Business ideas: I am the greatest

What is the greatest business idea ever? Everybody has their favourite. For
some it might be Henry Ford’s decision that consumers ­ and his motor company ­
would benefit from standardised, mass-produced vehicles, or perhaps Bill Gates
deciding software, not hardware, was where the fortune lay in computing.

Ideas are great not simply because of immediate benefits, but because they
provide inspiration and a way of working that others can follow. One of the
greatest ideas was ‘scenario planning’ pioneered by Shell.

In the 1960s Pierre Wack, Shell’s head of group planning, wanted to discover
factors, other than technical availability, that might affect the future supply
of oil. By exploring possible changes to governmental policy, it became apparent
that oil-rich governments were unlikely to remain amenable to Shell’s
activities.

But for Shell, the 1973 Arab-Israeli war limited the supply of oil, raising
prices five-fold, so their scenario work meant they were better prepared than
their competitors to adapt. Shell knew which governments to lobby, how to
approach them, where to diversify and what action to take.

Scenario planning enables leaders to manage uncertainty and risk and to
understand the dynamics of the business environment ­ the forces at work shaping
the future. It helps recognise new opportunities, assess strategic options and
take long-term decisions.

Hogging the limelight

The challenge of building customer loyalty has spawned some of the best ­ and
worst ­ business ideas. Harley-Davidson uses its knowledge of customers’ needs
and an appeal to emotions to build trust and bond with customers.

Their managers meet customers regularly at rallies where new models are
demonstrated. Advertising reinforces the brand image, promoting customer
loyalty, while the Harley Owners’ Group membership club entrenches this loyalty,
ensuring customers receive benefits they value. The result is that customers
trust Harley-Davidson and this trust is used to develop stronger bonds and
greater profits.

Another genius idea is microfinance ­ lending small sums of money to
entrepreneurs in the developing world. Microfinance targets the bottom of the
wealth pyramid, and its pioneers, Muhammad Yunus and the Grameen Bank that he
founded, were jointly awarded the Nobel Peace Prize in 2006.

It works by loaning customers relatively small amounts of capital (for
example £50) at a commercial rate of interest. This leads to the development of
a product or the realisation of an idea.

The micro-lending process then stimulates a self-sustaining cycle of wealth
creation. By addressing humanitarian concerns, microfinance provides hope and
promotes prosperity. It encourages responsibility and generates greater
participation in society, which can lead to improved political, social and
economic stability.

Demonstrating the simplicity of great business ideas is the service-profit
chain and employee engagement. It may seem obvious, but engaged and committed
employees do a better job for customers and this translates directly into
greater profits.

Sirota Consulting surveyed more than two million managers in 237
organisations worldwide from the 1970s to the 1990s. It identified three factors
affecting employees’ commitment:

• Equity ­ being treated justly in relation to the basic conditions of
  employment;

• Achievement ­ taking pride in one’s accomplishments by doing things that
  matter and doing them well; and

• Camaraderie ­ having warm, interesting and cooperative relations with
  colleagues.

Licensing is another simple, but effective, idea. It may seem ordinary, but
when it works well ­ as with Microsoft licensing IBM to use its operating system
and, in the process, creating a standard for the computer industry ­ the results
are impressive, benefiting businesses and customers.

We mean business

In the 1920s, US President Calvin Coolidge famously commented that ‘the
business of America is business’. Arguably, the 1803 Louisiana Purchase
qualifies as a great business idea. It highlights the need for boldness,
flexibility, opportunity-spotting and a readiness to splash the cash.

US President Thomas Jefferson believed in reducing America’s national debt,
but when cash-strapped Napoleon offered a massive slice of continental America,
Jefferson couldn’t miss the opportunity. Although the problems of integration
(and America’s westward expansion) were significant, it laid the foundation for
a bold, modern and secure future.

Identifying great business ideas is subjective, but it highlights some of the
key ingredients. As these examples show, circumstances matter, the situation
needs to be favourable for ideas to thrive. Yet there are ways to improve the
quality of innovation. These include simplicity, a relentless energy and
enthusiasm and the ability to build on ideas and recognise that they can come
from anywhere.

Also significant is the ability to handle paradox and ambiguity, for example:
balancing rationality with intuition; to implement ideas by sweating the
details, taking personal responsibility and providing leadership; and to let
imagination roam free by adopting a constructive, challenging and questioning
approach.

Great ideas have empathy, an appreciation of the current situation that
provides a starting point. This prompts the question: what do you want to
achieve that is not currently available? Finally, self-awareness and an emphasis
on learning and development play an important part. People play to their
strengths and than expand these strengths. Achieve that and you are on the way
to a great idea.

balanced performance

Of particular interest to finance directors is the balanced scorecard, which
is a great business idea because it highlights the importance of measurement for
improving business performance. The balanced scorecard enables managers to
generate objectives in four areas (innovation and learning, finance, customers,
and internal processes) providing a framework for action, with progress being
regularly assessed. Its success lies in its ability to integrate indicators that
measure key activities and processes. This presents a balanced picture and
highlights specific activities that need to be completed.

Two of the highest profile and most successful examples of the balanced
scorecard at work are provided by Exxon Mobil and Cigna Insurance. Exxon moved
from last to first in profitability within its industry from 1993 to 1995. Cigna
Insurance was losing $1m (£500k) a day in 1993, but within two years it was in
the top quartile of profitability in its industry. Both organisations attribute
part of their success to the balanced scorecard.

Jeremy Kourdi’s 100 Great Business Ideas is published by
Marshall
Cavendish and Cyan Books priced £8.99