Which turned out to be not quite the truism Johnson hoped for.

The Basics

Johnson made some pretty basic mistakes, but the biggest mistake he made was one that many small business owners can also fall prey to:  focusing on attracting new business without paying equal attention to retaining a loyal customer base – even when that base isn’t enough to sustain the business.

We all know that it costs less to retain a customer than it does to acquire a new one.  But it goes deeper than that.  Johnson not only didn’t pay attention to a loyal customer base – he essentially abandoned them.  This doesn’t send out a very positive message about a company to prospective customers.  It certainly does nothing to build the kind of trust necessary to get people to open their wallets.

Acting in such a manner makes prospects question how loyal a company will remain when it comes to continuing to meet their needs – if a company abandons one target for another in the pursuit of profit and in such an obvious way, it’s likely they’ll “do the same thing to me” if it turns out the business thinks they can make more money by doing so – and being unreliable is not a great selling point.  Thinking a business is only about “the business” and not about customers motivates customers to go elsewhere.

Johnson stepped over the line.  He didn’t institute innovative change – he attempted radical change.   For instance, his idea to get rid of sales and coupons might have appeared a great way to telegraph every item in the store was value priced – but it was too much too soon.  It might have appeared getting rid of sales racks and insert “jean bars” would attract a younger crowd eager to hand over their money, but why was it necessary to get rid of products that were selling (for instance St. John’s Bay apparel?)  All that did was serve to alienate Penny’s most loyal customer base, the over-40 woman.

It’s Not Rocket Science

And how is that Apple’s Genius Bars worked great whereas the trendy jean bars and “upscale shops” didn’t?  Think about it.  Does it matter who shimmies up to an Apple Genius bar?  No.  Whether you’re a Great-Grandma or a giggly 14-year-old girl an Apple Genius stands ready to provide you with relevant and personal service designed to meet your needs and wants no matter how old (or young) you happen to be.

Ironically, this is what was once attracted so many to J.C. Penny.  You could take the kids back to school shopping (all those sales!) with your mother who needed to buy a new sweater, pick up some new socks and underwear for your husband, as well as pick out a pretty dress and some great shoes to wear when he took you out for a fancy dinner on your anniversary all in one place, all at one time.

Unfortunately Johnson wasn’t “renovating” J.C. Penny, his approach was more to demolish the business and start again from the ground up.

Now, we’re not privy to what market research was conducted during Johnson’s brief tenure.  But, as we’ve noted, the changes he instituted came pretty darn quick – which can mean research was conducted and that research seemed to support his plan.  On the other hand, we don’t know who exactly was surveyed.  Certainly not Grandma who’d been shopping there for last 40 years.

However, in our opinion, J.C. Penny is doing one thing right:  They are taking responsibility for their mistake.  Doing so is central to providing the kind of customer service that does, in fact, retain loyal customers:  If your business makes a mistake don’t make excuses.  Fess up, apologize, and do what you can to make it right.  The only question is whether or not J.C. Penny allowed the mistakes to continue for too long a period and damaged this iconic retail department store’s reputation in ways that can’t be repaired as quickly as all those changes that took place during the Johnson administration.

Let this serve as a cautionary tale for small business owners.  Innovation is good.  Creativity is good.  But only when that innovation and creativity is directed to serve the best interests of both prospective customers (including new customer profiles), as well as loyal repeat customers.

In short:  Never throw the baby out with the bathwater.

Of course you’ve spoken to her about it.  It’s normal for employees to have a bit of “down time” where they aren’t as productive or enthusiastic about their work – you usually let it run its course because you know that in most cases it is short-lived and your employee is literally “recharging” for the next advance.  Which is exactly what you did with Maggie, at least at first.

However, after six weeks went by with no marketing plan written or executed (which was why you hired her), you took her aside for a private chat.  Maybe she just wasn’t as good a fit as you thought.  Turned out that Maggie was having “family issues” for which she deeply apologized and promised that she’d not let her personal problems get in the way of her work from then on.

But they did.

Maggie finally arrives, rushes over to take her seat, and says with a sigh, “The traffic on 180 was outrageous!”; leans uncomfortably close to you and says in a confidential tone, “The traffic on our website took a jump today” giggles and then reaches for the bottle of red wine.

Is that alcohol you smelled on her breath before she even reached for the bottle?  Is that why she’s been late and missed work so often?  Is that why you keep catching her “napping” at her desk?

Not So Easy to Tell

The above scenario describes a situation that many small business owners have faced:  an employee addicted or abusing alcohol and/or drugs.  In our story, while it took a while, it became obvious that it’s likely our small business owner has such an employee on their hands.  But detecting addiction or abuse in the workplace isn’t always easy.  Many addicts and abusers are experts at eluding detection.

You may dismiss the subject because you just know none of your employees fit an addict or abuser profile.  However, The DWI Resource Center (an organization dedicated to “DWI Death and Injury in New Mexico through data-driven, research-based solutions”) posted the following data on their website:

• Employees who engage in heavy alcohol or illicit drug use are 33 percent less productive than their co-workers, and on average cost their employers $7,000 annually.1 In total, substance abuse costs America’s employers more than $160 billion per year in accidents, lost productivity and related problems.

• Workers who are heavy drinkers or illicit drug users are twice as likely as non-users to have been fired by an employer in the last year, changed employers more than three times in the last year, and missed two or more days of work in the past month.

• Up to 40 percent of industrial fatalities can be linked to alcohol abuse and alcoholism. Drug-using employees are 3.6 times more likely to be involved in workplace accidents and five times more likely to file a workers’ compensation claim.

• According to the National Council on Compensation Insurance, nearly half of all workers’ compensation claims are related to substance abuse.

• Substance abusers are three times more likely to use medical benefits than other employees.

• 80 percent of drug abusers steal from their workplaces to support their drug use.8 Substance abuse is the third leading cause of workplace violence.

The Center’s website also reports that “Employers who think alcohol and other drug abuse will never be a problem should consider this: job applicants who can’t pass a drug test tend to apply to companies that don’t test.”

