Alliance Partners

Wednesday, October 19, 2011

Three Rules for Entrepreneurs During Uncertainty - Ndubuisi Ekekwe - Harvard Business Review


by Ndubuisi Ekekwe | 

The Mexican economy was in ruins in 1982. Oil prices had fallen, the peso was devalued, interest rates were high, and some banks were nationalized. Yet a young entrepreneur saw opportunities and invested heavily during that downturn. He acquired clusters of companies, across industries, from foreign and native investors, who were fleeing the collapsing nation. His father had told him that nations never go bust forever. Good times always return. That entrepreneur is Carlos Slim, now the richest person in the world.
John Templeton, in the early stage of his career, bought 100 shares of selected companies, trading at less than $1, in 1939, the onset of World War II. By 1943, he had made many times the money he invested. He later became a billionaire.
Amadeo P. Giannini founded San Francisco-based Bank of Italy to provide banking services to immigrants. Immediately after the 1906 San Francisco earthquake, he went straight to business, despite the uncertainty. He made loans to people from a makeshift desk, with no luxury of a bank hall. His bank was later renamed Bank of America, after some mergers.
Before the Great Recession, it was far easier to become an entrepreneur. The values of homes were inflated, stock prices soared, and credit companies flooded families with mind-blowing offers. The result was a season of unprecedented consumerism and spending for both companies and consumers. With access to capital and readily available happy spenders, entrepreneurs could not ask for a better moment; many flourished.
But that was then; today, the headlines are on debt crises, high unemployment, currency wars, and general lack of consumer confidence. From New York City to London, Athens to Tokyo, we are living during a period of economic uncertainty
Yet, even in this time, there are still opportunities. Many companies have improved revenue, ballooned profits, and watched their stocks soar. Apple not only dominated an industry, it became the world's most valued company. Even now, there are opportunities to win new customers, grow market share, and improve profit margin.
The following rules can help entrepreneurs through this period of turmoil.
Rule 1: Focus. The crises in the market must not distract entrepreneurs from their core missions. Most times, they are not exposed to the same level of risks as the big companies. It doesn't matter as much if the Dow loses 2% if a company is not publicly traded. Just as Slim and Templeton did, entrepreneurs should focus on what they can control: building their businesses. Headlines must not overtake strategy sessions.
Rule 2: Visibility. During uncertainty, customers, staff, and stakeholders panic. To get the trust of all these people, entrepreneurs must be visible, especially to their major customers. Visibility alleviates fears. Learn from A. P. Giannini who despite the ruins was visible to do business. Entrepreneurs should also be visible to their staffers — they deserve to know what is happening, if you want them to focus on working rather than polishing their resumes.
Rule 3: Planning. In most developed nations, bad economic times do end. This economic uncertainty will end one day. Is the entrepreneur ready for what comes after? Caterpillar provides a good example: it has plans for the good and bad times. The industrial equipment giant came out of the last recession knowing exactly what to do for growth. No matter how deep the uncertainty, it won't last forever. Prepare for what comes next.

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