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Tuesday, April 8, 2008

Entrepreneurial Consideration: Managing the ripple effect

from Sid Mohasseb, Venture Farm





Editor's note: Sid recently posted this on his blog providing startup advice to companies, and we received permission from him to repost it here.

A non academic view of business change & improvement

Stating the sometimes forgotten obvious:

A business is a living entity that embodies many functioning organs. It performs the best and is healthy when all the elements are working together in harmony. The physical components of this living organ includes sales, marketing, IT, logistics, accounting, etc. and its psychology is represented by the core values, cultures, and beliefs. A pain or a dis-functionality in any organ influences the effectiveness of the business entity as a whole – if you are ill mentally or physically you can not be fully productive.

An illness maybe addressed by a better diet or some vitamins or a few pills a day for a few weeks (process improvement, overtime, incentives, etc.) or may need more drastic measures such as chemotherapy or surgery (re-organization, firings, new IT systems, a new business model, change of partners, etc.).

Almost always, to cure an illness the prescribed actions have some side effects. A change in the sales force compensation plan, influences the accounting daily practices, may require new software, may increase returns and impact the resource needs at the warehouse. An improvement in the resource planning software impacts the practices at both payable and receivable ends, Promote the person who is not competent and deal with your good folks looking for another job, etc. etc. Sometimes we actually create the illness with our actions (cutting our hand with a knife or hiring the wrong person).

Stating the not so obvious challenge:

So BECAREFUL of what I call “THE RIPPLE EFFECT” – Make a decision about A and watch for the ripples impacting B. And every decision big or small has some ripples. So what should an entrepreneur do, not make a decision ? or lose time and opportunities by over analyzing and procrastinating on every decision?

You want to stay healthy, you have to monitor your heartbeat, your cholesterol, your blood pressure, etc. etc. and react quickly to avoid worsening of your situation. You want to run a thriving and healthy organization, remember to measure the “right” performance indicators and watch them closely with a broad inclusive perspective.

Recently, I met an entrepreneur, I asked her for some performance metrics about her business and the answer was “we are too busy to spend time on measuring, we will put some performance elements when we get a chance.” Well, good luck! is all I can say; drive a car blindfolded and you will run off the cliff, and that is no accident.

Sid Mohasseb is the managing director of Venture Farm and the 2008 incoming president of the Tech Coast Angels in Orange County, the largest angel investment organization in US with close to a billion dollar follow-up investments by VC's. As an investor and board member, he is very active with a number of start-ups. He has a history of building and exiting companies, as well as, helping many of the fortune 500 with strategy, operations and execution advice. Learn more about Sid @ www.Mohasseb.Com Blog: http://sidmohasseb.blogspot.com/


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