As the world continues to bounce back from the devastating effects of the financial crisis in 2008, one thing has become increasingly apparent – things have changed. While the financial tsunami alone was enough to shake the core of companies worldwide, a powerful new set of forces are emerging that will transform the face of business indefinitely. In this blog, we explore what those forces are and why harnessing them isn’t be an option, but a necessity.

Back in 2008, when the world was undergoing a financial shock not seen since the Great Depression, many were left feeling helpless and perplexed as they watched their respective economies go down the tubes. The question lingering on everyone’s mind was, how do we recover from this?

Almost three years later, it’s clear that while things are starting to get back to normal on an economic level, everything has changed fundamentally. Companies are leaner, scrappier, and more efficient, BRIC countries are driving market growth and there is an entirely new awareness about risk.

Any company who survived the financial crisis deserves a pat on the back; however it may only be the first is a series of seismic shifts, which will combine to redefine the role of business in society and consequently how business is done. While there are multiple forces acting on a business at any given time, we think the following four will most profoundly impact business for decades to come:

Technology:

The 2000 dot-com era was just a bubble – this time, however, things are real. From hardware to software and everything in between, technology is reshaping businesses in ways never before seen. Technology is helping lower barriers to entry and offering new entrants the unprecedented ability to bring down established incumbents in a matter of years, sometimes even months. The most powerful technologies include:

  • tablets and mobile phones: the on-demand, no-strings attached worker can now share and create almost anything, anytime, anywhere
  • the cloud: businesses can move their data to the cloud and turn their fixed technology costs in monthly variable expenses, while realizing incredible efficiency and flexibility in the process
  • video chat: while telepresence will make its mark on larger companies, video chat (HD quality with perfect audio) will empower businesses to make connections anywhere, for free in many cases
  • software as a service (Saas): by turning fixed software licenses into monthly, pay-what-you-use contracts, businesses can exponentially increase their software purchasing power and maximize its effectiveness for employees at all levels

Social Media:

It’s official, the social media wave is real. While the hype and jargon accompanying it is sometimes overwhelming, the fundamentals behind social media are rock solid.

It’s a pretty simple concept overall, despite the dizzying number of platforms. Take your message, spread the word through your network and if it’s a great story, there’s a good chance it will go viral and global quickly.

The amazing thing about social media is that we are only at the beginning of the curve. While platforms like Linked-In, Facebook and Twitter have had amazing success, none have really been able to find a business model worth getting excited about. It is the companies that are being built now, on the initial social layer created by the above-mentioned companies, who will really make social media magical.

Business Model:

Many of today’s top companies have been operating on the same business model for decades, and are still thriving. That, however, is about to change.

With such rapid change going on in the world on all levels (social, political, economic, technological) companies are starting to get squeezed at every seam, threatening their entire business model. Industries like consulting, fashion, health care, etc. are feeling the pinch, opening up the playing field to any company who can nail the business model and execute on it.

Fundamentally, people are no longer willing to pay for what they don’t need. Companies who have got by with the status quo are going to be caught flat footed when an increasingly enlightened consumer base moves to the company who gives them what they want at the price they are willing to pay.

Transparency:

The internal debate gripping most companies these days is how to deal with problems; whether they are social, environmental, health or otherwise, companies are now starting to grapple with the reality that customers, and society as a whole, feel like they have the right to know, now.

Any company who tries to hide anything, from product defects to corporate scandals, even dishonest marketing claims, runs the risk of being out of business in a heartbeat. In the new business world, you need to be transparent about everything relevant to your stakeholders – when there is a problem, they want to know; in most situations, they will be more than forgiving if you are open and honest about it.

Fundamentally, it’s about moving from bottom-line only thinking, to a more holistic way of doing business, where companies at all levels understand that they must embrace transparency or be at the whim of angry, social-media savvy stakeholders.

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To survive the coming shfit, companies will have to embrace all four forces listed above – the companies that thrive will be able to utilize each force to drive growth and discover new opportunities. Only the select companies, the ones who use each force as a channel to deepen their relationship with customers and create unique, unmatched experiences, can become market leaders.

In today’s environment, some forces may be less obvious than others, and there is certainly a wide variance from industry to industry. But once consumers are exposed to brands executing incredibly well in any of the above areas, they will start to look for other brands who do the same; eventually this will become an expectation and the snowball effect will be so profound that many companies operating old school will be left in the dust.

