Entrepreneurship – and What Else?

Someone asked me long ago about my unsuccessful business venture. I started a restaurant in 2008 and within a year I closed it down. Many of my friends surprised by that decision and I was personally felt the same. I was affected by the economic crisis and decided to stop the bleed. It was bad location decision and few other things. Bugger!

Lesson learned and I shouldn’t repeat again. Some friends comforted, “At least you got that spirit of entrepreneurship! Which all of us don’t.” I also learned that spirit of entrepreneurship was just a good head start, but never enough. Recently I faced with the same question – Entrepreneurship and what else? But this time was on Bumiputera Small Medium Enterprises (SMEs). The issue is larger than I first thought and I begin my conquest to unearth the mystical reason why Bumi SME not as successful as non-Bumi (more specific the Malaysian Chinese).

From Global Entrepreneurship Monitoring (GEM) Report 2009, Malaysia is categorised as Efficiency-Driven economy i.e. in between Factor-Driven (1st stage) and Innovation-Driven (3rd stage). The finding also discussed about entrepreneurial Attitudes and Perceptions among the participating countries. Malaysia surprisingly rated 5% Entrepreneurial Intentions; which is equivalent to Germany (5%), higher than Hong Kong (3%) and slightly lower than United States (7%). In other words, even in some advance economy the entrepreneurial attention is not necessarily high. This confirmed my hypothesis that entrepreneurship is not the problem but something else.

On Perceived Capabilities, Malaysia was rated 34% which is almost the same as South Africa (35%), higher than France (27%), Japan (14%) but lower by half compared to Saudi Arabia (68%). It is understandable and also evidenced in GEM Report 2009 that entrepreneurs were reduced by several percentage caused by the 2008 financial crisis. Many aspiring entrepreneurs think the opportunities look bleak and full of uncertainties. I can attest to that!

From GEM Report 2009 also I draw the conclusion that Malaysian entrepreneurs do not suffer from any serious disease because a few other economies that perceived to be entrepreneurial also had similar attributes. Therefore in terms of spirit of entrepreneurship we are more or less at par. Then what is the problem? Entrepreneurship and what else?

Definition of Efficiency-driven entrepreneurship is:

“As the industrial sector develops further,

institutions start to emerge to support further

industrialization and the build up of scale in the

pursuit of higher productivity through economies of

scale. Typically, national economic policies in scale intensive

economies shape their emerging economic

and financial institutions to favor large national

businesses. As increasing economic productivity

contributes to financial capital formation, niches

may open in industrial supply chains that service

these national incumbents. This, combined with

the opening up of independent supplies of financial

capital from the emerging banking sector, would

spur opportunities for the development of small scale

and medium-sized manufacturing sectors.

Thus, in a scale-intensive economy, one would

expect necessity-driven industrial activity to

gradually fall and give way to an emerging small scale

manufacturing sector.”

Basically Malaysia is on right track promoting entrepreneurship lead by the government (a vital component for a healthy ecosystem). But the majority entrepreneurs in the statistic may not be the Malays. I don’t see many of them committed to their enterprise. I don’t see them playing the global business as entrepreneur. I don’t think there are many of them in the emerging and highly profitable businesses such as IT, manufacturing, retailing or oil and gas. There is a handful of course. Recently, a senior executive pondered and asked why there are so many casualties with Malay entrepreneurs. He added, “Their products are as good but didn’t take off well.” Some spend hundreds of thousands (some millions!) in branding or rebranding, marketing and nice office to please the customer but fell short. Worse many were accused over reliant to government contracts, personal contacts and handouts that flanked them. On the contrary?

At first I believe all these accusations true to all Malay entrepreneurs. But then I see some of them made it well. How could that be possible? They run small businesses with financial prudence, very good products and most important profitable. Some grew to become large enterprise, some remained where they are for number of years and some became fair-size. I joined some of them to know further. I work for a few years and quickly know the answer why some Malay entrepreneurs successful and some not. I also have worked with non-Malays therefore understand how they ran their enterprises. Moreover, I also conducted some interviews with leaders of multi-millions and several billion dollar business owners, they concluded my hypotheses. These people are successful entrepreneurs and possess solid entrepreneurship spirit. They also have additional skill which I will tell you soon.

