valuable? Value is subjective in the customer’s mind, so you have to empathize, penetrate that mind and understand it in the customer’s terms.
So don’t start at the wrong end of the process. Don’t be thinking: I want to produce something. How much can I produce it for and sell it at a profit? Rather, you should be thinking: who is out there looking for a value; what is valuable to them?
Price is determined by the customer. You can only sell a product or service for a price that is lower than its value, and value is determined entirely by the customer.
Similarly, you don’t “make a sale” to the customer. You make it a no-brainer for the customer to buy because you offer a better product or service than they’ve got today, and one that is better value for them.
Customer centricity, or customer obsession is a good path. Listen to customers, and learn what they are looking for, and what represents value to them.
Always be thinking about how to meet the future. Customer wants and needs and circumstances and preferences are always changing. Anticipating the change is the stock-in-trade of the entrepreneur. That’s not necessarily the same as innovating. You can create new value by anticipating future needs. Listen to people and look for trends.
Everyone can be an entrepreneur and it’s a very fulfilling experience. Entrepreneurship is aspirational. It’s something you do for customers, and making people better off is very rewarding. They’ll buy your products and services only if they feel that it’s a benefit for them. If you are successful, you’ve helped them. And to be successful, you must be doing something you are good at, which is another source of reward.
https://hunterhastings.com/wp-content/uploads/2019/02/e4e-long-1.jpg3001000Hunter Hastingshttps://hunterhastings.com/wp-content/uploads/2021/03/hh-logo-blk.svgHunter Hastings2019-03-05 14:15:102020-01-22 14:25:183. Per Bylund on The Role of The Entrepreneur
Values As A Basis For Business Building And Brand Building.
In Economics For Entrepreneurs, we will attempt to bring you some usable tools that represent a way to apply economic principles to your business to help you to greater success. Economists talk about individuals embracing values as a guidepost to the right behavior and the right choices. An example of such a value might be Family Security. An individual who holds this value in high esteem will make certain choices about their career, for example, perhaps emphasizing stability over frequent change. Another individual who prefers an exciting life might make the choice of more change, excited by the possibilities it brings. How can entrepreneurs diagnose and understand these idiosyncratic choices and take cognizance and advantage of them in business? This week we talked with Trini Amador, who is an entrepreneur who advises some of the biggest corporations in the world on these mysteries, and has built a highly successful values-based brand of his own. Here are some highlights.
Show Notes
People adopt values as a guide to their behavior and a signpost for prioritizing their preferences and choices. For example, a sense of achievement might be a value for one individual to pursue, and in as many circumstances as they feel are applicable, they’ll ask themselves, “Will this choice or action bring me a sense of accomplishment?
There are many possible values; individuals tend to be most motivated by their “highest values”. Entrepreneurs who can identify these highest values in their customers, and can develop an understanding of how to appeal to them, can be especially successful in designing value propositions and service offerings.
The way for entrepreneurs to understand how to appeal to consumers’ highest values is to think about climbing up the values ladder to reach the top. Their first encounter with your business will be at the bottom rung – the service or product you are offering. Their first question will be, what’s the benefit for me? If they see a functional benefit, they’ll ask themselves if it makes them feel good – proud, comfortable, energized, whatever feeling is relevant. If they experience an emotional benefit, they’ll ask if your offering fits with their highest value – that’s what makes them a devoted and loyal customer.
The tool to help your business climb the values ladder is the Mean-End Chain. We posted a simple example with Episode #1.
When you’ve constructed a Means-Ends chain for your target customer, you can begin to populate a brand framework. People are loyal to brands, and they often pay a premium price. A brand can be a person (you) or a business (yours) or a product or a service. Trini explains how to populate the brand framework to make your brand relevant to the target audience and differentiated by making a unique promise that you keep every time.
These are the brand building tools utilized by the world’s most successful brands. Trini delivers the insider’s knowledge.
https://hunterhastings.com/wp-content/uploads/2019/02/e4e-long-1.jpg3001000Hunter Hastingshttps://hunterhastings.com/wp-content/uploads/2021/03/hh-logo-blk.svgHunter Hastings2019-02-26 14:00:402020-01-22 14:25:242. Trini Amador on the Role of Values in Business
