First and foremost, Happy Holidays to all of you! The support you have shown to our Lorange Network has been fantastic—thank you so much! We progressed very well in 2019 and are now approaching 2000 Basic members. We all deserve a holiday so that we can enter the new year full of energy.
Also, my holding company, S. Ugelstad Invest, turned 90 years old on October 24th. We properly and happily celebrated this event! The book I wrote for this occasion, Adaption and Flexibility in the Family Firm: A Brief History of S. Ugelstad Invest, is available as a free PDF for those of you who are interested. Just let Karin Mugnaini (karin@lorangenetwork.com) or Lizzie Ellis (lizzie@lorangenetwork.com) know via email if you would like a copy.
Finally, as is traditional in holiday articles, I want to share four insights and issues that I learned the most from during 2019.
1. Sustaining Family/Corporate Wealth through Growth
Sustaining wealth is the central driving objective for wealthy individuals, families and their family-controlled business as well as for independent investors. This is unlike publicly traded firms, in which the focus lies mostly in bottom-line profits and quoted stock market share prices. Top line growth is crucial for both private and public firms, but what drives rapid growth?
First, scalability is an essential factor. Take higher education, for example. Both the number of students that can fit into a classroom and each teacher’s capacity constrain the delivery of class sessions. Such a business is not scalable! In contrast, IT-based learning tools and multi-user access courses delivered on the Internet are scalable because there is no limit to the number of students who can participate in a particular digital learning initiative.
Thus, due to its scaling potential, technology is a driving force for achieving rapid growth. Online network platforms are particularly critical. However, other more overlooked technologies may also allow for scaling. Assets in a so-called shared economy might be fundamental, and sharing may replace ownership as the norm (think of transportation, homes, etc.). New payout systems will make this even more of a reality. New technology is at the heart of the ability to quickly scale.
In the end, rapid growth can only take place if consumers truly want a given offering. This issue of rapid consumer adoption is so critical that it deserves its own section.
2. Strong Customer Endorsement—Another Key to Wealth Preservation
Positive customer feedback is a pivotal component of success. This year, I learned to recognize the paramount importance of customer endorsement. We saw that it definitely is the consumers who decide whether a business succeeds! Entrepreneurs’ “good” ideas typically are not enough to convince the public. Their ideas must also make fundamental sense to the consumer (i.e., satisfy a basic need). Therefore, communicating how an idea serves consumers’ needs is critical.
One related challenge concerns the intricacies of pitching a package of related product elements. How does the whole package fit together so that its entirety makes sense to the consumer? As you know, in Lorange Network, our Basic membership is free. Basic members get access to all our insights (articles), executive profiles and book takeaways (reviews or summaries) through Lorange Network’s library. For a fee, users can upgrade to a Premium membership, which gives them access to Lorange Network’s various executive educational offerings, its diverse set of events and its Deal Wall, whether to raise funds for or invest in a particular project. One challenge for us has been finding a way to communicate all of this clearly.
We have learned that such a value package must tie together logically and be simple! One of my favorite dictums, “strategy means choice,” applies here. Simplifying a package by eliminating nonessential elements has proven more effective than adding new features. Simplicity is crucial!
3. The Entrepreneur–An Essential Wealth Preserver
Most entrepreneurs fail, or at least do not live up to their hopes. Why? Many factors explain this phenomenon. Lack of capital is one explanation. Another source of failure is pushing a product or service that a customer does not fully appreciate. These failures relate to specific entrepreneurial projects, but let us instead focus on the personality traits that support a successful entrepreneurship effort. We have identified two essential and indispensable characteristics.
First, a successful entrepreneur possesses a good combination of competencies in the financial, technical, marketing and leadership dimensions. These factors are largely self-explanatory, but several issues must be added: first, all of these competencies should be present, at least to some degree. They must also be “practical in parallel” (i.e., present at the same time). Many entrepreneurs are happy when they can “do business,” perhaps primarily through selling in the market. Regrettably, many then run out of cash. A typical entrepreneurial reaction is to drop everything to focus on a new round of financing, followed by a wholehearted and renewed marketing effort. These startups experience a stop-and-go rhythm, which is typically not a healthy sign. Instead, the ability to use all these competencies in tandem is what brings success.
Second, it is necessary to elaborate on the leadership dimension. Does the entrepreneur have the necessary energy and drive, or will he or she become tired and slack off? Entrepreneurs’ hard work and “skin in the game” are good indicators of their drive. To be truly inspirational vis à vis employees and clients, entrepreneurs must give more than they take. The importance of curiosity, continuous learning and open-mindedness cannot be overstated.
4. Social Impact Investing—Fundamental for Wealth Preservation
We all admire leading philanthropists such as Bill Gates and Stephen Schwarzman, who make substantial donations while maintaining their wealth. But for the rest of us who do not fall into this uber-rich category, I have come to understand the importance of social impact investing.
Social impact investing does not need to be driven by idealism per se. Of course, sound commercial objectives remain the ground rule. Contrary to what we typically find in most venture funds, however, a long-term perspective is key. One typically reaps greater economic rewards in the form of dividends, or even through M&A, than through a planned exit.
Aside from this, social impact investing and other entrepreneurial projects do not differ all that much, except for the fact that a fair number of social impact investment projects are located in developing countries that have specific political, regulatory, stability and cultural idiosyncrasies.
Outlook
These four novel insights are driven by three overriding changes:
The continuous presence and growth of disruptive technologies such as 5G, biotech, agritech, new alternative energy types, mobility, etc.
Changing consumers, who are much more concerned with the environment and health-related issues than they were before.
Evolving demographics. We are living longer, and the proportion of us that is actually working is already decreasing in most developed countries. Remote work solutions are on the rise worldwide, and population growth is shifting toward developing countries.
Now that we are entering a new year, we all have fresh ambitions and hopes. For Lorange Network, my hopes are that we will become even more relevant and that our membership will continue to grow— perhaps most significantly in North America and Asia —to complement our traditional European markets. I also hope that our Deal Wall approach will become an even more central factor in the successful implementation of entrepreneurial startups. Above all, the Lorange Network will focus on wealth and value preservation more than ever.
On behalf of the entire Lorange Network team, I wish you Happy Holidays!
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