Category: SME's


I better continue the personal posts – they are surely easiest to write. I want to talk a bit about what I do, and why I do it.

On a daily basis I try to run a company. I am co-owner together with 2 partners. It is the company Imaginess design & dtp.

We have been doing this for a year now and I would say we have a steady growth. Our core concept is to outsource graphical design for Danish companies to our Lithuanian company. We started out outsourcing directly to Lithuanian freelancers – but have realized that we need a steady base of work. Meaning full time designers. We have now some nice office spaces in the artsy quarter of Vilnius.

Challenges

The challenges are many and I can divide them on a internal and external level.

1. Communications: First of all, I and one of my partners live here in Copenhagen. It makes communication internally very difficult. We try through Skype and mail – but hard it is.

2. Competences, ressources and capabilities: Our business strategy is highly based on minimizing risks. This means that we have not invested any money in the company. It also means that growth through economical ressources is going slow. We would do miracles with 10 million Euros.

It also comes to the personal competences. A small company is depending on that everyone has a drive and very broad competences. Designers should be business managers and business managers should be designers. And everyone should be skilled in project management.

So when it comes to big organizational capabilities, it is difficult. I see myself as a good strategist, but it is hard to think strategy in a small company where financing is low and most of the time goes with doing daily stuff.

3. External comes when we face costumers – or potential ones. It is hard work to do B2B – mass marketing does not work. And it makes it even harder when there is a high mistrust to your product from the decision makers.

Outsourcing can be dangerous and many concerns arrise with the client. We try to do what we can to reduce these uncertainties, but it is difficult. Therefor we are preparing to hire an external sales consultant to work for us. We realize that as entreprenours we are not professional sales persons. Our sales corner is not working as effective as it should.

So we hope from 2009 that we can have a highly effective outsources sales corner.

Additionally I have also a few other concepts “in the lake” – but let’s take them another day…

The end of a 1.400 year old family business

I think a great way to start this blog is by looking back. Looking so far back that things like marketing, advertisment, HR, corporate social responsibility didn’t exist.

Have you ever wondered, what the oldest existing business is? Can you guess?

The world’s oldest continuously operating family business ended its impressive run 2 years ago. Japanese temple builder Kongo Gumi, in operation under the founders’ descendants since 578, succumbed to excess debt and an unfavorable business climate in 2006.

Few industries could be less flighty than Buddhist temple construction. The belief system has survived for thousands of years and has many millions of adherents. With this firm foundation, Kongo had survived some tumultuous times, notably the 19th century Meiji restoration when it lost government subsidies and began building commercial buildings for the first time. But temple construction had until recently been a reliable mainstay, contributing 80% of Kongo Gumi’s $67.6 million in 2004 revenues.

Keys to Success

Kongo Gumi also boasted some internal positives that enabled it to survive for centuries. Its last president, Masakazu Kongo, was the 40th member of the family to lead the company. He has cited the company’s flexibility in selecting leaders as a key factor in its longevity. Specifically, rather than always handing reins to the oldest son, Kongo Gumi chose the son who best exhibited the health, responsibility, and talent for the job. Furthermore, it wasn’t always a son. The 38th Kongo to lead the company was Masakazu’s grandmother.

Another factor that contributed to Kongo Gumi’s extended existence was the practice of sons-in-law taking the family name when they joined the family firm. This common Japanese practice allowed the company to continue under the same name, even when there were no sons in a given generation.

So if you want your family business to last a long time, the story of Kongo Gumi says you should mingle elements of conservatism and flexibility—stay in the same business for more than a millennium and vary from the principle of primogeniture as needed to preserve the company. The combination allowed Kongo Gumi to survive some notable hard times, such as when it switched temporarily to crafting coffins during World War II.

Burst Bubble

The circumstances of Kongo Gumi’s demise also offer some lessons. Despite its incredible history, it was a set of ordinary circumstances that brought Kongo Gumi down at last. Two factors were primarily responsible. First, during the 1980s bubble economy in Japan, the company borrowed heavily to invest in real estate. After the bubble burst in the 1992-93 recession, the assets secured by Kongo Gumi’s debt shrank in value. Second, social changes in Japan brought about declining contributions to temples. As a result, demand for Kongo Gumi’s temple-building services dropped sharply beginning in 1998.

By 2004, revenues were down 35%. Masakazu Kongo laid off employees and tightened budgets. But in 2006, the end arrived. The company’s borrowings had ballooned to $343 million and it was no longer possible to service the debt. In January, the company’s assets were acquired by Takamatsu, a large Japanese construction company, and it was absorbed into a subsidiary.

To sum up the lessons of Kongo Gumi’s long tenure and ultimate failure: Pick a stable industry and create flexible succession policies. To avoid a similar demise, evolve as business conditions require, but don’t get carried away with temporary enthusiasms and sacrifice financial stability for what looks like an opportunity. These lessons are somewhat contradictory and paradoxical, to be sure. But if sustained success came easy, then all family businesses would have a 1,428-year run.

Source: Business Week, April 16, 2007

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