Situation: A CEO senses that employees don’t have his sense of urgency regarding the business. A case in point is responding quickly to new customer inquiries in a competitive market. Too often, he takes over to assure that bids are submitted quickly. How do you get comfortable delegating to staff?
Advice from the CEOs:
Prepare for a meeting with staff by defining the key desired standards in advance.
Initiate the meeting with this message: “We have a company image. This is how we define it.” Work with staff to create standards that define this image.
Agree on standards with the team.
Discuss standards with the team but have them make the decision. Guide the conversation – through questions – to focus on the desired standards. Be open to using the language developed by staff to enhance ownership.
Examples of standards that may apply:
Response time to incoming calls, maximum number of rings before response.
Time to return telephone messages.
Time to return emails.
Invoices completed the day or the order, or whatever is appropriate.
Establish a response regimen – assure that response is professional.
Train all people who pick up the phone.
Assign rotating office days for salespeople with responsibility to answer the phones.
Emphasize the importance of speedy response with an explanation that everyone will understand.
When a customer calls, assume that they are also calling 2-3 other suppliers. The first responder can shape the conversation in favor of their company and offering – for example the company can offer both a solution plus design and logistics assistance.
As first responded, assure that the focus is on the company’s strengths – this puts the competition at an immediate disadvantage.
Enforce and maintain the standards
Once standards are set, make review and updates of performance against standards part of weekly sales meetings. Use large charts to track this.
Create friendly internal competition. Who got the most business last week? Who did the best with incoming calls? Have the team develop competitive goals.
Recognize top performers with $50 – $100 cash award, restaurant certificate, etc. Make it fun!
If “everyone” is supposed to pick up the phone this becomes “nobody” because nobody is responsible for picking up the phone!
A company is looking at options to fund growth. These include selling a stake
in the company, bank financing, organic growth. or partnering with another
company. There are trade-offs to each option. How do you fund business growth?
Advice from the CEOs:
There is a question that should be answered before talking about funding: what is the vision for the business?
Think about building the business that the founders want to run. What size company feels comfortable from an operational perspective? What does it look like?
Does the company have the right people and infrastructure to support planned growth? Are current direct reports capable of taking on additional projects and monitoring both current facilities and additional sites?
As the company grows, can the bottom line be increased as fast as the top line?
Commit the 5-year plan to paper. Before deciding how the company will grow, determine the vision, the growth rate to support that vision, the organization required, and the strategic plan to get there.
The funding decision is an investment decision. What’s the return for a multi-million-dollar investment? What incremental revenue and earnings will it produce?
Estimate how much revenue the investment will generate in 5 years. At the current gross margin, what is the incremental gross margin per year.
Given this estimate, what is the projected EBITDA? Does the annual EBITDA represent a reasonable rate of return on the investment?
The investment ROI must be known – both from the company’s perspective and for any lender or partner who invests in the planned expansion.
How high do the company’s relationships extend in key client companies? Do client upper management realize how critical the company is to them?
If the answer is not high enough, develop these relationships. This could open new funding opportunities.
For example, if the CEO knows the right people at a key customer, let them know that the company may want to build a facility near them. The customer may be interested in partnering with the company to finance the facility.
A multi-million-dollar joint venture plant investment is a modest investment to a large customer if it gains them a strategic advantage.
Situation: A company wants to up its game by focusing on service. They are evaluating different options to provide customized services to gain a sustainable differentiating advantage over their competition. How do you enhance your customer service model?
from the CEOs:
the gaming industry one CEO sees an effective model focusing on higher level customer
service. The top games have allowed user customization using generic
customization tools. This allows the provider of the tool kit to serve a larger
number of users using a single tool kit to provide a wide variety of gaming
example from the gaming industry focuses on middleware developers. These
developers create an interactive knowledge base for customer self-service. The
knowledge base is monitored by the host company, and misleading or potentially
harmful input is excluded. The benefit is that this enlists clients to provide
their input on customer service as well as product development.
CEO sees this as a useful way to drive down customer service costs by providing
more tools and fewer bodies to perform the customer service task. The model’s
objective is for the customer not to need personalized service, but to be able
to develop solutions on their own using a flexible took kit. The host company
gains additional advantage because their user agreement allows them to take the
best models used by clients to spark their own product development.
fourth CEO sees lasting value in developing close relationships with customers.
They have developed tools that allow the customer to solve simple customer
service tasks but require company assistance for the more sophisticated
solutions. The company, in exchange for this added expense, learns from the
Situation: A founder CEO established her company with a significant personal loan, which is being repaid. To compensate herself for the original investment, she is considering several options including an employee stock option plan (ESOP) through which employees would be able to establish ownership of a certain percent of the company. What is appropriate compensation for a founder CEO?
Advice from the CEOs:
The critical question is: what is the CEO’s goal? The next question is – what options best serve to achieve goal?
