Master of the game

How many entrepreneurs really know the game they play? Mastering the game or industry is founded on understanding the logic of the business. This is a must for any entrepreneur worth his/her salt.

The innovative strategies generated by the entrepreneur must not go against the fundamental logic of the business. Or should take advantage of the fact that not too many players in the game see this. Unfortunately or fortunately, there are many entrepreneurs who only see the surface of the logic of the game. A genuine master knows the substance of the game and who the real competitor is, and clearly understands what it takes to be a superior player.

First and foremost, one must understand the drivers of a superior player. The first question to ask is: What is your product or service? The obvious answer is the shallowest answer. It is not the description of the product or service, but rather the real reason why the product or service is purchased at an amount greater than its cost.

The answer to the question leads to the next critical issue. If we know the real reason why the product or service is being purchased above its cost, then who is my real competitor?

The next question builds on the answers to the earlier questions. What does it take to do better than my real competitor? In other words, what does it take to be a superior player?

Knowing the logic of the business is fundamental to superior performance in order to be sustainable. Knowing the logic of the business is fundamental to produce results that are driven by deliberate strategies and not simply by luck. Knowing the logic of the business is fundamental to opportunities and strategic shifts in the business of the entrepreneur. Knowing the logic of the business makes the perfect strategy obvious.

Our student-entrepreneurs at the Asian Institute of Management go through this process and are painstakingly guided by their gurus to discover the logic of their business. What follows are snapshots of spirited discussions that take place in our Master in Entrepreneurship case rooms:

Student-entrepreneur: My business is about making special ensaymada. What is the logic of my business?

Guru: What makes your product different or, as you called it, special? Who buys your product? Is the buyer the one who eats your product? What does your buyer do with your product?

Student-entrepreneur: My product is not bought in stores. My customers phone in their orders and I deliver. My customers buy boxes upon boxes of my product. The majority of my customers give my products away.

Guru: To whom do your customers give your products?

Student-entrepreneur: They give it to relatives on their birthdays or other special occasions. They are also given to family doctors and other professionals who do not charge them for services rendered. My AIM classmates give it as Christmas gifts to their special clients.

Guru: What is the common motivation of your customers to choose your product over some other gift items? What is the message that your customers want to send to the recipients of the gift?

Student-entrepreneur: My customers want to express gratitude or say thank you in a special way. They have chosen my product over others because it is special and it is not available commercially. It is something personal, yet my customer do not have to worry if the item fits the receiver.

Moreover, it is a good gift for someone who has everything. The message my customers want to send is: "Thank you for your kindness. I know that you have everything but this is something personal which I am sure you do not have access to and can have access to only because I found it for you." I am in the business of baked products for special people who have everything.

Guru: Therefore, who are your competitors and what is the essence of your game? And what does it take to be a superior player in your game?

Student-entrepreneur: My competitors are providers of hard-to-find personal items that will be appreciated by people who have everything. This can range form jewelry to even antique items. My ensaymada is but a medium of expression. A superior player in my game will be driven by the ability to provide a personal product that is desired by people who have everything and one that is not easy to find, even by people who have everything.

Guru: That being the case, how do you grow your business? Is it by making more ensaymadas or something else?

Student-entrepreneur: Making more ensaymadas will make my product not hard to find. And, therefore, this goes against the logic of my business. In order to grow, I must come up with new baked products that will be considered by my customers as hard-to find personal items that are appreciated by people who have everything.

When my ensaymada is perceived in the market as the food for people who have everything, I shall make more ensaymadas available for people who want to feel they have everything. This type of customers will consume more of the product rather than give it away as a gift.

Thus, I can sell them in malls. My hard-to-find baked products will still be on a delivery basis. I have two great opportunities for growth that are mutually exclusive. But they will hinge on my ability to come up with new baked products that are going to be appreciated by people who have everything and by my ability to sense when it is time to position my product for those who want to feel they have everything.

Clearly, this student-entrepreneur was first in one game but has now found another opportunity to create and play a new game.

Next week, I will share another "logic of the business" dialogue between a guru and an AIM student-entrepreneur to further illustrate gems of master "entrepreneuring" for your own consideration.

(Alejandrino Ferreria is the associate dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further information/comments, you may mail him at: [email protected]).