Entrepreneurs want to make a difference in the world. However, there is a fundamental distinction in the way in which entrepreneurs operate. That distinction is grounded in the difference between profit and not-for-profit enterprises. With a not-for-profit, the objective is to maximize the benefit to all constituents. If we started a charity to find a cure for cancer, we would be working to maximize the benefit to all of those people affected by cancer.
The largest not-for-profit association is the government. Its purpose is to maximize the benefit to all of the governed. Sometimes, when the policies of the government serve the general interest, but not our individual interests, we get upset.
In business, however, the objective is to optimize. Not all clients or customers are equal. Profit is the key driver that sustains the enterprise. Maximizing the benefit to everyone is a sure way to undermine profitability.
Wal-Mart’s differentiation is the lowest price. Everything they do is designed to drive down costs and deliver the lowest price to consumers. Neiman Marcus caters to the affluent and ultra-affluent. Their moniker “Needless Markup” emphasizes the fact that lowest price is not part of their value proposition.
Both Wal-Mart and Neiman Marcus optimize in serving their customers, but their value propositions are quite distinct.
The Oxford dictionary defines optimization as ”make the best or most effective use of”. Entrepreneurs are always looking for the best or most effective use of a product or service to create value. In business, rewards are given to those who optimize i.e. find the best or most effective use.
The starting point for optimization is for entrepreneurs to always work at the highest level of their capabilities, to identify and focus on their unique ability.
In fact, the greatest opportunity lies in making the best or most effective use of their unique ability or talent(s).
People often choose to become an entrepreneur in a specific field because of their passion and purpose to make a difference in that sector through a product or service. For example, people choose to become a financial advisor because they have a unique ability to build relationships with their clients built on trust. Yet, too often, as their practice grows, they end up spending less time building relationships with clients and high-quality prospective clients. The complexities of running a business get in the way of expressing their unique ability. To optimize, they must learn to master the various aspects of building a business, while expressing their unique ability.
Head to our blog “The Second Principle of Entrepreneurship” to find out everything you need to know about the second element that is key to achieving success.