Now, it’s likely that you’re one of those small business owners who do not test as a condition of hire.  It’s also likely that you don’t have a formal written drug and alcohol policy.  You may think it’s pretty simple:  you discover someone is an alcoholic and you fire them.   That could be a very bad move.  According to Nolo.com:

“The federal Americans with Disabilities Act (ADA) and many state disability rights laws protect alcoholics from workplace discrimination. The ADA doesn’t allow employers to make an employment decision based solely on the fact that an employee is an alcoholic. An employer can, however, make a decision (including a decision to discipline or terminate an employee) based on the employee’s inability to meet the same performance and productivity standards that it imposes on all employees.”

What Can, or Should, You Do?

Dealing with alcohol and/or drug addiction or abuse in the workplace is one area where the saying “An ounce of prevention is worth a pound of cure” holds true.  Here are some suggestions for pro-active steps to take:

Consider testing as a condition to hire.  Remember, addicts and abusers are attracted to businesses that don’t test.  However, be very careful about random testing after hire as the practice may break privacy laws in your state.  If you intend to random test, seek expert legal advice.

Be sure your small business has a formal, written drug and alcohol policy.  Every employee should receive a copy of this policy and acknowledge they received and understood those policies by having each employee sign an acknowledgement.  Your policy should address standards that must be met and the consequences for not meeting them.

Communicate resources for alcohol and drug addiction/abuse to your employees.  This information can be a part of your drug and alcohol policy handout.  Some small business owners may provide an employee health insurance plan that covers substance abuse treatment.  If your policy doesn’t, you can include contact information for resources available in your community.

Maintain confidentiality and focus on behavior and/or performance when you suspect abuse.  When dealing directly with an employee you suspect may be abusing, emphasize behaviors such as frequently being late or absent from work, missing assignments, or low-quality performance.  Only mention alcohol or drugs if you have factual examples.  For instance, in our story about Maggie her boss not only thought she might have been drinking before she arrived, but he was certain she was abusing after watching her drink five full glasses of wine and having to drive her home because she was slurring her words and having trouble standing.

It is imperative you maintain confidentiality about an employees’ suspected or confirmed abuse with other employees.  Again, make sure that when addressing any complaints about that employee from their colleagues that you do not share you suspect they are abusing, have reprimanded them in any way due to that abuse, or have referred them for treatment.  That is a certain invasion of privacy and should be absolutely avoided.

“Here’s to those who create their own luck!”

Of course there are quite a few people out there right now who may beg to differ as to whether or not it’s possible to “create” your own luck.  In today’s economic climate luck seems to be more along the lines of “the luck of the draw” rather than anything you can control to the extent of creating the kind of luck you need or want.  And among those “quite a few people” are quite a few small business owners who find themselves “down on their luck.”

The Luck Factor

Many of us think that some people are just luckier than others.  Luck, after all, is arbitrary with no rhyme or reason.  Luck is something that happens by chance, not something you can create.

Psychologist Richard Wiseman of the University of Hertfordshire has done some research that counters the perspective that luck is synonymous with chance.  He decided to study the “lucky” versus the “unlucky” to see if he could discover anything that could “cause” good luck.  And he did.

Wiseman didn’t pull his findings out of a hat – Wiseman conducted a “A ten-year scientific study into the nature of luck has revealed that, to a large extent, people make their own good and bad fortune. The results also show that it is possible to enhance the amount of luck that people encounter in their lives.”

In other words, it is possible to create your own luck.  According to Wiseman’s article “The Luck Factor” that provides a summary of his findings, Wiseman presents four principles that those we may have formerly considered “born lucky” use to create their own luck:

“Principle One: Maximize Chance Opportunities.  Lucky people are skilled at creating, noticing and acting upon chance opportunities. They do this in various ways, including networking, adopting a relaxed attitude to life and by being open to new experiences.

Principle Two: Listening to Lucky Hunches.  Lucky people make effective decisions by listening to their intuition and gut feelings. In addition, they take steps to actively boost their intuitive abilities by, for example, meditating and clearing their mind of other thoughts.

Principle Three: Expect Good Fortune.  Lucky people are certain that the future is going to be full of good fortune. These expectations become self-fulfilling prophecies by helping lucky people persist in the face of failure, and shape their interactions with others in a positive way.

Principle Four: Turn Bad Luck to Good.  Lucky people employ various psychological techniques to cope with, and often even thrive upon, the ill fortune that comes their way. For example, they spontaneously imagine how things could have been worse, do not dwell on ill fortune, and take control of the situation.”

The Difference Between Luck and Chance

Lewis Schiff, executive director the Inc. Business Owners Council has a slightly different perspective on how you can create your own luck – but he is in complete agreement with Wiseman that luck is different from chance.  When Wiseman was asked if there was a distinction between luck and chance in an interview posted on fastcompany.com he responded:

“There’s a big distinction. Chance events are like winning the lottery. They’re events over which we have no control, other than buying a ticket. They don’t consistently happen to the same person. They may be formative events in people’s lives, but they’re not frequent. When people say that they consistently experience good fortune, I think that, by definition, it has to be because of something they are doing.”

Schiff’s research for his book Business Brilliant found out something really interesting about “super successful” people:

“Super-successful people believe in luck. They believe in it more consistently than they believe in education, creativity, investing, and a lot of other things commonly associated with building wealth.”

He goes on to say that his data indicates that 80% of self-made millionaires say luck was an important contributor to their success, while only 42% of ordinary, everyday middle-class people admit to “believing” in luck.  This might sound as if Schiff’s research “proved” that luck does indeed happen by chance and isn’t something we can create for ourselves.  However, Schiff’s research indicated that, in fact, the very belief in luck contributes to “increasing the odds” of being lucky.  Schiff offers up five “attitudes and habits” (versus Wiseman’s four principles) that the belief in luck fosters which, in turn, work to create our own luck.

“Narrow your goals and focus. Lucky people and wealthy people both commit to their goals and make their own luck in the process. Having a specific objective makes it easier to recognize a “lucky” opportunity when it comes your way because luck always favors a prepared mind. On the other hand, if you hedge your bets on a disparate set of goals, you can end up feeling lost and unlucky. As the ancient saying goes, “For a ship without a destination, there is no favorable wind.”

Play to win.  The lucky and the wealthy go at their objectives full bore, with a positive, winning attitude, and in doing so, they maximize their abilities to profit from chance. For instance, in my book I describe how the most skilled and successful negotiators are always those who investigate the other side’s positions the most thoroughly. The better prepared you are in any business dealing, the more ready you are to deal with bad surprises that a less-prepared person might deem as “bad luck.”

