Ben & Jerry’s PartnerShop Conference Workshop

Ben & Jerry’s

PartnerShop Conference Workshop

“Turning your goals of social enterprise into a BUSINESS reality”

September 29, 2005

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What would you like to get out of this session today?

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Most organizations are not designed, they grow.Indeed, there are several studies which draw on biological analogies to

describe organizational phenomena. But not all organizations adapt equally well to the changing environment within which they grow. Many, like the dinosaur of

great size but little brain, remain unchanged in a changing world.-Charles Handy

What is the major problem?It is fundamentally the confusion between effectiveness and efficiency that

stands between between doing the right things and doing things right. There is surely nothing quite so useless as doing with great efficiency what

should not be done at all.-Peter Drucker

Behaving like a manager means having command of the whole rangeof management skills and applying them as they become appropriate.

-Herbert Simon

Everything should be made as simple as possible, but not simpler.-Albert Einstein

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What is a big challenge or decision that you need to address about your PartnerShop in the next 30-90 days?

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SNAPSHOT OF SMALL BUSINESS REALITY

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Snapshot of the Small Business Industry : Small Businesses Failure

Total number of employer companies

Number of employer companies that closed

Number of business bankruptcies

Closed Doors5.7

million5.8

million5.8

million

531,400 524,500 528,600

63,912 44,197 37,639

1990 1998 1999Source : U.S. Small Business Administration, Small Business Economics Indicators, 1998. March 2000 & Small Business FAQ, December 2000. The 1998 & 1999 Numbers are estimates.

Source : U.S. Small Business Administration. The State of Small Business : A Report of the President, 1997.

Percentage of Businesses Still in Operation Among….

Companies of All Sizes

(Soloists Included)

Companies that Hired

1 to 4 People

Companies that hired

5 or More People

76% 92% 94%

47% 80% 87%

38 % 76% 79%

53% 70%29%

21 % 41 % 62%After 10 Years

After 4 Years

After 2 Years

After 6 Years

After 8 Years

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Snapshot of the Small Business Industry : Small Business Failure

6%

10%

17%

19%

20%

27%

28%

39%

Other

Calamities (fire, flood, etc.)

Personal reasons (illness, divorce, etc.)

Dispute with a particular creditor

Tax problems

Inside business conditions (loss of customers,mismanagement, etc.)

Financing

Outside business conditions (competitors, cost increases,etc.)

Top reasons why small businesses declare bankruptcy:

Source : Teresa A. Sullivan, Elizabeth Warren, and Jay Westbrook. “Financial difficulties of small businesses and reasons for their failure,” Business Bankruptcy Project, University of Texas at Austin, 1998.

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COMMON SMALL BUSINESS MISTAKES

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Common Business Operational Mistakes(I wish my clients and/or I hadn’t made)

1. Ignoring your business and/or marketing plan once it is completed

2. Not planning and managing to multiple scenarios: best case, expected case and worst case scenarios

3. Explaining away poor results rather than taking them seriously and responding aggressively

4. Treating your profit center like a cost center; spending money faster than you earn it

5. Not developing and managing to key performance indicators

6. Hiring substandard talent to play a key role in the business

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Common Business Operational Mistakes(I wish my clients and/or I hadn’t made)

7. Not fully appreciating the concept of working capital; failing to invest some of the profits back into the business

8. Viewing business development as an expense rather than investment

9. Failing to become knowledgeable about the competition and staying that way

10. Failing to understand that debt properly managed creates leverage

11. Failing to measure and understand the importance and interrelationship of both employee and customer satisfaction

12. Hoping for different results using the same strategy and/or tactic that isn’t working

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Have you made any of these mistakes? If so, how did you

address the issue?

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WHAT LEADS TO SUCCESS

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Characteristics of a Successful Enterprise

Source : Harvard Business Review on Entrepreneurship. Harvard Business School Press. 1999.

Arthur Rock, one of America’s leading venture capitalists, cites the following

characteristics as the most important ones for the creation of a successful enterprise :

1) “Strategy is easy, but tactics are hard.”