The problems are convoluted one. I realized it was structural and cultural problems of the Malays. Many Malay entrepreneurs are unable to sell professionally. Yes, the selling skills. That’s all. They did fairly well in other areas except selling skills. They had lots marketing ideas (although may not be the truest marketing form but still acceptable), they make great products (some technical people I met have superb skills through solid education), they are well networked but fail to sell – professionally. They soon wind down and suffered great losses.

There are two obvious reasons to this. Firstly, culturally the Malays are somehow not adept to selling skills. And structurally, none of us learn how to sell in school. After many years in sales profession, I think selling is a technical skill. You can learn and practice to get it just like any other skills. Let me tell you how it works.  My work in training and consulting in the area of human resource development allows me to see this first hand.

Since the financial crisis – Great Recession of 2008, many companies concerned over dwindling business. Sales are heart of a business. They say the customers were cutting back. Business is hard to come by. Therefore they have a grand plan; instead of carefully train them, the management decided to convert as many current workforces into sales force. This trend started back 10 years ago after 1997/98 economic crisis. At that time sales people were recruited by boat loads. Many of them didn’t have any experience because there wasn’t any need. The growth period means business comes to you. Competition is not around, foreign business is limited and efficiency as a strategy is not as ubiquitous. Sales people job at that time was to secure jobs by whatever means and there was limited training provided or around. The good news was they pulled it through. After so many years when the economy stabilized the sales people became order takers. Many of them reap the seeds they sowed during the bad times for continuous business for several years more until – another crisis hit. Now they have forgotten how to sell professionally because they never had the skills to begin with. They used to have big entertainment allocation, golf courses deal maker and karaoke rooms deal singers. To make matter worse, all of the sudden they see business landscape changed, competition from everywhere and innovation at breakneck speed. They couldn’t catch up. In 1997/98 crisis many of them, as senior staff, cashed in by taking separation scheme (VSS) especially in banking sector. They opened up own business and little did they know the “borrowed” branding and profile of their company that made those past sales happen. So when they are on their own, they lose the leverage. “What brought them here, can’t take them there.” The same is happening now. Can you sell?

Like I said, selling is a technical skill. Whereby you can learn the skills and sales usually happen quite naturally. However, selling skill is made of several other skills and to sell professionally is another ball game altogether. There are presentation skill, organization skill, business writing skill, speaking skill and closing skill. These are basics. I will not touch all of them here. But I will touch some of them by explaining what you can do to become better salesman.  “Sales happen by design, not by chance.”

  1. 1.       Prospecting (Looking for customers)

If any of my sales people say that they cannot get a sale because there is no customer, I will tell them to try harder, because they’ll get luckier! Today’s world presents us with so many types of customers. You can get customers from directories, personal contacts, professional network, magazines, internet, and associations report and so on. Find and call ‘em. What I observe here is many entrepreneurs are not hard working enough to look to other than personal contacts. How many contacts do you have on your cell phone? Although personal contacts (own networks) prove to be easy to penetrate (check out insurance and multi-level selling approach), but this network also prove to have the highest expectation and damage control will cost the highest if you screwed up.

Entrepreneurs have to be very careful because generally when you are new, you tend to screwed up in the first few attempts. But the degree of screw-up”ness” varies. Another issue is because they are your own network and maybe to be nice to you they might not tell you the truth. They simply don’t want to hurt your feeling. Therefore when you are looking for customers I would normally recommend someone outside, someone represent your ideal customer profile and someone that can tell it off your face. Look from other channels.

When you have a list of them, say 1, 000 of them (yes 1, 000 customers!), you need to qualify them. I use qualifying method as simple as ABC. ‘A’ is for top must see customers, ‘B’ is your must see but smaller in size and ‘C’ is good to know them for future sales. You also must note that each customer in each category can move up or down depending on their buying readiness. Just don’t get stuck up with the approach, because it’s just ABC!

2.       The Presentation (Showcasing yourself and your business)

This is where so many entrepreneurs fail miserably. The main reason is unpreparedness. A lot of entrepreneurs and sales people think they can “fry” or “BS” the customers. Like the saying goes, “You can fool one person at a time but you can’t fool everyone all the time.”They underestimate the customers right at the beginning. This disrespectful behaviour kills the sale even before it starts. It erodes your mind and soul. What many don’t realize is the customer is always prepared before the pitch. The customer search the internet, ask from the buyers or friends, crowd source from social media or read from the newspaper. Shooting your own foot?

