Situation: A company has a long-term relationship with a Japanese distributor that is also an investor in the company. Due to time zone differences and language difficulties, communications are very difficult. This leads to significant cost overruns for the company. How do you satisfy a difficult foreign customer?
Advice from the CEOs:
In working with a difficult partner, it is critical to set expectations, establish ground rules and repeat these at the beginning of each conversation or teleconference until it is clear that both sides understand each other. Even at this point, these should be repeated and reinforced any time a new individual is participating in the conversation.
Do you want us to give you (a) our honest answer, or (b) do you want us to tell you what we think you want to hear? – They would be foolish to choose (b).
Preface each critical response with this choice to reinforce the agreement at the beginning of the meeting.
In a situation where you are losing money under a fixed price contract, you may have to have a “Come to Jesus” meeting. During this conversation, you want to understand and establish:
Whether this relationship is profitable for both of us, and
Whether this project is doable by each of us.
Usually this will result in a radical shift in the model.
If it does not they it is better for both if you part ways. You are unlikely to reconcile the situation.
The bottom line is to establish, mutually, whether you can satisfy your partner through your efforts. This is critical to your future with this customer.
If you cannot find an acceptable solution you must abandon the effort.
It makes no sense to take on business that is not profitable to you, even if the revenue is important to plan achievement.
At the current rate, you will not make up the loss in profitability through additional volume.
Situation: A company’s major customers are expanding their manufacturing in China. They want the company to be able to service their Chinese locations. If you don’t already have a presence in China, what are the best ways to create a presence in China? In addition, how do you get the cash produced by these operations out of China?
Advice from the CEOs:
Increasingly, multinational businesses with operations in China seek vendors who can seamlessly handle all of their domestic and international needs. In China, the objective is to be able to translate service output into English so that US managers can monitor the output and assure that Chinese operations are meeting the same or similar basic standards as their domestic and other foreign operations. If your company can’t do this large contracts are at risk.
Look for local partners, including partners located in Hong Kong or Japan who can deliver service in China to your standards. You want partners who you can risk-manage.
It is interesting to look at the Japanese approach to China. Japanese concerns known to CEOs around the table only transfer highly developed, late stage manufacturing projects to China.
As you look at partners who have capabilities in China there are a number of qualities that you want to investigate:
Competence and honesty.
Loyalty – a partner who will stick with your company and not just take the new knowledge and start to compete with you.
Absence of graft and record of compliance with the Foreign Corrupt Practices regulations.
If you work with Chinese partners, work with two of them. Do not give them exclusive agreements, and do not tell them about one-another. This is critical to protecting any IP that you will be using in China.
We’ve learned over the past year that taking cash from your Chinese operations out of China is difficult. The Chinese government imposes heavy fees and levies on companies exporting earned capital because they want this capital to remain in China. Given this, you must ask yourself whether this is important to you.
Situation: A company has received RFPs from two companies who regularly do business with each other, but who are also competitors. The projects specified by the two RFPs might compete with each other. Under the terms of the two RFPs, the company can not disclose the existence of either RFP to the other company. Can you do business with competing companies, and how do you protect the company if you do?
Advice from the CEOs:
The principal concern for the Company will be assuring that there is no violation of the CDAs that you have with each company.
Assign the RFPs to two different groups within the Company, with strict instructions that they must maintain their respective client’s confidentiality both internally and externally.
Emphasize the importance of confidentiality in responding to the RFPs to the Project Manager responsible for responding to each RFP.
Respond to both RFPs, but do so such that if both projects are contracted you can disclose this to both companies.
Prepare a set of talking points – the same talking points – to both companies and disclose the situation to both immediately after the project has been contracted.
Let them know what happened, share the timeline, share your obligations under your CDAs with both companies, let them know what you did internally to preserve their confidentiality, and that as soon as you were able – i.e., as soon as both projects was contracted – you informed them of the situation.
Companies commonly get involved in similar situations. The beauty is that you get business under either scenario. The challenge is that you must take all steps necessary to assure that the interests of both potential customers are preserved.
If you can successfully demonstrate to both companies that you have acted in an honorable fashion, they are more likely to trust you to do the same in the future.
Situation: A CEO recently sold his company and is evaluating new opportunities. What are the most important questions you should ask when evaluating new opportunities?
Advice from the CEOs:
Perhaps the most important thing to evaluate is your passion for the choice that you select. As you evaluate options look closely at the business involved and your enthusiasm for that business. In addition, how does the company feel to you? Does the staff and culture reflect your values? Are you comfortable with the sense of teamwork and collaboration that you see?
Doing a cost/benefit analysis on each opportunities, with a focus on:
Financial stream – financial prospects for the company as well as the financial package and incentives that you are being offered. In the case of an early stage company, what are their prospects for obtaining financing? If you will be an investor, what is the investment required on your part and what it will cost to support family until you can replace your recent salary?
Personal enthusiasm and satisfaction associated with each option.
Consult several trusted advisors throughout your selection process
Any new CEO assignment requires considerable work and focus, especially in the early phases. Anticipate long hours. The more that you feel compatible with the company and culture, the easier this will be.
Look for an appropriate balance between your personal and career priorities, and the financial opportunity offered by each option. If there is an imbalance, you will have to determine which – financial or personal priorities – you want to give the greatest weight.
In addition to personal, career and financial priorities, determine the most important factors that you want in your lifestyle. As you evaluate options, assess the match that each option offers to your results.
Situation: A company has been presented with a new business opportunity. The opportunity is compatible with the company’s current business, but also involves skills and markets with which the company is not familiar. How do you evaluate a new business opportunity?
Advice from the CEOs:
There are at least four critical questions to assess as you evaluate any new businesses opportunity:
What is the total available market, and what is the immediately convertible market for the product or service?
Can you acquire expertise in the new markets that this will open to you?
Do you have a track record starting and nurturing new business within your company?
Is there sufficient seed money available – through company funds or outside investment – to keep the effort going for at least a couple of years as you develop the core team that will operate this business and gain traction?
If there is an offer of outside investment, consider how many months this funding will support the salaries of the team that will build this business, plus operating and overhead costs. You want to be sure to give yourself an adequate runway.
New business development opportunities typically require huge energy, creativity and focus for the first few years. Key management will have to devote all of their effort during the start-up period. Can the company afford to lose the services of key personnel for the time that you estimate this effort will take?
Before deciding to pursue this opportunity, take the time to investigate the market for this opportunity.
In particular, look for other companies that have tried to enter this market, and learn from their experience.
Develop a network of advisors who understand this market and can help you understand both the workings of the market and why companies may have struggled trying to enter the market.