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The Value Creators Podcast Episode #7. Hermann Simon: Hidden Champions Of Value Creation

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The vast majority of businesses – the very backbone of the economic system – are derogatorily defined as small and medium enterprises by government statisticians. A better mental model is that they are the champions of value creation.

Hermann Simon is a renowned management thinker and author, and chairman of the consulting firm Simon-Kucher and the founder and leader of the research project he calls Hidden Champions. Hidden Champions uncovered the data demonstrating that – compared to the larger and more publicized companies of the major stock indexes like the S&P 500 – small and medium businesses are typically more profitable, more efficient (higher revenue per employee), faster growing, better at investing in and producing innovation, and better at making a return on that innovation, i.e. creating new value.

Show Notes:

0:00 | Introduction

0:48 | The Role of Language in Business

1:27 | Introducing Hermann Simon

2:28 | Hidden Champions

3:09 | History & Background of Hidden Champions

4:46 | Performance Metrics for High-Performing Companies

7:36 | Common Quantitative Metrics

9:39 | Establishing Close Relationships with Customers

12:25 | Customer-Driven Relationship

13:49 | Employee Commitment

14:36 | Industrial Digitalization as Germans

15:50 | Tacit Knowledge

17:36 | Long-Term Goals in Companies

18:57 | Cultural Differences for Long-Term Goals

20:34 | Deepening the Value Chain

22:57 | Value Capture as an Expertise

24:48 | Pricing as a Skill

27:18 | Calculating Value Created for Customers

29:17 | Different Approaches to Financing

30:57 | Self-Financing

34:14 | Organization

36:51 | Emergent Strategy

39:20 | Wrap-Up on Hidden Champions

41:43 | Works of Hermann Simon

Knowledge Capsule

In his books and writings, Dr. Hermann Simon explores the characteristics and success factors of these Hidden Champions. Here is a summary of some of the key points and causal factors the highlights:

*    Niche Focus: Hidden Champions typically specialize in niche markets, focusing on narrow segments where they can achieve a dominant market share. They often serve niche customer needs with highly tailored products or services.

*    Global Market Leadership: Hidden Champions strive for global market leadership in their respective niches. They aim to become the best in the world in their specific domain, rather than merely being local or regional players.

*    Innovation and Differentiation: These companies emphasize continuous innovation and differentiation as key drivers of their success. They invest significantly in research and development, constantly striving to improve their products, processes, and technologies.

*    Customer Proximity: Hidden Champions maintain close relationships with their customers, which allows them to understand their needs deeply and respond quickly to changing demands. They often offer superior customer service and build long-term partnerships.

*    Operational Excellence: These companies excel in operational efficiency and effectiveness. They have lean and agile organizational structures, efficient processes, and high productivity levels. They continuously strive for operational improvements.

*    High-Quality Workforce: Hidden Champions focus on attracting and retaining talented employees who possess the necessary expertise and dedication. They provide a motivating work environment, invest in employee development, and foster a strong sense of commitment.

*    Internationalization: Many Hidden Champions have a strong international presence. They actively pursue global expansion, establishing subsidiaries and distribution networks in different countries to access new markets and customers.

*    Long-Term Orientation: These companies adopt a long-term perspective in their decision-making and strategy. They prioritize sustainable growth over short-term gains, often reinvesting a significant portion of their profits into research, development, and market expansion.

Dr. Hermann Simon’s research and insights into Hidden Champions provide valuable lessons for businesses seeking to achieve sustainable success. By focusing on niche markets, pursuing innovation, maintaining close customer relationships, emphasizing operational excellence, and cultivating a high-quality workforce, companies can strive to become Hidden Champions themselves.

Resources

Hermann’s book: Hidden Champions Of The 21st Century: The Success Strategies of Unknown World Market Leaders

Hermann’s autobiography: Many Worlds, One Life.

214. Professor Shawn Ritenour: The Vital Role Of The Entrepreneur In Economic Development

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Entrepreneurship is well-defined in economics, and well-recognized as the engine that drives economic growth. That means people enjoying greater well-being, including but not limited to material prosperity. But economic growth can be uneven. Some countries, some regions, and even some firms do not generate the same levels of economic growth as others. How do we understand this variability? We look for what holds entrepreneurship back.

Knowledge Capsule

Economic development can be a self-reinforcing cycle of continuous improvement in people’s circumstances.

