Thursday, September 27, 2007

A tale of two companies

Once upon a time, there was a company S whose key business was delivering technological and engineering projects. Since company S was closely-related to the local government, most of company S’s projects were also government or military related.

And then one day, there was this multi-million-dollar project opened for bidding. Company S was interested in the project, but did not have the technological abilities to develop it. Thus, company S decided to partner with an overseas company X, even although company X did not have a ready solution at that point of time either. As a result, the two companies secured the project, with company X as the main contracter and company S as the sub-contracter.

Company X then started with the design of the architecture down to each individual components. As fulfillment of the partnership requirements, company S sent a few young software developers over to company X to assist the developments. These young developers of company S were then deployed to work under the various group leaders of company X, throughout the development stage. However, due to the lack of experience of these young developers, they were not involved in any software design and rarely touched on the development of the core components of the system.

After the project was delivered, these young developers returned to company S and were subsequently dispatched to other different projects. Over the years, most of these developers eventually left company S, or proceeded their careers as managers. On the other side, company X retained all the architects, designers, technologists and developers of the project, and immediately proceed to develop version two of the system.

A few years passed by, and the customer decided to upgrade their existing system. This time round, company S and company X approached the customer separately. Company S presented to the customer their ideas and past track records. Company X also presented their ideas and past track records, but on top of that, they also gave the customer a demo on the version two of their system, which was a much improved system that met most of the customer’s requirements. When asked to quote for the project, company S quoted a figure and timeline equivalent to that of developing the project from scratch. Whereas company X quoted a much lower figure and timeline, due to their possession of an advanced system baseline. Needless to say, company X got the project.

The mistake made by company S was what I had often critised about. That is, they failed to capitalize on their initial advantages and build up their own technological and intellectual assets. Company S managed their company from a short-term business aspect, while company X managed from a long-term technological aspect. Many local companies that I have seen are making the same mistake as company S, just that most of them don’t have the financial backing and customer relationship of company S to survive the mistake.

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Friday, September 14, 2007

Entrepreneurs also have comfort zones

Just recently, I read paddy’s post “Complacency, a big price to pay later”, which talks about how some employees tend to stay in their comfort zones, live from paycheck to paycheck, and face problems when they get retrenched. I believe the tendency of staying within one’s comfort zone, either knowingly or unknowingly, is a common trait among most working class people. So what about entrepreneurs ? Does entrepreneurs also have comfort zones? I believe the answer is yes.

Normally, one would think that entrepreneurs are highly-motivated risk takers. So how does being a risk taker corelate with a person who stays within his comfort zones?

An entrepreneur’s comfort zone usually originates from a self-perceived sense of security. At the initial stage of startups, entrepreneurs are normally driven by their passions and enthusiasm. They would probably work almost 7 days a week and not feeling tired. When time goes on, some survive and some fail, some struggle while some manage to achieve stability. The problem is, upon achieving a certain level of stability, some entrepreneurs may gain a false sense of security. And that false sense of security may eventually lead to complacency, or what I called, an entrepreneur’s comfort zone.

Very often, we have heard people saying that a certain entrepreneur had survived for a couple of years and thus his company is already quite stable. However, being around for a long time does not necessarily mean that a company is in a stable state. Or in fact, is there really a stable state for a company? Personally, I have seen companies that had been around for more than 10 years being closed down, due to various reasons.

So what exactly would happen if an entrepreneur stays in his comfort zone? Firstly, the entrepreneur would probably be contented with the status quo, instead of looking at how to expand his operation or thinking about possible future challenges. As a result, the decisions made by the entrepreneur would most probably be geared towards short-term gains and immediate monetary rewards. This can become quite dangerous as we all know, the world is changing very fast and sometimes it takes only a subtle change in policy or technology and whatever competitive edge you possessed can dissappear within a blink of the eye. Similar to an employee who lives from paycheck to paycheck, some entrepreneurs live from project to project without seriously considering building up the intellectual and other intangible assets of the company. When times become bad, these entrepreneurs may be surprised to find out that the foundation of their companies are actually much more vulnarable than they thought.