• The key to turning a good idea into a good business comes from the day-to-day management of the company. Having the right people can be more important than having the right business plan.

2) “There’s a thin line between refusing to accept criticism and sticking to your guns.”

• Entrepreneurs must be brutally honest with themselves about bad news & disappointment while still believing in their ideas.

3) “A great idea won’t make it without great management.”

• Entrepreneurial companies go through three stages of growth that require different managerial skills. The best entrepreneurs understand how vital good management is to their company, and if they can’t provide it themselves, then they look outside and bring the right person in.

4) “An entrepreneur without managerial savvy is just another promoter.”

• It is important that entrepreneurs have a style that leads people. Best entrepreneurs are skilled managers who can be tough-minded with themselves and their team, who can say “no”, and who ideally are well versed in the technology on which the company is based.

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Determinants of New Venture Performance

Based on the findings of 62 independent research models, the following

functional relationship for new venture performance becomes evident :

New Venture Performance = f (E, IS, BS, R, OS)

E = Entrepreneur

IS = Industry Structure

BS = Business Strategy

R = Resources

OS = Organization structure, systems, and processes

where :

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

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Determinants of New Venture Performance : Organizational Structure, Processes, and Systems


When planning the organizational structure, processes, and systems of a new venture, keep in mind that :

• In a venture’s early stages of growth, flexibility of organizational structure,

processes, and systems has a negative effect on its probability of survival,

but a positive effect on its probability of success

• As a venture approaches maturity, formality of structure, processes, and

systems increase the probability of survival and success

• A venture’s organizational structure, processes, and systems are most

important to its survival during periods in which it must make the transition

from one stage of growth to another

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Investing in Organizational Infrastructure

While many start-ups lack formals systems & processes, at some point an entrepreneur needs to

start building some infrastructure in the ventures. The degree depends on the following :

Delegating tasks

• As the need for delegation arises, entrepreneurs may need to establish mechanisms to monitor employees and to establish standard operating procedures & policies.

• However, such mechanisms should not stifle employee initiative.

Specializing tasks

• As a business grows & tries to achieve economies of scale & scope, employees must be assigned clearly defined roles and grouped into appropriate organizational units.

• However, integrating the units successfully will be critical to reaching economies of scale & scope.

Mobilizing funds for growth

• Cash-strapped businesses that are trying to grow need good systems to forecast & monitor the availability of funds.

Creating a track record

• If an entrepreneur hopes to build a company that they can sell, then well-kept financial records & controls are essential in reassuring potential public markets & potential acquirers.

Source : Harvard Business Review on Entrepreneurship. Harvard Business School Press. 1999.

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What are some lessons learned that you would like to share with your

colleagues?

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THOUGHTS ON SOCIAL ENTERPRISE

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Potential Social Enterprise Landmines

• Accountability for Success

• Analysis Paralysis• Customer Satisfaction • Organizational Buy-In• Communication Issues• Expectations regarding

business outcomes• Funder Perception(s)• Knowledge/Talent

requirements

• Implementation Planning and Execution

• Legal/Tax Issues• Project Momentum• Money/Capital

Requirements• Organizational/Staff

Passion• Political Issues• Preparation/Due Diligence• Systems/Organizational

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Steps Necessary to Achieve Social Enterprise Success

1. Build the organizational capacity needed to support the enterprise

2. Get buy-in from board, staff and external stakeholders

3. Have an internal sponsor who champions the idea

4. Do your homework

5. Always keep in mind potential risks

6. Know the laws

7. Ensure effective cash management

8. Hire the right talent

9. Fill the gaps in expertise

10. Draw the connection to your mission

11. Define success for your organization

12. Develop a good business plan (an revisit it on a regular basis)

Source: Unlocking Your Profit Potential, BoardSource

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Questions?

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Session Wrap-Up

• What is your biggest takeaway from today’s session?

• How can you apply this learning to your business?

• What will be different tomorrow having gone through

this session?

• Other comments?

