Business Concept 1: Competitive Advantage

For any business to survive in the long term, it must have a competitive advantage, or edge. To keep customers coming back to that business, it must have an edge over its competitors. Put simply, a competitive advantage is where you are able to provide goods or services which are:

• better
• faster
• cheaper

than your competitors'. 

You don't have to have all 3 of the above to have an edge over the competition. Just 1 or 2. If you can have all 3, that business will be a monopoly player in the industry. 

If you're in business or starting out a business, as youself, what is it about my product or service that is better, faster or cheaper than my competitors? If you can't answer this question, you might have huge challenges facing current and upcoming compeitors.

Who is a good competitor to go up against? Government Linked Companies (GLCs)! Why? Because government agencies are mostly inefficient in terms of operations and cost. Nobody looks after quality, they are slow, and nobody cares about the bottom line. Just look at the opportunities they create:

Astro Satellite TV: We have such bad quality programmes shown on national TV, the public is "forced" to subscribe to satellite tv to get better content for their entertainment. National TV is free to air, but people are willing to pay for a better service.

(Example of doing things better)

Toll Infrastructure Projects: Rather than waiting for government approval of funds, getting the work organised, etc, private companies can get the whole process carried out faster. They fund and build the highway themselves, stick a toll booth there, and the public pays for a service that would require the government another lifetime to have completed because of lack of funds, beauracracy, etc...

(Example of doing things faster)

Air Asia Airline: The national carrier, being the monopoly player in the field, never put operational and cost efficiency as priorities. Now this budget airlines are taching them a lesson or two in operational and cost efficiencies. For customers who percieve air travel as only getting from point A to point B, the full service carriers lose the edge of having a better service to the budget airline's edge of being cheaper.

(Example of doing things cheaper)

The above are some examples of how inefficiencies create business opportunities. When you get an edge over the competition, don't forget to keep looking back as competitors do not just sit on their hands doing nothing. Keep sharpening your edge and don't lose it.

"If you want to be successful, be a professional (referring to a specialist in a field), because amateurs get killed" 

- Quote from a self-made managing director whose company has a turnover of Sg$ 15 Million a year. Also echoed by a businessman who became one of the first few to own the latest Mercedes S-Class when it was available in my hometown.

Things That Make Me Go Mmm...

I'm a simple guy and one sure-fire way to cheer me up anytime is this combo set from KFC. 2 pieces of original recipe chicken, with cheezy wedges as a side order. I had this combo on Happy Tuesday, where they had 25% off for the chicken order (RM 5.62), and special savings for the cheezy wedges and drinks set. (RM 3.80). Total came to RM 9.90 after tax. Damn good value and a very satisfying dinner...

The story of Colonel Sanders is often used to illustrate persistence, the ability to overcome rejections, and the fact that age is no barrier to success. Colonel Sanders started off in a kitchen selling fried chicken, but was forced out of business when the government built a highway to bypass his restaurant and was broke by the age of 65. He understood the difference between being self-employed and a business owner, which is why rather than opening up and running another restaurant, he decided to drive throughout the country, persuading restaurant owners to use his secret recipe, and paying him a royalty in return. 

It took over 2 years and 1,008 rejections before he got his first "yes" 

(I wonder who actually counted the number of rejections he had...)

Imagine your own grandfather who is past retirement age, driving around the country for 2 years and getting nowhere with his "fantastic business idea". How many people would have stopped this grandpa? How many people would have said this old man is crazy and insane? How many people would have told this old man to face the facts and that there is no way his business idea is going to be accepted?

Colonel Sanders managed to become a millionaire in 8 years, starting off at the age of 65. He wouldn't have been able to achieve this as a self-employed restaurant chef because time would be a limitation to his cashflow. This is an extraordinary success story because extraordinary results come from extraordinary men. I am sincerely grateful to this once "insane, thick-faced, desperate and broke" old man for allowing me the dining bliss I am able to experience now.

Jack - Straight From the Gut by Jack Welch

A great read from the rise of Jack Welch, CEO of GE, to his retirement of one of America’s most admired companies of all time. There are more management principles in this book than you can shake an MBA stick at. Warren Buffet called this guy “the Tiger Woods of management”. I got this book to learn about his management ideas, so the best parts of this book for me were Sections II and IV. The rest of sections are an autobiography of his rise and endeavours as CEO.

