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Huang

Robert Huang

Mr. Donald

Writing for College

16 April 2018

How to get Rich (Not a Scam)

With fortunes of over forty billion dollars, the top ten wealthiest people source of wealth

has one thing in common: business. Despite the huge successes of these companies, 21.2% of

businesses fail within the first year and 51.2% fail within five years. With huge corporate

companies already established in oversaturated markets, it is hard for small businesses to get a

good footing in the competition. Powerful corporations have more resources, recognition, and

experience that help them remain at the top of the markets. In the United States, small businesses

make up 99.7% of all businesses. Since every aspect of business is so interconnected, it is hard to

pin-point a single reason for failure. Businesses often fail due to multiple faults over time. The

top five reasons of failure include: cash flow problems, lack of market needs, cash issues,

inadequate teams, and competitors. The low success rate of starting a new company accentuates

the need for something different and new. While it takes multiple factors for failure, it also takes

multiple factors for success. To create a successful business, one has to innovate, market, and

have a strong business plan and strategy.

Innovation can be seen in all types of successful business, and innovation is essential.

Business innovation is defined as an organization’s process for introducing or improving: new

ideas, workflows, methodologies, and services or products to solve problems and reach new

customers. When a company innovates, it builds on previous ideas make it more convenient,

efficient, and effective. Many businesses credit innovation and the creation of new products to
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their success. Many big companies rely on the output of new products to keep afloat. “87 percent

of leaders believed their companies’ innovation resulted in a good return on investment” (Neese).

Companies like Xerox credit their growth to the introduction of new products. But with

innovation comes risk. Although innovation has a direct correlation in the success of a business,

it does not always work. “A leading market research manager concludes that only 1 percent of all

new product ideas on which development is undertaken attain success” (Sands, Saul, and

Warwick). Because innovation is an investment to the unknown, failure can result in the loss of

money, time, and growth. Although the risk is high, “the alternative is even worse: steady

erosion of market position and profit” (Sands, Saul, and Warwick). Taking the risk and

innovating is better than being stagnant and letting profits decrease. The business who takes the

biggest risk will reap the biggest rewards. Risk and innovation are aspects that make a successful

business.

Having a process for innovating can help minimize the risk involved with innovation.

Instead of relying on luck and serendipity, a systematic approach to innovating can yield

excellent and consistent results. The process of successful innovation has five steps: idea

generation and mobilization, advocacy and screening, commercialization, and diffusion and

implementation.

The first step of innovation has two parts: idea generation and mobilization. Idea

generation is where new ideas form during brainstorming sessions. New ideas should be born

from an atmosphere of competition, freedom, and creativity. Ideas can be completely new or

stem from the improvements of existing products.

The Atlantic explains how Apple waited three years after MP3 players were introduced to

create the iPod, which was attractive, intuitive and offered capacity for up to 1,000 songs.
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Conversely, the invention of Scotch tape was a brand-new idea. Priceonomics tells the

story of Richard Drew, a college dropout who joined 3M, saw a need for a type of tape

that wouldn’t ruin paint on cars and overcame hurdles to complete his invention. As a

result of Drew’s work ethic, 3M provides employees with time (15 percent of their

workday) to explore ideas outside of their work assignments. (Neese)

After the idea generation, the new idea passes through mobilization, during which ideas are

transferred to a different physical or logical location. Since most inventors aren’t also marketers,

a new idea often needs someone other than its originator to move it along, such as an outside

firm or another department (Neese; Mariello).

The second step is advocacy and screening. Here, ideas are narrowed down and evaluated

based on their benefits and problems; only the best ideas remain. This is also where idea

generators communicate with managers to advocate their ideas to executives. To effectively

advocate and screen, the process needs to be standardized and transparent.

Experimentation is the third step where the new idea is tested as a pilot or a prototype.

“The experiment stage tests the sustainability of ideas for a particular organization at a particular

time – and in a particular environment” (Mariello). This stage is used to gather information on

how the idea performs in a particular time, place, and organization, but also what the customer

base is and how they use the innovation. Although results may show that the innovation is ahead

of its time or that it does not fit a particular market, the findings and innovation should not be

discarded. The results can influence other new ideas and the innovation can be set aside for later

use and development. Amazon’s grocery delivery service is one example of experimentation.

One innovation came in 2007, when Amazon tested its grocery delivery service in certain

Seattle suburbs. After this successful experiment, Amazon Fresh expanded to Los
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Angeles, San Diego and New York City; New Jersey and the United Kingdom are the

latest locations Amazon has targeted. (Neese)

Amazon expanded its grocery delivery service to other cities, after their experiment in certain

Seattle suburbs proved to be a success.