Ed RobinsonPresident & FounderCapacity Building Solutions Inc.301/[email protected]

APPENDICES

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Determinants of New Venture Performance

Based on the findings of 62 independent research models, the following

functional relationship for new venture performance becomes evident :

New Venture Performance = f (E, IS, BS, R, OS)

E = Entrepreneur

IS = Industry Structure

BS = Business Strategy

R = Resources

OS = Organization structure, systems, and processes

where :


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Determinants of New Venture Performance : The Entrepreneur

• The survival and success of a new venture will be a function of the

behaviors and decisions of the entrepreneur

• The entrepreneur’s personality, skills, experience, and values affect the

entrepreneur’s behavior and decisions

• The resources assembled by a new venture are influenced by the skills and

experience of the entrepreneur

• The industry which the venture enters, and hence industry structure, is

influenced by the skills and experience of the entrepreneur

• The entrepreneur’s skills, experience, personality, and values will affect

the formulation of the venture’s business strategy

• The entrepreneur’s skills, experience, personality, and values will affect

the configuration of the venture’s organizational structure

An entrepreneur affects a new venture in the following six ways :

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Determinants of New Venture Performance : Entrepreneurial Variables


Personality Characteristics

• Autonomy

• Confidence

• Locus of control

• Need for achievement

• Need for affiliation

• Need for power

• Personality type

• Risk-taking propensity

• Self-reliance

• Tolerance for ambiguity

Values & Beliefs

• Contribution to society

• Power

• Security

• Status

• Wealth

Experience & Education

• Age

• Entrepreneurial parents

• Experience in founding

companies

• Experience in large firm

• Experience in similar

positions

• Formal education

• General management

experience

• Industry experience

• Pre-startup training

• Shared experience of

founders

• Start-up experience

Behaviors & Decisions

•Ability to focus on essentials

• Decision-making process

• Flexibility

• Goal direction

• Length of work day

• Management style

• Organizing

• Planning

• Problem analysis

• Risk-reducing behavior

Skills

• Communication skills

• Financial skills

• Interpersonal skills

• Managerial skills

• Manufacturing skills

• Marketing skills

• Organizational skills

• Personnel skills

• Technical skills

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Determinants of New Venture Performance : Industry Structure


When considering the question “what business should the we be in?”, remember the following :

• Industry structure has both a direct and moderating effect on new venture

survival

• Industry structure has a moderating effect on new venture success

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Determinants of New Venture Performance : Industry Structure Variables


Structural Characteristics

• Degree of industry

concentration/fragmentation

• Elasticity of demand

• Entry barriers

– access to distribution

channels

– brand image

– capital requirements

– cost advantages

independent of scale

– economies of scale

– experience curves

– product differentiation

– switching costs

• Exit barriers

• Industry profitability

Structural Characteristics

• Industry value added

• Industry failure rate

• Industry sector

• Key success factors

• Opportunities to create

high barriers subsequent

to entry

• Product heterogeneity

• Stability of demand

• Stage of industry

evolution

• Size and growth rate of

industry

• Substitute products

• Technological and

regulatory changes

Industry Rivalry

• Aggressiveness of

competitors

• Competitors’

commitment and

dependence on industry

• Competitor diversity

• Degree competitors

have established

positions

• Degree of exposure to

competitive attack

• Excess capacity

• Excess cash, borrowing

position

• Level of competition

• Presence of small firms

with weak positions

Nature of Buyers & Suppliers

•Concentration

• Heterogeneity

• Importance to success

• Number

• Relative Size

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Determinants of New Venture Performance : Business Strategy


When considering the business strategy for a new venture, keep in mind that :

• A venture’s strategy has a direct and moderating effect on its survival and

success• A venture’s strategy to obtain resources from the environment has a direct

effect on its survival and a moderating effect on its success• A venture’s strategy for development and deployment of the resources it

controls directly effects its success and survival; the effect of strategy on

the former is greater than the effect on the latter • In its early stages of evolution, a venture’s strategy to obtain resources is

just as important as its strategy to deploy resources• As the venture approaches maturity, its strategy to develop and deploy the

resources its controls becomes more critical, and its strategy to obtain

additional resources from the environment becomes less critical, than in its

earlier stages

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Determinants of New Venture Performance : Business Strategy Variables