Greater material prosperity is a valid and worthwhile goal for economic development. But, says Shawn Ritenour, economic development goes beyond that goal: it delivers a greater variety of goods and services that individuals and businesses can use as means to achieve their own diverse ends. The production of this greater variety requires entrepreneurship in the creation of new ideas and the pursuit of new value, and it generates new entrepreneurship by supplying a greater variety of resources to work with in those pursuits.

To generate this cycle, an enabling environment is required — one that acts as a catalyst for entrepreneurship.

Economic development is a multifaceted process in which several forms of human action combine in a system for economic prosperity. It’s not instructive to try to isolate financial capital or capital goods or technology or even human capital, and culture and social institutions can’t be ignored. These sources of prosperity must work together in an orderly fashion to generate the necessary synthesis.

The vital role is that of the entrepreneur.

The entrepreneur is the one who undertakes production, the one who combines resources to produce a product that meets customers’ needs and enables those customers in their own economic pursuits. Entrepreneurs kick off the cycle. Firms and organizations can act entrepreneurially, but it’s fundamental to understand that individuals — sometimes working in teams or committees — are the ones behind entrepreneurial decision-making. The entrepreneur is not necessarily a single person, but entrepreneurship is always a human action.

How do we get entrepreneurship started?

Entrepreneurship requires customer knowledge, technical knowledge and financial capital. Customer knowledge includes the empathic understanding of what’s needed for customers to be able to better meet their own needs. In the context of economic development, this knowledge is probably widely available to private entrepreneurs, but it may not be available to governments, whose understanding is distorted by predispositions to develop specific industries or subsidize specific economic sectors, or towards a particular technology. For these reasons, there can be no “entrepreneurial state”. Individuals with their own ideas and their own private property will provide the energy o break economic inertia.

Technical knowledge defines a sufficient understanding of the technology and technological resources to deliver the desired new value to the customer. In under-developed economies, this technical knowledge may be thin, so reinforcing the technical knowledge of entrepreneurs is appropriate, through education, injections of new technology, training, mentoring, or other forms of knowledge transfer.

With the right understanding of customer needs and the command of the right technology, the entrepreneurs involved in the development state will always need financial capital, because production takes time to organize before cash flows in to the firm from customers. In development contexts, entrepreneurs often will not have savings of their own, and there may not be an appropriate institutional infrastructure of local banks and lenders and investors.

Therefore, customer knowledge, technical knowledge and financial capital combine to provide the foundation for entrepreneurial leadership and growth. They’re integrated: it’s important for the sources of financial capital to understand and appreciate the nature of the customer and technical knowledge that is being deployed. Typically, this takes the form of venture capital or private equity.

Education is another important element in the institutional environment for entrepreneurship.

Entrepreneurship as a skill or capability can not be taught — it requires a special orientation that’s more developed in some individuals and firms than others. But principles, process and tools can be taught, and experienced entrepreneurs and businesspeople who have developed market savvy can share knowledge that they have acquired. Communicating the entrepreneurial mindset and methods in all stages of education will help to create and promote an entrepreneurial community that’s supportive of economic development.

One aspect of learning is to understand the entrepreneurial ethic of sacrifice, that it takes a lot of time and effort and expenditures and extended commitment before business success can be achieved. There’s more hard work than there is magic.

Institutional elements such as property rights and sound money are important components of entrepreneurial development.

Property rights and sound money may sound like abstract concepts, but they are extremely influential in economic development processes. Property rights mean that entrepreneurs can assemble and go to market with their own resources in whatever way they prefer. Sound money means that entrepreneurs can anticipate a return from their productive activities that’s not eroded away by inflation, and they’re not led into miscalculation by monetary manipulation (e.g., unanticipated escalation of future borrowing costs).

Removing obstacles to entrepreneurship is the best economic development policy.

Traditional approaches to economic development favor centrally planned initiatives, government spending, and policies in the form of subsidies or special incentives. They’re not typically market-based approaches. But the right approach is the opposite of policy-making. Instead of trying to design and add new structures, development should be focused on the removal of barriers — on identifying what’s getting in the way of nurturing a rich and robust entrepreneurial culture, and focusing on the removal of those obstacles. Leave the entrepreneurs to identify the specific products and services and businesses that can flourish, and to attract the investment capital that will support those businesses, without the need for “policy”.