During the presentation the entrepreneurs must make sure to well dress, smell and feel good, bring sales kit, prepare presentation slides, know who is coming to the meeting, have sales goals and able to handle questions. And these are just the basics. If you cannot fulfil any of mentioned, you should get someone who can to go with you. Bring your technical team, project member or bosses to help you out. Customer likes the feeling that you pay attention to his needs by being prepared.

From my experience, the Malays tend to be very shy. Either lack of confidence or too full of themselves. Why I say this because I have some of them who are too “full” (read fool!) and some plain “underdog” (also read fool!). The latter group is worse because they feel selling is a demeaning job and only for failures. Only those who manage to see the ultimate goal of selling is to provide something useful and benefits to the customers espoused selling.

3.       FU! (Follow up your customers)

There was a study and I have forgotten what it was but it says that, “Majority of customers want to be asked to buy because they want to feel you (sales person) really want their business”. This is so true. If you don’t ask you don’t get. The customers will only queue up (like iPad 2 launched recently) if your product pull-effect is great, else push-effect still needed. The Malays tend not to be so hard or pushy. You will be surprised to know that a lot of customers don’t buy because they were not asked to! They just walk pass and grabbed by someone else. How many of you had experience with customers who said they always bought from the wrong guy? Later they stereotyped the nice guy like you?

By being able to sell professionally we will be able to grow our SME sector. Trust me. Our problem is the supply of salesmen. Professional salesmen. The Malaysian Chinese has enormous supply and as you can see their SME growing fast and expanding globally. Besides because there are too many of them, the cost of hiring them is cheaper. The commission tend to be bigger. Unlike the Malays because the supply is small, the talent market rate not as competitive. Besides, its difficult to get a good one.

I urge all the Malay entrepreneurs to take up professional selling skills somewhere or learn from someone who knew. I know a place where you can get it cheaper – bookstore. But you got to read of course. Otherwise, just call me! 🙂

You see, it is very important to understand that selling is an important life skill. Everything around the world now needs selling. With better selling skills you will different and your sales will certainly climb. A recent research also shown that many CEOs now came from sales-related background. Try my seemingly simple solutions up there. Now, if you look at the Malaysian Chinese, they have selling in their blood from the mainland and it’s in history too (go read). It’s culturally embedded in them. I can understand why living in China is stressful because can you imagine competing with lots of them? It’s ferocious. I have seen some during my primary school whereby they almost strangle each other to top the class in Math and English. Professional selling is learnable skills and you should fight for it. When asked whether I should set up another venture and call myself an entrepreneur again, “I might!!” – because damn sure I can sell!!

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The 5 Myths of Innovation – The Magazine – MIT Sloan Management Review

Innovation is very close to my heart. Innovation is the new engine of growth for every business, big and small. It is hard to tell when is the right time to innovate, but i personally feel that innovation will be here to stay and is a core competency for company that wants to survive.

Innovation requires entrepreneurship. without entrepreneurship, innovation cannot thrive in organization; especially in organization. It will just become another R&D nice to have, process transformation that fail to take off, sucession planning that is not successful, failure to launch products, and many more. Innovation if not being laboured entrepreneurially, will fail indefinitely. Innovation is like kung fu, and kung fu means “hard work”.

The following article is about the 5 Myths of Innovation. You will find the article illustrate many examples on how others have used and experienced innovation activities first hand. while the examples given involve primarily large company (because it is easier to get data from them!), to my opinion even small companies also need to pay attention to this myth. Simply because small companies have less resources and less money to go to waste. When have with less money, we need to be creative, we need to hit it right the first time, and we need to spend time on our activities.

The myths will help you see how it has affected someone else in other companies, but by no means you will experience the same outcome in your company. nevertheless, i am sure you will know what is the obvious that you dont need to follow and what is grounded principles that can be recycled and reused by anyone; including you.

“Entrepreneurs innovate!” – Peter Drucker, Innovation and Entrepreneurship

 
The 5 Myths of Innovation – The Magazine – MIT Sloan Management Review
via The 5 Myths of Innovation – The Magazine – MIT Sloan Management Review.

PTMBD_Interview with Pak Agus from REFANES

If you have ever been to Indonesia you would realized that it a country that capture the spirit of entrepreneurship substantially. You will see many people involve in businesses from the petty traders to IT geeks.

I was at Padang a number of times where I saw “mobile” cigarette seller, rent-an umbrella (while raining you will see a lot of them) and street performers. A few times I was at Bandung to see fruit sellers (selling durian by the big basket and very cheap), songket traders and IT geeks.

