Situation: A CEO is
concerned about long term trends versus short term volatility. While the
business has done well over time, short term volatility has made it difficult
to project both personnel needs and cost. As the company expands geographically
these issues are becoming more critical. Which is more important – long or
from the CEOs:
the company find that capabilities are not fully understood until they get into
development? In this case, is the problem with variables of schedule, budget or
capability more important?
forward, evaluate each of these variables to determine which is having the greatest
effect, positive and negative, on project performance and profitability.
the problem is time constraints in the project planning phase, assure that
sufficient time for project iterations is allowed in both the schedule and
budget. It may be that the clients are not sure of what they want until they
see a model, and that several iterations are required to assure that clients’
needs are satisfied. Plan and bid for this.
fixed costs impact margins during dips between active projects, assure that enough
fixed cost coverage is built into project bids to cover dips.
geographically remote offices is the company’s issue a question of volume or
resource cost or is it a pricing issue?
it’s a pricing issue to stay market competitive focus initial activity where
this issue is minimized. As market presence expands, add additional capabilities
in phases according to the ability to cover costs profitably.
it’s a resource cost issue use the same solution, adding resources according
ability to cover costs profitably.
the company’s sales and marketing structure in phases while expanding into new
markets. If sales compensation is base plus commission, vary commissions paid
according to resource rates negotiated. This will tie sales incentives to
negotiated resource rates and will help to assure that costs are covered.
with short term issues effectively will improve long term planning and profitability.
Situation: The CEO of a product and service company has seen her company struggle for several years. While the overall market has turned around, her company has not. She is tired of barely staying afloat and not making the kind of money that she a decade ago. Is the glass half-full or half-empty?
Advice from the CEOs:
What keeps you from hitting the numbers? Creating a forecast, budget and objectives allows you to establish a reward system for meeting and exceeding objectives. Once there is an upside, then not hitting the numbers means that a manager misses the upside and the financial rewards that accompany this achievement. This is often consequence enough, particularly if others are hitting their numbers and getting performance bonuses.
The glass is half-full. The past few years have been difficult. Review what the company accomplished during an extended recession. Look at how the company fares versus local competitors. Review positive changes that have been made and take credit for these. This will provide energy to move forward.
Given the company’s successes, sit down with the management and show them what the company has accomplished. Celebrate. Use this opportunity to set goals for next year. A good place to start is to set a bottom line profitability objective before taxes.
To be a great manager requires more than just a revenue and profitability target. People rally around a vision and a culture that they aspire to and want to enjoy. The role of the leader is to create this vision and culture. Do this, and revenue and profitability will take care of themselves.
Two more thoughts on whether the glass is half full or half empty to check your bearings:
What is your passion? If you love what you’re doing, what else would you do?
If you were doing something else, would you be making more money or enjoying more success?
Situation: A small company has always used guerilla marketing as its marketing modus operandi – trade shows, etc. Their VP Sales recently left. They feel a need for a marketing plan and hired a company to assist them in understanding how they are perceived by their customers. Should they continue to outsource, or is it preferable to bring marketing expertise in-house? Is it time to hire a marketing manager?
Advice from the CEOs:
How well do you understand your customer profiles? It is important to characterize, segment and understand your customers before you can understand your marketing.
What is the company size of your typical customer? Small companies don’t spend a lot on big trade shows, other than perhaps sending a couple of people as attendees. Event marketing may be a more effective way to reach small customers.
The company that you hired should be answering these questions for you.
Marketing is about creating an environment in which people are aware of you and find you versus your having to go out and find them. Social media have fundamentally changed the marketing challenge, emphasizing pull versus push marketing – commercials, ads, billboards, etc.
An important role of marketing is perception management so that when a lead or need arises, your company is a natural answer.
Whether or not you hire a person, you need a marketing plan. Once you have a plan, you need a marketing budget.
The company is now at 35+ employees. Fischer’s growth curve research indicates that at this size you need a professional in the marketing position – someone with experience who knows the ropes. This person could be inside or outside.
Situation: A CEO knows that his employees have been working hard and have been productive all year. Now that we’re coming to the end of the summer, he’s concerned that in the past he has seen an energy drop every August. What can be done to increase the voltage? How do you counteract the Dog Days of August?
Advice from the CEOs:
Anoint a “Champion of Fun.”