The fourth step, commercialization, “is the stage of the innovation process when the

focus shifts from development to persuasion” (Neese). Businesses start to prep for the launch of

their innovation by checking if their innovation meets the of the audience, evaluating the cost

and benefits of launching the product, and marketing it to their audience. The fifth and final step

is diffusion and implementation. “Diffusion is the company acceptance of an innovative idea,

and implantation sets up everything needed to develop or produce the innovation” (Neese). The

whole business needs to be on the same page to be able implement an innovation. Diffusion and

implementation also involves receiving feedback from customers to find out what their next

demands are, therefore restarting the process of innovation. Understanding each of these five

steps can streamline the process of innovation. Businesses who follow these five steps will

ultimately experience growth and opportunities (Neese: Mariello).

Along with innovation, marketing is one of the cornerstones to the success of a business.

Even if a business has the most innovative product, without marketing, it will not sell. According

to the American Marketing Association, marketing is defined as “the activity, set of institutions,

and processes for creating, communicating, delivering, and exchanging offerings that have value

for customers, clients, partners, and society at large” (Definition). From the creation of a concept

to the selling of the product, marketing includes the product life cycle and the process of

innovation. Marketing is not tricking customers to buy a product, but creating demand for that

product and fulfilling the customer’s needs.


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The purpose of marketing is to get attention and build interest for a business or a product.

In a market crowded with competitors, marketing can enable a business to gain recognition,

reputation, and new potential customers which results in higher sales. “The ultimate goal of

marketing is to match a company’s products and service to the people who need and want them,

thereby ensuring profitably” (Marketing). At the end, the purpose and result of marketing can be

boiled down to one answer: profit.

Although commonly confused for one another, marketing and advertising have different

definitions and purposes. Advertising is one of the many aspects of marketing.

Advertising is a single component of the marketing process. It's the part that involves

getting the word out concerning your business, product, or the services you are offering.

It involves the process of developing strategies such as ad placement, frequency, etc.

(Lake)

Besides advertising, marketing has other subsets which include: customer support, sales strategy,

public relations, product pricing, market research, and media planning. These subsets work

together to form an effective marketing plan.

When marketing a business, it is important to identify and understand the business’s

market. The concept of “market” can be broken down into three parts: potential and actual

customers, competition, and industry. If understood, these points can help a business find its

profitable customer base and develop strong marketing strategies.

Learning about a business’s target customer can help the business develop marketing

strategies that center around them. First, a business will start by identifying the best customer

prospects based on observations on the market. Then a business will learn more about their

market like, what the target customers’ buying habits are, if there are important industry trends,
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and what the competition is doing. Using this data, a business will change its strategies and plans

to appeal to the market. If a business fails to understand its target customer, it might fail to

realize that there are not enough potential customers for the business or fail to find ways to

market to their customers. Demographics can be used to help define target customers which in

turn, helps build a solid foundation for marketing activities.

Learning about competitors is also important in staying successful, especially those with

the same customer group. Having a unique niche that other companies have not jumped on yet

can be helpful. Being the first business in a profitable niche can be dangerous because other

businesses can copy the niche and improve on it, beating out the original pioneer.

Besides competitors, businesses need to worry about the industry. Understanding the

industry trends can help businesses gain an advantage by avoiding bad trends or hoping on new

ones. An example of hopping on trends would be if a restaurant in Texas removes foie-gras from

their menu, because they saw a restaurant in New York do the same. An example of avoiding

trends is the low carb trend couple of years ago. Restaurants adapted to this trend by offering

non-carb options on their menus. Bakeries adapted to this trend by expanding their non-carb

options like coffee or meats and cheese. Being aware of economic conditions and other

industries are also important for the success of a business (Pakroo).

Marketing research can take a large amount of time and money, but if a single element is

wrong, the outcome could become useless. To avoid a huge waste of an investment like this, a

business can use the marketing mix to better define the marketing elements for a successful

market offer position (The Marketing).

"Marketing mix" is a general phrase used to describe the different kinds of choices

organizations have to make in the whole process of bringing a product or service to


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market. The 4Ps is one way – probably the best-known way – of defining the marketing

mix, and was first expressed in 1960 by E. J. McCarthy (The Marketing).

The four P’s of marketing, product, price, promotion, place, is a foundation model and a

common tool used in marketing. The first P, product, is the good or service that will fulfill the

demands of the customers. Full knowledge of the product like, demands, utilization, features, and

benefits need to be understood before being marketed. Typical market decisions for products

include: product design, branding, and product assortment. The second P, price, is the amount

the consumer will pay for the product. The product pricing will affect profit margins, supply,

demand, market shares, and marketing strategy (The Four). Typical market decisions for pricing

include: price strategy, price tactics, and price setting. The third P, promotion, is the way the

business will communicate information about the product to the potential consumers. Promotion

include strategies like: advertising, public relations, sales promotion, and social media

marketing. The final P, place, is where the product is going to be sold. The distribution of the

product is affected by the type of product being sold to capture the most sales. Although distinct,

the four P’s are interdependent, and need to work together to become effective. The four P’s of a

product need to be fully understood to have a successful marketing strategy (The Four).