Chapter 8: The Vision Thing

Good businesses needed to be separated from the bad, so there was the No.1 and No.2 concept – only businesses that were in market leaders (or No.2) were to be concentrated on, whereas the rest were to be fixed, closed or sold. The rationale behind this is if a business doesn’t have a long-range competitive solution, it’s just a matter of time before it’s over.

Chapter 11: The People Factory

Passion in an organisation is characterised by the 4 E’s:

• high Energy levels
• ability to Energise others
• having the Edge to make decisions
• ability to Execute promises

Employee passion is the graded on a scale of A, B and C

A’s should get increments 2 to 3 times more than B’s. B’s would get standard increments. C’s get nothing. Losing an A is a sin.

Bottom 10% elimination – 10% of the bottom performers have to go, no matter how highly they are regarded.

Chapter 13: Boundaryless: Taking Ideas to the Bottom Line

GE linked their lighting business with Wal Mart’s cash register system so that they know when they are selling out and prepare their orders before it sells out. Jack also learnt from Wal Mart that regional managers would fly in to visit the stores under them on Mondays and spend the next 4 days going through the inventory as well as visiting the competitor’s stores. They would fly back on Thursday nights and deliver their field reports on Fridays. Problems such as shortage in inventory can be sorted out on the spot.

Redefining markets so that you represent less than 10% of the total market share is a way to expand your mind on your room for growth. Take for example the 63% GE Power systems had on servicing GE products. If you broadened the market to include fuel, power, inventory, asset management, and financial services, that now shrinks into less than 1% but you now view a bigger potential for creating opportunities. It’s all in the mindset whether you perceive your market as saturated, thus do nothing about it; or a huge untapped market with vast opportunities.

Chapter 20: Growing Services

After sales service i.e. the supply of spare parts, servicing and repairing was overlooked in the high tech big equipment business. Putting emphasis in services meant that customers can justify their investment on a longer lifespan, while creating a steady income stream from the existing customer base. Today GE is spending as much time ensuring their installed “sockets” are increasingly productive, as they are on finding new “sockets”,

Chapter 21: Six Sigma and Beyond

Good example to illustrate Variation – the main concept of Six Sigma, is shown in this chapter. You can have a 50% reduction in AVERAGE delivery times and management would think you have done a fantastic job, but if the variation for this data is spread out widely, the customer does not take note of your “fantastic” improvement. The thing the customer notices is whether or not you deliver on the date you promised. Six Sigma is about consistency – delivering on your promises.

Differentiation

Jack discussed differentiation in various parts of the book, starting with Chapter 2, “Getting out of the Pile”. Everyone and everything has to have their point of differentiation or edge to stand out in life. In Chapter 2, Jack showed that even as a technician, he went the extra mile into making comparisons with other products even when not asked to do so. This is how he stood out from the rest and “got out of the pile.” The Six Sigma qualification is another way to stand out from the crowd.

Differentiation as a company was illustrated in Chapter 14, “Deep Dives” when GE wanted to break into the Japanese market. The point of differentiation he used was positioning the company to the “employer of choice for women” in an environment where women were not the preferred hires.

Chapter 24: What this CEO Thing is About

Some points of interest Jack wanted to talk about:

