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Ben & Jerry’s PartnerShop Conference Workshop “Turning your goals of social enterprise into a BUSINESS reality” September 29, 2005. What would you like to get out of this session today?. Most organizations are not designed, they grow.

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slide1
Ben & Jerry’s

PartnerShop Conference Workshop

“Turning your goals of social enterprise into a BUSINESS reality”

September 29, 2005

slide3

Most organizations are not designed, they grow.

Indeed, there are several studies which draw on biological analogies to

describe organizational phenomena. But not all organizations adapt equally well to

the changing environment within which they grow. Many, like the dinosaur of

great size but little brain, remain unchanged in a changing world.

-Charles Handy

What is the major problem?

It is fundamentally the confusion between effectiveness and efficiency that

stands between between doing the right things and doing things right.

There is surely nothing quite so useless as doing with great efficiency what

should not be done at all.

-Peter Drucker

Behaving like a manager means having command of the whole range

of management skills and applying them as they become appropriate.

-Herbert Simon

Everything should be made as simple as possible, but not simpler.

-Albert Einstein

slide4

What is a big challenge or decision that you need to address about your PartnerShop in the next 30-90 days?

slide6

Snapshot of the Small Business Industry :Small Businesses Failure

Closed Doors

1990

1998

1999

Source : U.S. Small Business Administration, Small Business Economics Indicators, 1998. March 2000 & Small Business FAQ, December 2000. The 1998 & 1999 Numbers are estimates.

Total number of employer companies

5.8 million

5.7 million

5.8 million

Number of employer companies that closed

531,400

524,500

528,600

63,912

44,197

37,639

Number of business bankruptcies

Source : U.S. Small Business Administration. The State of Small Business : A Report of the President, 1997.

Percentage of Businesses Still in Operation Among….

Companies of All Sizes

Companies that Hired

Companies that hired

(Soloists Included)

1 to 4 People

5 or More People

After 2 Years

76

92%

94%

%

After 4 Years

47%

80%

87%

After 6 Years

38

76%

79%

%

After 8 Years

29%

53%

70%

After 10 Years

21

41

62%

%

%

slide7

Snapshot of the Small Business Industry : Small Business Failure

Top reasons why small businesses declare bankruptcy:

Source : Teresa A. Sullivan, Elizabeth Warren, and Jay Westbrook. “Financial difficulties of small businesses and reasons for their failure,” Business Bankruptcy Project, University of Texas at Austin, 1998.

common business operational mistakes i wish my clients and or i hadn t made
Common Business Operational Mistakes(I wish my clients and/or I hadn’t made)
  • Ignoring your business and/or marketing plan once it is completed
  • Not planning and managing to multiple scenarios: best case, expected case and worst case scenarios
  • Explaining away poor results rather than taking them seriously and responding aggressively
  • Treating your profit center like a cost center; spending money faster than you earn it
  • Not developing and managing to key performance indicators
  • Hiring substandard talent to play a key role in the business
common business operational mistakes i wish my clients and or i hadn t made1
Common Business Operational Mistakes(I wish my clients and/or I hadn’t made)
  • Not fully appreciating the concept of working capital; failing to invest some of the profits back into the business
  • Viewing business development as an expense rather than investment
  • Failing to become knowledgeable about the competition and staying that way
  • Failing to understand that debt properly managed creates leverage
  • Failing to measure and understand the importance and interrelationship of both employee and customer satisfaction
  • Hoping for different results using the same strategy and/or tactic that isn’t working
slide13

Characteristics of a Successful Enterprise

Arthur Rock, one of America’s leading venture capitalists, cites the following

characteristics as the most important ones for the creation of a successful enterprise :

  • “Strategy is easy, but tactics are hard.”
    • The key to turning a good idea into a good business comes from the day-to-day management of the company. Having the right people can be more important than having the right business plan.
  • “There’s a thin line between refusing to accept criticism and sticking to your guns.”
    • Entrepreneurs must be brutally honest with themselves about bad news & disappointment while still believing in their ideas.
  • “A great idea won’t make it without great management.”
    • Entrepreneurial companies go through three stages of growth that require different managerial skills. The best entrepreneurs understand how vital good management is to their company, and if they can’t provide it themselves, then they look outside and bring the right person in.
  • “An entrepreneur without managerial savvy is just another promoter.”
    • It is important that entrepreneurs have a style that leads people. Best entrepreneurs are skilled managers who can be tough-minded with themselves and their team, who can say “no”, and who ideally are well versed in the technology on which the company is based.