If the goal is long-term goal is maintaining or increasing current income combined with long-term security – like a Trust Fund – seek the counsel of a financial advisor who can help model how the options under consideration will satisfy the goal.
This individual can also evaluate the tax advantages associated with various options.
Is there a clear exit strategy in place?
Every company needs a written exit strategy, as well as a plan to put this strategy into action.
The simple existence of a strategy and a plan does not preclude adjusting either the strategy or the plan as conditions or opportunities change.
There are two important corollary points:
Having a strategy and plan is the only way to build a structure of accountability within the company; and
Recalling a lesson from Jim Collins’s book, Good to Great, the successful companies selected a solid strategy and stuck with it; the less successful comparators continually changed strategy and never allowed momentum to build.
To assist establishing an exit strategy, seek the advice of one or two consultants. There are several highly qualified exit advisors that can be researched through current professional contacts or via the Internet.
Situation: A company is transitioning from a service model to a product model. A major challenge is meeting funding needs during the transition. Funding sources perceive the current service model as heavy on cost of sales vs. implementation and this hinders acquisition of funds. The CEO sees this as a short-term problem as the company will quickly start to generate more cash through the product model. How do you transition from service to product?
Advice from the CEOs:
In a competitive funding environment, it is important that the offering be credible. While others may be offering similar solutions, believability will prove to be a strong differentiator.
Where to focus over the short term?
Create a hybrid model as a transition between the current service offering and the planned product offering. Demonstrate that current customers have responded favorably to the product/hybrid opportunity.
Test this concept with an investor. The story is that the company needs funding to get to a saleable product model.
What is the message to investors?
Helping the company to achieve a short-term and very feasible objective gives the investor the following advantages: purchasing at a lower valuation, getting a larger share of the company for less, and at a low risk.
As the valuation of the company increases, the earliest investors will get the best deal!
During meetings with investors, ask them for advice on the current and following rounds and financing, and what they will find most appealing.
How do you mitigate the risk to the first investor?
Have a solid business plan and projections that have been vetted by others.
Have a list of referenceable clients.
Utilize the current service model and demonstrate the product/hybrid Package. Build a case on the advantages of the hybrid model including the financial case. The company is always there to provide back-up assistance to meet customer needs in the hybrid model.
Demonstrate flexibility – the customer can always choose the service model or convert to this if they wish.
A Key Point: You are selling yourself as the trustable resource, not the product or service.
Reference previous investment including founders’ investments. The founders did not invest to fail!
Situation: A company has strong technology and good top customers. However, the CEO is concerned that the company is too dependent on a few large clients. She wants to increase business among mid-tier clients. How do you expand the sales funnel?
Advice from the CEOs:
Get very crisp in identifying who your core customer is and focus on them near term. Look at what you offer that your competition can’t match and create appealing offers for new clients.
Simplify and clearly define your market position.
Here’s an example: First to market with the best, smallest, fastest solution.
This clearly defines who you are. Focus the company on delivering this.
In each high potential market find one company to whom you can offer a significant advantage.
Their current market position might be number 2, 3 or 4. Offer them a solution to gain an advantage on #1 and shift the playing field. This is a win-win for both you and them.
Horizontal business expansion could be the best near-term strategy. This lets each vertical market solve their own problems of technology direction, logistics, etc. Seek customers who have the resources to manage this in their respective market places.
Tailor contract minimums and pricing according to customer order commitments. Be willing to sacrifice price and some margin for committed purchases that match your timelines and resources.
Buyers often overstate their anticipated needs because they don’t want to be caught with short supply.
You can meet and promise lower prices for higher volumes because they rarely order them. However, combine this commitment with higher prices for the lower volumes that they are more likely to order.
Look across markets and focus on promising targets.
Use a call center to queue up prospecting telephone calls.
Have sales people conduct scripted qualification calls with prospects by telephone.
Only send sales people out to talk to qualified prospects. This saves travel expense and increases the productivity of in-person sales calls.
Situation: A company is at a crossroads. They are no longer growing as they have in past years. The CEO is assessing alternatives including a merger, selling the company or restructuring. What are the essential questions to determine whether you merge, sell or revive a business?
Advice from the CEOs:
Do you really have the information to determine whether it makes sense to merge, sell or revive the business? The questions to ask are:
Is your core competency important?
Do you have the talent required to revive the business?
How much of your business is from repeat customers?
Is your platform still being used by a significant number of companies, and are they likely to shift their software soon?
If the answers are favorable, then the only remaining question is whether you have the energy and inclination to continue.
Having developed a profitable business model, why would you give up control or ownership?
Tighten up the business by focusing on the basics and turn the company around.
Identify where you can make money, and
Determine which portions of the business need to be restructured or eliminated.
Essential questions are:
Do you have a clear picture of where the profitability lies within the business?
Do you have a clear statement of your key competitive advantage – your “Main Thing”?
