How Do You Have a Fierce Conversation? Six Factors

Situation: A valuable tool for CEOs is Susan Scott’s book Fierce Conversations. This includes challenging conversations with staff. Scott characterizes Fierce Conversations as being robust, intense, strong, powerful and passionate. These are the traits that a leader must bring to challenging conversations instead of avoiding them. How do you have a fierce conversation?

Advice from the CEOs:

  • The first step is to master the courage to interrogate reality. This means confronting the difference between “ground truth” or reality and official truth or what we or others wish to believe. There is often a difference between the truth that we want others to see and reality. Jim Collins calls this confronting the brutal facts of our situation without losing faith in our ability to deal with it.
  • Be here, prepared to be nowhere else. The conversation must be your only point of focus when you are having it. Choose a location where you won’t be interrupted or distracted. Don’t allow yourself to be distracted by texts, phone calls or anything else.
  • Tackle your toughest challenge today – you gain little by putting it off for another day. Prioritize your challenges, and tackle the most difficult ones first. Handling these will make the most difference.
  • Obey your instincts – but remember that instincts are subjective and must be verified through reality checks. Trust your gut, but verify it objectively with evidence.
  • Take responsibility for your emotional wake – what he or she will remember after the conversation. Keep the focus on factors that the other party can control, and offer to assist. But be sensitive to how you deliver the message and how the other party responds. Don’t leave more of a mess than you had before the conversation.
  • Harness the power of silence – silence slows a conversation and increases your chances of making it meaningful.

How Do You Structure an Earnout? Five Perspectives

Situation: A founding CEO is evaluating a purchase offer for his company. The buyer wants the CEO to retain some ownership interest to assure a smooth transition post sale, and ongoing assistance from the CEO so that the company continues to succeed post-sale. Should the CEO retain a minority share of the company? How do you structure an earn-out?

Advice from the CEOs:

  • The ideal option is full payment up-front. However, if the CEO is perceived by the buyer as critical to the company the buyer will want to have some assurance of continued services for some period.
  • An earn-out of fixed payments over time is acceptable provided that the language of the agreement is acceptable. However, performance-based earn-outs make no sense if the CEO no longer has control over the decisions that will impact performance. Don’t structure the payment as an earn-out, but as a retention bonus and assure that the terms are favorable.
  • Post-sale a minority share of your old company holds no value if you can’t monetize it. Holding a small share of a non-traded company has the same challenges.
    • It is all about liquidity.
    • If the other party offers this, ask what is the value is to you of the retained share.
  • Minimize the earn-out if one is demanded, but don’t count on it.
  • If there isn’t a strategic fit between the buyer and the company, the value of the company in a sale will be lower.

How Do You Survive a Maelström? Seven Strategies

Situation: Edgar Allen Poe’s “Surviving the Maelström,” is a tale is of three brothers whose fishing boat is caught in a monstrous whirlpool, and how the reaction of each brother determines his fate. Similarly, in times of uncertainty, our ability to react with either panic or a rational, reasoned response determines our fate. How do you survive a maelström?

Advice of the CEOs:

  • Based on Poe’s story, you need to replace fear with assurance, uncertainty with boldness, and doubt with conviction.
  • There are several potential financial bubbles forming including student loans and negative interest rate loans to sovereign governments. Both, in their own way, pose a threat to the international and domestic financial systems and could rapidly impact borrowing costs for companies. The solutions are to stay in ongoing contact with customers, and to stay light and flexible as companies so that you can adapt to market changes.
  • For Internet companies, the shift to Freemium offerings (a base product for free with pay as you go functional add-ons) makes it more difficult to design viable business models, and means new competition for established companies in low capital cost businesses. Again, a solution is to stay in ongoing contact with customers, constantly reinforcing your value proposition and the reality of switching costs.
  • Creative Destruction – particularly the emergence of new companies that threaten large customers and can change the value perception of suppliers’ core competencies. Solutions include ongoing communication with customers seeing what they see as “the next big thing,” focusing on continually improving our own core competencies, and possibly teaming with the more promising emerging companies.
  • The illusion that advertising will pay for everything – in reality, advertising dollars are a scarce resource like all other resources. Solutions include testing our own value-adds as an ongoing process, and creating fast-fail models to cost-effectively test our own promotions.
  • Definitions of value and productivity are no longer stable; all depends on the method of measurement. A solution is to remain aware of the innovator’s dilemma and to continually renew our value propositions.
  • A workforce in flux where young people don’t want to work for what they perceive as “old line” companies, as well as early-retiring baby boomers who may learn in 3-5 years that they can’t afford retirement. Solutions include focusing on employee engagement, building more flexible and “liberating” business models, and teaming younger with more experienced workers to cross-train each other.