The Champion of Fun should be an employee – not management.
This may be a team of two people who focus on different things – one for small, day to day activities, and one for big events, like a Habitat for Humanity day.
Provide a budget for the Champion. Allow discretion to create excitement around the office or workplace. This includes posters announcing events and other ways to make the most out of each event or activity planned.
If out of office activities are anticipated, encourage employees to involve family members if they wish. Maybe a picnic and softball game at a local park, or an early evening of go-kart racing.
Create a sense that your employees have some control over their environment. This adds energy.
Circulate an Office Depot catalogue and give each employee a budget that they can spend to dress up their space.
It’s amazing how much a small investment like this can rejuvenate people and the overall atmosphere.
Bring in lunch as a surprise a couple of times during the month. Take some extra time and let people enjoy each other’s company. This is for deepening personal connections, not for lunchtime business discussions.
Situation: A company’s contracts are based on milestones versus time and materials. This is common for their industry. However, end products are poorly defined at project outset and product requirements frequently evolve and change, making milestones squishy. How do you negotiate milestone contracts and payment schedules?
Advice from the CEOs:
In addition to payment schedule, there are four elements to a project negotiation – specifications, schedule, project flow, and budget. Tell the client that to hit their budget target, they need to give you control of any two of the other three factors. This means that if they want to specify budget and schedule, then they have to yield you control of the specs and project flow. Any change to these means that they have to be willing to change budget and/or delivery date. Finally, to keep the project going on a timely basis, they must make milestone payments on time and on schedule.
Try to transform the project, as much as possible, to time and materials. Here’s your talk line:
To give you 100 hours of effort on a fixed bid basis, we have to budget 110. Time and materials, in the long run is less expensive because you only pay for what we need to deliver your product.
Your credibility to deliver on a time and materials basis will be based on past performance and the relationships that you have developed with your clients.
Milestone contracts are especially difficult in low margin industries because of project variability. One solution is to bid 130 hours cost for 100 hours work. The challenge is that this looks uncompetitive, especially compared with offshore resources. Therefore, an option is to develop offshore capability so that you can deliver your projects using a variety of resources with variable costs. Price everything based on domestic prices, but use offshore resources to improve your margins and your ability to cover project overruns without killing your profits.
Situation: A company’s customer base is experiencing market softness and uncertainty. Customers are tightening budgets and delaying purchase decisions. How do you boost sales in an uncertain environment?
Advice from the CEOs:
Offer incentives to prompt customers to buy now instead of waiting. Two potential options:
A limited time discount – Sign by <date> and save X%.
Pre-announce a price increase. Follow this with a promotion – buy now, before the price increase.
If you are selling a service, package your service options in smaller chunks while pricing them so as not to erode your margins.
Consider 30 day trials for $X, or discounted pricing for large or committed long term purchase contracts.
Examine your sales process. Are your sales people speaking to the right people? Try to move the sales process up a level if this gets you to the decision maker.
If some of your sales people are significantly outperforming others, give them incentives to share their sales techniques with other members of the sales team.
If the issue is sales productivity, leverage someone else’s sales team through a partnership. The partner incurs the sales cost while you focus on implementation.
Look for opportunities where a partner can sell your product on top of theirs to boost value of the overall offering and increase their own top line.
Interview with Trevor Shanski, Founder, eWORDofMOUTH, Inc.
Situation: A company with a new lead generation solution is ahead of the curve for their market segment, and ready to transition from a product development focus to a full-scale business development focus. This means developing new capabilities on a limited budget. How have you made the transition from product development to business development?
Advice from Trevor Shanski:
The reality of early stage companies is that they live on scarce resources. Founders and early executives have to be able to work for lean base salaries during the learning curve. They will be individuals who have selective characteristics.
They will be able to accept conservative salaries near-term, as well as during financial bumps in the road. Their focus will be growing the company’s value and their incentive will be having a material stake in the company.
They will have limited outside demands on their time and attention so that they can work long hours.
They will appreciate the challenge of heavily performance-based compensation, with the potential to win big if they can deliver.
They will have a network of connections and relationships upon whom they can call to gain early business traction.
Characteristics for successful early stage executives include the ability to work intimately with the founding team. Early stage companies are idea and capability incubators where things change quickly. Players must be able to get the job done with little support.