Additional Resources

The Economics of Prosperity: Rethinking Economic Growth And Development by Shawn Ritenour: Mises.org/E4B_214_Book1

The Economics Of Prosperity (Edward Elgar): Mises.org/E4B_214_Book2

Shawn Ritenour at Mises.org/Ritenour

Shawn Ritenour at Grove City College: Mises.org/E4B_214_Profile

213. Sharekh Shaikh On The Digital Revolution In Market Research

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Market research is a tool for gathering data about customers and consumers that businesses hope will lead to insights about their behaviors and preferences that can be translated into innovation, better service and better business performance. As with any dynamic system, it has changed over time, and the effects of entropy have begun to show themselves in invalid techniques, invalid data, and invalid conclusions. And as with virtually all business systems, the coming of the digital age provides businesses with the opportunity to review, revise and improve existing practices and existing thinking.

Knowledge Capsule

Traditional models of market research are losing validity.

The Economics For Business approach to market research leans to the qualitative, such as one-on-one conversations with customers and detailed ethnography whereby businesses can observe customer behavior directly. The market research industry grew up favoring quantitative research at scale for its own reasons: that’s where the money is. Sharekh Shaikh points out that a $USD 70 billion industry was built largely on large scale panels — recruited audiences adding up to hundreds or thousands of individuals, to whom the market research industry could launch survey questions (“data gathering instruments”), generating large amounts of response data for quantitative analysis and numerical reporting.

Customers of these research reports use the output for decision support. Consideration of launching, or of purchasing and installing, a software suite or platform costing millions of dollars can be justified with the results of a survey costs tens of thousands of dollars or low six-figures.

One of the planks supporting the value proposition of market research panels is the difficulty of recruiting qualified respondents, such as CIO’s or CTO’s for an enterprise software survey. Panel operators’ revenues reflect their claims to solve this problem, but Sharekh Shaikh tells us that the reliability of their claim has eroded. Panels now may include inaccurately identified respondents (wrong title or role, for example, because the respondent has changed jobs or roles), or even fraud (responses provided by others than the supposed respondent, including bots). The data from the panels is no longer as valid as it once was, and its decision-support quality no longer as high.

This general decline in the quality and reliability of traditional research is taking place in many categories, not just tech — consumer package goods, entertainment, fashion, and any industry that uses these methods.

The digital revolution brings new opportunities for change, including in traditional market research.

It’s unusual to think of digitization as increasing human contact, but in research it’s the case. Sharekh’s research platform, CleverX, has effectively removed the intermediary, the market research panel operator and market research respondent recruitment agency, from the equation, so that the firm requiring research can be connected directly with the respondent with the desired experience and user perspective.

Respondents sign up to a place on the platform by supplying their personal data, career profiles, qualifications, credentials and experience. Their incentives include their desire to participate in and contribute to industry developments, as well as the compensation offered. By learning the questions that are being asked, the professionals who sign up to be respondents can gain insight into the developments that are being pursued in their industry. Being a panel member is career and professional advancement.

The firm seeking to gather data can identify their respondents and assemble their own panel, using their own criteria and specified profiles, and building a direct relationship with their respondents and customers. Moreover, they can use any data collection tool they prefer, whether that is a technical tool such as Survey Monkey, or direct one-one-one conversations on Zoom or Microsoft Teams, digital focus groups, or any other format. By integrating with calendar software, research interviews with CXO’s can be organized and calendarized. These powerful toolsets result in higher quality research being completed up to 10X faster.

Digital technology also facilitates video interviewing, so that researchers can talk directly with respondents, and develop a relationship with them. The video interviewing can be asynchronous: given a query, respondents can video-record their responses whenever convenient, TikTok-style. AI can add enhancements such as sentiment analysis, body language and facial expression interpretation.

The distinction between quantitative and qualitative research disappears and we realize qualitative data at scale.

Market research can become continuous monitoring in the adaptive entrepreneurial system.

The reality of markets today is high-speed continuous change. Market research as a tool has always been at a disadvantage in delivering snapshot that take time to process, by which time the market has moved on. Now, with digital techniques, continuous monitoring is possible. Sharekh mentioned several applications:

  • Customer understanding of digital developments: as platforms and systems evolve, customers may not be able to keep up with the technology, or may not be taking advantage of new feature. Digital research techniques can monitor and measure customer understanding dynamically, and point to gaps in their comprehension.
  • Dynamic product development: as developers move a product towards market, digital research techniques can expose potential customers to the development path, and help developers to integrate real-time findings.
  • Monitoring changing lifestyles and mental models: since digital research technologies can provide a continuing connection with customers, it can measure not only their responses to queries, but also their behaviors, attitudes and thinking in general. It’s possible to develop profiles and personas and segmentations into which innovative ideas can be inserted to simulate reactions and acceptance.