Another important factor in creating a successful business is a strong business plan and

strategy. A business plan is defined as “A written document that describes in detail how a

business, usually a new one, is going to achieve its goals. A business plan lays out a written plan

from a marketing, financial and operational viewpoint” (Business). Like a blueprint, a business

plan is used to guide operations and provide structure for a business. By outlining and analyzing

a business and its future projections, a business plan can lead to a more streamline start up. In

addition, a business plan can also be used as a reference tool: helping a business avoid deviation
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from specific goals. Typically, the first step in creating a business is to create a business plan,

because it can transform an undeveloped idea to a refined reality. A business plan can also teach

the business owner the strengths and weaknesses in the business concept, cash flow, and the

realistic chances of success. If the business analysis shows that the chance of success is low, the

business owner should avoid starting or expanding the business. Other than helping the business

owner make decisions, a business plan can help secure funding, by convincing bankers and

investors in giving loans. For existing small businesses, a business plan should be updated

annually as a way to guide growth and navigate the expansion into new markets. Although a

business plan is time-consuming and can take up to fifty hours to write; it is necessary in

executing a successful business (What; Ward).

Most business plans focus too much on numbers, like month to month projections, which

are inaccurate and imaginary. Although important, these numbers belong at the end of the

business plan and should not be the main focus. A good outline for a business plan should

include four interdependent factors essential to every new venture: the people, the opportunity,

the context, and the risk and reward. The people section includes the people involved in the

venture and outside parties providing important resources and services. The opportunity section

includes what the business is, economics, and challenges. The context section includes factors

that unavoidably change but cannot be controlled, for example interest rates, demographic

trends, and inflation. The risk and reward sections includes the evaluations of the things that

could go wrong and right and how the entrepreneur will respond to them (Sahlman).

The people is an important aspect in a business venture. When selecting team members

and writing the business plan, three questions should be kept in the back of the mind: What they

know? Whom they know? How well are they known? The team members should have
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knowledge about the industry, have connections to influential people, and have high recognition

from others. Arthur Rock, venture capital legend associated with Apple and Intel, says “I invest

in people not ideas” (Sahlman). An effective team is crucial to the success of a business

(Sahlman).

When looking for opportunity, a good business plan focuses on two questions: Is the total

market for the venture’s product or service large, rapidly growing, or both? Is the industry now,

or can it become, structurally attractive? A large or growing industry is appealing to businesses

because it is not saturated with competition and is it easier to control a part of the market. A

structurally attractive industry allows the business to make money (Sahlman).

Contexts includes factors not in the business owner’s hands like economic activity,

government rules and regulations, tax policies, and technological limitations. These factors can

either create or limit business opportunities.

More than 100 new companies were formed when the airline industry was deregulated in

the late 1970s. The context for financing was also favorable, enabling new entrants like

People Express to go to the public market for capital even before starting operations.

(Sahlman)

Conversely, contexts like economic recessions and difficult financing environments can limit the

growth of businesses in certain industries. In a business plan, the venture’s context and how it

affects the business should be stated and understood. The business plan should also state how the

business will react to a change in context (Sahlman).

An effective business plan identifies and solves the possible problems of a business

created by the change in people, opportunity, and context. Management is responsible for the
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decisions involved with risk and reward. A new venture is less risky and more successful if the

potential problems are already mapped out (Sahlman).

Related to the business plan, strategic management is the development and

implementation of strategies that fulfill the business’s goals and objectives (Wicks). Strategic

management can help a business become more profitable and successful. “It has been estimated

that more than 100,000 businesses fail in the US every year and most of these failures are to do

with a lack of strategic focus and strategic direction” (Benefits). Besides financial benefits, a

business can also gain knowledge of competitors, awareness of external threats, and increased

employee productivity (Benefits). Generally, strategic management involves analyzing internal

and external strengths and weaknesses, formulating action plans, executing action plans,

evaluating the effectiveness of the action plan, and improving the action plan (Rouse). Any

business with a clear and strong strategic management will excel in growth and profits.

When creating a business, one faces large amounts of resistance. The lack of funding and

experience drive most business to failure: many failing within the first five years. To beat the

odds of failure, a business needs to focus on innovation, marketing, and business planning and

strategizing. When applied together, these interdependent factors can result in the major growth

and profits in a business. Accounting for around eighty percent of the jobs in the United States,

small business has a huge impact on the economy. Because of it their diversity and flexibility,

small businesses provide competition against large corporations and help the economy endure

tough conditions. The government should help the growth and development of small businesses.

By helping small business, the government is in turn helping the economy. To help small

businesses, the government can provide a fair legal system, encourage a diverse funding

universe, and simplify complicated tax laws. The most effective way in helping small businesses
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is to invest in education. Helping entrepreneurs understand the fundamentals of business can lead

to an increase in small business success rates. If small businesses succeed, the United States as a

whole succeeds (Mariotti).


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