New venture outsourcing blog

I recently received two interesting requests- one from the US and the other from India. One of our customers who had used our outsourcing services for his start-up asked me if I could help him find a printer in India. His family has a printing business and they are being squeezed by the Chinese. So they are looking to cut costs by outsourcing some of the routine, simpler orders to India. The second request was from a local business friend. He wants to setup a couple of mini golf courses and asked me to help him find a mini golf course manufacturer in US. Another client of ours, CRM learning (www.crmlearning.com) a producer of management training videos, already has a distributor in India. India is a growing market for educational products and services and I will not be surprised if CRM starts seeing sizable revenue contributions from here in the near future. I am sure there are a lot more small businesses in both countries trying to benefit from each others products and services. 

These two unrelated, yet connected events reaffirm my belief that small businesses can benefit greatly from globalization. That does not mean its all good- but on the margin it is doing more good than bad. Job loss in host countries is still a concern in large scale outsourcing deals. It is less of an issue when a start-up or a small but growing firm buys outsourcing services since the jobs are not yet created. In fact, outsourcing allows them to grow faster and more economically than they would otherwise, which in turn creates more jobs in other functions which need to stay onshore. Clearly, there is a case for small and new businesses to gain from offshore or other forms of outsourcing services. New, low cost yet very effective technologies like wiki are enabling companies to outsource even smaller projects cost effectively. Google recently  bought JotSpot which has such a technology- http://googleblog.blogspot.com/2006/10/what-joe-said.html .
The other half of the story is equally compelling. What Indian professionals are gaining through offshore outsourcing services to US and other parts is also helping create demand for services and products from US and elsewhere. Rising income in India and elsewhere due to business and IT outsourcing services is creating unprecedented demand. This is going to help all businesses- start-ups, small and large businesses.  As a small business owner, the question you need to ask is- are you ready to take advantage and grow your business or are you going to let your competitors get the better of you?   

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We see a fair number of formal and informal pitches (presentations to the uninitiated).  I was asked to be part of a review panel today — my parting advice was the now famous 10-20-30 rule:

10 Slides

20 Minutes

30 Point Font

This rough guide is intended to help entrepreneurs hone their presentations to only the most applicable, most important kernels, keep the presentation on target & relatively brief, and leave ample room for questions.  After all 90% of the time your goal is to get to the second meeting!

Today’s presentation did an excellent job of convincing us how they are going to change the world, even the best can improve…

What presentation advice have you heard?

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We’re delighted to be included in the very popular Carnival of the Capitalists roundup this week the post below on competition. Please click on the link above or the image below to see many fine posts from bloggers with similar interests. Happy reading!

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Potter Stewart wrote in hs concurring opinion in the 1964 case of Jacobellis v. Ohio about pornography:

“I shall not today attempt further to define the kinds of material I understand to be embraced within that shorthand description; and perhaps I could never succeed in intelligibly doing so.  But I know it when I see it, and the motion picture involved in this case is not that.” (emphasis added)

I believe this statement applies just as well to pinpointing star employees.

Many managers obsess over recuiting and hiring the “best & brightest” employees.  Depending on the industry, the difference can be quite dramatic.  In industries requiring a combination of heavy training and natural ability (e.g. finance, law, and professional sports), the difference between the most productive and the rest of the group can be startling.  Thus, finding methods for evaluating, selecting, and compensating employees based upon these differences can quickly become an important task for any business - but for new businesses in particular.

Google’s Peter Norvig for example, talks about Google’s Lake Wobegon Strategy they employ to maintain their high bar for talented employees.  This strategy allows a company to only hire someone who is expected to be above the mean of their current employees.  Below is a copy of Norvig’s compelling simulations of the difference hiring above the mean can make compared to hiring above the minimum employee talent level.

In any small to medium sized group of people, it seems to me that about 15 minutes are required to size up who most of the real contributors are, and who most of the slackers are.  There are always a few surprises, which is why actually working with someone or watching them work with others and seeing the outcome is the ultimate test.

Unfortunately, this “gut instinct” people evaluator we all come equipped with can get confused under certain circumstances.  Particularly when you’re pressed to hire quickly.  Google’s Norvig notes that Google doesn’t allow project managers to hire into their project - as they tend to lower their standards in order to get some help meanwhile they end up bringing down the average for the company.  This sort of breakdown happens more generally after you’ve already spoken to 100 other applicants, when your “real work” todo list is growing as you scan every new resume, and while your investors are breathing down your neck to increase head count.  The other unsettling aspect of this is the subjectivity of it.  If there’s one thing people can’t stand, it’s being treated unfairly.

Unfortunately, and fortunately, fairness is not absolute when it comes to real life human beings, it’s an issue of perception.  The Society for Industrial and Organizational Psychology Inc. says that there are basiclly three different types of organizational justice percepions:

• Perceptions about fairness of the outcome
• Perceptions about fairness of the process
• Perceptions about fairness of the interactions

For anyone who’s ever tried to evaluate employees in an organized, procedural way, it’s appalling how hard it is to create a “process” for doing this.  I think the problem may be that managers are trying to make the process too objective in an effort to make it more fair, or at least to improve the perception of fairness.  However, this effort is misguided.

Making a process more objective at best only reduces the risk of procedural unfairness.  It doesn’t address outcome or interaction fairness at all, as most of us have learned the hard way.  In practice, any attempts to correct for outcome or interaction fairness tend to reduce objectivity, undermining the procedural fairess as well.  The result: a process that is peceived to be much less fair than a purely subjective one.

Big businesses have a tough road to hoe in this respect, you can’t have the CEO really get to know everyone at a company the size of GE or WalMart.  Fortunately, new businesses have an advantage of being able to be in the same room with most of their people.  My advice?  Take advantage of it while you have it!  Being subjective about your interviewing, your evaluations, and your compensation systems can be more fair, more effective, and a lot less time consuming than implementing a more objective process.

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We meet with entrepreneurs at all stages of venture creation, one of the first questions I often ask is about competition. In light of this I thought it would be useful to put up some thoughts on the dreaded “C” word:

Competition isn’t a bad thing.

Educating customers is a difficult prospect, especially for a product or service that is disruptive. If your competitors are going to help you do this you should thank them. In the face of competition we are forced to articulate the meaningful, differentiated value we are providing.

The amount of competition is likely to be inversely proportional to what we initially think.

Our gut reaction tends to be ‘feast’ or ‘famine’ – either “I have no competitors” or “Every venture on the planet is trying to do what I do”. Each of these scenarios merits more work into understanding your competitive landscape; what do people buy and why do they buy it? A corollary of this is the classic sell one each person in China business plan.

Competition isn’t just direct competitors.

It is goods or services that are alternatives to yours – including, but not only, those that are similar to yours. If you are an event planner your competition isn’t only other event planners but also the resources available for those planning their own events.

Competition isn’t static.

The most successful ventures will foster the growth of competitors – the secret is knowing that this will happen and planning for it.

Even the most revolutionary ventures have competitors.

That is to say the customer always has a next best alternative. Even a insulin for diabetic (a classic example of a necessary purchase at almost any price) has an alternative – no insulin at all.

We’ll add to the list as the not-so-dreaded ‘C’ words come up in conversations, business plans, and presentations.

Does competition have too negative a connotation? What do you think?

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