CleverX represents exactly the kind of knowledge recombination that can result in revolutionary change across an entire industry.

A core concept in entrepreneurship is the combining of existing knowledge in new ways for new solutions. Sharekh Shaikh combines his software engineering knowledge with knowledge of the market research space and knowledge of the dissatisfaction of end users with the available research tools. His newly-launched company, CleverX, is a fast-growing new entrant in the research space as a result of providing a totally new service: the facilitation of a direct connection between researcher and respondent with digital intermediation in place of previous-generation tools. The experience for the customer is better data, at faster speeds, gathered more conveniently and faster, and, consequently, of greater use in development and innovation processes.

Additional Resources

CleverX.com

Sharekh Shaikh on LinkedIn: Mises.org/E4B_213_LinkedIn

212. Graceann Bennett: Brands Are Value-Generating Assets, Marketing Is Just Tactics

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Peter Drucker famously identified the only two value-generating functions of the firm as innovation and marketing. We propose to differentiate brand building (or branding) from marketing, especially in this digital age. Brands are the vehicle for framing, establishing, nurturing and enhancing relationships with customers. In the digital age, marketing has become mechanized and mathematicised; it’s about numbers more than about human values and emotional bonding. Graceann Bennett is a branding expert who has devoted her career and her research agenda to furthering the science of brand building.

Knowledge Capsule

Brands are assets that drive customer value and business revenue, and they’re more valuable than ever in the digital age.

Our Economics For Business entrepreneurial method emphasizes the facilitation of value for customers — it is customers who create value through their experiences, and the role of entrepreneurship is to facilitate those valuable experiences. Brands are platforms for value facilitation and conduits for value delivery. In the economic system where assets are value drivers, brands are high-capacity intangible assets. They can be developed and nurtured through various types of economic investment, with a high return on that investment because of the closeness to the customer that they can embody. The investment can be creative and intellectual and is not necessarily limited by budgets and financial resources.

Brands hold emotional and relational value, often communicated through symbols and codes.

Brands have meaning for customers, and the meaning is differentiated — customers prefer one brand over another. Brands fit into their lives and connect to them emotionally – they can trust brands, rely on brands, and even love brands. Brands express the essential humanism of economics – the entrepreneurial ethic of improving others’ lives. They represent an understanding of human yearnings. They help people who are striving to be the best version of themselves. They’re a great tool for entrepreneurs.

Brands often communicate via symbols and codes: advertising, logos, package design, social media, and sales presentations. These are important, but they’re not the essence of branding. That role is reserved for the emotional connections that brands make with customers, engendering trusted relationships.

In the digital age, marketing has lost the art of branding.

Brand building is an art, an engagement with customers on a psychological and philosophical plane, enhanced by creativity, design, expressive language and visualization. In the digital age, marketing is headed in a different direction. Marketing has become mathematicised. Digital marketing is all about the numbers: audience reach and likes and engagement metrics defined as clicks and views. It’s the mechanics of the engagement funnel, of clicks leading to conversions. Graceann Bennett called this approach “the attention economy rather than the emotional economy”.

Even worse, marketers are antagonizing customers with an interrupt-and-annoy approach of increasingly invasive pop-ups and intrusions and uninvited invitations in e-mail and text. Annoyingly intrusive marketing can further decay into creepiness as consumers receive offers for goods and services algorithmically triggered by their search history and e-mail conversations or voice requests to Siri or Alexa that they might not have realized were quite as available to marketers as they are.

Branding creates customer relationships through emotion and psychology.

The mathematical, mechanical approach is exactly the opposite of the human approach of brand building. Branding aspires to a relationship with customers, a creative relationship of innovation and renewal that continuously improve customers’ expectations of what’s possible and their anticipation of satisfactions to come from brand usage and branded services. Entrepreneurial brand owners seek to understand the needs and wants of customers, and what they find disappointing in current experiences, with a view to making their experiences and their lives better. A lot of this initiative takes place in the realm of psychology, getting inside customers’ minds to understand their preferences and why they hold them, and their choices and why they make them.

Brandowning firms examine themselves critically to ensure that they are authentic in serving customers’ emotional and psychic needs.

