Enterprise Styles - Lifestyle and Upwardly Mobile
Entrepreneurs organize, operate, and assume risk for enterprises with the intention of transforming innovative ideas into products and/or services as businesses for profit, or meeting the needs of communities through not-for-profit associations. Enterprises are formed with the intention of being either lifestyle – serving the needs of local communities, or upwardly mobile – serving the needs of large markets. By applying the duplicable principle, a lifestyle enterprise can become upwardly mobile.
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Lifestyle enterprises are the heart of Main Street. Lifestyle enterprises are focused on serving the needs of local communities. They are founded by an entrepreneur who either becomes a lifestyle business enterprise owner or eventually sells to one. They are closely held by a single owner, family, friends, or close business associates. They operate in traditional industries such as, but not limited to agriculture, automotive, contracting, food service, hospitality, light manufacturing and distribution, professional services, retail, travel and entertainment, and wholesale. They can operate from a single location, or several locations in a close geographic area, such as a municipality, county, state, or group of neighboring states.
Whereas the start-up risk can be high, it lowers as the enterprise gains a presence in local communities. Lifestyle transactions are predictable and repeatable in local communities because they relate to everyday activities - people are creatures of habit. However, location does matter. Business activity can change due to local, regional, national, and global economic conditions. Lifestyle enterprises are particularly prone to changes in transportation systems and demographics, and the impact of new or deteriorating neighborhoods. New residential, retail, office, and industrial developments can bring business if located nearby, or take it if located far away. Declining neighborhoods can be challenging if crime rates increase. Competition from scale providers, such as "big box" retailers or franchise systems can be challenging. Hence, a major differentiator for lifestyle enterprises is quality of service.
The lifestyle enterprise owner may be an active owner-manager or a passive investor with a delegated management team in place. In either case, the owner must pay attention to the enterprise because nobody else gives it and its constituencies the same level of care and attention. Owners must pay attention to the risk of theft, fraud and embezzlement too, especially when passive.
Upwardly mobile enterprises are the core of the activities of angel investors, venture capitalists, and Wall Street.
Upwardly mobile enterprises are focused on large market share, either industry-wide or in niches, with local-to-global aspirations. Their growth potential stems from highly innovative people that offer new products and/or services in existing markets, or existing and new products and/or services in new markets, or transform non-traditional industries into traditional ones over time. They create wealth.
Upwardly mobile enterprises start as narrowly held, first by the founders, and later by private investors seeking capital appreciation. They may become widely held publicly traded enterprises to gain scale. Upwardly mobile enterprises have a high risk in the early stages where capital appreciation opportunities exist. As they they gain market share and scale, the risk lowers. However, they must always be aware of changing market conditions. Long-term growth usually results from entry into foreign markets. Upwardly mobile enterprises require a professional management team of executives and other managers, which may or may not include the founding entrepreneur. A major differentiator for upwardly mobile enterprises is brand name recognition.
Upwardly mobile enterprises are particularly common in the high technology industries, where large markets are necessary to generate the cash flows required to command a respectable return on investment. However, if a technology really catches on around the world, the opportunity for capital appreciation can be significant. As fads fizzle, capital can depreciate too.
However, many upwardly mobile enterprises rely on a narrow set of well known products that are found in multiple markets around the world.
Lifestyle enterprises may become upwardly mobile enterprises over time. They grow by applying the duplicable principle: duplicating processes, functions, facilities, and equipment with proven products and/or services in one market that offer potential in others.
The duplicable principle can be applied to concepts ranging from single products to entire business systems, both corporate and franchised.
For example, Coca-Cola, Heineken, and Pepsi-Cola are recognizable worldwide. Although local practices may differ regarding packaging and distribution, these products have been duplicated on a worldwide basis.
For example, Starbucks grew through the process of duplication from a local lifestyle enterprise, owned by businesses associates, to an upwardly mobile public enterprise with global aspirations. It has expanded through its own and licensed locations, and with joint venture partners in selected markets.
Franchise systems offer a hybrid approach where the franchisor enables a lifestyle concept to become upwardly mobile by employing franchisee capital in exchange for a proven business system operating as a network.
For example, many car rental companies, fast food restaurant systems, and hotel chains operate as franchises around the world, such as Thrifty, Subway, and Holiday Inn.
Not-for-profit enterprises can be upwardly mobile also. Lions Club, Red Cross, Rotary Club, and Scouts are examples that have a worldwide presence.
Upwardly mobile enterprises may default to lifestyle enterprises it they cannot capture large markets.
The enterpriship disciplines of entrepreneurship, leadership, and, management apply to both lifestyle and upwardly mobile enterprises. Lifestyle enterprises differ from upwardly mobile in mindset. Lifestyle enterprises serve local markets locally, whereas upwardly mobile enterprises aspire to serve local markets globally.