It is critical to have a clearly defined set of expectations for the first few months as you bring on new executives. Early foci will include:
Immersion in understanding the product capability and possibilities.
Sitting down with a white board and openly looking at fresh thoughts for how the market should be approached. Founders frequently suffer from tunnel vision after a long period of development and need a fresh outside perspective on the market and messaging. What partnerships could accelerate market development? What knowledgeable experts should be leveraged to build awareness? What potential is out there that the founders are not seeing?
After these factors are defined, the next step is to develop an action plan and milestones to guide plan execution, plus a budget and alternatives under different resource scenarios.
Once the plan is in place, the focus will be to gain early feedback on the company’s product and capabilities, and then iterate quickly to find the right message to target significant segments of the market.
The focus of early stage companies has to be on quickly developing plans, and then executing.
Interview with Henry Chen, PhD, Founder & CEO, Cynovo
Situation: A company in a maturing market needs to gain customer feedback to guide product development. They want to optimize Alpha testing prior to investing in tooling. How do you assess product viability on a limited budget?
Advice from Henry Chen:
As the market for tablet devices matures, it is increasingly important to test mass market response to new product design prior to freezing product specs and investing in tooling. Our approach to vertically designed enterprise solutions focuses on four areas: going to the experts for guidance; monitoring the competition and market direction, investing heavily in prototypes, and leveraging speed to market.
Go to the experts; leverage their knowledge and understanding of the market to speed your own development efforts.
Get to know the market gurus who stay on top of the market and are knowledgeable about market direction. These are the influencers who blog, write and publicize new market innovations.
As a smaller company, the route to market in often through alliances. Senior staff at large companies are a valuable resource. One option is to work through large companies’ sales teams to identify senior product people and connect with them.
A good place to monitor market developments is at major trade shows. Events like the Consumer Electronics Show allow you to interact with a large number of experts and to monitor both what the large companies are introducing and their product direction.
Trade shows are unique situations because many experts attend. Some are speakers, and others simply attend to keep up to date with latest developments.
Use trade shows as an opportunity to gather a panel of experts to give you feedback on your design concepts. Experts like to be on top of the market and new developments and appreciate the opportunity to provide input on new products.
Leverage the opinion of younger leaders and experts. In the US and in China, the average entrepreneurial founder is young – often in their low 20s. They are not as cautious as older people who worry about failure. Successful young entrepreneurs are also potential investors.
Give experts time to think about your product. It may take a few hours or even days for them to “get” your new concept.
Invest in prototypes which have a similar look and feel as actual products, though they may lack full functionality. People like to hold a product, gauge the weight, look and feel of the controls, and to contrast different model options.
Large companies are often hindered by internal confidentiality rules. Smaller, more nimble companies may rely on speed to market to allay confidentiality concerns. This gives them the ability to gather more feedback prior to finalizing product design.
Situation: A company wants to revamp its marketing materials and web site. They have no in-house resources, and no specific direction has been set. What are the best ways to revamp your brand and marketing materials?
Advice from the CEOs:
The first thing to consider is whether this Is just an adjustment to your current marketing, or whether you really need a broader in-depth analysis of branding, positioning and how well this is communicated by your marketing materials and web site. If it has been several years since your last revision of materials and web site, these may no longer be in step with current needs.
If you are located near a major metropolitan area there are many marketing consultants who can bring both a professional approach and a fresh vision to the task.
Work with your Chamber of Commerce, industry organizations, and your vendors, suppliers and distributors to find companies who have recently revamped their marketing. Check out the web sites of these companies and see which appeal to you. Ask the ones that you like what consultants they used.
If your company sells to consumers, or sells to consumers through outside channels, you should consider social media as a part of both your marketing mix. Even B2B companies now see see value in social media. Choose a consultant with expertise in social media as well as traditional marketing.
Interview several consultants before you make your final choice.
Many small companies are financially stretched and don’t have the dollars to support a major market revamp. Are there ways to reduce the cost?
Consider semester or summer interns for some of the analysis, data gathering and perhaps some of the design or social media work. Students at colleges and universities are hungry for intern positions – both paid and unpaid – to satisfy college course and graduation requirements as well as to get an inside track on future jobs.
Key Words: Collateral, Web Site, Branding, Budget, Intern, Consultant, Vendor, Supplier, Chamber, B2B, B2C, Social Media