June 1954 — Vol. 35, No. 5 —
Business Development
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Every business, even the smallest,
needs business development enterprise. It may be a full time
effort by a skilled staff, or it may be merely a ten minute
period set aside every day by the proprietor to think up ways
of improving and extending trade.
Before plunging into increased production of goods, one
needs to consider the sources of supply, the financial reserve
and resources, the nature and extent of demand, the channels
of distribution, the course of price trends, and the general
economic environment assumed for the next several years.
In the disposal of goods the human element is predominant,
and no one has yet devised a sure plan to harness human nature
and make it act with as great predictability and controllability
as machinery.
That is why the wise executive who has an urge to develop
his business will try to get inside the heads of potential
customers to learn what they want, what appeal they will respond
to, and what quantities they will buy. Only thus can he avoid
the futility of endless stockpiling of goods without a market.
Perhaps the key—note of successful business development
is sales intelligence. Unless he has it, the most energetic
man will fritter away his effort, not knowing the areas where
his ingenuity and sweat can most profitably be expended.
Is There a Market?
He would be foolish who spent $500,000 in developing a machine,
only to discover that if he made all possible sales to all
possible buyers he would not recover even his development
costs. Foolish, indeed, yet Dr. Paul H. Nystrom records such
a happening in his Marketing Handbook (a very nearly
complete textbook for business development people).
The job of business development is to ascertain the characteristics
of the merchandise for which there is a potentially profitable
demand, to produce such goods, to find the market, to develop
plans for promoting sales: it includes the determination of
what to make, in what quantity, at what time, at what price,
and where to dispose of it through what channels. Sales pressure
alone does not create a market.
This is not to say that manufacturers should accept complacently
a narrow market, but rather that they should dig into the
problem of finding new areas of probable consumption. Where
is the customer? What, precisely, does he want? How can we
reach him? It is the customer who determines the kind and
extent of our business.
It is the customer, also, who determines profit. Profit
results from producing commodities and services people want,
at prices they are willing to pay, and from exercising foresight,
judgment, initiative and courage. By knowing, as well as research
and experience and judgment can inform us, the wishes and
capacity of customers, we can keep down overhead by avoiding
over—production and over—stocking; we can hold customers
in the face of competition by catering intelligently to their
needs; we can develop business by detecting and satisfying
new demands before the market has reached its peak.
To explore and develop the new territory thus opened up
demands enterprise, planning and attention. Unless a business
is run by guesswork, the solution of business problems requires
accurate information which is carefully and systematically
analysed. Every manufacturer and dealer - in fact everyone
to whom development of business is vital - should be a close
student of business conditions. The sale of practically all
commodities is influenced by conditions of general business
prosperity.
Sources of Information
There are many opportunities, in these days, to keep in
touch with the trends of business and the desires of people.
To use them efficiently means that the business development
man is studying his markets, reducing waste in manufacturing
and merchandising, developing new sources of profit through
discovery of new products, new uses, and new outlets, and
insuring his firm against unanticipated changes in the market.
While keeping the ship on an even keel he is preserving the
sense of direction and applying the thrust necessary to progress.
Most business development departments will have- or should
have - active plans for tapping the information that can be
given by buyers, consumers and dealers. More use might be
made by many firms of internal records, which can be drawn
upon to show the trends in individual lines, the fluctuations
in demand, and the changes in distribution which yield, to
the alert executive, data that will aid him in planning operations.
Production scheduling and marketing planning must lean heavily
upon statistical data. The genius of the business development
executive shows itself in the success he has in analysing,
assaying, adapting and applying this information to the situation
of his own firm. He should be rigorous in his examination
of statistical data, to see that it is based upon adequate
surveys, unbiased by accident or design, and fully applicable
to the purpose he has in mind.
Among the sources of information for the person surveying
Canada for business development are: the Department of Trade
and Commerce, Ottawa; provincial government departments of
development; industrial commissions of municipalities; business
publications; financial newspapers; trade associations; the
publications of advertising agencies; the services of specialized
research organizations, and of the business development departments
of banks, railroads, insurance companies, and other private
corporations. The Statistical Summary of the Bank of
Canada, published monthly, has much authoritative statistical
data. The D.B.S. Weekly Bulletin, published by the
Department of Trade and Commerce, at a price of only $2 a
year, gives the latest statistical information relating to
production, transportation, merchandising and finance.
