According to Pavlo, a business can be split into two halves – the product or service and the commercial system. These two halves require different skills and leadership and management styles, but they must both be executed well to create a successful whole.
Pavlo gave an example of a Ph.D. holder who built a business that manufactures cages for lab rats to test the osmotic transfer of gases in and out of living organisms. The product is highly specialized and worth $1 billion annually, making it a global leader in its industry. However, the success of the product alone is not enough to build a successful business.
The second half of the business – the commercial system – is equally important. This involves marketing, sales, logistics, and other aspects of the business that ensure the product reaches the customer. Pavlo emphasized that a business should see the product and the commercial system as separate entities, each requiring different skills and designs.
To illustrate his point, Pavlo quoted Ralph Waldo Emerson, who said, “If you build a better mousetrap, the world will beat a path to your door.” However, Pavlo noted that having a great product alone is not enough to attract customers – the product must solve a problem for the customer, and the business must provide value for money. This requires a well-designed commercial system that can effectively market and sell the product.
A successful business requires both a great product or service and a well-designed commercial system. Entrepreneurs must focus on both halves and ensure they have the necessary skills and resources to execute each half effectively. By doing so, they can create a successful whole and dominate their industry for years to come.
