Situation: A technology company has grown rapidly over the last year. Two customers representing a significant share of business have temporarily reduced orders for one quarter, resulting in a cash crunch until these orders resume. How do you bridge a short-term cash crunch?
Advice from the CEOs:
Do you feel relatively secure that once the quarter is over these orders will resume and your cash crunch will be resolved? If so, ask your bank to increase your cash line. Explain the situation, the companies involved, their order history and the expected timing until you get your next payments. A letter from each company saying that they plan to resume orders will help your case. Be aware that the bank may request a personal guarantee to substantially increase your credit line.
If you have to personally guarantee a line of credit extension, make sure that you see this as an acceptable risk, and that you can trust the customers to come through with their orders as promised.
If you produce products or subcomponents critical to these customers, ask whether they will extend a bridge loan or make a payment against future orders to assure their place in your production queue once their orders resume. You may have to escalate this request within the customer companies if you are currently dealing with purchasing personnel or lower level management.
Can you redeploy excess labor to other projects during the cash crunch? You will have to do this carefully so that you can rapidly redeploy these resources to priority projects once a large order comes in from one of these customers.
Situation: A company seeks the best way to introduce a novel health monitoring solution. The challenge is that people don’t want to change their routines. If you can creatively fit into existing routines with minimal behavior change this facilitates adoption. How have you introduced a new solution without asking for a change in behavior?
Advice from Kiran Kundargi:
As the population ages health care costs rise. A solution that can reduce healthcare costs while allowing more seniors to remain in their homes this can significantly reduce health care costs. The sticky part is making this solution a part of the elder’s and their family-caregiver’s daily routine.
Our solution is to seek the low hanging fruit – post-hospital discharge recovery at home. Seniors who have been discharged from the hospital following treatment or surgery often receive strict instructions to take their medication, adjust their diets and engage in regular exercise. This requires changes in the senior’s routine, and non-compliance is a leading cause of readmission.
Effective October 2012, Medicare will stop paying hospitals for readmissions that it deems avoidable. This forces hospitals to take a more active role in follow-up care following discharge. Our online health monitoring service, Nclaves, provides a low cost solution.
Nclaves facilitates communication between the elder and his or her children and grandchildren using Internet and hand-held technology. This enables family to help their senior comply with post-hospital instructions.
We approach this opportunity in four phases.
We start by using the Internet. We have made our solution easy for physicians and hospitals to find. Internet activity is supplemented with presentations to monthly meetings in hospitals. By acting as an information resource on the change in Medicare regulations, we can introduce our solution to those who will suggest it to patients. Early adopters will enable us to build case studies demonstrating both technical viability of our solution, benefit provided to patients, and impact on readmission rates and cost of care.
Next, we will approach large employers. Employers understand that increases in hospital costs will adversely affect the cost of insurance benefits for their employees. We want them to include Nclaves as part of their employee health and wellness programs.
The third step is insurance companies. These companies have the leverage to specify and suggest options to both patients and providers.
Our final step is broad market acceptance. Once both payers and providers are on-board, we will be ready to work through alliances, the Internet and broader public relations and advertising campaigns to build market acceptance.
Situation: A company has used the same accounting system for over 10 years. The current system produces information quickly and easily, and empowers management and sales to make good decisions. However, it doesn’t respond to customer information requests as well as newer packages. What are best practices for updating your accounting system without losing data?
Advice from the CEOs:
One option is to keep your legacy system, but migrate to a user-friendly platform designed to work with a CRM system that can better meet customers’ needs.
Keep both systems up live until you no longer need the old system, except as an archive of your historic data.
Be sure to cross-train other employees so that your current system doesn’t become worthless if your key administrator gets hit by a truck.
Before you decide which direction to pursue, ask what your employees like the current system.
What do they find most useful?
What accounting features do you need to support your growth plans?
What key functions of the current system would you have to emulate?
How expensive is it to maintain your current system?
Is your business so unique that no off the shelf alternatives exist?
Could you adopt an 80-90% solution and customize the rest?
It may be difficult to do this on your own. Look for a consultant with a background in accounting applications to analyze your needs.
If you feel that you must make a change, but are not ready to do so, develop your solution gradually.
Interview with Kelly Masood, President, Intilop, Inc.
Situation: An emerging company is gaining traction as it moves from early adopters to mainstream. They need to continue to develop new technologies, while bringing down the cost of existing products. This is a delicate balancing act for a small company. How do you grow without losing control?
