Lessons from Nicaraguan speed consulting

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In a moment straight out of The Pretender, I found myself doing “speed consulting” for rural Nicaraguans. The event was hosted by a local non-profit that helps small businesses grow. Several consultants (including me) sat at different tables, and Nicaraguan entrepreneurs were assigned to us for thirty minute sessions on any business problem they might face. I saw four entrepreneurs. The first one went something like this:

“I make wooden furniture, and I’d like to export.”

I wait for a second to see if he is done. “Okay…” I wonder if the skepticism is showing on my face. “What countries do you have in mind.”

“I was thinking Central America or maybe the United States.”

“Do you want to export finished pieces or individual parts?”

“Um.., sure, both sound fine.”

This guy was lost. I gave him some perfunctory advice about certifications for exporting and building a network of buyers. However I have no confidence that he will ever export anything, because he lacked knowledge of the market, brand positioning, and relationships with buyers: his idea lacked a “why” and a “how.”

Unfortunately he was similar to other entrepreneurs who arrived to my table for “speed consulting.” I want to use his example to make several points:

  1. People can erroneously extrapolate what they currently do into new markets
  2. Nonprofits are not magical panaceas for poverty, a detail sometimes forgotten
  3. People sometimes look for the wrong advice because they look forward too many steps

1. Hasty extrapolation of current activity into new markets:

I make chairs. My earnings are limited by the volume of chairs I can sell to my principle buyer, who has a furniture stall in the local market. Therefore, I should expand to other markets, and sell my chairs to people in United States.

Wrong! Just because you sell in one part of the world, does not mean you are an efficient producer in another. Of course it is possible there are other market opportunities, but you shouldn’t assume your advantage is transferable. Someone producing low quality furniture on a small scale may be strong in the local market but will not compete with IKEA.

2. Nonprofits are not magical panaceas for poverty:

It’s also possible that something entirely different was going on. It’s possible that the man doesn’t even make furniture. Perhaps he has a cousin who once received a scholarship from a nonprofit. So logic starts to form: nonprofits help people; I am a person; this nonprofit can help me.

This nonprofit advertizes support for people to build thriving businesses. “”Transform your business,” says the flier. So the man shows up and plays along: he invents a challenge – he wants to export furniture. He waits to see if he may get something out of it. Of course he will not, because this man doesn’t fit the profile for which the nonprofit was created.

Suppose you don’t have a house. A hardware store can help with this problem if you are building a house and you want to trade money for tools. If you don’t fit this specific profile, a hardware store will not help you with your problem. People don’t always look at nonprofits like hardware stores, though they are similar, offering only a small subset of solutions to a subset of targeted people.

Hardware stores don’t advertise support for people without houses. They advertise tools for money. Sometimes nonprofits, in all their idealistic zeal, promise a panacea benefits to anyone who participates in their programs. Nonprofits should be careful to advertise specific services. Otherwise they get unfocused traffic of people who don’t fit their targeted profile.

3. People seek the wrong advice:

A last possibility is that the furniture maker does have the ambition to export furniture, but is currently far away from realizing that goal. When I was a senior in college, I wanted to be an entrepreneur. I had several underdeveloped business ideas, and I wince to think back on asking contacts for advice. My ideas satisfied my concept of being an entrepreneur, but were not based on actual knowledge of people’s needs and production opportunities: the ideas lacked a “why” and a “how.”

Of course there is nothing wrong with dreaming to be an entrepreneur or dreaming to export furniture. The problem was how we were were seeking advice. I wanted businessmen to wave a magic wand and ordain me into entrepreneurial success. This man wanted me to wave my wand and reveal how one can export furniture. However he needed more familiarity with local and foreign markets and a strategy to add value. He should have asked less ambitious questions: how to learn more about furniture production; how to make contacts with different types of buyers and understand their needs; how to learn from the most successful producers in the market.

I would not have been able to provide all the answers, but a discussion with this frame would have been more productive. There’s nothing wrong with dreaming. However when seeking advice, consider whether you are in a strong position to discuss the end-state of the dream, or whether you should be looking for tips on getting training and knowledge.

Conclusions:

Speed consulting wasn’t that useful. I didn’t advise people with immediately feasible projects, and I didn’t locate entrepreneurs who can benefit from other services offered by the hosting nonprofit.

Development is hard! But it’s a worthy goal, and the effort continues…

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5 Responses to “Lessons from Nicaraguan speed consulting”

  1. Nic Says:

    Phil, nice post.

    As much as I agree with you, I have to wonder how much being a successful entrepreneur has to do with ignoring the details. Ignoring the ‘why’ and the ‘how’ to be specific.
    I struggle with the idea of going out there and building my own company, and every idea I come up with has multiple reasons for why it might fail. The list of road blocks is endless.

    If you think back to before the interwebs was ubiquitous, and if some guy said he wanted to start a shop online to sell books, you might have thought, ‘uh huh, yeah. awesome freakin’ idea. books. on the internet. genius. i mean, why wouldn’t I to wait a week to get a book i’ve just purchased anyway? retard…”

    i had a friend who went for a job interview (eons ago) and the interviewer told him of this magnificent idea of building an IT company that would then move into traditional media. Acquisition was one likely means of doing this. My friend went to MIT, and by all definitions is a genius. he thought the interviewer was retarded and decided not to join the company. That interviewer was Steve Case, and the company was AOL. They eventually did manage to get into the media business. You might say the story didn’t end the way everybody had hoped, but the vision was there and it was executed on.

