Situation: A software company is developing a new solution for their B2B market. The CEO has been in discussion with a potential partner to assist developing this solution. The question is whether this partner is the right partner. Is it smarter to complete development as a partnership, or on their own with the aid of subcontractors? How do you evaluate a potential partnership?
Advice from the CEOs:
Is the potential partner also a competitor? If so, is the partnership arrangement on or off the core focus of the company’s business. Is there potential for future development in the partnership, or is this just a one-shot opportunity?
What would a new partnership look like? Ask the following questions:
What is the long-term vision for the company?
Does the partnership fit this vision, and under what terms?
Is the potential partnership “sticky”? Will it bring in business that can be nurtured and developed under the company’s shingle?
Until answers to these questions become clear, soft pedal the partnership opportunity and plan for the company’s future.
Take advantage of situations that the partner presents as they benefit you, but do not let these become a distraction to the company’s focus unless the partner is open to working with you as a partner rather than as a source of bodies and skills.
Put a deadline and milestones on the partnership relationship. If they don’t pan out, walk.
Don’t burn bridges, if the partner takes off, then jump back in more strongly, but on terms that benefit the company’s strategy.
For the immediate future and until the situation becomes clear don’t let people become idle. Unless something develops quickly be ready to redeploy them.
An alternative is to stick with the company’s current customers and expertise. This involves investing resources and focusing R&D on solutions for these customers. If the market remains substantial and current customers are the largest players, this has the greatest potential for growing the company’s business.
Situation: A CEO is evaluating a horizontal market development opportunity to markets related to their current market. There may be branding implications. The new opportunity focused on a different sector and can add business unrelated to current customers. However, the new opportunity will stretch current resources and potentially impact current business and service delivery. How do you expand into new markets?
Advice from the CEOs:
Because the new opportunity utilizes known capabilities the company should be able to segue into the new market relatively easily.
Because the company is already familiar with security and other issues relevant to the new market, compliance should present no challenge.
Consider the impact on company time and resources. Building any new business will challenge current priorities and will require a careful balancing of efforts to assure that both current and new customers’ needs are being met.
Build workload and service schedules for both existing customers and the effort that it will take to develop the new opportunity including the time needed to create and build new customer relationships. Take your best estimate of resource utilization for the new effort and double it, then ask whether your current staff and capacity can handle both markets. If the answer is positive, then you can be more comfortable with the decision to expand into new markets.
As you evaluate the new market opportunity, look at both anticipated and unanticipated but predictable challenges that customers may face over the next five years.
For example, is there misalignment between future challenges likely to be faced and the current expertise and skill sets of managers who will be tasked with addressing these challenges? If so, tailor the sales pitch for new capacities to address these challenges.
Are there existing mismatches between products and services currently offered in the new markets, and do proposed solutions help to address these mismatches? If so, there may be significant opportunities in addressing these mismatches across multiple customers within the affected markets.
Situation: A boutique software company with superior expertise in their market competes against a large corporation that provides similar software for “free.” The competitor sells systems with their software pre-installed; however, these systems are known to work better with the boutique company’s software. How do you compete against free software?
Advice from the CEOs:
Create an alternate message that rings consistently through your advertising, speaking, and media. The core of this message is that if you want a successful experience with the competitor’s installation, the only clear choice is your software. Feature data from your case studies showing improvements in performance, savings of time and resources, etc.
Your best target is customers who are in the proof of concept stage. Here they are learning about the system and dealing with the early challenges with the software installed by the competitor. They not only have to pay for the system, but they must pay for installation services. If you can demonstrate both cost savings and smoother operation they will be open to your pitch.
Keep a list of the competitor’s trial sites and approach them three months after they try the pre-installed software. Have case studies in hand that demonstrate the clear superiority of your software. At this point they will have experienced enough during the trial that they will be open to your sales message.
Focus on the regional rales organizations of your competitor – the people who sell the competitor’s equipment. The RSOs are driven purely by sales performance. Show them that it is easier to sell their systems, and that trials go more smoothly when they recommend your software as part of the sale.
Your message: with our software your trial installations go more smoothly; without our software, the entire system sale is at risk.
Continue to refine your search engine optimization so that you appear in the first five hits when anybody asks about the competitor’s systems or software.
Find an independent Blogger who cares and wants to spread the message that your software is the only way to go with the competitor’s system. Continually feed this blogger with fresh material from your field sales experience.
Situation: A software company relies on in-house expertise to both position itself and come up with unique solutions to clients’ problems. The CEO wants to significantly scale up the number of clients served per year. The challenge is that it is difficult to find software engineers who are experienced in a wide range of code languages. How do you scale with scarce talent?