Planning & Strategy Formulation

• Breadth of planning efforts

• Depth of planning efforts

• Formality of strategic

planning

• Frequency of planning

• Functional area planning

• Consideration of multiple

alternatives

• Quality of strategic planning

• Rational and rapid decision

making

Goals & Objectives

• Ambitiousness of goals

• Targeted market share

• Targeted profitability

Strategic Direction

• Ability to maintain initial

strategy

• Aggressiveness of

strategy

• Clarity and breadth of

strategy

Entry Strategy

• Entry wedge used

– new products or services

– parallel competition

– franchising

– geographic transfer

– supply shortage

– tapping unutilized

resources

– customer sponsorship

– government sponsorship

– supplier sponsorship

• Order of entry

– pioneer

– early

– late

Scope

•Breadth of products

offered

• Breadth of services

offered

• Breath of customer

groups served

• Breadth of customer

functions satisfied

• Breath of technologies

utilized

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Determinants of New Venture Performance : Business Strategy Variables <cont’d>

Competitive Weapons

• Cost position

• Differentiation

– product attributes

– marketing mix attributes

– service

– technology

• Innovation

•Integration : forward &

backward

• Pricing strategy

• Strategic positioning

Political Strategy

• Alliances with competitors

• Alliances with customers

• Alliances with government

• Alliances with suppliers

• Alliances with other

stakeholders

Segmentation

•Extent of differentiation by

market segment

Investment Strategy

• Administrative functions

• Engineering

• Marketing

• Manufacturing

• R & D

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Determinants of New Venture Performance : Resources


The performance of a venture in a given depends upon more than just a good idea. Few ventures can survive for long

without resources. It is important to note that :

• The level of a venture’s tangible resources will have a positive effect on its

probability of survival but not necessarily its probability of achieving

success

• A venture’s level of intangible resources has a positive direct and

moderating effect on its success

• As a venture approaches maturity, the direct effect of intangible resources

becomes more important to its success

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Determinants of New Venture Performance : Resources Variables


Intangible Assets

• Access to capital markets

• Access to distribution

channels

• Access to labor markets

• Access to suppliers

• Access to raw materials

• Completeness of

management team

• Contracts

• Culture

• Databases

• Employee flexibility

• Employee specialization

• Functional skills

– financial

– manufacturing

– marketing

– technical

Intangible Assets

• Geographic location

• Intellectual property

• Licenses

• Outside consultants

– accountants

– bankers

– government sponsored

– professional

– university

– venture capitalists

• Reputation

• Social networks

• Trade secrets

• Trained professional

managers

Tangible Assets

• Current assets

– accounts receivable

– cash

– inventory

– prepaid expenses

– supplies

• Equipment & machinery

• Facilities

– plant

– offices

• Financing

– long term debt

– short term debt

– equity

• Initial size

• Land

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Determinants of New Venture Performance : Organizational Structure, Processes, and Systems


When planning the organizational structure, processes, and systems of a new venture, keep in mind that :

• In a venture’s early stages of growth, flexibility of organizational structure,

processes, and systems has a negative effect on its probability of survival,

but a positive effect on its probability of success

• As a venture approaches maturity, formality of structure, processes, and

systems increase the probability of survival and success

• A venture’s organizational structure, processes, and systems are most

important to its survival during periods in which it must make the transition

from one stage of growth to another

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Determinants of New Venture Performance : Organizational Structure, Processes, and Systems Variables

Organizational Structure

• Board of director’s role

• Centralization/decentralization

• Delegation

– administrative decisions

– implementation decisions

– line function decisions

– strategic decisions

• Flexibility

• Formality

• Number of hierarchical levels

• Organic versus mechanistic

structure

• Participate management

Systems & Processes

• Control

– financial

– functional

– startup process

• Human resources

– compensation

– hiring, firing

• Management information

• Speed of implementation of

new processes and systems

Ownership structure

• Dispersion of ownership

among employees

• Share of equity owned by

founders

Ben & Jerry’s PartnerShop Conference Workshop

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Transcript of Ben & Jerry’s PartnerShop Conference Workshop