Graceann Bennett employs Jungian archetype analysis to clarify and channel brand approaches to customer relationships, emphasizing what’s authentic in the brand’s character and orientation that aligns best with customer psychology. While the first stage of the entrepreneurial method is a deep understanding of the customer and their needs so as to define and scale a potential market, it’s also appropriate in the solutions design stage for the brand owner to look inward to define the persona for the brand. To establish trust and build a relationship, a brand must inspire confidence on the customer’s part, and to do so must establish authenticity: when claiming to deliver a benefit and facilitate a valuable experience, the brand claims must be consistent with the brand character, the brand heritage and the brand history. A brand can’t claim to be something it’s never been before, or claim a meaning and a purpose that it has never before exhibited. It can add features and polish and update its attributes, but it can’t depart entirely from its historical, observed orientation. Brand relaunches and repositionings risk losing connection with the customer if they are not credible.

Brands should search not for novelty in presenting themselves, but depth, clarity and simplicity in establishing brand character.

Ethnography is the best research technique to develop empathic engagement between brands and customers.

Ethnography is mingling with customers, talking to them, listening intently, and observing their actions and behaviors. This kind of interactive contact with customers should be primary – the analysis of digital clicks and views and followers and even purchase behavior can’t deliver the same rich emotional and psychic consumer understanding and insight. In the digital age, we’ve abandoned the art of mingling, and that’s a difference between branding and marketing.

Additional Resources

GraceannBennett.com

Playbook Studio: Playbook.Studio

Graceann Bennett on LinkedIn: Mises.org/E4B_212_LinkedIn

211. Jeff Grogg: Building The New Production Structure Of Entrepreneurial Capitalism

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t’s time to re-imagine how entrepreneurs bring their innovative value propositions to market at the appropriate scale to meet the important needs of millions of people. The new way of thinking is for entrepreneurs to focus all their energy on designing, refining and strengthening the value proposition, and then plugging in to a network of resources assembled by others so that customers enjoy the full realization of the value experience the entrepreneurial has designed. Jeff Grogg of JPG Resources joined Economics For Business to describe how this works in the CPG food and beverage industry.

Knowledge Capsule

Starting From A New Value Proposition.

The entrepreneurial journey — whether starting a new company or launching or improving a brand or launching and managing a new corporate innovation initiative or even a new division or internal venture — starts with a value innovation goal. An entrepreneurial team or an entrepreneurial organization conceives of a new experience for customers that they’ll value highly enough to warrant the firm’s investment in new capabilities. The team tests the market appeal and commercial power of the value proposition to greatest extent they can. They get ready to go to market at scale — to produce, package, ship, distribute, sell and take payments, and then to respond to marketplace results with more volume, or broader distribution, or maybe some tweaks to some aspects of the execution of the value proposition.

Traditionally, once the launch decision is made, the firm maps out the value chain and assembles the enabling resources — manufacturing capacity for products, service backrooms and infrastructure for services, supply chain components, business partnerships and their associated contracts, marketing and sales capabilities, distribution, warehousing and retail access.

What if this part — the resource assembly part — were already done? The risks and constraints of making a new business out of a new value proposition would be greatly reduced.

Jeff Grogg and his platform firm have built new business infrastructure so that entrepreneurs don’t need to.

Jeff describes his company, JPG Resources, as a business builder. His focus is on food and beverage businesses in the CPG category. The company build businesses so that entrepreneurs don’t have to. To be clear, the entrepreneurial teams focus on the customer and customer empathy and understanding, identifying a unique value that meets meaningful needs for a large number of people. That’s the critical step in the generation of new economic value.

The next step is typically building the supply chain from formulation and recipe development for scale, to manufacturing and packaging, shipping and distribution, and designing the management processes and hiring the people and drawing up the contracts for smooth continuous scale operations. That’s extremely hard work, and fraught with risk. The phrase “starting a business” can sound intimidating for that reason.

JPG Resources can absorb and take on and solve all those challenges and potential problems, and free the entrepreneurs to concentrate on customer value design and the last mile of marketing and sales.

The new entrepreneurial production structure can apply at all scales.

JPG Resources has helped pre-market start-ups with initial product development and culinary research, has provided infrastructure for growth for maturing companies, has helped mid-size companies expand beyond their current scope, and has helped big companies enter new areas beyond their existing comfort zones. The new “plug-in” production structure operates at all stages and all scales and all along the value chain.

