Focus on Value-Creating Investments

By Dr. Evans Baiya

One of the challenges for growing a company is knowing exactly where to focus your investment, time and resources. When you introduce a new value (innovation) to the market, there are many processes you must have in place such as sales, marketing, delivery, and of course financial processes. These all require investment in the form of money, people, effort and research.

One of the biggest mistakes that companies make is to try to invest in all of these processes right away. Remember, to invest in an operational system requires a lot of resources. It takes up the leader’s time. This is time you should be spending on delivering increased value to customers. It is impossible for an entrepreneur to do everything early on, so the tendency is to have a bulky budget and to hire people to help you do all these things. This leads to a variety of issues: getting into early debt, promising features to potential customers that you cannot deliver, even getting paid but losing money. This can be a fundamental problem.

Organizational bulkiness is a symptom of lack of clarity about what and when you need to deliver to your customer. It is not a value problem. Therefore, as an entrepreneur you must have clear priorities around value delivery, and invest only in those elements of the business that are absolute requirements to deliver that value at the right time to the right customers in a way that is repeatable.

After developing excellence, then you can come back and create the rest of the systems. You must generate agility in your organization early on with the right mindset. It is not just about being lean. Lean is over emphasized. It is about the economics of your attention and money.

The economics of attention are critical because the currency of leadership is attention. All implementation of systems and processes requires the leader’s time, efforts, leadership, attention and money. You alone cannot pay the required attention to all of these bulky systems in your organization. If you are doing it all, nothing will work out very well. You have to take your attention and economize it. There is often too much focus on processes and methodologies, and too little emphasis on managing the attention of entrepreneurs and leaders.

All of this leads to competing priorities. When you have too many competing priorities, one of the easiest priorities to neglect is value for the customer. If the leader does not pay enough attention to the whole ecosystem, then there is nothing to sell. You will kill the traction and growth of your business by losing focus on value delivery.

This is why I advise against venture capital and loans. A bulky company detracts from value. When you start, the focus should be on value delivery.

Let’s say you are going to deliver a new product; for example, a new type of yogurt. A temptation is to go buy expensive machines to make it, a large branded truck to deliver it, a sales team to sell it and even an accounting department to handle all of the money that is going to roll in. All of these are necessary, but if you took all of these and invested in them as a startup, you would need loans or investors. Instead, focus only on what is required to deliver and develop the right product. Identify a small population that wants your product every day, and develop a methodology for delivering it to them. You will be able to create revenue and ultimately validate your business model.

The next thing is to expand your niche market a little bit more, which means you can now hire a few employees to create the same amount of yogurt. You don’t need to develop a marketing strategy until you are ready to sell it in larger, unknown markets. As an entrepreneur, you need to learn that your business growth has a lifecycle. I encourage you to grow aggressively, but to grow with focus.

Here are three ways to focus on value-creating investments:

  1. Identify where your business is at today and where you need to go next.
  2. Identify the investments are you planning on that you could live without for some time.
  3. Define which part of your business you can grow aggressively with your current resources to get more revenue.

Dr. Evans Baiya is an innovation, technology and business strategist. He is the co-author of The Innovator’s Advantage and creator of the Innovator’s Advantage Academy. To learn more about Value, send an email to info@theinnovatorsadvantage.com.