Things Worth Knowing Before Running an In-House New Business
A rookie's personal opinions on running a new-business task force
For a typical SME, agency, or SI shop whose clients are public institutions or private companies — playing the role of the expert responding to their requirements, and through that process, solidifying expertise and generating revenue — putting together a new-business task force is an enormous undertaking.
Usually it's: no money means you can't do it, and once the money comes in, you're too busy to do it. Competition, is usually lost when there's a lot to lose, not when there's nothing to lose..
Before I roll out my half-baked personal opinions, sincere respect to everyone doing this.
What should the execution side do first?
What's below isn't about consulting external or other companies.
This is for the case of a monk trying to shave his own head — doing this to yourself.
Usually people do market research and trend analysis. Buzzer.
SWOT analysis. Buzzer. Buzzer.
Because planning a new business inside a single company(especially planning your own service inside a services-for-hire company)
is really no different from an individual choosing their own profession.
(Of course... plenty of people also pick their profession just to follow the trend..)
The first thing you should do
is, based on the TF team's personalities, hobbies, and backgrounds,
define a first-draft persona. Then, based on that temporary persona you've created, draw the stakeholder map.
You need to understand the temporary persona's state, range of action, spending habits, and so on.
Then, using that temporary persona as the standard, explore opportunities and make decisions as that temporary persona.
To say it again, this is on the premise that you're not outsourcing, and not consulting.
Because no matter how plausible or lucrative the business looks,
you yourselves will have to run it in the end.
A business has to be built on the assumption that it will be operated.
And you have to be able to answer: can real revenue actually come out of that operation on the ground,
and can that revenue produce added value over the long term?
The design methodology is different too.
People usually approach this from a UX angle, but that's a buzzer too.
Business doesn't run on the "correct answer." It runs on the internal conditions, temperament, and attitude with which you respond to uncertainty.
So service design methodology fits better than UX.
The design should come out of a service blueprint produced by that methodology.
Because it considers both the front stage and the back stage, it lets you derive more realistic alternatives.
But.. actually,
the first thing to do isn't setting up a temporary persona, and it isn't adopting service design methodology either.
What you have to check first, check constantly, and prepare your own response for is nothing other than the budget.
"Huh? I'm just an employee!" — you might say.
But well.. that's the reality.
If the contents of the operating budget for that new-business TF aren't shared and discussed in real time inside the new-business TFT,
then unless you're a large corporation, or unless the CEO personally runs the new-business TFT top-down and controls everything,
(usually it's the latter that happens..) ninety-six out of a hundred cases are destined to fail.
This post isn't written with outsourcing or consulting other companies as its baseline. And
it doesn't apply to big corporations with overflowing headcount and budgets. It's aimed at SMEs, small businesses, or self-employed operations — which, not by revenue size but by sheer quantity, make up the vast majority of businesses.
You have to think realistically.
This is the same reason why a business school master's or PhD can't actually consult for a neighborhood-market shop owner. Those shop owners (unlike most businesses) design their responses based on budgets — and, just like the book Strategy Puzzle describes, most management consulting is used less to actually come up with alternatives and more to provide justification for decisions that have already been agreed upon internally.
Just as an individual knows the answers to their own worries best, when you run your own business, you too are the one who knows your own problems best. Individual psychotherapy is similar — you find the answer in the process of confessing to yourself.
So you might ask, then, "How big should the appropriate budget be when running a new business?" Buzzer. It's not a good question.
A better one is: the TFT should all know the message that, at minimum, a budget equal to about 1.5 times the cost that will be incurred up to the estimated BEP (break-even point) in the initial business draft must be secured.
Naturally. Because you haven't even decided what business you're going to do, there can be no such thing as "the right budget."
You could call this confusing. It's the part that analysts and consulting specialists get most tangled up on. Because their skill is solving problems, not creating them. Of course, this may be a bit of a structural irony in society.
But it's not actually a hard problem. As long as everyone in the TFT can see it through the lens of "I am the owner," that's enough.
Before wrapping up this rambling post, here's an everyday analogy.
In the third year of university, the family's financial situation should be shared.. A decision has to be made about tuition. You have to judge which side — taking a loan or having family pay — is the more reasonable option in terms of interest, etc. If this part is vague, it becomes neither-here-nor-there... actually, "vague" might be the better word. You spend a vague period of time, and after graduation you also end up in a vague state.
But if it's clear — say, if you have to bear the cost yourself — you can make a plan. Roughly two options. One is to take out a student loan and focus only on studying. The other is to not take a loan and work while studying. Even within working-while-studying, multiple choices arise. Finding a part-time job that doesn't pay much but matches the direction of the work you dream of, and balancing that with long hours of study; or going for diverse experience or efficient pay even if it has nothing to do with your planned career — and so on. Beyond this, we're drifting far off topic, so I'll stop.
You have to recognize the point at which you need to plan. And you have to be able to judge how reasonable the scale and schedule of that plan is.
For that student, is there a "correct answer" to their choice? No. It's a problem without a single correct answer. It's even rash to talk about best and second-best, because everyone's background, circumstances, and attitude toward life are different.
This is similar to the situation of a new-business TF or head office. Which business category you choose isn't the important thing. What matters in reality is the position of the TF that has to run things in practice, and the position of the head office that has to stay patient with a direction that might come out no one knows when or how.
People who are truly crazy are rare. Most of the time, due to various circumstances, they happen? to be unable to handle their own inner emotions for a while.
Businesses rarely fail outright. Most of the time, it's the internal alignment of interests that collapses first.
To summarize,
1. (In a startup, the business budget is already defined..) For a typical in-house new-business team, you have to figure out how many months the surplus revenue coming from the existing business units can keep the currently configured new-business TFT running — in both manpower and physical costs. Then, based on that time horizon, define the TASK and GOAL ("business goal" doesn't feel like the right word here..) you can realistically achieve. And the TFT itself has to think about how to secure that time. Only then can the head office's effort not be wasted, and the two sides actually collaborate.
Through this process you can objectively analyze where the head office's own business needs to improve and come up with real, workable fixes.
Through this process you can generate problems of your own making — realistic ones, where success and failure are clearly defined.