Source : Harvard Business Review on Entrepreneurship. Harvard Business School Press. 1999.

slide14

Determinants of New Venture Performance

Based on the findings of 62 independent research models, the following functional relationship for new venture performance becomes evident :

New Venture Performance = f (E, IS, BS, R, OS)

where :

E = Entrepreneur

IS = Industry Structure

BS = Business Strategy

R = Resources

OS = Organization structure, systems, and processes

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide15

Determinants of New Venture Performance : Organizational Structure, Processes, and Systems

When planning the organizational structure, processes, and systems of a new venture, keep in mind that :

  • In a venture’s early stages of growth, flexibility of organizational structure,
  • processes, and systems has a negative effect on its probability of survival,
  • but a positive effect on its probability of success
  • As a venture approaches maturity, formality of structure, processes, and
  • systems increase the probability of survival and success
  • A venture’s organizational structure, processes, and systems are most
  • important to its survival during periods in which it must make the transition
  • from one stage of growth to another

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide16

Investing in Organizational Infrastructure

While many start-ups lack formals systems & processes, at some point an entrepreneur needs to start building some infrastructure in the ventures. The degree depends on the following :

  • Delegating tasks
  • As the need for delegation arises, entrepreneurs may need to establish mechanisms to monitor employees and to establish standard operating procedures & policies.
  • However, such mechanisms should not stifle employee initiative.
  • Specializing tasks
  • As a business grows & tries to achieve economies of scale & scope, employees must be assigned clearly defined roles and grouped into appropriate organizational units.
  • However, integrating the units successfully will be critical to reaching economies of scale & scope.
  • Mobilizing funds for growth
  • Cash-strapped businesses that are trying to grow need good systems to forecast & monitor the availability of funds.
  • Creating a track record
  • If an entrepreneur hopes to build a company that they can sell, then well-kept financial records & controls are essential in reassuring potential public markets & potential acquirers.

Source : Harvard Business Review on Entrepreneurship. Harvard Business School Press. 1999.

potential social enterprise landmines
Accountability for Success

Analysis Paralysis

Customer Satisfaction

Organizational Buy-In

Communication Issues

Expectations regarding business outcomes

Funder Perception(s)

Knowledge/Talent requirements

Implementation Planning and Execution

Legal/Tax Issues

Project Momentum

Money/Capital Requirements

Organizational/Staff Passion

Political Issues

Preparation/Due Diligence

Systems/Organizational

Potential Social Enterprise Landmines
steps necessary to achieve social enterprise success
Steps Necessary to Achieve Social Enterprise Success
  • Build the organizational capacity needed to support the enterprise
  • Get buy-in from board, staff and external stakeholders
  • Have an internal sponsor who champions the idea
  • Do your homework
  • Always keep in mind potential risks
  • Know the laws
  • Ensure effective cash management
  • Hire the right talent
  • Fill the gaps in expertise
  • Draw the connection to your mission
  • Define success for your organization
  • Develop a good business plan (an revisit it on a regular basis)

Source: Unlocking Your Profit Potential, BoardSource

session wrap up
Session Wrap-Up
  • What is your biggest takeaway from today’s session?
  • How can you apply this learning to your business?
  • What will be different tomorrow having gone through this session?
  • Other comments?
slide23

Ed Robinson

President & Founder

Capacity Building Solutions Inc.

301/624-5686

robin_ed@capacity-building.com

slide25

Determinants of New Venture Performance

Based on the findings of 62 independent research models, the following functional relationship for new venture performance becomes evident :

New Venture Performance = f (E, IS, BS, R, OS)

where :

E = Entrepreneur

IS = Industry Structure

BS = Business Strategy

R = Resources

OS = Organization structure, systems, and processes

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide26

Determinants of New Venture Performance : The Entrepreneur

An entrepreneur affects a new venture in the following six ways :

  • The survival and success of a new venture will be a function of the
  • behaviors and decisions of the entrepreneur
  • The entrepreneur’s personality, skills, experience, and values affect the
  • entrepreneur’s behavior and decisions
  • The resources assembled by a new venture are influenced by the skills and
  • experience of the entrepreneur
  • The industry which the venture enters, and hence industry structure, is
  • influenced by the skills and experience of the entrepreneur
  • The entrepreneur’s skills, experience, personality, and values will affect
  • the formulation of the venture’s business strategy
  • The entrepreneur’s skills, experience, personality, and values will affect
  • the configuration of the venture’s organizational structure

