Place Branding and Life Cycle Management – Entrepreneurism

Place branding is often thought of as advertising and promotion, but it is much more than that. Place branding also involves effective economic life cycle management.

As an economic development professional, you not only need to be concerned with the health and aspirations of the mid-to–large sized employers in your geography; but, you also need to be watchful of the health of the entrepreneurial community.

Effective economic life cycle management requires a virtuous circle of successful entrepreneurial companies succeeding to become mid-sized and eventually grow into large scale companies which in turn create a demand for new entrepreneurs to help meet business challenges. Economic systems built primarily on entrepreneurial activity are not as robust because the innovation efforts are more narrowly focused on meeting a specific company’s challenge versus broader commercialization.

Failure to have an active entrepreneurial community leads to economic system atrophy and an eventual death spiral as many larger employers run the risk of becoming increasingly irrelevant in the market and demand for their product or service declines. On a macro (and admittedly simplistic) level, effective life cycle management helps minimize this risk and leads to economic health and vitality.

Just as a product brand manager must listen to the voice of the consumer and manage the brand product portfolio effectively by adding and subtracting line extensions to maintain overall profitability; so does the place brand manager need to listen to the voice of the capital investor and adjust the business climate to ensure sustainable long-term job growth and economic prosperity.

In order to create a better business environment for entrepreneurial success, it helps to understand the key drivers of failure. To that end, I asked a group of entrepreneurs, the following question – “Based on your experience, what are the three greatest barriers to entrepreneurial success?”. The answers fell into four categories – 1) capital access, 2) over confidence, 3) non-competitive idea and 4) poor management.

CAPITAL ACCESS Lack of Capital (2)Not enough money to get your enterprise aloftLack of Start-up funds in cash and encouragement by the business community to secure borrowed funds for day-to-day operationFeeling like a small potato in a giant field of turnips (not being taken seriously in order to receive actual no or little cost help whether that be financial or council.
OVER CONFIDENCE Eagerness to take on debt.  This limits one’s options.Lack of Talent (2)Lack of objectivityFailure of the entrepreneur to understand his/her own skill set limitations.Entrepreneur’s failure to fully recognize the importance of professionally selling the idea or concept. (i.e. thinking a unique or technically innovative idea will sell itself)”The Ladder of Inference”, a principle in cognitive psychology wherein the human mind filters incoming information to support prior beliefs. This tends to distract the listener into distorting genuine new information.

Inability to do proper full-scale consumer research in order to either strengthen the idea or throw it out and start fresh.

Everyone is so involved in themselves, which means the product or service being developed has to revolve around a mindset which is completely closed off to a new idea. People generally don’t allow themselves enough time to truly listen to something that could be a prize especially when the entrepreneur has little money or “official” education.

NON-COMPETITIVE IDEA Lack of winning IdeasThe time limitations of making a 60 second elevator pitch as a project manager. American’s like simple answers. Life is not so simple sometimes. A new idea could be genuine and ultimately valid, but if overly summarized, it could appear to be wacko.Inability of entrepreneur to develop products or services that customers actually want and will pay for (listening skills).Most companies don’t: • Define who their brand • Communicate who they are • Deliver what they promise Here’s the checklist: Who are you as a company? What exactly do you do? What makes you different than your competitors? Who cares about all this? Is your difference compelling enough to motivate action? What do you promise to your customers? Can you deliver it? Can you deliver it consistently?
POOR MANAGEMENT A failure to create a business plan that allows for adequate profit.A failure to vigorously control costs. Entrepreneurs should endeavor to be the low cost provider.Lack of processLoss of focus on the best uses for early limited capitalFailure to pull in people with complimentary talents to balance the entrepreneur’s – and willingness to trust and empower themLack of strong marketing and sales support: understanding the customer your product services and ability to reach them

Some of the best talent forgets that as a system becomes more complex, a greater portion of the continuous process improvements result from increased efficiency in inter-personal business relationships. In other words, there are many elements to success in the marketplace, other than just having a better fundamental widget or gadget

Not hiring the right people to get on the bus, and once on, not figuring out which seat they should be sitting in.

Once success sets in and real profits are being made, many first time entrepreneurs seek to increase material possessions transferring company earnings to person wealth rather than taking the profits and re-investing in organizational growth, business and product development, and talent acquisition objectives

Failure to develop a Business Mindset which is required to protect earnings, build bench-strength, and obtain capital assets as well as plan for the future

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3 Comments so far

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  2. Michael Stumpf

    December 26, 2012

    Interesting observations, Ed. As both an economic developer and an entrepreneur I’d add a couple thoughts to the discussion.

    Capital access – Very, very few entrepreneurs really need capital in the sense that most economic development programs approach the issue. The vast majority of new businesses do not have substantial capital costs for buildings, machinery and equipment, and inventory. They may need a computer and software, or some initial inventory, or perhaps some tools. But these are not large costs and are typically self-funded. What they do need is operating funds. Cash flow is the killer of most start-up businesses I have seen. One of the reasons is…

    Overconfidence – Too many entrepreneurs believe they will begin making money right away. They also tend to underestimate their costs to make money, or just as bad, think they can get away with not spending money to make money. They underestimate the strength of their competitors, the comfort factor that keeps potential clients/customers from switching, and the need to get in front of potential clients through advertising, calling on them, etc. Established businesses often expect to have a new location open for two or three years before it becomes profitable, and rely on an established reputation and concerted marketing effort to make it profitable. Entrepreneurs often open with only a few months of cash in the bank and little money for advertising, expecting traffic to walk through the door so that they can begin profiting right away.

    Poor management – Here I see the issue as one of being able to make good decisions. I mentioned the failure to advertise already, but another example may be Groupon. Offer an unbelievable discount to get people through the door, and expect that they will become loyal customers, making up for the losses you take in making the offer. It sounds questionable, and as it turns out, many of the businesses that did it suffered rather than profited. Most could have figured that out before they agreed to do it, but they got caught up in the hype. This happens because they are “sold” by people who do not have their business’s best interest in mind, because they are carried along by the crowd, or because they do not have people who know better to advise them – or maybe the people advising them do not know better.

    All of the above are the tough ones because, except for these factors, the businesses might be less likely to fail. They can be addressed. As for a non-competitive idea… well, as economic developers we should know when to put our resources elsewhere. Just a final thought, though. Sometimes we are not so good at figuring out what is a non-competitive idea and what is truly a game changing innovation.

  3. Tim Guen

    December 31, 2012

    One important nuance to the “Poor Management” barrier you cited: as an enterprise transitions from development stage to early-operational stage, a different caliber of leadership is required to imbue the entire employee base with the same level of entrepreneurial spirit that the founder possesses. Too often, an entrepreneur feels a sense of entitlement to the proceeds of the business, and/or exercises a control dominance over the company’s employees that saps the spirit and passion of those who are critical to the success of the enterprise.

    This is not a matter of intelligence or business “smarts”. It is really driven by a personal orientation of the individual, and how that translates into the stated mission and purpose of the company.

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