Can you establish a pricing strategy that pays you fairly for the value you provide?
Look at bench time among current employees.
Identify, and fully utilize the most important contributors, perhaps by giving them additional responsibilities in other areas.
See that all retained employees are fully utilized.
Eliminate those who are on the bench the most, or transform them into contractors so that you only pay for active time.
Utilize contractors to fill the “full service” slots that are important to your service offering but which do not contribute significantly to your bottom line.
Most importantly, reformat your role so that you are doing that which you truly enjoy. Your own enthusiasm and passion are the most important long-term drivers for your business, and will be the most important motivators to your staff.
Situation: A professional services company wants to grow while maintaining the small company atmosphere that has been the key to its success. There is a limit to how many clients a manager can manage, and with this the reality that if the firm is to grow they will have to bring on more client managers and support personnel. How do you maintain your culture as you grow?
Advice from the CEOs:
To maintain your boutique atmosphere, consider hiring to fit your needs rather than to maintain a culture. Use team meetings to direct team members while communicating and instilling the culture that you wish to maintain.
Don’t risk diluting the strength of your client relationships. A $250K client who is fully committed to your service may have more demands than a $1M client for whom you only represent 10% of their business.
Service companies with the highest profit ratios rotate customer contact among several qualified people. What matters is the level of service provided, not the individual providing the service.
Grow by adding locations. Instead of growing vertically in the same office, grow modularly by spawning additional offices.
Create an optimally sized model for the level of service that you wish to deliver.
Design the organizational structure for this model and identify the order in which slots will be filled as business grows through each office.
Develop a service and organizational template with standard operating procedures, metrics, technology, and reporting.
Once the model is created, spawn it.
Focus your business. Define a niche that you can serve better than your competitors. Focus on this niche and develop a sustainable advantage over your competition.
Assure that your service delivery is seamless to the client and make sure that it remains seamless.
Offer a menu of service options and price options by the level of service delivered. Some will want to buy a Mercedes, and some will be happy with a reliable lower priced sedan.
Situation: A company is drafting a pitch for their next round of funding. They want to reach both current and a new set of investors and highlight the improvements that they’ve made since their last round of funding. How do you optimize a financing pitch?
Advice from the CEOs:
Work on a quick demo of the site. This is critical for a software company. The site must clearly and quickly show what differentiates you.
When you sit down with potential investors, start your pitch with a catchy statement, e.g., “We’ve all heard about ‘pay it forwards’. I want to talk to you about ‘Job-It Forward’.”
Start the presentation with an overview and a simple illustrative explanation so that the audience instantly gets what you are doing. For example, “we’re about generating social capital and here’s an example of how we do this.”
Be careful not to drown your audience in detail. Limit yourself to 3 bullets per page. Use graphics rather than words as much as possible. Most people can only absorb a limited amount of verbal information, but they remember pictures.
If you’ve already started talking to potential investors, what are your results? What feedback have you received to date? Analyze this and adjust your presentation and pitch accordingly.
Can you show a potential funder ROI? For example, if you give us $X, we will generate $Y in terms of return. You want to demonstrate IMPACT! Those who will support you want to see the advantage of investing in you vs. other options available to them.
Include a slide showing sources and uses of money spent to date. Show how you will use the money that you wish to raise.
Situation: A company is planning to pitch a Blue Ocean service to a major prospect. The service has a proven track record with industry leaders and is not being offered by other vendors. How do you pitch a Blue Ocean service?
Advice from the CEOs:
Start by listening to the client’s current situation. Here are some opening questions:
How did you get here? Just the 2-3 minute version. As a follow-up question, ask what their past performance has been.
What is your most important competitive strategic advantage? Follow-up: what is your future competitive advantage – the same or different?
If everything goes right, where do you see things in 2-3 years?
What obstacles, roadblocks and constraints will keep you from getting there?
Include graphics in your presentation on both the prospect’s current situation and how your proposal differentially impacts their ability to reach their future objectives.
In your presentation, highlight your ability to offer a very competitive overall cost proposal based on your ability to outsource work to lower cost subsidiaries or partners.
Emphasize your track record providing the proposed service to industry leaders.
Be sure that your overall proposal looks sound and responsive to the prospect’s need as you understand it. It will be important to understand whether the individual with whom you are meeting next has the same perspective. Try to determine this before your next meeting.
Adding an additional vendor within your proposed framework doesn’t upset the apple cart. It probably benefits everyone as long as it benefits the prospect.
Note: The term Blue Ocean Strategy comes from a book published in 2005 and written by W. Chan Kim and Renée Mauborgne, professors at INSEAD and co-directors of the INSEAD Blue Ocean Strategy Institute. The authors argue that companies can succeed not by battling competitors, but rather by creating ″blue oceans″ of uncontested market space through the simultaneous pursuit of differentiation and low cost to open up a new market space and create new demand.