Advice from Kelly Masood:
It’s important to maintain momentum and continuous improvement. From a practical standpoint, we do this by applying common sense to our technical discipline. Common sense, here, is a relative term. It isn’t really taught in school at any level, but is gained through experience. This is the true expertise of the CEO.
The delicate part of the balancing act is the mix between developing new technologies and building an effective business model. An effective business model is built on innovative and cost effective products and sustainable profitability. Since new technologies go through development stages, it is important to create break points where you transition from development to productization to marketing and sales. Continuous improvement in existing products based upon customer feedback and new product ideas for future developments are crucial aspects of a successful business model.
If you want to minimize outside funding and investment you have to watch cash flow and development expenses. Revenue from existing products is the key. When you don’t have resources, you become resourceful. If the team is dedicated to producing innovative and good products that make business sense, they figure out how to accomplish it without cutting corners.
To mature your team over time you must keep them motivated, occupied and adequately compensated today while inspiring them to make it big in the future.
You maintain interest through the pursuit of new technology and the learning associated with it. Engineers like to see their designs work and turned into a product that creates value, is used and is appreciated.
Keeping the team occupied and challenged starts with choosing the right talent in the first place and then getting them to focus on building great products.
Compensating them with a fair salary means locally competitive rates, sweetened with stock options to provide great upside potential.
For us, retaining great employees is about enabling them to innovate products that will find broad market acceptance.
Key Words: Early Adopter, Mainstream, Develop, Cost, Continuous, Improvement, Common Sense, Business Model, Cash Flow, Expense, Price, Retain, Employees, Off-shoring
Situation: A small company has a key employee who has been with them for one year. Previously, this individual had been a production manager in a large company managing as many as 100 employees. He excels at analysis, QA and other “doer” roles but has not demonstrated strong supervisory skills. How do you address a key manager functioning at 80%?
Advice from the CEOs:
Small companies are different from large ones. In a small company, people must wear multiple hats and be willing to roll up their sleeves with the others. The atmosphere can be very different in a large company. Past experience in a large company does not mean that previous skills are transferable.
If the person is not a fit for your needs and organization, then you must find a fit or make a change.
Do you have room on your payroll for a job appropriate to this individual’s skills and talents? If so retain him in a new role. If not, then take action.
Engineers often do not transition well to management positions. Different skill sets are required. Shortcomings may have been masked in a large company.
If your future need is for an individual to take on many or your current responsibilities in the role of General Manager, hire an individual who has demonstrated success in this position in a company of in size and focus as yours.
If you need to hire a different person, review your selection process.
If this position requires the wearing of multiple hats, indicate the range of responsibilities in the position description.
During the selection process query candidates on their experience handling these responsibilities. Ask open questions and look for specific instances where they have demonstrated talent. Confirm responses in reference checks.
Key Words: HR, Selection, Performance, Doer, Manager, Supervisor, Big vs. Small Company, Success, Experience, Selection, Position Description, References
Interview with Mari Anne Vanella, CEO, The Vanella Group
Situation: High tech companies need a more effective, higher level approach to prospect accounts. This means capturing sales intelligence more meaningfully, and aligning marketing approaches with customer needs based on prospects’ experience. Traditional transactional lead generation methods must be replaced by a deeper methodology that enables salespeople to speak to the personality of the business buyer. If all of this is true, how do you revamp your lead generation process?
Advice from Mari Anne Vanella:
Executives are so busy that their schedules are overloaded. If you want to reach them, you must engage them at a meaningful, more situationally fluent level.
Executives aren’t disinterested in new vendors and opportunities to gain efficiency or save money; they’re just hard to reach. Therefore, it is critical to develop sufficient knowledge prior to initial contact so that you can quickly engage the prospect, and equally quickly re-engage them on follow-up calls as they progress through your sales pipeline.
Companies must mature beyond volume-based marketing and sales. The traditional model calls for up to three or so telemarketing center contact attempts to a large number of leads.
Current research indicates that 80% of leads are matured into prospects after 5 or more contact attempts. More effective approaches call for 7 to 10+ contact attempts to reach busy executives and managers. This requires greater skill and persistence than the traditional approach.
Re-engineer the process through which you contact leads and follow-up on prospects. Most deals fall out of the pipeline through mismanagement.
The focus of sales and marketing transformation should be on new metrics to boost success rates, as well as communication skills and pipeline management.
It is critical to understand the individual buyer’s purchase process. Sales close at varying rates. This requires listening closely to the prospect’s timeline and the next steps in his or her consideration process. If you agree on a follow-up date, honor it. Attend to the smallest details.
A lost deal calls for a deeper de-brief than a simple note of “sale lost” or “lack of prospect interest.” Marketing needs to understand why deals don’t happen to optimize processes.
