Structure of the Article?
- Introduction
- Definition
- Ingredients
- Who Fit with BD
- What should they know
- Role of BD
- Skill & Knowlege
- Objectives of BD
- Summary
Introduction to Business Development
We used to hear a title such as Director-Business Development, Executive–Business Development, Manager–Business Development, or VP–Business Development, Venture capitalist. With my personal experience, I realised that often people assume it as sales department activities. However, it's not always true.
There are many department consider under business development units such as Sales (obvious one), strategic initiatives, business partnerships, market development, business expansion, and marketing–all of these fields are involved in business development, and are often mixed up and mistakenly taken as the sole function of business development.
Theoretically, this term clash with economic development, some countries & companies having their economic development or business development department, however, their roles are not the same always.
In the simplest terms, business development can be summarized as the ideas, initiatives and activities aimed towards making a business better.
According to Palgrave Encyclopedia of Strategic Management:-
Business development activities extend across different departments, including sales, marketing, project management, product management and vendor management. Networking, negotiations, partnerships, and cost-savings efforts are also involved.
For instance, a business has a product/service which is successful in one region (say, the United States). The business development team assesses further expansion potential.
Sales: Sales personnel focus on a particular market or a particular (set of) client(s), often for a targeted revenue number. In this case, business development assesses the French markets and concludes that sales worth $1.5 billion can be achieved in three years. With such set goals, the sales department targets the customer base in the new market with their sales strategies.
Marketing: Marketing involves promotion and advertising aimed towards the successful sale of products to the end-customers. Marketing plays a complementary role in achieving the sales targets. Business development initiatives may allocate an estimated marketing budget.
Product Management: Regulatory standards and market requirements vary across countries. A medicine of a certain composition may be allowed in India but not in the U.K., for example. Does the new market require any customized (or altogether new) version of the product?
Vendor Management: Will the new business need external vendors? For example, will shipping of product need a dedicated courier service? Or will the firm partner with an established retail chain for retail sales? What are the costs associated with these engagements? The business development team works through these questions.
Negotiations, Networking and Lobbying: A few business initiatives may need expertise in soft skills. For example, lobbying is legal in some locales, and may become necessary for penetrating the market. Other soft-skills like networking and negotiating may be needed with different third-parties such as vendors, agencies, government authorities, and regulators. All such initiatives are part of business development.
Other departments: Other departments such as Legal, Mergers and acquisitions also come under Business development.
A business developer can be the business owner(s), or the designated employee(s) working in business development. Most often in SME & startup companies this department handle by company partner or founder itself.
There are 4 major roles of business development according to Schumpeter, J. and Backhaus, U., 2003. The theory of economic development. Joseph Alois Schumpeter, pp.61-116.
Which leaves the question: “What exactly is business development?”
Here we will go into detail to see understand business development, what it encompasses, and what, if any, standard practices and principles to follow.
Here we will go into detail to see understand business development, what it encompasses, and what, if any, standard practices and principles to follow.
Definition of Business development
Theoretically, this term clash with economic development, some countries & companies having their economic development or business development department, however, their roles are not the same always.
In the simplest terms, business development can be summarized as the ideas, initiatives and activities aimed towards making a business better.
According to Palgrave Encyclopedia of Strategic Management:-
″Business development is defined as the tasks and processes concerning analytical preparation of potential growth opportunities, and the support and monitoring of the implementation of growth opportunities, but does not include decisions on strategy and implementation of growth opportunities.″
This includes increasing revenues, growth in terms of business expansion, increasing profitability by building strategic partnerships and making strategic business decisions.
But it's challenging to boil down the definition of business development. First, let's look at the underlying concept, and how it connects to the overall business objectives.
Ingredients of Business Development
Business development activities extend across different departments, including sales, marketing, project management, product management and vendor management. Networking, negotiations, partnerships, and cost-savings efforts are also involved.
All these different departments and activities are driven by and aligned with the business development goals.
For instance, a business has a product/service which is successful in one region (say, the United States). The business development team assesses further expansion potential.
After all due diligence, research and studies, it finds that the product/service can be expanded to a new region (like France). Let’s understand how this business development goal can be tied to the various functions and departments:
Sales: Sales personnel focus on a particular market or a particular (set of) client(s), often for a targeted revenue number. In this case, business development assesses the French markets and concludes that sales worth $1.5 billion can be achieved in three years. With such set goals, the sales department targets the customer base in the new market with their sales strategies.
Marketing: Marketing involves promotion and advertising aimed towards the successful sale of products to the end-customers. Marketing plays a complementary role in achieving the sales targets. Business development initiatives may allocate an estimated marketing budget.
Higher budgets allow aggressive marketing strategies like cold-calling, personal visits, road shows, and free sample distribution. Lower budgets tend to result in passive marketing strategies, such as limited print and media ads, and billboards.
Strategic Initiatives or Partnerships: To enter a new market, will it be worth going solo by clearing all required formalities, or will it be more pragmatic to strategically partner with local firms already operating in the region?
Assisted by legal and finance teams, the business development team weighs all the pros and cons of the available options, and selects which one best serves the business.
Project Management/Business Planning: Does the business expansion requires a new facility in the new market, or will all the products be manufactured in the base country and then imported into the targeted market? Will the latter option require an additional facility in the base country?
Such decisions are finalized by the business development team based on their costs, time- and related assessments. Then project management/implementation team swings into action to work towards the desired goal.
