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In search of brave, new business worlds -- The Entrepreneurial Mindset

Strategies for Continuously Creating Opportunities in an Age of Uncertainty

By Rita Gunther McGrath and Ian MacMillan

*Publishers: Harvard Business School Press

*Price: $ 29.95

SEVERAL studies show that less than 10 per cent of those who buy a book read past the first chapter. And the first chapter of this book is nothing to write home about. If you want to stick through the book, you would be better off starting with th e last chapter -- that's the one that really tells you what the book is all about and how it can be used effectively. Start with the last chapter, skip the first two chapters and go directly to the third chapter.

As the title suggests, the book is about entrepreneuring -- for both managers and strategists of large companies, as well as for start-up entrepreneurs. Both authors are entrepreneurs-turned-academics. One is Associate Professor in Management at Columbia University and the other, Professor in Management at the Wharton School, University of Pennsylvania.

The Entrepreneurial Mindset is not about generating ideas. You don't need a brilliant product to capture a market. It's about action -- and strategy. It's about finding niches in existing markets, entering those niches, and using them as a base for expanding further into the market. In order to effectively differentiate his products or services, resegment the market and block competition from entering his chosen segment, the entrepreneur needs certain tools of analysis and strategy. The book attempts to give him those tools. It doesn't always succeed at first read but, as the authors write, you have to keep coming back to it.

The book really starts off from the third chapter, which shows how to create an attribute map to help you understand how a product or service is addressing a customer's needs. According to the authors, there are three customer attitudes -- positive, negative and neutral -- and three product attributes -- basic, discriminator, and energiser. Arranged in a table, the nine cells formed can help map your product accurately in terms of strengths, weaknesses, opportunities and threa ts.

A positive-basic is a `non-negotiable' -- something that absolutely must be included in the product or service and that the customer takes for granted. It doesn't really cause any differentiation to take place in the customer's mind, but you ignore it at your peril. For instance, a remote control with a colour TV is today seen as a non-negotiable. No one even looks at it twice; but try not providing one and watch how fast the competition eats into your marketshare.

A positive-discriminator is something that differentiates your product/service in some way. For instance, worldwide, Volvo cars are seen to be `safe'. They differentiate on the basis of safety. The cars may look a bit bulky because of reinforced bod ies, but for a family placing priority on safety, Volvo's the choice.

A positive-energiser is something that absolutely delights a customer. Nokia, the mobile phone manufacturer, found that customers get delighted when presented with an attractive-looking instrument with replaceable covers to match their clo thing or make their instruments look trendy and sporty.

Negatives are what disgust or turn away customers. But negatives are also opportunities. Many entrepreneurs capture a great source of business by fixing the negatives that competitors fail to address.

Companies usually try to create value by adding extra positive features. Opportunities created by removing negatives are often overlooked -- and removing a negative is not only cheaper than adding a positive, it can also generate similar revenues .

A negative-basic is something that customers tolerate (even though they don't like it) simply because it comes with a product they do want. For instance, we tolerate long waits downloading from the Internet because we want access to it. But if someone comes along with technology that does away with the waits, he will grab a great business for himself. Eliminating tolerables gives an edge in the business-to-business world.

A negative-discriminator is a `dissatisfier'. As soon as a customer discovers that he can avoid dealing with the negative attribute of your offering (and all offerings have negative attributes) by buying a competitor's product, that attr ibute is no longer a `tolerable'. It becomes a dissatisfier that differentiates you from your competitors -- in the wrong direction. For instance, when high-quality Japanese cars began invading the American market, the comparativel y inferior products of the American big-three took a beating. What customers had tolerated for years suddenly became intolerable when presented with superior alternatives.

A negative-energiser is an `enrager'. When customers experience anger, fear or disgust, your product has the potential of being an enrager and you have to either eliminate the enrager or leave the market. Johnson & Johnson encountered this effect in 1982 during the Tylenol scare when some crank laced the company's popular capsules with cyanide. J&J's reaction has become a case study on what to do when faced with enragers. It recalled every single capsule and halted manufacture until it came up with new, tamper-proof packs. The product is now again a best-seller.

Neutral-basics are `so whats'. They don't affect the buying decision of many customers and, instead, just add to the cost. If a `so what' can be eliminated, you can reduce costs and thus make your product more attractive.

Neutral-discriminators are `parallels'. They're not directly related to the product but can add to the customer's perception of value. A promo that gives, say, a PET jar with a coffee packet is a parallel. The danger of parallels is that customers can get used to them and resent their removal. For instance, the frequent-flyer miles started off as a parallel promo. Today, no international airline can afford to do without it.

Using the attribute map, you can spot a niche that is not being served currently. But once you do so, what next? You not only have to protect your niche, you also have to expand your marketshare. The authors suggest four ways -- on slaughts, guerilla campaigns, feints and gambits. Let's examine `onslaughts' and `guerilla campaigns' here.

Onslaughts are direct, aggressive attacks on an established company's position. Andrew S. Grove, former chairman of Intel, describes in his classic book -- Only the Paranoid Survive -- how Intel, the leading semiconductor manufacturer, was forc ed to give way under the Japanese onslaught. The Japanese attacked using a 10 per cent rule -- they undercut Intel by 10 per cent in every target segment and with every customer. When Intel retaliated with a price cut, they again reduced prices by a further 10 per cent. Very soon, Intel was forced to exit the DRAM business. Onslaughts are expensive affairs and smaller entrepreneurs can't afford them usually. There are exceptions though: Remember Nirma?

Guerillas use small and remote towns and villages as a base to expand their areas of operation. Similarly, a guerilla campaign for marketshare involves occupying an unpopular niche that other established players don't touch and using that niche to build up business and expand into more attractive niches.

The entire book is a study in practical ways of entering markets. The authors constantly stress that a niche can always be created and you only need to know how to systematically identify and occupy niches. But does it really work? Does reading the book make it easier to identify niches?

Recently, I was upset with a company that insists on sending me documents by regular post. Half the time I don't know whether the delayed documents are in the mail or have been lost. I do understand the company's position. I'm faced with a similar problem in my mailing. Ordinary post is not always reliable, couriering is expensive and registering letters before 4 p.m. is a pain. Does a niche exist here? Let's look at an attribute map of couriering. The negative factor is the pri ce. The positives are reliability, overnight delivery and desk pick-up. But, as far as I'm concerned, I don't need overnight delivery. It's fine by me if my documents reach major Indian cities after a day's gap. For me, overnight delivery is a `so what' that adds price. And on asking around, there are many like me. Almost 70 per cent of documents sent don't need overnight delivery, but do want the attributes of reliability and desk pick-up.

I checked with three major courier companies and none of them offer lower charges in exchange for deferred delivery. They are focused so much on speed that they overlook the fact that some customers don't mind a day's delay if the service is rel iable and comparatively cheap. Put a document into the Mumbai Mail tonight and, if it can be on my client's desk the day after tomorrow at rail rates rather than airfreight rates, I'm a happy customer.

If one of the courier companies reduces the negative (price) by doing away with the `so what' factor, they could just have found a niche that's not currently serviced by the big three.

Coming back to the question, `does the book work?' It sure does.

Porus P. Munshi

The author is a Chennai-based HR consultant. He can be reached at porusmun@hotmail.com