Tighten up your network and recruit the right people.  If you associate with people who consider themselves lucky, the studies show your luck will improve. Business Brilliant tells how friend-of-a-friend connections often produce opportunities for successful people that appear to be lucky when they are, in fact, the result of good network design. I found that self-made millionaires have smaller and tighter professional networks comprised of highly-networked people whom they know very well, and represent a wide range of fields. Develop a network of that kind, seeded with “connector” personalities who are familiar with you and your goals, and you will see your “lucky” opportunities multiply.

Work at your strengths.  Super-successful people consider their ability to work doing the things they are skilled at as a major contributing factor to their success. Not coincidentally, working at your strengths is also how you develop such deep expertise in your work that you can pick up on patterns others don’t see. You are also more likely to trust your gut in decision-making. Both are defining traits of lucky people.

Be persistent and seek value in your failures.  The two most impressive findings in my survey reveal how deeply the super-successful believe in the benefits of failure and persistence. Self-made millionaires, very unlike the middle-class, go right back at the things they fail at and are determined to learn from their mistakes. Surveys of lucky people show similar traits. Lucky people say they see the positive sides of their misfortunes, don’t dwell on the ill effects, and take corrective steps to avoid misfortune in the future.”

Stay in the Game No Matter What Hand Your Dealt

Luck may indeed have a lot to do with the “luck of the draw.”  Certainly recent events in economic, social, and political spheres demonstrate the truth to the notion that there are things we cannot control.  Things do “just happen.”

However, even the best card sharks in the world aren’t always dealt a winning hand.  Instead, they leverage any chance opportunities that get played, listen to their hunches, expect the fortune of winning, and somehow manage to turn their bad luck to good.  They also play to win, tend to associate with like-minded people, play their strengths, learn from their failures, and (perhaps most of all) persistently stay in the game.

However, with Content taking over the SEO throne, the challenge is coming up with content of value to your reader – and your reader is, of course, either an established customer or a potential customer.  Actually, similar to SEO, content marketing has evolved as well.  For quite some time “article marketing” was the technique de jour.  However, if you’re still on the article marketing bandwagon, blogger James Martell provides us with a succinct explanation of why article marketing no longer works – actually he provides 5 reasons, but his quote from Matt Cutts, head of Google’s Webspam department cuts to the chase as to Google’s position on article marketing:

“… if I had to make a prophecy or forecast about how Google feels or how search engines feel about them in general, the trend that I am hearing and the sort of complaints that I am hearing are that people are not huge fans of article marketing and don’t view it as an incredible value add in terms of the content that gets added to the web.”

Of course the man’s title provides us with some pretty good insight into how Google feels about “traditional” article marketing – he’s the head of Google WebSPAM and, as we all know, spam has absolutely no real marketing value.  Quite the opposite – spam tends to tick people (including your customers) off.

Spam a Not

Monty Python made a ton of money with their musical Spamalot – but we can almost guarantee you’re not going to make a ton of money creating content that’s focused on SEO.  You’ve got to think about content from the perspective of your customer.  What value is it to your customer to enter a search term and simply find content that’s written for purpose of including other search terms people might use to find the same article?  Customers want content with some meat (not spam) in it.  Content that actually means something to them.  Content that helps them figure out how to meet a need or solve a problem.

All right, we know you’ve most likely heard all this before and right now you’re thinking something like “Hey, I was searching for information on content marketing – can we just cut to the chase?”  We’ll get to that in the next paragraph.  But first things first, and the first thing about content marketing is that it is NOT article marketing.

A Simple Way to Create Content Meaningful to Your Customer

Here is an extraordinary simple way to create content of real value.  Content that is so super, so informative, and so useful that your customers and prospects will make it a point to come back for more.

1. First and foremost you’ve got to write for your audience – which means you’ve got to decide who that audience is.  The best place to start is to use your customer profiles.  A customer profile contains two types of information about your customer: Demographics -  Personal statistics that include such information as income level, gender, educational level, location, ethnicity, race, and family size. For example, the marketing department of a business might use demographic variables as an important input when formulating target customer profiles.(Source: Businessdictionary.com). Psychographics - Analysis of consumer lifestyles to create a detailed customer profile. Market researchers conduct psychographic research by asking consumers to agree or disagree with activities, interests, opinions statements. Results of this exercise are combined with geographic (place of work or residence) and demographic (age, education, occupation, etc.) characteristics to develop a more ‘lifelike’ portrait of the targeted consumer segment. (Source: Businessdictionary.com)
2. For the purpose of this post we’re going to assume that you’ve compiled at least one customer profile.  If you haven’t – you’re going to need to – but if you haven’t done so that doesn’t mean you have to wait to do so before producing great content.  For now, simply write down the demographics and psychographics for what you would consider to be your “perfect customer.” Many small businesses have more than one customer profile – so identifying who your audience is means knowing which segment of your customer profiles a particular post will target.  For instance, one segment might be Millennials in college, another segment might be aging Boomers.  Each of those segments will have specific demographics and psychographics.
3. Step number three is identifying the particular customer (or market) segment.  This is your audience.  For example, your segment might be “Mother of the Bride.”
4. Next you want to list the specific characteristics of your identified segment.  You’ll glean a lot of this from the demographic/psychographic. For instance, the Mother of the Bride you identify as the segment you will address is over 50, single, and doesn’t have a lot of financial resources.
5. Now you’re going to list the needs and challenges of your segment.  For instance this segment of Mothers of the Bride wants to lose 20 pounds before the wedding, isn’t thrilled with the colors her daughter has chosen, isn’t looking forward to having to spend the day with her ex-husband, doesn’t have a clue what kind of dress suits her figure – yet wants the day to be perfect.
6. You can see where we’re going with this.  By Step #5 you’ve got a really good idea what you’ll be writing about.  You’re going to give your audience information that is going to help her meet some fairly specific needs (i.e. For a Mom facing a wedding that’s two weeks away it’s clear she’s not going to lose 20 pounds, in this case you write about eating healthy so she looks healthy and radiant; if the wedding is a year from now, you talk about sensible weight loss and exercise and provide a few reliable resources.)