• Integrity – establish it and never waver from it
• The Corporation and the Community – CEO’s role is to assure the financial success of the company. Only a healthy, winning company has the resources and capability to do the right thing
• Setting a Tone – the personal intensity of business leaders determines the organisation’s intensity
• Maximising on Organisation’s Intellect – Take the best ideas and transfer them to others
• People First, Strategy, Second – Getting he right people in the right jobs is a lot more important than developing a strategy
• Informality – Creating an informal atmosphere is a competitive advantage. Passion, chemistry and idea flow from any level at any place are what matters. Everybody’s welcome and expected to go at it
• Self Confidence – courage to be open, welcome change and new ideas regardless of their source
• Passion – intensity covers a lot of sins. If there’s one characteristic all winners share, it’s that they care more than anyone else
• Stretch Targets – rather than get people responsible to deliver the numbers to provide a target (realistic or not), have the team come in with operational plans and discuss what tools they require to improve their performance and how far they can go with these new tools. This will stimulate discussion around new directions and growth.
• Celebrations – make the job fun
• Aligning Rewards with Measurements – make sure what you reward based on correct / proper KPIs.
• Differentiation Develops Great Organisations – chop off the bottom 10% performers on a regular basis
• Owning the People – Give the people their best opportunities to grow within the organisation
• Appraisals All the Time – give it
• Culture Counts – set it from day 1 and resisters have to go
• Strategy – Ask yourself the following:
• What is the detailed global position of your business and that of your competitor: market shares, strengths by product line and by region today?
• What actions have your competitors taken in the past 2 years that have changed the competitive landscape?
• What have you done in the last 2 years to alter that landscape?
• What are you most afraid your competitors might do in the next 2 years to change that landscape?
• What are you going to do in the next 2 years to leapfrog and of their moves?
• Competitors – 2 things to keep in mind:
• If the competitors are seem crazy and are practically giving their product away, it just means they have a better cost position or a strategic rationale for what it did – look into yourself and ask yourself what is wrong with you, not them.
• When you come up with an idea to blow the competition away, don’t assume they will be sitting on their hands doing nothing. They will strike back and maybe harder than you think.
• The Field – Headquarters doesn’t make anything or sell anything. Banging around the field is the best shot at getting some ideas about what was really going on.
• Markets vs. Mind-sets – Change your perspective on market share and you will open your minds to growth opportunities. (Example in Chapter 13)
• Initiatives vs. Tactics – Keep in mind your initiatives (i.e. company strategy), but keep coming up with fresh short term tactics
• The Communicator – There can never be too much repetition over important ideas you want to get through the company
• Employee Surveys – Make it meaningful. The one that GE found a breakthrough were fundamental issues around the theme: “Is the company you read about in the annual report, the company you work for?”
• Upgrading a Function – Whenever a department is not performing up to par, get all the best minds into energizing it.
• The Advertising Manager – Image matters
• Managing Loose, Managing Tight – Know when to meddle, when to let loose. There’s no form of measurement, just gut feeling and instinct.
• Chart Maker – Charts clarify thinking
• Investor Relations – Marketing people sold better stories of GE
• Wallowing – A discussion of people involved in the job regardless of job titles. Focus is on getting the job done better and diving into deeper issues
• Your Back Room is Somebody Else’s Front Room – If one department is not achieving its full potential, consider having it outsourced. The outsourcing company might do a better job and give its best
• Speed – Swift and quick decisions often prevail over regrets over delaying a decision
• Forget the Zeros – Breaking projects into smaller pieces can get greater focus and the entrepreneurial benefits of being small i.e. – agility, speed, and ease of communication

Business Review 1: Chicken Buffet Restaurant

I just came back from stuffing myself at a chicken buffet. Noticed some interesting business aspects of the restaurant, so feel compelled to jot them down. By the way, this post is dedicated to my first encouraging comment left on my blog by P J Stuart, Thanks :)

As I sat there and observed the business operations, I thought that it's quite a good concept. But before we go through the strengths of that particular business, let's discuss what makes a BAD restaurant:

1. Bad food or inconsistent quality
2. Bad service from that bitchy waitress
3. Food takes too long to be served
4. Unhygienic place
5. Overpriced

Let's run the above through with the buffet restaurant I just went to:

1. When the main course is fried chicken, it is usually hard to go wrong because to me, the hardest thing to cook wrong in this world is fried chicken. Even if the other dishes have been cooked bad, you don't usually complain because there's others to choose from.
2. The only interaction I had with the service staff is at the entrance where I paid my dining fee, then accompanied to my table. The rest was self service at the buffet bar, so very little interaction with the service staff, less chance of being poorly served
3. The buffet bar is ready when you are so no waiting time, unless there's a queue...
4. It was neat and tidy. The staff attentive because their only job was to clear the tables. They were focused on the job because they do not need to carry out the typical restaurant tasks like taking orders, sending out food to the right table, making recommendations, distributing and retrieving menus, etc... 
5. All customers are aware of the price before dining, so there can't be surprise because you pay first.

Other than point number 4, which is unavoidable in any premise, the buffet restaurant doesn't seem to be susceptible to the usual restaurant complaints... Now lets talk about the strengths, or advantages:

1. Ease of operations - the cashier can easily be the person who shows you to your table, and also help bring out the food from the kitchen to the buffet bar. Low skill sets and able to carry out different tasks. Even the complexity of calculating the bill is almost non-existent because everyone pays the same amount.
2. Easy to track profit and loss - as the boss, you should have a rough estimate how many people need to walk into your restaurant for you to break-even. Imagine if you're overseas on holiday, all you need to do is to have your manager send you an SMS on how many people visited your restaurant that day and you'll know you've made money or not.
3. High revenue per table- buffets are usually social events so there's usually more than 2 people dining per table.