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide27

Determinants of New Venture Performance : Entrepreneurial Variables

  • Personality Characteristics
  • Autonomy
  • Confidence
  • Locus of control
  • Need for achievement
  • Need for affiliation
  • Need for power
  • Personality type
  • Risk-taking propensity
  • Self-reliance
  • Tolerance for ambiguity
  • Values & Beliefs
  • Contribution to society
  • Power
  • Security
  • Status
  • Wealth
  • Experience & Education
  • Age
  • Entrepreneurial parents
  • Experience in founding
  • companies
  • Experience in large firm
  • Experience in similar
  • positions
  • Formal education
  • General management
  • experience
  • Industry experience
  • Pre-startup training
  • Shared experience of
  • founders
  • Start-up experience
  • Behaviors & Decisions
  • Ability to focus on essentials
  • Decision-making process
  • Flexibility
  • Goal direction
  • Length of work day
  • Management style
  • Organizing
  • Planning
  • Problem analysis
  • Risk-reducing behavior
  • Skills
  • Communication skills
  • Financial skills
  • Interpersonal skills
  • Managerial skills
  • Manufacturing skills
  • Marketing skills
  • Organizational skills
  • Personnel skills
  • Technical skills

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide28

Determinants of New Venture Performance : Industry Structure

When considering the question “what business should the we be in?”, remember the following :

  • Industry structure has both a direct and moderating effect on new venture
  • survival
  • Industry structure has a moderating effect on new venture success

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide29

Determinants of New Venture Performance : Industry Structure Variables

  • Structural Characteristics
  • Degree of industry
  • concentration/fragmentation
  • Elasticity of demand
  • Entry barriers
  • access to distribution
  • channels
  • brand image
  • capital requirements
  • cost advantages
  • independent of scale
  • economies of scale
  • experience curves
  • product differentiation
  • switching costs
  • Exit barriers
  • Industry profitability
  • Structural Characteristics
  • Industry value added
  • Industry failure rate
  • Industry sector
  • Key success factors
  • Opportunities to create
  • high barriers subsequent
  • to entry
  • Product heterogeneity
  • Stability of demand
  • Stage of industry
  • evolution
  • Size and growth rate of
  • industry
  • Substitute products
  • Technological and
  • regulatory changes
  • Industry Rivalry
  • Aggressiveness of
  • competitors
  • Competitors’
  • commitment and
  • dependence on industry
  • Competitor diversity
  • Degree competitors
  • have established
  • positions
  • Degree of exposure to
  • competitive attack
  • Excess capacity
  • Excess cash, borrowing
  • position
  • Level of competition
  • Presence of small firms
  • with weak positions
  • Nature of Buyers & Suppliers
  • Concentration
  • Heterogeneity
  • Importance to success
  • Number
  • Relative Size

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide30

Determinants of New Venture Performance : Business Strategy

When considering the business strategy for a new venture, keep in mind that :

  • A venture’s strategy has a direct and moderating effect on its survival and
  • success
  • A venture’s strategy to obtain resources from the environment has a direct
  • effect on its survival and a moderating effect on its success
  • A venture’s strategy for development and deployment of the resources it
  • controls directly effects its success and survival; the effect of strategy on
  • the former is greater than the effect on the latter
  • In its early stages of evolution, a venture’s strategy to obtain resources is
  • just as important as its strategy to deploy resources
  • As the venture approaches maturity, its strategy to develop and deploy the
  • resources its controls becomes more critical, and its strategy to obtain
  • additional resources from the environment becomes less critical, than in its
  • earlier stages