Actually, you could probably write a series of posts on the needs and challenges your segment is experiencing.  However, just remember these simple steps for writing killer content:

1. Identify your segment (audience)
2. List specific characteristics within that segment using the demographics and psychographics of that segment – you want most readers to relate, but you need to make sure your subject isn’t so broad that your article becomes a book.
3. List the needs and challenges of the segment you’ve targeted.  When choosing particular needs and challenges remember you want to “tighten your topic” rather than attempt to cover the whole enchilada.
4. Brainstorm ways to meet the needs and solve the problems/challenges you’ve identified.  Decide if you want to write a series of posts directed to your identified segment, or just one article.
5. Organize your brainstorm in a logical fashion.
6. Write your post.

Think of your key ring.  You’ve probably got quite a few keys on that ring – you may have even forgotten what some of them are for.  But we’ll bet that you’ve got a few “key” keys on that ring that you know exactly what they’re for and you couldn’t do without.

That’s a pretty good analogy when it comes to key business drivers.  Just as different cars open with different keys, different types of small businesses can have different business drivers.  However, when you back out of your driveway in the morning, there are a few key things you’ve got to do such as put on your seat belt, adjust your seat, check your mirrors and, before you pull out, you’d better make absolutely sure the road is clear and there’s nobody and nothing behind your vehicle.  No matter who you are, or where you’re going – everybody needs to perform key activities in order to drive safely.

When you’re in the driver’s seat running your small business here are fivekeys you want to make sure you’ve got on your ring to run your business successfully:

1. Risk Reduction
2. Efficiency
3. Time Management
4. Cash Flow
5. Your Customers

Risk Reduction.  We know there’s the whole “successful small business owners are risk takers” school of thought – but successful small business owners are also very successful at reducing risk.

Rock climbers and parachutists are certainly willing to take risks – but the most successful rock climbers and parachutists (meaning they make it off the mountain to climb another day and experience soft landings after jumping out of a plane at 10,000 feet) make sure they are properly trained in safety measures and use safety devices related to those risks.

Similarly, the most successful small business owners are those who focus on minimizing risks.  Risk reduction may not be as sexy as seeing ourselves as risk takers.  For instance, a call to your insurance broker to review your policies or creating contingency and disaster plans probably doesn’t get your adrenaline flowing.  Making sure your small business is compliance with government and industry regulations might not be your idea of an exciting task.  But both of these examples are risk reducers, and reducing risk is just as important as taking risks.

Efficiency.  Being efficient isn’t limited to meaning being good at what you do.  American Heritage Dictionary of Business Terms business efficiency is:

A measure of productivity that compares output to inputs. In automobile manufacturing one measure of efficiency is the number of labor hours required to produce a vehicle.

The example Heritage provides is a good one, but it is important to understand the meaning of the words “input” and “output” when measuring business efficiencies.  For instance, a new computer program or deploying a new process to produce vehicles is an “input” that can “output” – but you won’t be able to quantify that impact unless you monitor and measure output.

The point is that successful small business owners just don’t deploy new “efficiencies” – they measure the impact of those efficiencies (such as a new customer service policy) on output.

Time Management.  Outside of cash (which we’ll get to in just a minute) it seems there’s never enough time and not just not enough time to get everything that needs to be done completed – but we don’t seem to have enough time to figure out what our priorities are in order to “best spend” our time.

However, when time is not properly managed it is almost always wasted.  Which makes more sense – to schedule time to strategically approach how time is used at your small business, or waste untold hours chasing your own tail?  When time is not managed properly it is almost a certainty that productivity and profitability are reduced.

At the very least take time to “chunk out” daily, weekly, monthly, quarterly, and annual tasks.  Prioritize those tasks, realistically assign the number of hours those tasks will take to perform, and then schedule accordingly.

Cash Flow.  Amazingly there are a vast number of small businesses operating without properly monitoring or predicting necessary cash flow.  Monitoring cash flow is the most important risk reducer in your small business toolbox.  Establishing historical cash flow is what allows you to adequately forecast future cash requirements as well as keep your business operating on a day-to-day basis.

Finding out that you don’t have the necessary cash on hand when needed simply isn’t good business.  It is bad business – bad enough to cause you to close your doors.  The more you understand and can establish times when cash flows freely as well as when the river tends to run dry the more you can take the necessary steps to arrange for additional funds ahead of time instead of being caught in a cash crisis.

Your Customers.   Simply put, your customers are everything.  No customers, no business.  Today’s consumers are the most informed consumers since trade began.  Additionally, today’s customer isn’t interested in “paternal” approaches where businesses “tell them what is best for them.”  Instead your customers are looking for relationships with businesses that partner with them to meet their specific needs and solve their specific problems.  This means that communication with your customer is a key success driver for your small business.  Every communication – from advertising to content marketing – needs to be presented from the perspective of your customer, not your business.  This approach may seem to be “putting the cart before the horse” but, just as we no longer use carts pulled by horses to deliver our products or services, today you attract and retain customers by “putting your customer before your business.”  

The most common approach to establishing a partnership with a prospect or current customer is a “consultive” approach where, rather than “selling”, the business takes on a role similar to that of an outside consultant.  Depending on how well the business is able to successfully consult with the customer determines whether or not this type of partnering wins sales, maintains customer loyalty, as well as continued customer engagement.  In other words, sales are “customer driven.”

But there’s a “Semi New Kid on the Block” for partnering with customers that combines the best of consultive sales with as well as building your business based on a culture of innovation.   According to Ranjay Gulati Harvard Business School professor and author of “Reorganize for Resilience: Putting Customers at the Center of Your Business”:

“Being customer-driven doesn’t mean asking customers what they want and then giving it to them. It’s about building a deep awareness of how the customer uses your product.”

Gulati defines a “resilient” business as a business “that prosper(s) both in good times and bad” by working from “the outside in.”

Now this may sound pretty much the same as partnering with your customers via a consultive relationship.  But it’s not.  Instead of a business acting as the customer’s consultant, the customer is the businesses’ consultant.  And vice versa – which translates into a deep partnership between businesses and customers.

That alone is pretty darn innovative.  Remember, a consultant is an “expert” – now, ask yourself, “Wouldn’t it be great to be able to bring in a consultant who couldn’t only tell me exactly what my customer’s need and how to solve their problems, but also be able to help me find other uses/applications/modifications of my products and services that I am not currently leveraging?”