Seems like a good business to own... easy to operate, duplicate and monitor. But what do I know? I've never run a restaurant in my life. Just sharing my thoughts. And even if this is not a good business idea, the morale of the story is, whenever you are at a business establishment, ask yourself questions like:

• is this a good business model?
  
• how do they make money?
• what are the potential weaknesses and threats?
• what else can they do to make more money?
• how do they keep the business running smoothly?
• what can i do better if i were the boss?

Ask more, learn more, grow more...

Best Roti Canai in Kuching

I've worked in KL for over a year, trying out different types of roti canai from their millions of "mamak" eateries and none even came close to what I can find back in my hometown... 

They put so much butter in the roti, pan fry it to perfection, and give it a big crush inwards before serving it. It is so crispy that it tastes more like the top bit of pastry from a baked pie than the regular indian staple food. Tastes so good, I don't even take it with the accompanying curry...

Here's where to find it: (location map)

D and D Foot Reflexology

Located at Batu Kawah, D and D Reflexology features masseuses from the Philippines and China. It opens from 11am to 11pm. For more information contact 016 8009977

Address: AE 204, Batu Kawah New Township, Jalan Batu Kawa, 93250 Kuching, Sarawak

How to Make Money

The following is my interpretation from the works of Robert Kiyosaki from the book Cashflow Quadrant

Kiyosaki sums up the 4 ways of earning money is by being a/an

1. Employee
2. Self employed
3. Business owner
4. Investor

Hence, the E-S-B-I Quadrant. I'm planing to go into detail of each quadrant in my future posts. Here's just the run through...

Being an Employee

Everyone knows this as this is the formula for steady income. We study hard to get our degrees, so we can work in a big and well known company with a respectable salary. You basically sign a contract (employment letter) to determine what you are worth on an hourly rate for your services to your employer.

The maximum income potential is: (your hourly rate) x (hours company is willing to pay you)

Your hourly rate is a fixed and the only way to increase the amount of income you have is to work more hours, but of course, there is a limit to how much you can work or how much extra time your company is willing to recognise

Being Self Employed

Being self employed is being personally involved in selling a product or a service, or simply put, being your own boss. Might sound like the best way to go, but unlike being the employee, there usually is no fixed working hours or holidays for the self employed because each blood, sweat and tear directly affect his income. the self employed person is central to the operations meaning that if he is not at work, the business would not run.

The maximum income potential is (profit margin per hour) x (hours worked)

Here, like the employee, your hours worked is limited by your own input, but of course, the limit to any human being is 24 hours a day. The only variable you can change is the profit margin per hour, so your focus is to increase it to the highest you can. Below are some examples of different self employed careers:

Doctors - High profit margin per hour compared to most service based industries. On top of that, the doctors in Malaysia sell medicine too. (In western countries, the doctors can only charge a consultant fee and the patient has to buy the medicine at a pharmacy). So selling medicine is a method that doctors use to increase the profit margin per hour.

Shop Keeper - Medium profit margin per hour. To increase the amount of sales per hour, they can source for higher margin products or find more customers

Small-time Food Seller - Low profit margin per hour. Like the above, they can increase the amount of sales per hour by improving their product mix or increasing their customer base.

Being a Business Owner

This is where things get interesting... The difference between a self employed and a business owner is that the business owner is not directly involved in the day to day operations of the business. The business owner has a self running business run by employees. His objective is to set up a business and getting the right people to run it, so his focus is to set up an effective system, or easier still, employ someone to set it up. The best way to determine if someone is a business owner or not is to ask him if he were to go on a 6 month holiday, would his business still be running by the time he gets back? If the answer is yes, then he is a business owner. If not, he is self employed. This question also shows that a business owner is not limited by time as his income is not directly affected by the amount of time worked. This is the biggest difference, and advantage, the business owner has above the self employed and employee.

His maximum income potential is: (profit margin per hour) x (business hours)

Because his income is not limited by time, he can use his time to set up more self running businesses, which in turn increases the amount of income earned per hour and number of business hours. For example:

Franchise / store branch owners - If the business has a fixed recipe or operation manual, etc, the franchise / branch can be duplicated. A 2nd store opening will double BOTH the profit margin per hour AND Business hours. Both variables in the equation above can be increased - unlike the employee or self employed where time is a limitation

Multi Level Marketing (MLM) - MLMs can actually make you into a business owner. After setting up an effective sales downline, you will notice that for every successful downline, you've just increased your profit margin per hour and business hours because your downline is using their time and effort to make you more money. Once again, no limit to profit margin per hour and hours worked.