Advice from the CEOs:
Start by looking at the load carried by your current employees. Do they have the capacity to significantly increase the number of clients that they serve? Do you have sufficient back-up to serve existing and new clients should something happen to a key employee? It’s one thing to have ambition to expand, but another to assure that you have the capacity to serve both existing and new clients.
Take a close look at your org chart.
What happens and where are the exposures when you double the current service volume? Where will the greatest stresses occur? These are the first areas in which you should start to build redundancy.
From an HR standpoint, you need a leadership development plan that extends down your organization chart. Use the stress analysis just mentioned to identify the areas in greatest need of additional resources and leadership development.
Look for areas where you can off-load current responsibilities to support staff to increase the capacity of your current talent. This increases potential capacity as well as the overall value of the company.
The lack of redundancy may prove to be detrimental to your ability to attract new large clients. Large potential clients and partners will use whatever means they have at their disposal (including stealth visits to your offices by local reps) to vet your organization before they make a commitment to you.
New client and partner relationships are like new product introductions.
A few early adopters will jump on your opportunity.
Many of the most established clients or partners will sit on the sideline to monitor the experience of early adopters.
If you trip in your service delivery early in your scale-up, most of the remaining targets will be slow to support your offering.
Count on the first two years of building additional clientele to be very intensive. It will distract you from many of the functions you perform today, unless you have additional personnel to support this.
Situation: A private company has a Board of Directors that functions more as an Advisory Board than a traditional Board. For example, they do not have the power to fire or replace the CEO. The CEO wants feedback on how to interact with the Board, and how to work with them between meetings. How do you make the best use of your Board?
Advice from the CEOs:
Decide what you want from the Board, and clearly communicate this to the Members.
Treat the Board as a single entity – not as individuals. Avoid politicking individual members between meetings. Use the Board to drive decisions.
At your next Board meeting have a discussion with the Board:
Let the members know that you are concerned about whether you are using them effectively as a resource.
Lay out strategic elements to be dealt with over next period, and ask for their advice.
For example, if you are moving into a new market you need advice on how to succeed. Are they the right group to provide this advice? If not, what other expertise should be added to the Board?
Consider having this conversation in a special session of the Board.
Bring in expertise – if your industry has shifted, adjust the make-up of the Board to reflect the new realities. If you need to raise capital, look for expertise in this area.
Eliminate less productive members from the Board.
If you are looking at a new market, build an Advisory Board that is knowledgeable about this space, but who are not necessarily customers. Consider retired executives from companies in this market.
Additional needs that you might want to address either through your Board or an Advisory Board:
Financial expertise in new markets.
Where should you partner to make a complete offering or to supplement your offering?
Another CEO has a similar Board situation. In this case, the CEO makes it clear that Board members are expected to:
Assist in bringing in business.
Members are expected either to produce or they are off the Board.
Meetings are driven to a specific agenda with expectations of deliverables.
Situation: A company is preparing for end of year reviews. They use several performance measures to evaluation employee performance, including 360 Reviews. The challenge is that both managers and peers tend to rate everyone at the highest levels – even though everyone knows that this is not valid. How do you get managers to honestly rate their teams?
Advice from the CEOs:
This is a common problem for companies. The central issue is that managers want to get on well with their teams, and may fear that giving someone a less than stellar review will impact individual and team performance. You have to change both the perspective and the methodology.
Start with the basics. Performance reviews are about communication and documentation.
Expectations should be based on an up-to-date Job Description for the position.
Job Descriptions should address skills, expertise and behavior. Clarity and specificity are essential.
They should anticipate growth, and include standards of performance to measure growth.
To prepare for a review meeting, the manager rates the employee against the standards specified in the Job Description, as well as any objectives established in past reviews. The employee self-rates against the same measures.
Following the review meeting, the manager must document the discussion and objectives for the next period set during the meeting. The employee reviews and signs this document.
For managers, a key performance measure is quality and substance of reviews.
Besides individual reviews, have your managers rank their people 1 to X along several metrics:
Reliability on the job
High or low maintenance
Use zero based thinking: Knowing what I do now, would I hire this employee for their current position?
Align the review process with the company’s goals.
Do a total ranking among company employees. Tell managers that those ranking last place(s) must be upgraded. The CEO approves the final ranking.
Situation: A company has determined that market shifts off-shore have neutralized their strategy for the past two years. They need to find new markets that offer growth potential. How do you find and evaluate new markets?