It certainly would be great – and, believe it or not, you’ve got quite a few consultants waiting in with wings – they’re called “customers.”

Customer Innovation Centers and Networks

Gulti’s observation that being customer-driven requires “building a deep awareness of how the customer uses your product” is dead on.  But what if your customers could also consult on creative and innovative ways to use your existing products, services, and/or capabilities outside your identified market(s) or customer profile(s)?

This is exactly what Customer Innovation Centers (we’ll refer to them as “Centers” but they are also called Innovation Networks – and larger corporations actually operate entire networks of Innovation Centers in multiple locations) are designed to do.   Innovation Centers are places where ideas are exchanged between businesses and their customers.  We started this post off talking about partnering with customers – and Customer Innovation Centers promote a very unique partnership between customer and business.

We’ve already mentioned the value of turning the tables and having your client or customer act as a consultant to your business rather than just the other way around.  Customer Innovation Centers provide both the opportunity as well as structure for customers to consult with them.

For example, DuPont refers to their Innovation Centers as “the Global Collaboratory.”  On their website DuPont describes the “two dedicated spaces” of each of their Innovation Centers:

“In the Collaboration Space, collaboration partners and our scientists can discuss and exchange knowledge. It is where we expect solutions to be nurtured and delivered.

In the Innovation Space innovations focusing on various industry needs are displayed, demonstrating the latest technology offerings, applications, and industry trends. It allows our collaboration partners to visualize possible directions when working to meet industry needs.”

DuPont also provides us with what we’ll refer to as the mission statement for their Innovation Centers (Note: this quote is not presented as a mission statement by DuPont):

“The network is designed to allow our customers, governments, NGOs, universities, and other strategic partners to collaborate with us to solve both regional and global issues.  Innovation Centers bring to life the problem-solving power of private/public alliances, serve as a catalyst for growth, and serve to uncover unmet needs that will improve the lives of people everywhere.”

You’re Not too Small for an Innovation Center

It’s easy to discount the value of putting any sort of Innovation Center together for your business.  After all, you’re not some large global corporation.  You’re a local small business.  However, it is possible to adapt the “two space” format DuPont describes on their webpage to your small business.

The first thing you want to note is that DuPont doesn’t limit their Collaboration Space to their employees and customers – they include other stakeholders such as universities, government bodies.  They bring in outside stakeholders (i.e. universities, governments, charitable organizations.)  You can adapt this to your small business by bringing in outside stakeholders from the community your small business serves to discuss and exchange ideas.

The Accenture Customer Innovation Network also provides a list that small business owners can adapt to their business type and location:

• “Trend watching: The ACIN team researches new trends and connects with various sources, conferences and companies worldwide. It collects global and local market insights and delivers them to clients via multiple formats such as a newsletter or apps.

• Streaming live: The network team uses videoconferencing to deliver customized sessions on a wide array of topics and emerging technologies, with on-demand access following each session. 

• Innovation labs and programs: The ACIN helps clients identify, prioritize and pilot innovative ideas. In addition to providing thought leadership, the team helps put processes in place to facilitate the creation of ideas within client companies. 

• Events and fairs: The network organizes sessions with speakers from the industry, demos and team-building events where innovative ideas are put into practice for participants.

• Innovative workshops: The network team also organizes workshops to help explore trends and best practices that are shaping the future of the industry. Participants can experience the emerging consumer experience in a live, interactive environment and connect with experts around the globe to understand the best ways of operationalizing strategies for the future.”

3M is also a company small business owners can emulate.  Jeffery Phillips of Ovo Innovations described 3M’s Innovation Center after having visited one of their centers:

“Innovation and basic research is not valuable unless the discoveries can be converted into value for the organization or its customers. 3M carefully connects its innovation work to customer needs (particularly B2B customers) through meetings and exchanges with customers in Customer Innovation Centers located throughout the world. Typically each facility has several meetings every day with corporate customers. These meetings identify significant challenges the customers face and help 3M identify the right technologies or opportunities for new innovation.”

Xerox’s Gil Hatch Center for Customer Innovation website describes their approach:

“The center represents Xerox’s continuing commitment to this community of industries and businesses we serve. Here, customers will interact with today’s digital technologies and imagine the innovative possibilities emerging for tomorrow.

Customers can attend an Executive Communication Exchange (ECE), where they can have a unique agenda designed to meet their specific requirements. Subject matter experts lead discussions on various challenges and opportunities affecting the customers’ business. The center is also used to host workshops on a variety of topics focusing on our customers’ objectives: growing their business, producing more jobs, reducing costs and delighting their customers. These workshops include industry experts, as well as an opportunity to see the technology and workflow associated with specific applications.”

While these examples are all from large corporate sources, just as small business owners utilize other corporate best practices (such as strategic and operational planning, marketing, human resources, and business development) Customer Innovation Centers can also be adapted to a small business environment.

Then you’ve got the most likely lesser known (to you) Biz Chair’s Sean Belnick who, at 20 years of age, is worth around 42 million.  The list of young billion/millionaire young entrepreneurs makes it seem that anyone over the age of 30 isn’t making much of an impact in the startup world.  Of course, not all young entrepreneurs are worth millions, but, Entrepreneurship.org reported that, according to Carl Schramm, president and CEO of the Kauffman Foundation, that 54% “of the nation’s Millennials either want to start a business or already have started one.”

However, the generation who coined the phrase “Don’t trust anyone over 30” is far from ready to throw in the entrepreneurial towel.  As a matter-of-fact, an article written by Janean Chun for Huffingtonpost.com reported that “In 2008, at the height of the entrepreneurial youth renaissance” Vivek Wadhwa produced research that indicated “the number of (business) founders older than 50 was double the number of founders younger than 25, and the number of founders over age 60 was also twice the number of founders under 20.”

Additionally, the Wall Street Journal reports “The Kauffman Foundation, for example, says that rates of entrepreneurship are 50% higher for people between 55 and 64 than people between 20 and 34. And rates of entrepreneurship among people ages 55 and 64 have generally been trending up since 2007, whereas rates for that younger group have stayed relatively flat.”

Retiring Retirement

So, what’s up with all these people who are supposed to be more interested in grandchildren, golfing, and gardening instead setting their sights on starting their own businesses?