During one of my visits I was introduced to this person where I have some work to work on with him and the friendship lasted until today. Having done my own business but I wasn’t successful, thus I am always eager to meet someone who has made it to the top. His name is Agus Widodo. I call him Pak Agus.

As soon as my project ended in Indonesia we maintain good relationship and exchange ideas. Pak Agus runs his own enterprise called REFANES other than being an IT Project Manager. I was very impressed with his enterprise because it is very successful and classic. After some time I thought it would be good if I can share his experience and some stories about his business, perhaps some other people might get inspired or perhaps expand their own business.

I did an email interview. I sent him a set of questionnaires and he has to answer at least 5 questions but he did 7! J  The main reason I did this interview is because Pak Agus business is a good example of small medium enterprises (SME) that is thriving. Besides, it also an exemplary model of how seemingly traditional and mundane business can grow exponentially and profitably by leveraging on modern technology.

The interview below has been edited for pleasant reading experience and context.

 Q1: Can you tell us a little bit about yourself, your business?

My business is in creative industry and my company is called REFANES. Our main product is innovative and creative Muslim fashion clothing especially for kids. We have been in business for about 4 years. Our main market is Indonesia and we are currently exporting regionally and other parts of the world such as Middle East through our agent distributors.

I am handling the management of the company and my wife is focusing in product design and communication to our customers. This is relatively a family business but we are expanding rapidly. Our karyawan (workers and artists) and distributors are mainly Indonesian. But we are open for foreign distributors if the model is right.

Q2. What are the products that you carry?

Our main products and very popular currently are the following:

a)       clothes and tudung (or jilbab) for kids and teenager

b)       dolls

c)       any bags with same character with the clothes

 Q3. Who are your market segments? Local and International?

Our main market is Indonesia (local). It is  close to 250 million population strong and majority is Muslim. If we can cover the whole Indonesia it would be good enough for us. On top of that, we also have exported to other countries such as Japan, Malaysia, Singapore, Qatar, US (California) and Saudi Arabia.

Basically, wherever there is Muslim population we would like to be there. You probably should take a look at our designs and you would be surprised how creative, innovative and modern Muslim world now, without compromising the faith. I am glad to be in this business.

Q4. How much is your business turnover/sales per year?

Our current turnover is around $ 500, 000-$700, 000. We are still growing and we are working hard to fulfill the market demand. I think the potential upside is still very huge. We hope to expand and add up more karyawan to meet those needs.

Q5. How do you see the prospect of your business with the current economic condition?

While the economy seems bleak, we are confident the business thrives. In today’s economy especially while it is interlinked, there are parts of the world that is not affected such as Middle East and parts for Asia like Malaysia.

Our strategy is to maintain our creativity and innovativeness because that is our main differentiation factor. Customers buy on differentiation regardless of price and economic state. They may not buy now but we need to create presence so when they recover they will buy from us.

Q6. What are your key success factors?

Our key success factors are our ability to constantly coming up with new creative ideas and new design in sustainable manner. In this aspect, I think my wife and her team has done a great job. It is not easy to get someone dedicated and consistently producing good stuffs.

On the other hand, we also keep improving our internal manufacturing process. We keep investing on new machines so we can hire new karyawan (workers and artists). Our production is still manual whereby we use the foot pedal sewing machines. Yes, the production is limited by that method but we maintain the high quality of our product. We created numerous jobs at the same time and still profitable.

Q7. What media channel do you use to engage your customers?

Just like any other business, we are involved in trade shows, magazine and social events. We are social products, so we need to be where the society is. Our distributors also our walking advertisers, with their good service they attract more customers. With our high quality clothing, we attract more agents and distributors. It works both ways.

We’ve been on blog for quite some time. And recently we jumped in to social media such as Facebook. In Indonesia there are close to 25 millions users on this and we are tapping into it. With social media we are able to post videos on our events and fashion shows for children. They love it. We gathered a lot of Fans/Friends of our products. We also have a website that has online catalogue. We also communicate with the distributors and agents online where ordering can me made from our website. Lately invested in SMS as another engagement model. 

We believe in communication and that’s why we invest in all these channels. We want to maintain good rapport with all our stakeholders so we can grow together profitably.

Children is REFANES main customer

Thanks Pak Agus! See you at Bandung soon! 🙂  

If you have other entrepreneurs from small medium enterprises that is suitable for this type of interview, please email to entreprenovator@gmail.com