Three things that hit the spot: An Analysis of the Rahim Fazal interview

If you missed the interview with Rahim Fazal, CEO of Involver, you can read it here. Rahim is intelligent and articulate, with a capacity for expert business planning. I think the interview drips with rich insights – it reads like one of those books in which you discover or perceive something new every time you read it. Here are my key takeaways from the interview:

1. ‘I think it’s really, really important to understand what the problem (in the marketplace) is as well as you possibly can’.
I thought this was Rahim’s central message and it is a good one. It’s pretty basic, but it’s amazing how many companies forget this principle, especially when in ‘expansion’ mode. Unless there’s a problem in the marketplace, you (or your company) have no business being in it. I would go so far as to say that this may be one of the biggest reasons ‘me-too’ businesses fail so often. These companies aren’t solving problems (they may not even be aware about problems in the market) but just want to run businesses in a given market because they see others succeeding in that market. There are several examples of how businesses both start off and continue to succeed by solving fundamental market problems; off the top of my head, here are some I can think of:

• The incandescent light bulb – Thomas Edison is believed to have spent years looking for a viable solution to a huge problem of his day – an effective and scalable source of light – which resulted in his invention of the incandescent light bulb
• Subway (fast food franchise) – A lack of healthy fast food was and still is a problem; Subway is one of the popular and successful solutions to this problem
• Robeez Footwear – Sandra Wilson started this hugely successful childrens’ footwear company when she was unable to find shoes that would stay on her son’s feet properly

2. ‘When we started this company, we started with the problem of getting brand dollars into Facebook…. (The target) segment included advertising agencies that wanted to market on Facebook using video. Now as we’ve grown and solved that problem, we’ve expanded the target market.’

I thought it might be worth pointing out a classic growth path for most entrepreneurial companies: concentrate on a narrow niche; become very good at it, ‘own’ the niche and make money; then expand into other markets or industry segments. It only make sense to choose to play in a narrow niche, given a small company’s limited resources. But there are tons of small companies out there who try to do ‘everything’ and be all things to all people. In most cases, this is a flawed strategic choice that not only leads to a lack of identity in the marketplace, but also demotivates employees.

Involver’s path to growth was to target new segments in the market. But there are several other paths to growth as well. This might be a good opportunity for me to put my business school hat on and list the various options for organic growth (If I’ve missed out anything, please be sure to leave a comment):

1. Growth in existing product markets
   • Increase market share
   • Increase product usage
     • Frequency
     • Quantity
     • New applications
2. Product development
   • Add product features
   • Develop new generation product
   • Develop new products for the same market
3. Market development
   • Expand geographically
   • Target new segments
4. Diversification – New products, new markets

When planning for growth, it is vital that companies assess their options and choose a path that aligns with their vision and business objectives. It is also important to understand the overall return on investment (ROI) that a strategic choice would lead to. Estimating three fundamental measures - Return on Equity, Return on Assets and Return on Net Assets – is a good place to start.

3. ‘The key thing to remember is this: launching and running a business is a very iterative process and you need to really believe in that and execute around that.’

In my analysis of the Mike McDerment interview, I had touched upon this very point. However, I put this quote up in order to expand on another related point: iterations not only allow you to slightly tweak your business plan, but may also lead to radical changes such as fundamental shifts in your business model or business itself. Think of the insanely successful businesses that started off as something completely different. Dell Computer went through several iterations (in the early 90’s, it tried selling its products through warehouse clubs and superstores) before reverting back to its innovative direct-to-customer business model. Flickr, the photo sharing site, was originally intended to be a multi-player online video game. If their leaders had persisted with their original business plans, their success might not have seen the light of day.