The most important concept in this type of segment is that time is no longer a limitation of your income. The business owners build up cash cranking machines, which are the self running businesses, then continue to build more. This is where the good life is.

Being an Investor

An investor is a person who buys an entity and rents it out, and over time, the entity should increase in value from the time it was first bought to make it a positive investment. A person who buys shares from the stock market and sells it for a profit is NOT an investor. This is a common misconception that any person who makes money buying and selling shares to make a living is a "good investor". He is merely a trader making a profitable transaction. I'm planning to write an article on the difference between a trader and an investor. So from the definition above, here are some examples of investors:

Property Rental - The owner buys the property for an amount of money. Usually rents it out at the amount slightly higher than the monthly installment, and over time, the property increases in value. Because the rent covers the monthly installment, this means that the renters are actually helping the property owner pay off the mortgage. And when the mortgage is fully paid, the investor has just acquired a property of full value by paying just the down payment. If he put down $20k for a $100k property,

his return on investment is (100k - 20k) / 20k * 100% = 400% at the end of the loan period

but if over the time the rent is paid, the property value increases to say, 120k,

his return on investment is (120k - 20k) / 20k * 100% = 500% 

Running a Foodcourt - Similar to property purchase, you only need a downpayment, not the full amount if you can plan that the rent you are charging and monthly sales profit covers the bank loan. Over time, you are using just your downpayment amount to aquire a property in full value.

The concept of investing is not about creating massive amounts of cashflow, rather, using the smallest amount of money to acquire an asset at full value. Many people do not think of it this way. This concept of leveraging money is covered in more detail in Kiyosaki's book, OPM.

Dividends on Stock - The investor buys shares in a company that he believes will continue making money in the future, therefore profitable and pays out a dividend annually. He reinvests the dividends into buying more shares of the same or another company, and year after year, accumulates more dividend-paying shares. These dividends should give a better rate than the fixed deposit (FD) rates from the bank and on top of that (as a bonus), increase the value of the underlying share. Because selling the share for a profit is not the focus of the investor, the daily fluctuations of market price do not make him nervous. His focus is to acquire more profitable company shares that pay a dividend to increase the number of income producing assets. So another way to look at this is that an investor buys the company shares, rents it out to the company, receives rent in the form of dividends, and if he has done his homework right, bought the shares at below its market value, and the share price increases over time. When's a good time to buy shares at below its market value? During a stock market dip / crash / correction, when everyone's selling shares...

How to Win Friends & Influence People by Dale Carnegie

I read this classic book 2 years ago, so I'm making a summary so I don't forget. The title is self explanatory and it deals with a broad spectrum from social to business etiquette.

Part 1: Fundamental Techniques in Handling People

• Don't critisize, condemn or complain
• Give honest and sincere appreciation
• Arouse in the other person an eager want

Part 2: Six Ways to Make People Like You

• Become genuinely interested in the other people
• Smile
• Remember peoples' names
• Be a good listener. Encourage others to talk about themselves
• Talk in terms of the other person's interests
• Make the other person feel important - and do it sincerely

Part 3: How to Win People to Your Way of Thinking

• The only way to get tge best if an argument is to avoid it
• Show respect for te other person's opinions. Never Say "You're wrong"
• If you're wrong, admit it quickly and emphatically
• Begin in a friendly way
• Get the other person saying "yes, yes" immediately
• Let the other person do a great deal of the talking
• Let the other person feel that the idea is his/hers
• Try honestly to see things from the other person's point of view
• Be sympathetic with the other person's ideas and desires
• Appeal to the nobler motives
• Dramatize your ideas
• Throw down a challenge

Part 4: How to Change People Without Giving Offence or Arousing Resentment 

• Begin with raise and honest appreciation
• Call attention to people's mistakes indirectly
• Talk about your own mistakes before critisizing the other person
• Ask questions instead of giving direct orders
• Let the other person save face
• Praise the slightest improvement and praise every improvement. Be "hearty in your approbation and lavish in your praise"
• Give the other person a fine reputation to live up to
• Use encouragement. Make the fault seem easy to correct
• Make the other person happy about doing the thing you suggest