Casey Dowd, Boomer expert on Foxbusiness.com offers up a few insights as to what’s going on with the “Once Younger, Now Older” Boomer generation when it comes to business ownership.  Casey reports that a poll conducted when the first edition of Working From Home  was published “members of the GI Generation (either your parent’s, grandparent’s, or great grand-parent’s generation, depending on how old you are) were not in the least interested in pursuing “income-producing” work – including opening their own businesses – when they retired.  Instead, they looked forward to spending time with the grandkids, traveling, or finally having time to pursue interests and hobbies they had no time for during their working years.

However, that picture has completely changed for today’s retired and “pre-retired” Boomers.  According to the 13^th Annual Transamerica Retirement Survey (May 2012) 54% plan to work after the age of 65.  While the current economic climate has certainly influenced this decision (i.e. lost investments, lost jobs, inadequate retirement savings) – 49% of people now in their forties state they’ll work past 65 because “want to stay involved” and 44% of people in their fifties will continue to work past 65 because “they enjoy what they do.”

The Big Three

Wanting to stay involved and liking what you do are certainly reasonable motivators to continue working after the traditional retirement age of 65.  However, there appears to be 3 main reasons for Boomers (generally speaking people born between the years 1945 and 1964) to jump on the small business bandwagon:

• Boredom
• Economic Downturn
• Social Change

Boredom.  Although the Boomer generation included “Hippies” who deplored the values of their parents, there is one value the two generations held in common – they were both hard workers.  While they made much more money (due to being one of the most highly educated of all American generations) working 80+ hours a week than their parents did – Boomers thought doing so was the price to be paid in order to fund a lifestyle that many Boomers may have once thought of as making no contribution to society.

Boomers who did not experience significant negative financial impact during the Great Recession still have significant resources available to them after retiring.  And certainly many of these Boomers got pretty tired after working their butts off for 40 years and may have embraced the goals of their GI Generation parents at retirement – visiting grandkids, traveling, and having some time to do something (anything) that interested them that wasn’t work related.  But then, after a few months or a few years something unexpected happened – they got bored.  They miss the excitement of the work-a-day world.  Some may go back to work for others, but a huge component of Bored Boomers decide to use some of their resources to start they own small businesses.

Economic Downturn.  The Great Recession resulted in a cumulative loss in American personal wealth at an estimated $7.7 trillion less than it was prior to the Great Recession.  That’s a whole lot of dough.  And many Boomers took huge hits losing significant value on their investments, retirement accounts, and home values.  Many laid off Boomers lost their homes or are barely hanging on due to being “underemployed” – which means earning salaries that are drastically lower than their previous incomes.

Even if a Boomer may not have taking an “I’ve lost practically everything” hit – they are now faced with knowing that they simply don’t have the money to fund their retirement.  Add that to a trend where finding a job at 50+ years of age is just as bad as a recent grad Millennial trying to find employment outside of the fast food industry – it is easy to see why both of these generations consider opening their own business to be a light at the end of their tunnel.

Social Change.  There may be more “Hippie” values lurking in the minds of formerly retirement age Boomers then we may have guessed if we judged then by the model car they drive or luxury vacations they take.  Huffingtonpost.com reported on a “recent study” that indicated “one in four Americans between the ages of 44 and 70 are interested in starting their own small business or social venture – with one third of these 25 million people having already begun, or taking steps, to start their business, and half making plans to do so in the next 5-10 years.

It makes sense that social entrepreneurship would be attractive to Boomers thinking of running their own small business.  These are people who often quite literally put their lives on the line to create social change by participating in activities such as the civil rights movement as well as other types of social protest.  Flash forward 30-40 years and you now have a generation of business and technologically savvy Boomers now able to transfer their skill sets to businesses designed to create or contribute to social change.

“The act or process of legally confiscating somebody’s property temporarily until a debt that person owes is paid, a dispute is settled, or a court order obeyed.” 

Now, most of us understand that the current “Sequestration” in the context of the United States of America is centered on settling a dispute.  No matter which side of the political coin you’re on, we most likely all would agree this is a very sorry state of affairs.

The Sequester:  How We Got Wherever it is We’re At

Sequestration is actually a CR (Continuing Resolution.)  According to the glossary on the United States Senate website a continuing resolution is defined as:

Legislation in the form of a joint resolution enacted by Congress, when the new fiscal year is about to begin or has begun, to provide budget authority for Federal agencies and programs to continue in operation until the regular appropriations acts are enacted.

This would seem reasonable to most small business owners who operate using a budget.  Sometimes it takes a bit longer to gather the information required to create a viable operational budget, and it is quite possible you’ve missed your own deadline a time or two.

(Note: if operating with a budget does not describe your small business we’d have to say that no matter whether you favor a Democratic or Republican budgetary agenda, it’s a bit hypocritical to object to the fact our government has failed to come up with a budget.)

If you’ve missed your own deadline to have a budget in place for your small business, it’s a pretty good bet that this became your highest priority and you made sure your budget was completed and deployed sooner than later.  That’s simply sound business sense.

The issue that we have as a nation is that our nation is operating using a 78 page continuing resolution rather than an actual budget.  We’ve actually been operating on more than one resolution in the last few years.  Here’s how putting together our nation’s budget is supposed to work:

• In 1921 the Budget and Accounting Act of 1921 as well as the Congressional Budget and Impoundment Control Act of 1974 make it a legal requirement for the President to submit a budget for the upcoming fiscal year, the deadline is the first Monday of February.  The President’s budget is to be a detailed document to include both spending and revenue proposals, as well as proposals for policies and other initiatives put forth by the President and their impact on the budget.

• The President’s budget is delivered to the Congressional Budget Office which is responsible for analyzing the President’s budget and then publishing a report.  The CBO is a “nonpartisan” agency and is also responsible to estimate federal revenue and spending should a budget not be passed for the fiscal year as well as for the next ten fiscal years.

• Both the House and Senate Budget Committees, along with other committees related to the budget are to begin their review of the President’s budget in February and March.  All committees are to submit their budgets by April 1 to the House and Senate.  It is expected that the House and Senate, after analyzing and perhaps amending the budget, have a Congressional Budget Resolution approved by April 15.  The CBR is Congress’s agreed upon budget proposal and must include estimated revenue and spending, surplus or deficit, and an estimate public debt resulting from their budget resolution.