Behind each force is a push back towards a more customer-focused, authentic way of doing business, where customers are treated like gold, and integrity and ethics are considered more important than share price and gross margin. It is a shift that will occur swiftly, so get prepared to ditch the old textbooks and rewrite the playbook because the new-school business class is about to begin.

Do you agree?

Let us know …


+ Building Blocks for the New-Era Business
+ Finance 2.0 – Wall Street Meets the Web

Crowdfunding Strategy – Summary


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Every entrepreneur needs financing for their business. Whether it’s seed money, second round or rocket fuel, most early stage businesses are actively seeking financing. And this access to capital is what 95% of companies struggle to find.

This is partly due to the nature of the business and partly due to lack of preparation and knowledge. Contrary to conventional industries, the technology business is all about the idea and often requires a “leap-of-faith” investment (ie. investors will supply capital based on the strength of the management team, the quality of the idea and the diligence that’s been done on the planning side as opposed to secured loans). The tech company has no assets and more than likely can’t get a traditional bank loan.

Furthermore, like it or not, there are hundreds of thousands of people out there that have a technology product/idea that they think will “make it big”. We guarantee that if you’ve thought of a great product that fulfills a need in an unserved market, 50 people have thought of the same idea. I don’t mean to be a downer, but many others have thought of the apartment cleaning robot that you’re in the process of designing.

Bottom line: thousands of entrepreneurs are competing for the same dollars. Who gets those dollars? It comes down to a function of the four P’s (not the marketing P’s): the people, the product (or service), the planning and the pitch.

So, what am I getting at here? Well, technology investors see thousands of people, products, plans and pitches.

PITCH MISTAKE #1: Entrepreneur has not done their diligence

You would be shocked at how many entrepreneurs are hung out to dry when they are asked by investors what their competition is doing or how competitive their market is. DO YOUR DILIGENCE! You absolutely absolutely need to know your competitive market, including both your direct competition and your indirect competition. You then need to figure out where you fit in – this is essential when presenting your product to investors and accurately forming your value proposition.

Love, Lumos.


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Nowadays, it seems like so many tech companies are aspiring for the same goal: venture capital (VC). Multiple VC companies from Canada and the US plod around searching for the next big company to infuse their money into, while local tech companies pray to be discovered.

Most tech companies are fueled by a dream of being bought out for millions, so the founders can retire on the beach or be promoted to high paying executive jobs in the big tech companies. The desire to meet the VC standards leads to exalted expectations, inflated revenue numbers and a corporate strategy that requires the company to grow at breakneck speed.

The typical VC company will only look at companies who have the ability to be generating $50 million in revenue by the 5th year. Only the companies with all the stars aligned are able to create a compelling case that they can hit this number, and they get the cherished VC dollars.

In September, we attended a California investor bootcamp in Victoria held by SVASE. According to SVASE, a reputable VC company will see 25,000 business plans each year from businesses seeking funding. Of those 25,000, only 10 will ever get funding and of those that do receive funding only about 40% go on to become profitable ventures. With odds like that, it becomes obvious that VC is probably not always the best option for most companies.

Here are some of the characteristics that a VC will look for in companies:

  1. A market of at least $500 million, but ideally $10 billion. That’s big!
  2. A working product or service that is proven and people are paying for.
  3. You and the management team have done this type of thing before and had great success doing it
  4. You need $1,000,000 and you’ll be cash flow positive within 1 year of launching your business.
  5. Strategic alliances with proven companies and identified companies who are likely to buy your company in the future

The bottom line with VC money is that it is not meant for everyone. Like anything, there are positive and negative trade-offs to getting VC money, but most companies are myopically focused on the big dreams they have for their companies. Any startup needs to realize that while bringing in VC (assuming they qualified) may bring in cash and expertise to the company, they will lose a lot of the control and freedom that may have brought them to start their own business in the first place.

There are multiple alternatives that are worthy of exploring. Many companies have found success bootstrapping and entering a slow growth mode until their sales allow them to expand. Others have used small batches of funding from friends and family until the company is able to be self-sustaining in its growth. Whatever route you decide to take, the most important thing is to develop a good business model for the company. Companies like Lumos exist to provide cost-effective options for those who are looking to get their company to the next level.

Love, Lumos.