The implication of these observations is broad. Most sales and marketing teams are held strictly to results, expressed as numbers that can be taken to management and the Board. This serves a function, but if it dominates sales and marketing processes it may undermine results. Understanding the realities facing prospects calls for a more technical marketing organization and an empathetic customer approach based on an intense understanding of the prospect and their needs.
Situation: A company sued a customer for non-payment. The customer had a long history of slow payment or payment only on threat of denial of service. The customer countersued and has offered to settle for a $7,000 payment. How would you advise the CEO to respond to this frivolous lawsuit?
Advice from the CEOs:
One option is to let the countersuit go to trial. The challenge is that if this ends up before a jury the outcome is a crapshoot and can be very stressful. You may win, but at a higher cost than to settle, and if the other party declares insolvency you may never recover your costs. You also have to deal with the distraction of the suit.
Another option is to respond very aggressively through your lawyer. This sends a message to the other party and may prompt them to lower or drop the settlement demands. If this doesn’t work and you aren’t a gambler, give up the $7K and walk away. However, if there is a way to make this the most expensive $7K that the other party ever collected, go for it.
You may decide on principal to prosecute the case to send a strong message to the market that others should not fool around with your company.
To prevent this situation in the future, assure that you have clauses in all your agreements to prevent future repetitions of this situation. Specify binding arbitration in the case of payment or performance disputes. Arbitration can be more effective and timely than litigation.
Situation: An acquired company is poised for dramatic growth. The corporation that acquired them has questions about the current team’s capability to realize planned growth, and achieve their financial and operational targets. How can they assess whether the existing team is up to the task?
Advice from Gene Tange:
Think of this as an assessment process that accurately predicts the ability of the leadership team to realize planned outcomes while maturing key business processes. The leadership team is tied to both financial and operational outcomes that cover competence, continuity and alignment. This enables proactive management of organizational changes to support planned growth of the business. A real life example will illustrate the steps of the process.
The starting point was whether the current CEO had the right compliment of skills and capabilities to lead a high performance team. Could this leader see beyond the current stage of growth in terms of the talent and processes required for growth? Could he build a high performance team, align them and retain them to achieve results?
The CEO then laid out the future state organization. The essential question was whether he had teams of leaders in each of the key functions to assure success.
Specifically, the Product Development Team generated a competitive analysis comparing the current product with all others to assure a 2 year competitive advantage. They were also tasked with improving cost of manufacturing.
The Sales Team installed an integrated CRM system to support large orders, including internal cross functional communication to increase customer visibility and satisfaction scores.
The Operations organization moved from a traditional batch manufacturing process to a state of the art, focused factory organization, eliminating WIP, reducing operational costs and increasing the speed of order to delivery.
Finally, the Finance and Administrative functions were assessed.
As a result, in 16 months the company grew 5x in revenue and increased margins. Time from order to delivery was reduced by 16x. Headcount was reduced while shipping volume increased by 5x.
A disciplined assessment process that predict business outcomes and ties your talent to the bottom line can provide a significant advantage in today’s highly competitive environment.
Situation: A company has a long-term loyal employee who has served in a number of roles. The company is growing, and no longer has a clear role for this individual. This individual can’t and doesn’t want manage either other employees or projects. The CEO wants to be compassionate with this individual to honor their loyalty, but finds himself in a quandary. How would you handle a loyal employee who no longer fits the company’s needs?
Advice from the CEOs:
Your desire to treat this individual compassionately is commendable. This individual has been loyal and has served you well. There are a couple of questions to ask: is there a valuable function that this individual can serve within the company, and is this individual essential to the company?
What happens when this individual goes on vacation? Are there gaps in service or function?
Who handles this individual’s duties while they are on vacation?
If the answer to these questions is that others fill in easily and not a beat is missed, particularly when this individual is absent for long vacations, then either they have made excellent preparations prior to their vacation absence, or they may not be essential to the team.
As a business grows, it changes. Not everyone who came onboard early will have a place as the company grows. Think of a pick-up basketball team on the local playground. In pick-up basketball, you play with whoever is available. Let’s say that the team starts to improve, and they decide to join a competitive league. Now the game starts to change, and some of the buddies who played pick-up ball won’t be able to make the shift to competitive ball. They aren’t bad people; they just no longer fit the game that the team is playing.
You may need to sit down with this individual and have a heart-to-heart discussion about the needs of the company and their ability to serve these needs. This is difficult, but if there is truly no longer a role for this person, then you need to be honest with them while at the same time honoring their past contribution.