How Do You Deal with Cut-throat Competition? Seven Thoughts

Situation:  A company serves a market with a lot of new small entrants. Clients purchase from these other companies as well as the CEO’s company. They are continuing to call and network with their client base to retain clients and build new customers. What else should they be doing? How do you deal with cut-throat competition?

Advice from the CEOs:

  • Make a list of those clients who are no longer purchasing from you or referring new clients. Go talk to them. Ask why they are no longer purchasing from you or referring new clients. This may open new options. You may find something new or unexpected that you can offer.
  • Work with an outside service to follow up with on clients lost and won. The key question for them to ask clients is why. Learn from the responses what is most important about the clients’ purchase and referral decisions.
  • Consider a new service. A health/happiness outcome would be a nice value-add: a quarterly report back to referral sources on how happy the clients that they referred are. The last question on the survey should be – Would you work with our firm again? Why or why not?
  • Consider using an outside source to gather the data for these surveys. To get more valuable responses, don’t just ask about your company, but also several of your top competitors; this will produce a richer set of responses.
  • There are two ways to compete: either you are low cost or have established a unique value proposition. Whatever this is, sustainability of your critical point of differentiation is essential.
  • Health care legislation is now in flux. Whatever the outcome, it will have an impact on your market. Become an expert resource on the implications of various outcomes.
  • Look at social media resources – feed valuable information to your audience via blog.

How Do You Develop a Revenue Model? Six Recommendations

Situation:  A company has a crowd sourcing solution which is co-creational. You ask a question and get multiple answers. The company then uses technology to select the best answers. The challenge is developing a business model. What parameters are predictable and dependable? How do you develop a revenue model?

Advice from the CEOs:

  • Revenue is always, in the end, a matter of value received – both potential and actual.
  • High dollar per click comes from delivering better responses, particularly if you can demonstrate higher sales conversion rates.
  • High value responses are valuable. If you can deliver these consistently, consider charging a subscription instead of pay-per-click. Pay per click is fine for attracting first-time users, but move to subscription for ongoing access.
  • Limit your initial audience to crowd source participants who have knowledge and experience – like CXOs on LinkedIn. Create relevant communities.
  • In addition to best practice answers, provide an opportunity for participants to share failures – experiences from which they learned. Simply Hired created an early, and lasting audience by creating a companion site called Simply Fired when they started. Based on the responses to this site, they created a Top Five Reasons for getting fired, with inappropriate behavior and sexual harassment at the top. This exercise helped them to create a lasting presence.
  • Make your site clean and show clear steps to a revenue model for users. This will take time and you won’t see results immediately. Over time it will pay off for you.

What’s the Next Version of Our Business Solution? Four Ideas

Situation: A company that provides personnel services wants to adjust their business model to make it more appealing to employers. They are unique in that they focus on social issues, rather than purely on business services. From the perspective of a hiring Manager, what would you want to see? What’s the next version of our business solution?

Advice from the CEOs:

  • The idea of a social issues-based brand is unique. To some employers this may have appeal.
  • Your obvious differentiator is the tie between existing communities and social networking. Emphasize this.
  • As an employer, the focus is on finding quality employees for the right price. This will always take precedence over other factors for most businesses. In fact, over-emphasis on social issue-based hiring could subject an employer to discrimination issues. It also will not appeal to everyone. How can you address quality employee for the right price through your service? Here are some things to consider:
    • The employers’ challenge is finding good candidates. How do you solve this problem?
    • Employers have specific needs to fill. Help them by identifying and screening candidates so that it makes their job easier.
    • The question for the employer is whether your helper audience can crowd source the screening function. Screening is the challenge of the employer. Solve this and I as an employer want to talk to you!
    • Within your model, instead of asking for monetary contributions from your helper audience ask them to donate time to screen candidates. Not being a recruiter is a plus.
  • Pitch your new ideas to your company insiders – see what they say.

How Do You Build a Young Company? Four Perspectives

Situation: An early stage company is positioning itself for growth. The CEO believes that they need to adopt a new model to grow. She is focused on a new channel – an affiliate model using the web. How do you build a young company?

