Learn from your root industry

Whenever student-entrepreneurs are in a quandary about where they can get information on their businesses, our ACE gurus’s standard advice is to benchmark with the root industry.

A key process in situation mastery and enterprise mastery is knowing what it takes to be a superior player in the industry. Although it is true that many industries have not been the subject of industry analysis, it does not mean that one can never find answers to the question, "What does it take to be a superior player?"

During one mentoring session, an overseas student who was taking his Master in Entrepreneurship in the field of social development and was involved in the micro finance/credit consulting industry was quite concerned about the absence of serious studies about it.

As a social entrepreneur, his organization’s clients were other organizations who were either already engaged in lending to micro-enterprises and/or the marginalized sectors of the economy or would like to do so. Typically, these lending organizations include cooperatives, rural banks and non-government organizations.

Although micro-finance as an industry has been studied, the consulting component has not been the subject of studies. Indeed, his apprehension was valid. What follows is the synopsis of the mentoring session that ensued between him and his guru.

SE: Since nobody has ever formally studied the micro-finance consulting industry, how can I compare my industry analysis?

Guru: How do you define your industry?

SE: I’m in micro-finance consulting.

Guru: If we remove micro-finance, what is left?

SE: Consulting!

Guru: What is the logic of the consulting game? Who are the superior players in the consulting game? What does it take to be a superior player in the consulting game? How does a consulting company evolve to become a superior player?

SE: A big consulting company usually starts with an individual who had the expertise needed by the market. This is the important issue. The superior consultant must have an expertise that has basis. Fundamentally, the product/service must be good. Then, as the reputation for the expertise increases, more customers seek help.

This is when the second test of a superior player comes into play. A superior player will be able to accept more clients because of the ability to multiply the expertise in other people. At this point in the life of the firm, if the individual consultant is unable to multiply the expertise, the firm will not grow. The superior player should have been able to train people to replicate the expertise and make the customers feel that other people in the firm can deliver the same expertise equally. This is the only way to grow the consulting firm.

Guru: Then what happens? Any more tests for superiority?

SE: Another test for superiority is when the people who have been trained in the expertise by the founding consultant leave the firm.

Guru: Why?

SE: If the clients follow the individuals who leave, then the consulting firm’s list of clients is reduced. A superior firm should be able to keep the clients even if the servicing consultants resign. A superior player makes clients realize that the quality of the expertise is found in the system of the firm and not only in the people who service the accounts.

Guru: What are your conclusions on the consulting business thus far?

SE: Small players in this game imbed the quality of the expertise in the founding consultant. Medium players imbed the quality of the expertise in the people of the organization. Superior players imbed the quality of the expertise in the systems of the firm.

Guru: Now, tell me what does it take to be a superior player in the micro-finance consulting industry? What is the logic of the industry?

At this juncture, the student-social entrepreneur from Bangladesh, Kamrul Tarafder, looked at his guru, pleasantly satisfied. He has found answers to the questions he has raised. Better yet, he has found the answers himself. Now, he could proceed and complete his industry analysis.

Definitely, we should never let the absence of previous studies prevent an entrepreneur from determining the logic of his/her industry and discover what it takes to be a superior there. Benchmark. Look closely at your industry. Remove the adjectives and get to the root industry to find your answers.

Because of the growth and proliferation of industries, the resulting segmentations or specializations have created or spawned new industries. But all these redefinitions still follow the fundamental logic of the industry at the base. This is where we can start and learn from the precedents they have set. What superior players essentially do in your root industry may, in fact, work in yours.

(Alejandrino Ferreria is the dean of the Asian Center for Entrepreneurship of the Asian Institute of Management. For further comments and inquiries, you may contact him at: [email protected]. Published "Entrepreneur’s Helpline" columns can be viewed on the AIM website at http//: www.aim.edu.ph).