Traditional Businesses should invest in the necessary digitized operational backbones
(Feng Zhu and Bonnie Yining Cao.Smart Rivals. Harvard Business Review Press;2024.)
Always invite AI to the table
(Mollick E. Co-Intelligence. Penguin; 2024.)
These two quotes above are from different books, but they convey the same meaning that I, Dithanon Khrutmuang, firmly adhere to and apply to my own business in Thailand.
Businesses must have digital or data capabilities, and AI is a key assist in my business and like yours. So, this is important for you as a business owner or leader. As long as your business has an annual income of more than 100,000 USD, what I will tell you next is something you should not miss.
Table of Content
First of all, forget about scaling the business that requires a growth rate of more than 150% per year. The first thing that a business owner like you must be aware of is that your business must survive with profitability.
Next, if you have done the first thing well, then invest in Data or AI, which will help develop the capabilities of your business even further in terms of profitability (P) and customer satisfaction (C).
Lastly, when it's time for you to think about scaling the business, focus on increasing the capability for business growth (G).
All of this is a strategy that I have gathered and modified from courses and books that I have read, and then applied it to my own business. I hope that this will be beneficial to your business as well. Of course, there is no one-size-fits-all solution, which is why it is the basis for creating a Power Ladder that will create a unique formula for your business through what is called Predictive Business and Magical Creatures Model.
The concept of Predictive Business involves using the data that a business possesses to analyze and identify business opportunities, as well as to mitigate risks that may occur in the future. The analysis process can be carried out by experts or by using AI technology.
The quote by Feng Zhu, Bonnie Yining Cao, and Mollick E emphasizes the importance of Data and AI for every business. They suggest that having these elements is essential for keeping your business relevant and to communicate to your stakeholders that you have these capabilities. I think it is not a good enough answer, as they consider these investments in Data and AI as an expense for the business.
The true answer is that as a business owner or leader, like yourself, you should strive to utilize the capabilities of Predictive Business to increase competitive opportunities, reduce risks, or simply put, make more accurate decisions by having Data and AI by your side.
Operating your business using the Magical Creatures Model
As you have seen in the video, you will notice that businesses are categorized into 4 types as shown in the image above, namely, Solo Entrepreneur, Dinosaur, Camel and Unicorn.
X-axis represents Investment Risk and the Y-axis represents Predictive Business Level.
Starting with Solo Entrepreneur, possibly with a small team of up to 5 people, representing the initial stage of business operations. In this initial phase, you have low investment risk in your business since you have not invested much. You can continuously adjust your business goals, focusing on small sales and building a small loyal customer base. However, the weakness lies in lacking Predictive Business, affecting your ability to increase (P) profitability, (C) customer satisfaction, and (G) business growth.
As you reach a point where you have grown for some time, the next option is to consider using a magical animal to further advance your business.
How Magical Creatures can help you
It's not just about the team and people, not just about assets and money, not just about technology or strategy, but everything combined is a company, simply referred to as a Magical Creature.
If you were to have Jeff Bezos compete in mathematics with an ordinary university student, the outcome could be that Jeff Bezos may win or lose. Even if the student wins against Jeff Bezos by a slight margin, it does not necessarily mean that the student can build a business and become as wealthy as Jeff Bezos. But what is certain is that in the business aspect, Jeff Bezos in 2024 will definitely surpass that student, because Jeff Bezos has Amazon.
It's like Larry Page having Google or Jensen Huang having Nvidia.
Magical Creature is more important than the unique abilities of the business owner, being able to predict that this business will be highly successful. Conversely, "Magical Creature" also indicates that this business may fail in the near future
I have compared business decision-making to choosing a Magical Creature to ride, as follows.
1. Dinosaur
If the owner of a business like you were riding a dinosaur, it would be equivalent to running an old school business that lacks measurement tools, does not utilize technology or AI to drive the business. At the end of the article, we will attach a test question to determine whether you are still riding a dinosaur or not. Riding a dinosaur may pose high investment risk and have low predictive business capabilities. Choosing to run a dinosaur business could lead to future profitability challenges (P), affecting customer satisfaction (C) and business growth (G), potentially resulting in a decline in the business.
2. Unicorn
an extraordinary creature that symbolizes boundless opportunities and prosperity. In the business context, a unicorn business can scale and grow rapidly in a vast market with abundant investment resources. Running business like unicorn focus on creating products or services that change consumer behavior, such as Uber or Grab, which have transformed the way we satisfy our hunger. Instead of physically going to a restaurant when we're hungry, we can now order food through an app. The unicorn strategy can generate rapid business growth. Many business owners aspire to become unicorns someday because they have unlimited budgets and high business potential. However, achieving this comes at the cost of requiring higher-than-normal investment.
The potential danger of a unicorn business lies in the substantial investment required to build a large ecosystem or platform. While having a high predictive business model can mitigate some risks, the significant budget needed in exchange for the potential for business growth still entails considerable risk. It can be challenging for entrepreneurs to start businesses with this concept. Examples of other unicorn-type businesses can be found in platform businesses such as Amazon, Google, Facebook, etc.
3.Camel
The camel can adapt to walking through the hot, scorching desert during the midday, while the desert sand may turn cold and harsh during the nighttime. The camel can continue the journey because it has stored enough food and water for its crucial journey. On the contrary, if a unicorn wants to walk through the desert, it needs abundant preparation before the journey. This means having lush green grass, abundant flowing streams along the way, and most importantly, a long rainbow to serve as inspiration and motivation. Only then can the unicorn embark on its journey.