JPG Resources can provide manufacturing or train manufacturers from start up through expansion. The can help with food science, create new processes, manage contracting, identify and mitigate risk factors and arrange insurance. They can organize supply chain redundancy (efficient redundancy through back-ups, not wasteful redundancy through duplicates) and build resilience for clients. A virtual supply chain is superior to — and more flexible than – the self-assembled version.

The new entrepreneurial production structure is a network without boundaries.

The very term “supply chain” reflects linear thinking — links joined together in sequence. Systems thinking is non-linear. The JPG Resources infrastructure is an ecosystem using connective logic, connecting the necessary components, people, knowledge and flows for the desired outcome, and reconnecting as needed when the environment or the market changes. The network is not bounded — there are always external or partner services that are currently outside the network that can be brought in through new connections. All are conceptually aligned, and all the relationships and contracts are win-win. The experience of JPG Resources in designing, assembling and integrating supply chains and production networks means that they’ve seen both sides of contractual relationships and service partnerships under all conceivable circumstances and can make sure all the agreements work – and expand the value space – for all parties.

The new entrepreneurial production structure is an acceleration and strengthening of knowledge-building proficiency.

In episode #199, we identified knowledge-building proficiency as the key to value creation capacity. By partnering with infrastructure building firms like JPG Resources (and Gembah from episode #210), entrepreneurs can benefit from sharing the knowledge that these forms have already accumulated over multiple projects and product and business launches and growth initiatives. Jeff’s company is only too happy to share this knowledge, and doing so can help entrepreneurs avoid what he calls “self-harm” — making mistakes that could be avoided with the relevant prior knowledge.

Experience is harder to share. Jeff’s staff have hundreds of thousands of hours of experience, and, while entrepreneurs can’t live what they’ve lived, they can certainly benefit from experiential learning.

The error avoidance inherent in knowledge and experience sharing can be invaluable to entrepreneurs.

Individual freedom and choice still apply, in a more flexible capital structure.

Entrepreneurs can choose as much or as little of the available pre-built infrastructure as they choose. They can focus on their own strengths and supplement where they know they need to. They can make their own connections in the ecosystem and their own adjustments as circumstances dictate.

The new entrepreneurial infrastructure does not imply a reduction in entrepreneurial initiative, but a boost, an acceleration, an expansion of value creation potential. It enables the entrepreneur to concentrate on value facilitation rather than on building a supply chain.

The capital structure for value creation in the economy as a whole becomes more flexible, flows more freely and can throw off the shackles of bureaucracy and regulatory compliance. The entrepreneur can pass on the burdens of HR and finance and legal and many more functions that are peripheral to — and sometimes impediments to – value creation and concentrate on the value task alone.

This suite of organizational and capital innovation points to a structure of more firms, better firms, and faster and more significant value creation, with fewer economic resources devoted to value-extracting bureaucracy.

Additional Resources

JPGResources.com

Jeff Grogg on LinkedIn: Mises.org/E4B_211_LinkedIn

210. Steven Blustein: A New Structure Of Production—The Plug-in Entrepreneurial Network

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A lot economic thinking about the structure of production and entrepreneurs’ challenges in the assembly of resources can be revised in the 21st Century. There are networks of value-driving resources already assembled, connected and operating, into which entrepreneurs can plug their business ideas. We talked to the CEO of one of the leading networks for insights into how it works.

Knowledge Capsule

Entrepreneurs are rethinking and redesigning the production structure of the economy.

Value generation includes the identification of unmet customer needs, the design of a new solution for those needs, and the assembly of a production structure to deliver the solution in the form the customer prefers to experience it.

Historically, entrepreneurs have been required to master all three components. Now they can focus on customer understanding and solution design, and plug in to a pre-assembled production structure.

Lack of supply chain and production knowledge and experience are no longer barriers to fast and effective business progress.

Let’s say an entrepreneurial firm or team has a new product – perhaps an idea, perhaps a prototype, perhaps even tested for customer response. How is to be turned into a manufactured and delivered reality? What are the product specs, what are the right fabrics and the right colors and the right feature sets, what is the compatibility with current manufacturing machinery or is customization required, what are the right production steps for packaging and surface design, what about shipping and warehousing, and marketing and sales? What financing arrangements are needed?

We can call all of these assembly steps a “supply chain”. If the team does not have supply chain knowledge or the experience of creating products quickly, then great challenges, consuming lots of time and effort, lie ahead.

