Entries RSS · What are the ingredients to launching a company?
Hello again. This here is a typical “fill in the blanks” write-up. I like thinking about starting companies, haven’t as yet engaged on starting one, though I feel relatively confident that I understand what it takes, but also that there are several ingredients that I still lack.
Following is a diagram of all the components of a company, that I could think of, without opening a book or consulting other people. That is where you come in. If I made vital errors in my logic, I would appreciate being corrected, no matter how harsh your criticism may be.
Ultimately, I see companies as coming out of a number of basic building blocks. An important one is the idea, and in order to bring that idea from production to market, you need an excellent multidisciplinary team (which includes partners), sufficient cash, and the right legal structure, the latter serving as both protection for an idea and for its stakeholders. I call them basic, they are in fact essential, and the hardest to achieve of all.
Decisions on the production side include where to locate your “plant,” the production-facilities needed to produce your product as cost-efficiently as possible. You need to decide on materials, which in the case of IT is hard- and software, needed to produce your product. And design also plays an important part in the way customers perceive your product. All of which feeds back to the basic building blocks that ensure that these things are executed well, funded, and protected legally.
Logistics is a function that I usually consider as (partially) outsourced, because it is both a relatively expensive process and there are plenty of efficient global operators that can take over most of that task. As production increases it may be logical to take over that function yourself, though it’s still better to hire a ship than to buy it, I think. And of course, economies on the internet are entirely different, though things like hosting are again more logical to be outsourced most of the time.
Decisions on the sales & marketing side include whether to target businesses (B2B) or individuals (B2C) and whether to operate nationally or internationally. This is a pretty complex decision-process, which comes with a number of trade-offs. If you target too large a market, your production may not be able to handle it. If you’re a B2C company, growing international may require working with local partners (B2B), and the same applies to national-to-international B2B-strategies. And you need to position yourself well enough to reach the right customers and protect against competitors & new entrants. Again, commercial strategies require the right team skill-set, sufficient funding, and legal structure that protects your business, nationally & internationally.
So, while I realise I’ve been speaking in generalities all this time, it’s nice to hear where my logic falters, or where I see things too simplistically or complex. Please let me know in the comments.
Time and inspiration permitting, I may write a number of more focussed posts in the future, asking about strategies towards attracting the right basic building blocks (ideas, people & money mainly), as well as regarding the production and sales & marketing functions.
Vincent van Wylick is a co-author on Tech IT Easy. Rumours of his demise have been far exaggerated (by himself mainly).
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That diagram is quite simple. In a good sense.
Maybe you’ve got couple of things with too narrow definitions. Instead of “Production” and “Sales & Marketing” I ‘d suggest more general things. The first is in a sense the core of what the company does, and while “Core” might be too consultant-marketing-speak, “Operations” has a nice ring to it. The latter, on the other hand, while Sales and marketing are, among others, support functions for the “core”, but I think highlighting sales and marketing is quite important too, so I don’t know how to group that one.
Also, it’s worth noting that because everything expands from The Idea(tm), this style of diagram could give you better room to extend your thoughts better… maybe. Or maybe I’m just having one of my (rare) creative hang-overs. http://i31.tinypic.com/micftf.png
I like the diagram too.
Building a company is indeed like assembling blocks.
However, the idea of jumping from one block to another is largely theoretical: as an entrepreneur, I have to cope at the same time with an unbelievable number of topics.
The two ingredients that matter are:
A. A working product
B. People who want to use it
Everything else is subordinate to those. A is about having money and people who can implement it. B is having a good idea and good marketing.
I think your diagram is too complicated.
Hello Vince,
First thing first : your diagram, for as complete as it may seem at first sight in regards of the multiple aspects of operating a company, misses the true point : it’s all closed loop.
You can’t start, build up, and run a successful company without setting its structure upon a feedback loop. Each department needs to talk to each department. Everything is heavily tight up. Marketing needs to talk to Production which needs to talk to Sales etc etc etc.
Then, second yet most important parameter : THE CUSTOMER. I don’t see the Customer on your diagram. Read Peter Drucker : a company creates a customer. The company delivers a service (or a product) to the customer, who in returns delivers money to the company. Full stop.
This is your diagram now :
/–service–>\
“COMPANY” “CUSTOMER”
\<–money—/
Then you can setup your structure accordingly : make every single department able to reach the customer, one way or another.
Thanks everyone for the great feedback! Even though you all came from different angles, it may me think a great deal about the business-process. I’ll be back, as soon as I have some more thoughts about this.
I’m in line with Marc here: customers first.
Ok, I’m researching for my next post, on how to get to that customer.
Great startup guide and neat explanations.
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