If you choose to ride a creature like a unicorn, the camel will guide you to create a strategy that focuses on generating profits for your business in all economic conditions. This can be achieved by creating products or services to address the needs of a specific group of customers or grow your own Ecosystem ( Feng Zhu and Bonnie Yining Cao.Smart Rivals. Harvard Business Review Press;2024.), similar to how Pop Mart, a unicorn-shaped golden store, focuses on creating products for art toy enthusiasts. When Pop Mart built bridges for customers to access their stores and offered intriguing surprises like the blind box concept, they were able to generate substantial profits without necessarily having to change the customer behavior. Furthermore, Pop Mart has utilized predictive business to minimize the risk of financial loss in their business, such as reducing the production of products that customers do not like since camels can survive for long periods without food, withstand extreme heat from the scorching sands, and adapt to highly volatile weather conditions. They can survive and thrive in the most hostile regions in the world. This is analogous to running a business in the post-COVID-19 era because it is a business that can achieve a balanced budget and maximum cost-effectiveness based on limited resources.
As mentioned above, the camel can survive very well, especially in challenging, harsh, or resource-limited conditions, while the unicorn has everything abundantly.
In business, if you aim to be a unicorn, you definitely need significant capital investment to grow your business to its maximum potential, expanding rapidly without worrying about how much investment may be lost or budget considerations being the last priority. Surely, if you want to ride the mythical creature called a unicorn, but you don't own a business that is about to become a fast-growing VC, I would recommend considering the unique animal called a camel.
The camel's special ability in Predictive Business is its cost-effectiveness
As summarized in Tanya Menon and Leigh Thompson's article "How to Make Better Decisions with Less Data" from the HBR Special Issue Fall 2023:32, it is indeed possible to make decisions with limited data when applied to deciding whether to do Predictive Business in the unicorn rider vs. camel rider format. The results are as follows.
1. Define
When faced with a decision using data to define the problem, if you choose to ride a unicorn, you may overcomplicate your business problem by spending time and budget on things like deciding which color to use or which font will attract customers slightly more. However, if you choose to ride a camel, you will likely focus on identifying and asking the most critical questions related to the core issue at hand, such as how to increase profits compared to last year or how to gain a competitive edge in marketing.
The answers obtained from analyzing the business perspectives in these scenarios are more likely to be actionable. If the insights from investment analysis do not influence your decision-making process, you should not invest significant resources into it right from the start.
2. Integrate
Defining the necessary and sufficient data objectives for analyzing a business problem. You don't have to analyze all the data available, as it would be a waste of time. It's like opening a jigsaw puzzle and trying to guess what the picture is when you randomly open a few pieces and are confident in your guess with about 60 to 80%. You can guess the whole picture without opening all the pieces. This is the approach of riding a camel.
However, if you choose to ride a unicorn, you would have to wait to open all the puzzle pieces to be 100% sure about the picture. This might lead to more accuracy, but at the cost of significant investment. Do you think it's worth it?
3. Explore
To explore the results of data analysis from various perspectives, such as when you want to increase sales, you might decide to lower prices. This could potentially increase sales, but it might also negatively impact your product's image. The complexity and multiple steps involved in finding these answers mean that you might be riding a unicorn without realizing it. Try to simplify, for example, if you need to conduct surveys or focus groups, just do what is sufficient. Remember that every time you try to find answers, you are essentially spending your money in exchange for accuracy. Meanwhile, if you choose not to seek answers, you will not have any predictive business at all, similar to driving with your eyes closed. You must choose just enough.
4. Test
Testing hypotheses is important, but it's important to be cautious that many people tend to test repeatedly until they get the result they initially had in mind, which is counterproductive. If that's the case, go back and revisit step 1, which is to define the problem you need to make a decision about using data. It's important to note that if the findings from the analysis don't change your decision-making, you don't need to invest in it from the start.
All of this is the principle of Predictive Business. For camel riders, investing in data analysis with the minimal investment possible in exchange for sacrificing some accuracy. While unicorn riders invest heavily in data collection, even utilizing Big Data and having a large team ready to dedicate time to achieving higher accuracy by around 5 to 10 percent. However, if the analysis results are not used to aid decision-making or kept aside without being utilized, it's better to let them go.
Business achievement must be measured
After identifying the problem or business goal, the next step is the process of conducting Predictive Business. The owner or entrepreneur will have a preliminary understanding of the health of their own business, similar to when we are sick and go to the doctor. The doctor will examine our physical condition to determine what illness we have.
In this step, we will categorize your business problems into 3 Perspectives that I have developed from Harvard Business School online. These perspectives are: the business can operate smoothly only if the business or company has profitability, customer demand, and growth potential.
The 3 Pillars of business are composed of :
1. P - Profitability
Using Predictive Business to explore Cash flow or Balance Statement can help identify potential issues. However, if we want to dig deeper to really solve the problem, we need to analyze more extensively. For example, why cash flow is not good even though the balance statement is excellent may be because we do not understand the details of the root cause of the problem. It could be due to pricing errors, overuse of the budget to the point where the risk level that the business can bear is exceeded, or even internal fraud within the organization.
2. C - Customer Satisfaction
3. G - Business Growth
Conclusion
Once you have identified the business problems, it is time to score how well your business performs in each Business Pillars and which areas need immediate improvement. In addition, just knowing the problems of your business is not enough. It is like when a doctor completes a health check-up and then has to prescribe medication to treat any health abnormalities. But one difference between personal health and business is that the medication used to treat business problems tends to focus on specific aspects of the 3 Business Pillars
Take the next step in your business journey today. Measure your business achievement with our experts and pave the way for sustainable growth and success.
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