• Here’s where it can get pretty confusion and a ton of issues can arise.  Within the budget there are two types of spending, mandatory and discretionary.  Simply put, mandatory spending is mandated (required) by law.  However, discretionary spending is not.  Any discretionary spending in the budget must be evaluated by Appropriations committees who analyze the discretionary spending in the budget, put together bills that may include amendments to what was allocated in the budget, and then submit their bills to the House and Senate.  If the House and Senate can’t agree on particular appropriation bills, they then are forward to a conference committee of both members of the House and Senate.

• When an appropriation bill is approved by both the House and Senate it is shipped off to the President who can then either approve or veto the bill.  If the President vetoes the bill, it gets sent back to Congress who then either come up with another bill or override the veto (requires 2/3 vote.)

For several years practically none of the above has gone according to plan.  President Obama has missed the deadline for submitting a budget.  According to Dave Boyer of the Washington Times:

“In 2009, the president submitted a budget outline on Feb. 26. In 2010, Mr. Obama actually met the legal deadline, presenting his plan on Feb. 1. In 2011, the budget arrived on Feb. 14 — a week late. In 2012, he released the budget on Feb. 13, again one week late.

But this year, a budget that was expected on Capitol Hill by mid-March now has been pushed back until April 8. That would be 63 days late, a record unmatched by any president. President Reagan in 1988 submitted a spending plan that was 45 days late.”

However, again according to the Washington Times, Congress has also neglected their part of the deal:

“Congress hasn’t passed a budget since 2009, even though the Budget Act says it must do so by April 15 every year.

House Republicans passed budgets in 2011 and 2012, though they never reached final agreement with the Senate, where Democrats haven’t written a budget since 2009.”

The Impact of the Sequester On Small Businesses

How the sequester is/will impact small businesses is a big subject.  But here are a few predictions as well as current problems small business owners face due to the sequester:

Constantine Von Horrman, CBS Money Watch:

In this article Dr. Stephen S. Fuller of George Mason University in conjunction with Chmura Economics and Analytics is quoted:

“Many small businesses are subcontractors, suppliers and vendors to larger scale businesses that are the prime federal contractors,” he said. “These subcontractors, suppliers and vendors have little recourse when their contracts with their primes are scaled back or terminated; in fact the suppliers and vendors may not even know that their business is linked to a federal contract that could be canceled due to something called ‘sequestration.”

Kelly Phillips Erb, Forbes.com  

In this article Ms. Erb notes that, because of sequestration, “the refundable portion of the Small Business Health Care Tax Credit for qualified small tax-exempt employers will be reduced.”  The purpose of this tax credit was to incentivize small businesses to continue providing health insurance.

“Now, with sequestration, that credit gets a haircut. Practically speaking, what that means is that health care benefits just got a little more expensive for those employers. Just like that. And considering that health care costs for employers are already increasing at about 8% per year (about four times the rate of inflation), that’s not insignificant.”

Maybe Sequestration Isn’t Such a Bad Thing for Small Business

Outside of “doom and gloom” there are some who don’t see sequestration as being all that bad for small business.

Elana Fine, managing director for the Dingaman Center for Entrepreneurship stated in a recent article that she felt that the sequester would be good for the Washington D.C. region:

“Rather than starting high growth technology businesses, our top talent is working for government consultancies. There is now a higher risk to working in/for the federal government, so the trade-off to start a business has changed. If you are sitting at your desk right now, unsure of what lies ahead, and see a market need that matches your skill set, start thinking about starting something of your own!”

Startups are good for the economy and Ms. Fine’s observation can also hold true at the state, county, and municipal level.

However, we particularly enjoyed Gene Marks’ article on Inc.com “9 Great Things About the Looming Sequester.”    For one, it’s written tongue in cheek, but his humorous viewpoint is definitely a breath of fresh air when it comes to the sequester.  Here are our “Top 2” of Marks’ 9 Great Things:

3.  Most small businesses will not be affected.

Contrary to the Armageddon predicted, most business people I know aren’t fazed by a five percent budget cut.  In fact, most small businesses will not really notice it.  That’s because there are between 20 million and 30 million small businesses in this country.  These are pizza shops, gas stations, accounting firms, strip bar owners, and plumbers.  Some, of course, will be impacted, particularly those that sell directly to the U.S. government, rely on federal grants, or have military contracts.  And there will be others (like me) who will feel the bite indirectly because customers are in affected industries, like defense and education.  And some will see revenue fall because they’re located in regions where cuts will make a difference.  But the good news is that the government next year must cut $85 billion from its $4 trillion in spending.  You know the math.  You cut stuff from your budget all the time.  Life goes on.

4.  Something is being done about the deficit.

Hundreds of thousands may lose their jobs.  Government services may get squeezed.  Flights may be late.  Some businesses will suffer.  Locusts, hail, and frogs may fall from the sky.  This will all be painful.  But not as painful as allowing the deficit to continue and the national debt to grow to more than 900 percent of U.S. GDP.  Not as painful as passing down significant debts to the next generation and hampering the government from funding expansion, infrastructure, and defense because the country is unable to borrow any more to pay the bills.  These automatic cuts are at least doing something about that problem  And in an era where no one in Washington can get anything done, most of the business owners I know are happy that at least something is getting done.  Even if it’s just a five percent cut.

Your Best Bet for Reacting to the Sequester

Reacting to the sequester isn’t going to do you much good.  When we “react” to something this usually means we’re in fright or flight mode and can rush into making some unfortunate decisions, or simply become so paralyzed that we do nothing.  Rather than react – ACT.  And, in order to act effectively, this means making decisions and plans from a proactive, solutions-based perspective.  Complaining about problems or challenges is like treading water, you put out a whole lot of energy, but don’t get anywhere.  Sooner or later you run out of energy and drown.

Rather than drown, you can swim through the sequester.  You may get tired and have to float on your back every now and then, but you do have a choice as to whether you’re just going to let yourself sink, or keep swimming for shore.

Some will tell you that wanting to be your own boss is a “bad” reason for starting a business.  While we’d agree that if “being my own boss” is your only reason for becoming an entrepreneur it’s rather likely you’re going to have problems, a strong desire to be your own boss can also be a strong foundation upon which to build a successful business – but only if being your own boss is connected to a strong desire to be an exceptional leader.