Advice from the CEOs:

  • Introducing a new product to a new market is very difficult, especially for an early stage business that is still establishing itself. Shifting from direct sales to ancillary services presents a new challenge and a new demographic. In addition, in your market there are low barriers to entry so it may be too early to diversify. You are more likely to be successful marketing to your core.
  • Evaluate and decide whether there is growth in your core business. If so, stick with your core plan. If not, then you either must change or decide that your core market is not what you thought it would be.
  • You offer a valuable, important service. The issue is branding and a clear vision of what you want to be. Start by identifying your revenue stream. Then assess ways that you can move from one-time sales to an annuity revenue stream without major adjustments to your model.
  • Is it feasible to build a revenue share model for ancillary services with your core business partners? Here are the steps:
    • Develop a model.
    • Talk to both your business partners and customers – test the concept. See how they respond.
    • There are two things to look for: does it turn out that that the model is easy to sell and implement, with little effort or distraction from our core business, or does it compliment your core business. If either or both is the case, you may want to pursue it.

What Incentives Do You Offer Your #2? Six Thoughts

Situation: A CEO’s “Number 2” is returning from maternity leave. He sees a role for her helping him grow the business and wants to give her an incentive for taking on that role. What is an appropriate incentive? What incentives do you offer your #2?

Advice from the CEOs:

  • Remember, first, that your #2 is a person with a new baby. Remember what it was like when you and your wife had your first child. How did your priorities change? How did your wife’s priorities change?
  • Never make her choose between child and job – you will lose. Offer her lots of flexibility. For example, allow her flexibility in hours to accommodate the needs of her child. This will mean a lot to her.
  • Find out what is important to her – what does she see as her role and goals. Be sensitive to the possibility that the birth of her first baby may have changed her priorities.
  • Here’s the message: “You’re valuable and I want you on my team. I appreciate your responsibilities with a newborn. How can we make this work for both of us?” Build a role around this – not an incentive program.
  • Many Silicon Valley and other urban families need two incomes. Work out something that works for her.
  • Have a Plan B in case it turns out that her priorities no longer align with yours.

How Can You Monetize Marketing Alliances? Six Thoughts

Situation:  A company works primarily with early stage/rapidly growing companies. To extend their service offering, they have alliances with corporations which are interested in these companies as sources of innovation. The alliances have helped them to gain new customers, but the CEO is curious whether he can gain additional revenue from these alliances. How can you monetize marketing alliances?

Advice from the CEOs:

  • Match making is a valuable resource – regardless of where your company is located or the customers that you serve. Companies are less likely to pay for something that they perceive as having received free in the past, but are more than willing to pay for options that will enhance both their top and bottom lines.
  • Look at ways that you can make your services more valuable to your current corporate alliance partners. How can you help them make more revenue, or enhance their bottom lines through a win-win revenue-sharing relationship?
  • Become a match maker and get a fee. Offer your alliance partners opportunities that are more intimate than speed dating. Make sure that you are playing both a key introductory and ongoing role.
  • Use speed dating to match companies and funding sources. Invite investment bankers or private equity firms. Charge a 1-2% match fee if they do a deal.
  • Simplify your model. Who is your real audience – who is the constituency that you can best serve?
  • The most valuable deals and matches are those that offer ongoing revenue opportunities to your alliance partners. This is where you can offer them the most important value – a value for which they will pay.

How Do You Join a Not-for-Profit Board? Seven Thoughts

Situation: A CEO wants to build network of highly placed contacts. One method that she is considering is joining a not-for-profit Board. What are good organizations? Is it reasonable to expect a quid pro quo? How do you join a not-for-profit Board?

Advice from the CEOs:

  • Do your homework. Find out what the most influential Boards are in your community. For example, the Silicon Valley Chamber of Commerce is very active and includes in its membership many very well connected people.
  • Influential groups and boards will vary by community. In Silicon Valley, the Silicon Valley Association of Start-up Entrepreneurs (SVASE) is a good organization to consider. This and other Angel groups know small companies that need help. Others include the Sand Hill Angels and the Asian-American Multi-Technology Association. In other communities Chambers of Commerce or similar organizations are the movers and shakers.
  • Don’t count out Rotary, Lions, and similar organizations. All these organizations are struggling to recruit new members and some have movers and shakers.
  • Rather than thinking about the meetings, volunteer to join a committee. For example, volunteer to join the Finance Committee. Once the members get to know you, you may be invited to join the Board.
  • Raise money for an organization, this will bring invitations to join the Boards of other organizations.
  • Follow your passions in selecting an organization, you will be more enthusiastic.
  • It is reasonable to expect a quid pro quo? Yes, if you make a significant contribution and demonstrate your competence.