Tag Archives: Market

How Do You Recruit an Outside Director? Five Suggestions

Situation: A company’s current directors are all insiders. The CEO wants to bring in an outside director for greater perspective, someone who can help the company grow to the next level. What should they look for?  How do you recruit an outside director?

Advice from the CEOs:

  • Look for an individual at a company in a similar market segment that is the revenue size that you want to be and which is selling to the same customers that you do. You want their sales process to be similar in type and complexity of sale but non-competitive with your company.
    • This can be an inactive founder or past employee who has been in GM role with P&L responsibility.
  • Write a list of the needs that you want this person to fulfill. Use this to evaluate prospective candidates.
  • Is it OK to hire a stranger?
    • Before you speak with a candidate, research their background and reputation.
    • You want someone who can provide information and a perspective that you don’t have now. During the selection process you will get to know the person.
  • Consider a high level individual from a company that has been a top customer. This individual can help you understand how you are viewed in the market, and how you can enhance your positioning and competitiveness.
  • Have lunch with a local recruiter who regularly recruits directors for companies. Get their perspective on how to select an outside director and what to look for in a candidate.

Do You Launch a New Brand or a New Company? Six Suggestions

Situation: A company is launching a new service – using existing technologies to address a new market. The CEO is curious as to whether it makes more sense to create a separate firm or corporation, a division within the current structure, or a new brand to take advantage of this opportunity? Do you launch a new brand or a new company?

Advice from the CEOs:

  • Because you are utilizing an existing process in a new market, don’t create the additional conflict or complexity that you might by splitting this into a separate entity just yet. Utilize the collaborative talent within the company to create a new brand rather than a new division or corporation.
  • Adding the additional overhead, accounting and other complexities of a separate entity is overkill – start it as a division or a brand.
  • Use this as an opportunity to grow your overall company brand. Create a series of icons to represent the company’s various capabilities. The icons will also help you to describe the range of capabilities of the company to prospective clients.
  • The market which you are addressing is early stage. By developing this new market as a new capability of your current well-respected brand, you have the opportunity to become the category leader.
  • When another CEO created new capabilities as extensions of existing technology he followed the following route:
    • Create a sub-brand as you develop and start to develop the new capability;
    • If it is successful and grows, develop it into a division;
    • If the capability grows to the point that you attract and decide to take outside funding to accelerate growth, create a separate company so that you don’t give away ownership of the parent company.
  • Think “effective vs. efficiency.” Start with efficiency. Add effectiveness (dedicated people) as opportunity proves itself out.

What is the CEO’s Role in Sales? Three Answers

Situation:  A company has customers scattered around world. When the company was small, the CEO was very involved at all levels of sales and customer relations. Now that the company is larger, the CEO is more strategic but misses client contact, particularly for gathering market intelligence and understanding. The CEO does go on regular sales calls with reps but is getting push-back from the Sales VP. What is the CEO’s role in sales?

Advice from the CEOs:

  • Make an effort to understand the push-back coming from the Sales VP. Probe – where is the resistance coming from? What is the basis of the resistance? Is it personal or functional? Keep probing until the roots of resistance are clear, and then deal with these.
  • As CEO, insist on continuing customer contact. This is essential to your role and your understanding of your market.
    • Sit down and discuss this with the Executive Team. Go over your travel schedule and your objective in meeting with customers. Where appropriate meeting opportunities exist, let them know that you want to be included. Follow-up and repeat the message if they do not schedule you for calls.
    • How does the sales rep position this with a client? Let the customer know that the CEO will be visiting the area and would like to meet you. Here are the broad objectives and the benefit to you. Knowing that the CEO is interested in meeting with the client can be a powerful way to deepen the relationship with the client.
  • Having the CEO accompany the local representative on the first meeting with a customer sends the wrong message. Let the representative establish the relationship first. Then bring in the CEO to deepen and strengthen the relationship when the opportunity is right.

How Do You Evaluate Distribution Alternatives? Four Thoughts

Situation: A software company is evaluating its distribution network. Historically they have worked with resellers who aggregate software services into packages for larger customers. Recently they were approached by a reputable distributor seeking a master distribution agreement with favorable payment terms. Is this an option that they should pursue? How do you evaluate distribution alternatives?

Advice from the CEOs:

  • There are at least three objectives to consider: market coverage, margin to the producer, and market risk.
  • For market coverage, evaluate the alternatives in terms of their ability and commitment not only to serve your current market but to expand into adjacent markets.
  • Regarding price and margin, there are two alternatives:
    • Decide what price you want, and don’t worry about the reseller or distributor’s final price to the customer, or
    • Establish a floor price for your product and ask for a percentage commission on sales.
    • Run models on each and decide which will provide the best return on sales.
  • Market risk is more complex. These are different approaches to the market.
    • In evaluating the reseller option, insist on terms in reseller agreements that the reseller disclose the terms of their sales.
    • Sharing of customer databases is another factor. Siemens, for example, considers their customer database as IP and only releases portions of their customer database selectively to resellers.
    • A master distribution agreement has different risks. It puts all of your eggs in one basket. If the distributor adjusts focus away from your software during the term of the agreement your sales and revenue will suffer.
  • Are there conditions where a master distribution agreement may make sense?
    • If the distributor is willing to sign a multi-year agreement with sales guarantees at favorable pricing this mitigates the risk.
    • The central issue is risk and guarantees. If you see the option as a low risk – high return proposition, it may be worth considering.