Analysing Skill Needed
In reading these and other reports the business development
man should guard against confusing evidence with proof. Proof
is arrived at after the evidential facts given in the reports
have been weighed and the unmeasurable factors taken into
account. Nothing in business can be more foolhardy than basing
one's projects for business development on the bare facts
given in statistical tables and summary articles. The keen
analysis of his alert mind is a prime reason for the employment
of a business development manager.
Information about his own business and the particular appeal
its product makes to customers is vital to the man who hopes
to expand trade. He needs to know the results of technical
research, to appraise the value of the goods; he needs product
research to bring out the most forceful appeal of the goods;
he needs consumer research touching upon size, shape, colour,
packaging, and the other features which influence buying;
he needs to know the limits, if any, imposed upon market exploitation
by such internal matters as productive capacity, financing
and management policy.
There is a happy medium between catching "research fever"
and working in the dark. The information flow cannot be effective
if it is swollen at times by a splurge of research and then
dried to a trickle by a wave of economy or the constriction
of inertia.
Information gathering must be a continuous activity carried
on as a regular part of the organization's business.
In addition to printed reports, the company's records, and
the information gleaned by the business development department,
there are other sources to be drawn upon as need arises. Advertising
agencies, market analysis firms, and others, offer two basic
services: their field organizations provide the physical means
of conducting investigations, and their trained staffs are
prepared to give advice in interpreting the analyses and then
planning on the strength of what is shown.
It is essential to business development that the man responsible
for it within any company should be able to answer, from his
own analysis or one in which he has complete confidence, these
questions: "What does it mean to my company? How can this
information be translated into our day—to—day operations?"
Timing and Technique
Developing new business is a managerial function which demands
the best in the art of timing. He owes more to good luck than
to good management who starts out to develop or expand business
without knowing what time it is on the economic clock.
Wise advice is given by Melvin T. Copeland, Director of
Research and Professor of Administration at the Graduate School
of Business Administration, Harvard University, in his book
The Executive at Work. He says: "Part of the art of
timing lies in an executive's ability to read the handwriting
on the wall or otherwise to sense an impending change well
in advance of the point where it mounts to full force. The
executive who has such a knack usually enjoys a relatively
long time span within which to prepare for dealing with a
new situation. Competitors who awaken belatedly to the problem
obviously have shorter time spans within which to act and
therefore must hurry and press in their preparations."
Whether big corporation or small individual business, the
concern which survives through difficult days and prospers
for any extended period of time usually is one whose management
foresightedly adapts its policies and practices to the meeting
of new situations. Ours is a dynamic, changing environment,
and our survival demands that we look upon it as a challenge
to our thinking, our enterprise, and our ability.
A dramatic illustration is given by Professor Copeland.
Between 1901 and 1919, Cluett, Peabody and Company built up
a substantial business in the production and sale of starched
collars, its sales amounting to more than $30 million in the
latter year. About that time men decided in increasing numbers
to wear collar—attached shirts, and the collar business
began to skid. The company switched into the shirt business
on a large scale, modified drastically its production and
marketing operations, and responded successfully to the shift
in demand.
Surveying and Planning
When seized by the impulse to develop business, it is necessary
for the enterpriser to make an up—to—date survey
so as to ascertain the most promising areas in which to seek
customers. Defining and locating the buyers, with due attention
to what are the buying influences, is the basis of sales.
What exactly is the information sought? The consuming possibilities
of the market; the total sales of all competing products;
the possibilities for additional sales particularly in areas
now covered largely by imports of goods; the opening for new
or modified or repatterned products.
These questions need to be answered thoroughly, but imaginatively.
There must be objective fact finding, then analysis, experimentation
and testing, before the business development executive can
make intelligent, forward—looking decisions.