It’s interesting that a desire to be your own boss commonly stems from being an unhappy employee.  According to an article posted on Forbes,

“A Business Insider survey of 225 executives reports 22 percent want to launch their own companies. Why are they willing to make the sacrifice and take the risk? They want to run an enterprise their way. Deep in their hearts, they feel and know they will enjoy more satisfaction and fulfillment by establishing a healthier business culture.”

This same article cites a study by Accenture which indicated that the top reasons why people are unhappy with their jobs are:

1)    They don’t like their boss (31%),

2)    A lack of empowerment (31%),

3)    Internal politics (35%) and

4)    Lack of recognition (43%)

Isn’t it Ironic?

So, we’ve got a couple studies that indicate that many people who are unhappy with their jobs want to open their own business because they think they’ll enjoy their work more, doing so will increase their sense of job satisfaction, and they’ll feel more fulfilled.  And they intend to do this by creating a “healthier” business culture at their small business.   A healthier business culture would seem to be one where:

1. Employees liked their boss
2. Employees feel empowered
3. Employees aren’t hampered by office politics
4. Employee accomplishments and contributions are recognized

What’s ironic is that many small business owners who think they are creating a healthier business culture by mentoring their employees in ways that meet the above four criteria are actually micromanaging employees.  And micro-managed employees generally don’t like their boss, don’t feel empowered, are stymied by internal office politics and hierarchy, and feel their contributions are ignored.  In other words, in too many small businesses employees find themselves stuck in the same boat that motivated the small businesses’ owner to start it up in the first place.

But don’t be too hard on yourself.  Change is always possible.  The first step is to understand the difference between micromanaging and mentoring an employee.  Fortunately Jim Rooney provides a succinct summary of the differences between the two:

What is micromanagement?  It is excessive involvement by a manager with an employee in regards to their performance. In short, it is imposing work standards and behavior expectations that meet the personal needs of the manager, not the employee. It is to control a person or a situation by paying extreme attention to small details. The manager has good intentions to assist the employee fulfill their duties, but the employee feels disempowered and not trusted to complete work properly.  Productivity falls drastically.

What is mentoring?  Mentoring is a relationship in which a more experienced or more knowledgeable person helps a less experienced or less knowledgeable person acquire specific skills, attitudes and techniques that increases their value to their employer. The mentor shares personal experiences with the mentee.  The mentee test drives the techniques and reports how it worked. The mentor helps them refine the concepts so it works with their personality.

This same article makes a distinction between mentoring and coaching.  In essence, mentoring is when you teach less experienced employees using your own experience, knowledge, and skills.  On the other hand, coaching according to Rooney is more about perspective.  When coaching you “ask questions, listen closely and provide information that helps the other person gain a perspective that is beneficial.”  We’d add that coaching helps an employee gain a perspective that is beneficial to that employee’s personal success and productivity in the context of contributing to your successful and productive small business.

Telltale Signs Your Micromanaging Not Mentoring

If it isn’t obvious to you whether or not you’re micromanaging, try asking yourself a few questions:

• Do you think you’re better at most “everything” than your employees?
• Do you have a hard time delegating?
• Do you constantly feel swamped or resent your employees because you think you have to do their job for them?
• Do you require employees working on tasks or projects to frequently/constantly report their progress to you?  Are employees spending more time putting reports together for you than working on the project or task itself?  Would you resent a boss who made you report as frequently?
• Do you “take back” projects that haven’t yet been completed just because you found a mistake?
• Are you constantly “checking up” on employees?  Do you get anxious if you don’t know exactly what an employee is doing at any given moment?
• Do you hoard strategic, innovative, or creative projects and restrict your employees to performing boring, repetitive, mind-numbing duties?
• When assigning a project to employees do you dictate not just “what” but every “how” to complete the project rather than give your employees the power to identify and deploy tactics and tasks?
• Do you sometimes get frustrated because it seems your employees need to get your approval on every little detail?  If so, ask yourself how you’ve contributed to this state of affairs.  Do you get angry quickly?  Are you easy to approach?  Do you encourage employees to make decisions appropriate to their position and/or project they are managing?
• Do you get the feeling your employees avoid you?

It really isn’t all that difficult to discern whether or not you’re micromanaging.  You can most likely tell whether or not your employees like working with you.  You know whether or not you’re giving employees recognition for their contributions.  And it isn’t too hard to tell if your employees feel empowered to make decisions appropriate to their position as well as how comfortable they are to come to you with ideas and information.

And, if after an honest self-assessment, you’ve identified yourself as micromanaging instead of mentoring and coaching, it isn’t all that difficult to turn things around.  Here are a few ways to establish that “healthier business culture” you were determined your small business would operate within:

• Don’t be afraid to delegate.
• Encourage employees to make decisions within the scope of their duties and/or projects you’ve assigned them.  This frees you to involve yourself in identifying high-level goals, strategies, and measureable objectives for achieving those goals.  Give employees room to identify tactics and tasks.
• Don’t hover – give employees room to get their job done without constantly looking over their shoulder.
• We’re not promoting not requiring employees to report back to you – but let them report on how they are managing their duties and projects.  Meet regularly with employees to go over their progress.  You can require data to be included, but don’t get lost in minutia and, if you find a mistake, concentrate on helping the employee correct the mistake or find a solution to a setback instead of “taking the project back.”
• Make yourself available to employees.  This might mean setting regular “one-on-one” times to meet for short periods of time with no set agenda.  As employees come to know you are there to listen and mentor, trust between yourself and your employees will dramatically increase.  Employees will become more willing to be transparent and willing to share ideas when their relationship with “The Boss” is collaborative in nature.  In turn, employee productivity will also increase.
• Be sure to recognize the work and contributions of your employees.  This can be done formally (some type of reward) as well as informally (“Great work” – “Thanks for getting this in on schedule” – “Good idea.”)

Finally, periodically put yourself in your employee’s shoes by asking some pretty basic questions:  “If I were my employee, would I like working with me?  Would I feel open to discuss problems or share ideas with me?  Would I feel comfortable making decisions appropriate to my job or task without clearing any all decisions with me first?  Would I feel appreciated?”