Advice from the CEOs:
This is a classic competitive strategy challenge any time a company wants to expand within or beyond its core business. Michael Porter of the Harvard Business School is a top expert on competitive strategy. You can find talks that he has given on TED Talks and elsewhere on the Internet that can help guide your efforts.
Do a SWOT analysis. First, figure out your vision and analyze the strengths that you possess that will fulfill that vision. At the same time analyze your weaknesses to provide a counterpoint on what should not attempt to do. Then consider both threats and opportunities. Have these analyses in place before you expend major effort responding to or developing new opportunities. There are more opportunities out there that will end up as dead ends than there are profitable opportunities.
Don’t discount the expertise that you have developed over the years in your specialty. This is the area of your greatest profits both now and historically. It is likely to remain so in the future.
If you need additional resources to meet existing or new client demand – particularly if these involve activities that are less profitable to you – explore partnerships to access this expertise instead of trying to do everything yourself.
Situation: A company has run out of space and is planning a move to a new and larger facility. The biggest challenge is that they maintain a live online data center upon which their clients depend. How do you move a live online data center?
Advice from the CEOs:
This is not a rare event. Many companies with live online data centers have to upgrade their systems on a regular basis as equipment and software technologies evolve. Maintaining service during a move is not significantly different. Research what steps these companies have taken to minimize disruption during upgrades.
Don’t try to do it all by yourself. Seek outside expertise to help you plan the move, and to develop options that will minimize both downtime and service interruption.
Ask a trusted data center resource for a 3rd party audit of your move plan.
When one company moved, they overlapped their leases by one month, and their Internet connections by 2-3 months. This gave them breathing room as they completed the move and allowed them to stay live uninterrupted through the move.
Another company increased their back up servers and service. They also planned their move to occur during what they knew would be a low demand block of time. As a result, they were able to complete the move, plug in the servers and were only down for 30 minutes.
If it is feasible, consider leaving your old center in place as a back-up data center.
Conduct a number of practice shutdowns and restarts to test your systems.
Situation: The CEO came into a company as a engineering consultant. Three years later the Board asked him to take on the CEO role. This created a credibility issue with staff because the CEO is a duck out of water, though a duck with better business sense than most others within the company. How do you manage a company outside of your technical expertise?
Advice from the CEOs:
The staff credibility issue may just be one of self-confidence. You have already demonstrated competence in revising company processes and improving profitability. In fact, your non-industry perspective may have contributed to your success to date.
Near term, in what areas should you focus?
Focus on building bridges which will give you more leverage to address key barriers, particularly within the more entrenched groups in the company.
Look at how the company communicates and exchanges information with clients. One thing that customers want is more self-service options and access to data. You have the opportunity to develop Web 2.0 capabilities which will to set the company apart in what is historically a very conservative and paper-oriented client culture.
These actions will help you to increase your credibility as an effective leader and CEO.
Longer term, what should be the plan?
Keep the ship running smoothly. This by itself will help to build appreciation for your talents.
Use any free time to create business plans of your vision for the future. Share these interactively with key staff members and incorporate their input into the plan. Involve them in disseminating the plan within the company.
As you develop your vision and plan, look for opportunities to attribute success to others. This will be a breath of fresh air to staff and will strengthen the bridges that you have worked to build. They will start to see you as a key ally who shares credit instead of hoarding it.
Situation: A company has developed and shipped equipment that puts it into a new market. They can continue to pursue this direction or make a significant shift that will open up a larger opportunity. What are the most important considerations to this decision?
Advice from the CEOs:
There are a number of points that you need to clarify before making this decision:
What is the magnitude of difference between the two opportunities?
How much of a shift in technology is required to make the jump to the larger segment?
How much of the expertise to make this shift do you have in-house, and how much must you bring in, acquire or develop through partnerships?
What is your most likely exit strategy and how will each opportunity impact it?
Are you being realistic in your ability to meet development timelines?
If you don’t have deep expertise in the area that you want to develop, the answer is most likely yes. If you do you can often beat your initial estimates.
If the shift includes both there is risk that you will underestimate the time required to develop both the prototype and to turn the prototype into production quality technology.
If your ultimate objective is to sell the company, be aware that selling any company can be tricky, and you may not be able to sell the company for the value that you need to support yourself after the sale.
Study other companies in your geography and market, and determine both the price that they received for their companies and how they positioned their companies for sale.
As an alternative to selling, consider hiring a general manager to run the company. This can free you to concentrate on your passion and also increase the value of the company if you decide to sell at a future date.