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide31

Determinants of New Venture Performance : Business Strategy Variables

  • Planning & Strategy Formulation
  • Breadth of planning efforts
  • Depth of planning efforts
  • Formality of strategic
  • planning
  • Frequency of planning
  • Functional area planning
  • Consideration of multiple
  • alternatives
  • Quality of strategic planning
  • Rational and rapid decision
  • making
  • Goals & Objectives
  • Ambitiousness of goals
  • Targeted market share
  • Targeted profitability
  • Entry Strategy
  • Entry wedge used
  • new products or services
  • parallel competition
  • franchising
  • geographic transfer
  • supply shortage
  • tapping unutilized
  • resources
  • customer sponsorship
  • government sponsorship
  • supplier sponsorship
  • Order of entry
  • pioneer
  • early
  • late
  • Scope
  • Breadth of products
  • offered
  • Breadth of services
  • offered
  • Breath of customer
  • groups served
  • Breadth of customer
  • functions satisfied
  • Breath of technologies
  • utilized
  • Strategic Direction
  • Ability to maintain initial
  • strategy
  • Aggressiveness of
  • strategy
  • Clarity and breadth of
  • strategy

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide32

Determinants of New Venture Performance : Business Strategy Variables <cont’d>

  • Competitive Weapons
  • Cost position
  • Differentiation
  • product attributes
  • marketing mix attributes
  • service
  • technology
  • Innovation
  • Integration : forward &
  • backward
  • Pricing strategy
  • Strategic positioning
  • Political Strategy
  • Alliances with competitors
  • Alliances with customers
  • Alliances with government
  • Alliances with suppliers
  • Alliances with other
  • stakeholders
  • Segmentation
  • Extent of differentiation by
  • market segment
  • Investment Strategy
  • Administrative functions
  • Engineering
  • Marketing
  • Manufacturing
  • R & D

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide33

Determinants of New Venture Performance : Resources

The performance of a venture in a given depends upon more than just a good idea. Few ventures can survive for long without resources. It is important to note that :

  • The level of a venture’s tangible resources will have a positive effect on its
  • probability of survival but not necessarily its probability of achieving
  • success
  • A venture’s level of intangible resources has a positive direct and
  • moderating effect on its success
  • As a venture approaches maturity, the direct effect of intangible resources
  • becomes more important to its success

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide34

Determinants of New Venture Performance : Resources Variables

  • Tangible Assets
  • Current assets
  • accounts receivable
  • cash
  • inventory
  • prepaid expenses
  • supplies
  • Equipment & machinery
  • Facilities
  • plant
  • offices
  • Financing
  • long term debt
  • short term debt
  • equity
  • Initial size
  • Land
  • Intangible Assets
  • Access to capital markets
  • Access to distribution
  • channels
  • Access to labor markets
  • Access to suppliers
  • Access to raw materials
  • Completeness of
  • management team
  • Contracts
  • Culture
  • Databases
  • Employee flexibility
  • Employee specialization
  • Functional skills
  • financial
  • manufacturing
  • marketing
  • technical
  • Intangible Assets
  • Geographic location
  • Intellectual property
  • Licenses
  • Outside consultants
  • accountants
  • bankers
  • government sponsored
  • professional
  • university
  • venture capitalists
  • Reputation
  • Social networks
  • Trade secrets
  • Trained professional
  • managers

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide35

Determinants of New Venture Performance : Organizational Structure, Processes, and Systems

When planning the organizational structure, processes, and systems of a new venture, keep in mind that :

  • In a venture’s early stages of growth, flexibility of organizational structure,
  • processes, and systems has a negative effect on its probability of survival,
  • but a positive effect on its probability of success
  • As a venture approaches maturity, formality of structure, processes, and
  • systems increase the probability of survival and success
  • A venture’s organizational structure, processes, and systems are most
  • important to its survival during periods in which it must make the transition
  • from one stage of growth to another

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.

slide36

Determinants of New Venture Performance : Organizational Structure, Processes, and Systems Variables

  • Systems & Processes
  • Control
  • financial
  • functional
  • startup process
  • Human resources
  • compensation
  • hiring, firing
  • Management information
  • Speed of implementation of
  • new processes and systems
  • Ownership structure
  • Dispersion of ownership
  • among employees
  • Share of equity owned by
  • founders
  • Organizational Structure
  • Board of director’s role
  • Centralization/decentralization
  • Delegation
  • administrative decisions
  • implementation decisions
  • line function decisions
  • strategic decisions
  • Flexibility
  • Formality
  • Number of hierarchical levels
  • Organic versus mechanistic
  • structure
  • Participate management

Source : Chrisman, James J., Alan Bauerschmidt,, and Charles W. Hofer. 1998. “The Determinants of New Venture Performance : An Extended Model.” Entrepreneurship : Theory & Practice. Vol. 23. No. 1.