Product Management: Regulatory standards and market requirements vary across countries. A medicine of a certain composition may be allowed in India but not in the U.K., for example. Does the new market require any customized (or altogether new) version of the product?
These requirements drive the work of product management and manufacturing departments, as decided by the business strategy. Cost consideration, legal approvals and regulatory adherence are all assessed as a part of a business development plan.
Vendor Management: Will the new business need external vendors? For example, will shipping of product need a dedicated courier service? Or will the firm partner with an established retail chain for retail sales? What are the costs associated with these engagements? The business development team works through these questions.
Negotiations, Networking and Lobbying: A few business initiatives may need expertise in soft skills. For example, lobbying is legal in some locales, and may become necessary for penetrating the market. Other soft-skills like networking and negotiating may be needed with different third-parties such as vendors, agencies, government authorities, and regulators. All such initiatives are part of business development.
Finance Management: Business development is not just about increasing sales, products and market reach. Strategic decisions are also needed to improve the bottom line, which includes cost-cutting measures.
Cost-saving initiatives can be implemented by outsourcing non-core work like billing and accounting, financials, IT operations and customer service. Strategic partnerships needed for these initiatives are a part of business development.
Other departments: Other departments such as Legal, Mergers and acquisitions also come under Business development.
The business development scenario discussed above is specific to a business expansion plan, whose impact can be felt by almost every unit of the business. There can be similar business development objectives, such as the development of a new business line, new sales channel development, new product development, a new partnership in existing/new market, and even merger/acquisition/sell-off decisions.
For example, in the case of a merger, significant cost savings can be accomplished by integrating the common functions of the house-keeping, finance, and legal departments of the two firms. Or, a business operating from five different offices in a city can be moved to a large central facility resulting in significant operating cost savings. But would this lead to employee attrition, if the new location isn't convenient for everyone?
It's up to the business development team to assess such concerns. In essence, business development involves high-level decision-making based on a realistic assessment of all potential changes and their impact.
For example, in the case of a merger, significant cost savings can be accomplished by integrating the common functions of the house-keeping, finance, and legal departments of the two firms. Or, a business operating from five different offices in a city can be moved to a large central facility resulting in significant operating cost savings. But would this lead to employee attrition, if the new location isn't convenient for everyone?
It's up to the business development team to assess such concerns. In essence, business development involves high-level decision-making based on a realistic assessment of all potential changes and their impact.
Through new ideas and initiatives, it aims to improve the overall business prospects, which drive the functioning of the different business units. It is not sales, it is not marketing, it is not partnering. Instead, it is the eco-system encompassing the entire business and its various divisions, driving overall growth.
Who fits with Business Development
A business developer can be the business owner(s), or the designated employee(s) working in business development. Most often in SME & startup companies this department handle by company partner or founder itself.
Anyone who can make or suggest a strategic business change for a value-add to the business can contribute towards business development.
Businesses also seek help from external incubator firms, business development companies (BDC) and small business development centres (SBDC).
However, these entities assist in the business establishment and the necessary fine-tuning only during the early stages of business setup. As a business matures, it should aim to build its business development expertise internally.
Skills and knowledge
Personality of Business Developer
Due to the wide-open scope of business development and activities, there are no standard practices and principles.
Due to the wide-open scope of business development and activities, there are no standard practices and principles.
From exploring new opportunities in external markets to introducing efficiencies in internal business operations, everything can fit under the business development umbrella. So the activities of business development office most often depend on company objectives and country culture.
Those involved in business development they need to be creative ideas, number oriented, organise and success oriented. It's important to be flexible, to seek out and take constructive criticism, and to remember that it's a process.
What Should a Business Developer Know?
Those involved in business development they need to be creative ideas, number oriented, organise and success oriented. It's important to be flexible, to seek out and take constructive criticism, and to remember that it's a process.
What Should a Business Developer Know?
Since business development involves high-level decision making, the business developer should remain informed about the following:
- Detail understanding of own product & service
- Deep understanding of the local, national and international market.
- The current state of the business in terms of SWOT analysis.
- The current state of overall industry sector and growth projections
- Competitor developments
- Primary sources of sales/revenues of current business and dependencies
- The customer profile
- New and unexplored market opportunities
- New domains/products/sectors eligible for business expansion
- The long-term view, especially with regards to the initiatives being proposed
- The cost areas, and the possible options of cost-savings
- Advance Excel knowledge
- Know how to analyze market or opportunity
- Dedicated & Interested in growth of the company
- Loves to make relations with other people
Objective of Business Development Department
There are 4 major roles of business development according to Schumpeter, J. and Backhaus, U., 2003. The theory of economic development. Joseph Alois Schumpeter, pp.61-116.
- Introduce a new product
- Using new method in producing goods
- To find a new market
- To develop new raw material as alternative sources - to have rearrangement of industries
Summary
Business development may be difficult to define concisely, but it can be easily understood using a working concept.
Business development may be difficult to define concisely, but it can be easily understood using a working concept.
An open mindset, willingness for an honest and realistic self-assessment, and the ability to accept failures, are a few of the skills needed for successful business development. Beyond the ideation, implementation and execution of a business development idea, the end results matter the most.
The bright minds in business development should be ready to accommodate the change in order to achieve the best results. Every approval or disapproval is a learning experience, bettering preparing you for the next challenge.
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