The approach must be creative. Many business people operate
in a limited field because they do not see the extent of their
possible market. They allow some arbitrary geographical line,
or some feeling of timidity, or ignorance of their capability,
to fence them in. The insular, fenced—in, attitude has
no productive place in business development thinking.
The business development man must have a broad outlook,
and if his vision takes in more than he can accomplish, that
is not to his discredit.
New Business
Expansion is not something to be undertaken lightly. It
puts executive judgment to a severe test. It must justify
itself on the right side of the ledger.
Among the methods of expansion may be: production of new
sizes and models, production of the same articles in different
quality and price ranges, production of a commodity usually
thought of by consumers as being connected in some way with
the commodity already distributed, production of goods which
have something in common with the old line in the way of raw
materials, manufacturing process, or distribution outlets.
Should the firm contemplating expansion have the opportunity,
it would be well to compare the profit possibilities of several
new products rather than to add the first one that is suggested,
or the most obvious one. A Check—list for the Introduction
of New Consumer Products is published by the United States
Department of Commerce. This list, with 64 questions going
to the heart of demand, distribution, competition, price,
sales and legal problems, is reprinted in Nystrom's Marketing
Handbook.
It is not always necessary to have new commodities in order
to develop new business. Sales may be expanded by improving
the product, or by finding and advertising new uses for it,
or by arousing desire in the minds of people. Innovation runs
through all phases of business, and is one of the most gratifying
experiences of the business developing executive.
Sometimes it is difficult to draw a fine line between what
is a new product and what is a new use. For example, says
an article in Dun's Review and Modern Industry (March
1954), to sell the Eskimos a refrigerator to keep food from
getting too cold is actually creating a new product. Technologically
there is, of course, only the same old product, but economically
there is innovation.
Comparatively slight adaptations in design have greatly
expanded the market for many commodities, as is illustrated
by the modification of certain articles originally made for
men's use so that they appeal to women, and vice versa. Similar
ingenuity may make a piece of equipment that was designed
for industrial use acceptable for home use.
Planning is Needed
All this demands planning of a high order. Business development
effort is intelligently directed only when it is founded on
a well ordered plan; not the static blueprint sort of planning
that goes into a building, but the dynamic, adaptable kind
that recognizes it is dealing with ever—changing human
beings.
Efficient planning depends on skilful use of information.
Business development is not a matter of blasting away at random
in the hope of bringing down whatever gets in the way.
It might be helpful to the executive seeking business expansion
if he were to go over the following questions with a pencil,
ticking those in which his firm's record is satisfactory,
and putting a zero at those to which he needs to draw his
managers' attention. What new goods or services have we in
the development stage? Based on our estimate of business conditions,
should we be expanding our sales efforts? Among what prospects?
Can we find new ways of stimulating the purchases of customers
from whom we expect to obtain the bulk of our new business?
What new goods or new uses for goods have we to offer them?
Do we know our customers' plans and prospects for the next
twelve months? Are we prepared to take full advantage of the
opportunities these plans give us to serve our customers in
bigger ways? Are we effectively anticipating their needs and
supplying them with information that will be of value to them?
Are our own information sources complete, so as to keep us
up to the minute about trade, credit, tariffs, government
policy, and other things which affect our buying, manufacturing
and selling? What are we doing to bring in the ideas of our
managers, staff and distributors? Do we get any constructive
suggestions, or only complaints? What are we doing about giving
our branch managers, sales staff and distributors information
and leads about possible new business? Are we organized in
this department, or just haphazard?
Business Development Department
Not everyone is endowed with an aptitude for business development.
Even a top—notch executive, expert in production or accounting
or some other special field, may lack what is needed in this
exacting and exciting arena.
The man charged with business development needs to be a
thinker and a planner, one who studies the future source of
sales and can shoulder the heavy responsibility of examining
and recommending on all avenues of expansion.
Above all, no one can be a business development leader who
is a complacent person, satisfied to drift without aim, avoiding
whatever hints at risk, smugly self—satisfied. This,
strangely enough, is a state of affairs likely to be born
of the very success which enterprise and adventure have brought
into being.