    I fear sometimes thinking through the problem too much actually keeps us from making the right decisions because we can see the negative consequences (all to vividly at times) and are then paralyzed into inaction. Perhaps faith and vision are more important ingredients to entrepreneurial success.

    Nic

  2. Nic Says:

    I’ve actually been thinking about this all day (likely to do with the fact that I’m currently on my 9th day of vacation, and there is little else occupying my mind) and had a couple more thoughts.

    The points you made above while (potentially) technically accurate, didn’t do anything to help your Nicaraguan friend. While the back and forth you had may have had some ironical elements to it, something of similar result happens all the time in the consulting industry. It’s a major reason why people think consultants are a waste of time and money. But instead of spending 30 minutes giving advice the would-be entrepreneur can’t use, we sometimes take months to give our clients recommendations that isn’t actionable.

    I think the problem is two-fold:

    1) We’re whores for money. I hate to say it, but it’s true. Only the most successful Directors are able to say no to bad projects, and honestly, even they probably let their standards slip from time to time. If a client wants to buy a project, it may not matter if you know it’s a waste of time. We’ll do it anyway. The result is, we end up taking on projects that are, a) impractical and ill-conceived, or b) doomed to be still-born, or end up on a shelf somewhere nobody will ever look.

    2) We too often are unwilling to stand up to our clients. This is partly because they have all the money, and there is a pretty high correlation between likability and future sales. So, being an arrogant consultant and telling your client they’re wrong is a pretty sure way of having the next phase of your project hit budgeting issues.

    Phil, I think you had a real moment here to not just answer the questions your ‘client’ was asking you, but to help him figure out what the ‘right’ questions really were.
    Did your client really want to sell furniture to American’s, or was he looking for a business he could start that would leverage the skills he had and help his family create long-term wealth?
    Did he really think international sales were the solution to his problems, or was he emulating what he thought international expansion meant?
    Was the right question really, “Do you want to export finished pieces or individual parts?” or was it something closer to, “What is it you’re trying to accomplish?”

    It’s very possible my suggestions have too much “talk-therapy” and not enough “practical business advice”, but I really think that to help a client is not just to answer their questions, but to help them realize what the right questions are that need to be answered.

    (This perspective – and recent realization – may be connected to the feeling that my consulting days may be numbered.)

  3. Sam Says:

    Nic, very thoughtful comments. Quick correction for clarification: I wrote the post, not Phil.

    You’re right. I should have been able to help this guy more than I did. But first, I’d like to provide a little more background.

    The organization behind the event is called Agora Partnerships, which provides Nicaraguan entrepreneurs with financing, strategy consulting, and access to networks to allow the entrepreneurs to incubate profitable small and medium-sized businesses that can stimulate job growth and bolster the Nicaraguan middle class.

    This organization has a very powerful story, compelling to people like you and me who are businessmen with an interest in development.

    However the organization faces challenges in identifying dynamic entrepreneurs who are capable of leveraging Agora’s services to build value. This “client,” for example, was not ready to build a thriving small business (at least in my quick judgment). The fact that he had a very vague idea of what he wanted to do made me skeptical that he was capable of developing the idea and executing.

    As a good liberal, sometimes I have the instinct to expect that any poor person CAN DO IT. That person probably has just been locked out because of closed social networks, lack of ability to take risks, and lack of financing. Then comes along someone I have very little confidence in. I wouldn’t trust him to make decisions for me or my business. He makes me think the problems are MUCH deeper, and probably have a lot to do with education. I think back on all my opportunities and times I was encouraged to achieve and learn, whether in school, on a sports team, or with a music teacher. Those are huge advantages over many Nicaraguans and other people around the world. I start realizing that my expectations were wrong. It’s not the case that EVERYONE can do it.

    I digress. Anyway, I did not believe that this person was going to ever export furniture. He was not likely to benefit from Agora’s services. So I didn’t reach out and look for ways to really help him.

    Yes, I could have done better by him. I should have tried to figure out where he was and where he could go. But we started so far apart, in fact from totally different realities, and the crux that was supposed to bring us together – he’s an entrepreneur with a business problem – was not compelling to me. So we wasted some time. I looked for the next candidate, hopefully someone more prepared, for whom Agora could provide more value.

    Anyway, those are my thoughts. What do you think?

  4. Nic Says:

    Hi Sam,

    Sorry for getting the author confused. You said Nicaragua, and I just thought it was Phil. Chile, Nicaragua, Philippines, it’s all the same to me.

    There are always specific reasons for why things don’t work out, or why a client isn’t ready to receive the advice we have to give. And it’s very difficult sometimes to see past all the reasons why somebody can’t get something done and to try to help them with what they can get done – especially when you think it’s a waste of time.

    I have no doubt the person you spoke with wasn’t business ready, and may very well end up getting nowhere with his furniture business.
    But I think we should try to help anyway. Yes, I’m being idealistic, but I believe (as you do) that when people are given opportunity and assistance they will rise to their level of ability (of course that’s not the same for everybody), and that is almost always above where they currently are.

    Of course I’m saying this from the 30th floor of my 6th Avenue office building, where I’m totally out-of-touch with the riff-raff. So, feel free to ignore everything I’ve just said.

    Nic

  5. What it’s all about « The Invisible Hand, in your pants Says:

    […] it’s all about Following up Sam’s somewhat pessimistic picture of entrepreneurship in Latin America, I want to bring forward a ray of […]

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