What if all this knowledge and experience were available for any entrepreneurial project or team to plug into, seamlessly, with the freedom to pick and choose customer elements, selecting the very best resources, but only those that are needed?

This is a reality today.

An entrepreneur who created product success on his own has assembled the network infrastructure for future entrepreneurs to plug into.

Steven Blustein created and operated a successful company in the pet toy industry. He conceived of a product design and then went through all the hard and time-consuming work of turning a design into product specs, including materials selection, testing and sourcing, as well as finding a factory to manufacture, packaging, branding and surface design, shipping and warehousing, sales and distribution, legal, finance and accounting. Such a resource assembly and integration task is not only challenging and difficult, but wastefully time consuming. It might require contacting 50 manufacturers before finding the right one to work with, for example.

What if someone else could take on this burden, solve all the manufacturing and supply chain problems, and reduce the time and expense required? That’s exactly what Steve Blustein did.

The Gembah value proposition is to help entrepreneurial businesses grow by focusing them on customer value generation, while others provide all the supporting infrastructure.

Steve Blustein’s company is called Gembah. In his previous company, Steve had personal experience of the time, effort, challenges and trial-and-error frustrations of identifying and contracting with and fine-tuning manufacturing resources, and building the supply chain from factory to market. He describes traveling to China 60+ times for his own business and the time he committed to learning the language. He experienced the diversion of time and effort away from his focus on serving customers, no matter how committed he was in principle. Entrepreneurs inevitably become consumed by operational detail.

His current company, Gembah, aims to solve that problem for entrepreneurs. It offers a client-customizable network of supply chain components, all selected and vetted to be best-in-class, and provides the management and co-ordination as a service, so that the entrepreneur no longer needs to devote time and effort to doing so.

Gembah maps the value production and supply network for the entrepreneur, and the journey processes and stages, and provides hands-on assistance at every point. Journeys are classified by general type (e.g., for hard goods, soft goods and mechanical / electrical), and then transparently customized and priced for each individual entrepreneurial project.

The entrepreneur can have direct connection to the producing factory (no intermediate trading company or agent) or can choose hands off management through a Gembah account director. Control always rests with the entrepreneur.

The starting point for the journey is flexible.

The supply chain journey can begin even before there’s a product design or even a fully fleshed out idea. Or the journey may start for a company with an existing supply chain seeking a new product to add to their portfolio. Or it could be an existing supply chain that a company seeks to relocate or strengthen or change in some way. Gembah offers complete infrastructure assembly and re-assembly to meet client needs.

There are different kinds of journeys entrepreneurs can choose. For example, a “direct to manufacturing journey” is one appropriate for existing goods that a seller on Amazon or other platforms might want to add to their range with only slight customization and some branding and surface design embellishments. Another might be a time-compressed product development journey. Steve gave the example of a company that sourced a new Bluetooth speaker to their own specs which they were able to manufacture from existing tooling, customize the feature set to make it unique, add branding, and launch in 5 months versus the more usual 52 weeks.

Gembah clients tap in to a large and growing knowledge base, and no part of the supply chain and manufacturing back-end for products is uncovered or unavailable.

Gembah aims at a complete service, with no gaps in the capacity to meet client requests, apart from the upstream components of doing the selling and generating revenue. There are experts available to help with design, marketing and branding, as well as financing, and also in opportunity identification via market scans. Most services are provided directly, some via partnerships.

There is even the potential for a reverse flow in which the manufacturers bring the product ideas and finished products to a seller who is a client of Gembah. The development costs are already spent and the seller benefits.

The prospect is for a new production structure in the economy integrating better companies with better value creation performance.

In today’s production structure, we observe problems of concentration, with large corporations dominating industries and markets, and the so-called small and medium sized businesses constrained, no matter how creative they are, by limited access to capital and infrastructure.

The prospect now is for this to change. Those who succeed at identifying important unmet customer needs can plug in to the manufacturing, supply chain and infrastructure network that companies like Gembah assemble, customize and manage.

We’ll replace industry concentration with a new set of empathic, value generating entrepreneurial companies. They’ll be better companies (e.g., less bureaucracy because it’s not needed, less financialization that distorts their results focus)) with better performance (greater concentration on customers and customer value creation, and more flexibility in adaptively reconfiguring operations when market changes call for it). Entrepreneurial companies will be newly empowered to rise and to thrive, wherever they are in the world.

Additional Resources

Gembah.com

Steven Blustein on LinkedIn: Mises.org/E4B_210_LinkedIn