The business development man will be adept in the art of
doing and saying the things that make people think favourably
of the first class goods and services his firm supplies. He
will direct the staff toward making friends of customers and
making friends who may become customers. He will teach employees
who deal with the public that courtesy is not only good manners
but a part of good business development; that service should
be not only prompt and efficient but friendly and cheerful.
Of such little things is business development built.
When advertising his firm's product, the business getter
will see that present customers are kept well informed about
all the services his firm can give them, and of the lengths
to which it is prepared to go in developing new services to
meet their needs.
Published advertising is handled today by a well—integrated
and far—reaching organization, but its key and tone are
set by the firm's representatives. "What do we do for people?"
is the question to be answered in advertisements. There is
no business or commodity but will yield to the business development
man of imagination and courage and energy something, new and
fresh, a real point of distinction or superiority, to serve
as a selling point for his firm's goods.
Personal Effort
The best goods and the best display and the best advertising
need personal attention to develop them into cash register
business.
Selling is as essential as production. You have to display
your goods. In self—service stores customers seldom ask
for what they can't see, and this same trait can be found
in other areas of merchandising. In fact, people frequently
do not know that they want a commodity until a salesman draws
it to their attention.
The business development of a company cannot be confined
within any single department. There should be a co—ordinating
and planning department, because a tangled harness reduces
team—work, but business development only reaches its
full effect when there is intelligent, informed salesmanship
by every member of the staff. Getting business is part of
everyone's job. There can be no allowances for mistakes, inefficiencies,
delays or time wasting. These nullify the best promotion that
business development departments and advertising departments
can produce.
The Executive's Part
Directing business development there should be men of expert
knowledge, technical skill and trained industrial vision.
When a business needs reviving, or when its growth does not
appear to be consistent with its age and possibilities, it
is not a vote by the directors or a sporadic effort by the
sales department that will administer the cure, but the vitalizing
and directive effort of the mentally alert executive.
Their executives' foresight and resourcefulness and their
ability to master perplexing situations and to build ahead
of others have been major factors in the growth and prosperity
of corporations. Behind the effective face—to—face
selling, behind the vigorous advertisements, and behind the
policy that guides business development in all its phases
there is a world of study, thought and planning, without which
the attempt to develop and expand business could not even
start.
These business development executives put their fingers
unerringly upon the critical point in their firms' programme.
There may be nothing wrong with the advertising - it may be
that the advertisements are not followed up strongly by personal
solicitation. The salesmen may be doing all right, but may
be foiled by confusion in the order department, or by faulty
factory superintendence resulting in short supply and nondelivery.
The comprehensive view of the good executive enables him to
avoid tinkering with the wrong gadget, and to find the gear
that isn't meshing in his drive for business development.
He knows that his job is decision—making, with all
the risk that involves. Here, again, the answers to some questions
will be of use. Is this the time to try to expand business?
Is there a need for the commodity we are prepared to offer?
Have we the plant and equipment necessary to produce the quantity
for which we estimate there will be a demand? Have we the
selling organization to do a quick and thorough job of bringing
in cash returns? Have we weighed all the factors so as to
decide without doubt whether to sell more intensively in the
market already served, to open up a new area in Canada, or
to get into the export market; to introduce a new product
or to modify the product we already sell?
Here is Opportunity
In the healthy society we have in Canada there are opportunities
for leaders to display their ability and initiative. We have
freedom to make new things, to start new enterprises, and
to sell to consumers who, in their turn, are free to bestow
their patronage where they choose.
The test of business development in such an environment
is its success. The results of changes and improvements and
extensions and new ventures must show up favourably in the
cash register or in customers' ledger accounts, or our efforts
have failed.
There is no easy prescription for success. Attractive new
business seldom offers itself voluntarily, and there is, as
has been shown, more to winning it than the launching of an
advertising campaign. The business development minded man
needs to search out facts, pay attention to circumstances
surrounding his business today and likely to affect it tomorrow,
and plan constructively. Through it all he must retain his
sense of direction and his confidence.
Published by RBC Financial Group. All editions from the RBC
Letter collection are available on our web site at www.rbc.com/responsibility/letter.
Our e-mail address is: rbcletter@rbc.com.
Publié aussi en francais.
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