What’s the Best Way to Renegotiate a Lease? Four Strategies

Situation: A company in a competitive real estate market has about 50% more space than they need at $2.80/sq. ft. per month – full service. The lease is up in 5 months with an option to renew for 2 years on the same terms. The company wants to both reduce its space and to reduce the cost per sq. ft. by about 25%. What’s the best way to renegotiate a lease?

Advice from the CEOs:

  • Gather information from multiple sources on current and forecasted cost of space in your market. Sources may include: other tenants, real estate agents, similar buildings, and walking the neighborhood to evaluate conditions. Look at newspaper ads and Craig’s List for both space & furniture.
  • Ask other tenants in your building whether have excess space that they would offer to you under favorable terms, or whether they are interested in your excess space. In either case ask for both price and terms.
  • Be careful with the information that you gain from real estate agents. They have more incentive to keep prices up than to find you the best deal. Balance their information with information that you gather from other sources.
  • Success in negation often is a matter of which side is best informed. Line up all of your options. Present these to your landlord and see if you can get what you need without having to move. For many landlords, a good tenant at a lower price is better than no tenant.

How Do You Manage Multiple Products and Segments? Five Ideas

Situation: A company was launched on a single product with variations. Their R&D team has now developed several additional products which they are planning to launch. This will involve new product names and new customer segments. Having not done this before, the CEO seeks advice on managing multiple products, brands and market segments. How do you manage multiple products and segments?

Advice from the CEOs:

  • The most important element is the plan – write it carefully and build from a solid base.
  • When working with multiple products or market segments, match your segment strategy for each segment to your product strategy for that segment.
    • Build a grid that shows all products and all segments where you wish to sell them. In each cell, determine both the decision maker(s) and their top purchasing priorities. This will help you to build your Product/Segment strategy and optimize resource allocation while increasing sales and marketing effectiveness.
    • It may also help you to fire problem customers who cost you money and attention and reallocate these resources to more promising opportunities.
  • Analyze the customer’s decision-making process for each product and segment. Make sure that your marketing and sales effort makes sense within their decision process and focus on what is workable.
  • When introducing a new product or idea, focus first on smaller segments and test the fit of your product or idea. This is low risk if you fail, and you can leverage what you have learned if you win.
  • Build a one-page strategic plan that covers your full company strategy. Each department compliments the company strategy with its own departmental strategy to support the company strategy.

Special thanks to John Maver of Maver Management Group for his contribution to this discussion.

How Do You Merge Two Firms Under One Umbrella? Five Points

Situation: A company has been approached by a customer with a proposal that the two companies combine. The customer believes that the combined companies will represent a greater market presence than either presents alone. This may make it easier for the combined entity to gain business from larger customers. How do you merge two firms under one umbrella?

Advice from the CEOs:

  • For a company to merge with a customer is a tricky process, assuming that the company has more than one customer. The merger places the company in competition with its other customers who may respond by seeking alternate providers. If this happens it will create a short term hit to revenue. This possibility has to be modeled into merger financial forecasts.
  • Different companies have different cultures. This fact is often ignored in merger discussions because culture is difficult to quantify or measure objectively. However if you ask those who have been through mergers, culture conflict between merging entities is most often the reason for their failure.
  • It may make more sense for the company to focus on ongoing sales to the customer than to entertain a combination that would result in the current owners losing control. In declining the proposal, it is important to emphasize your interest in maintaining a healthy ongoing relationship with the customer.
  • If the customer offers terms that are appealing, an alternative to a merger is a limited scope joint venture as a trial project to test the viability of collaboration.
  • Establish with your co-owners a price at which you are willing to give up control. This will help you to refuse offers that are below this price.

How Do You Find and Evaluate New Markets? Four Factors

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.

How Do You Respond to a Competitor’s Sales Tactic? Six Ideas

Situation: A company has learned that a competitor has cloned their client development approach. This approach enabled the company to gain early market share. They have since moved up-market and have enhanced their sales tactics. How should the company respond to the competitor’s tactic?

Advice from the CEOs:

  • Reconnect with the market contacts that got you where you are. Be sure that they are aware of your track record, the value that you provide your clients, and reinforce your current market development focus. Now that you are established, position yourself as the proven producer who consistently produces results.
  • Study what the competitor is doing, who their target customer is, their close rates, and what if anything they are doing to enhance their close rates. Learn from them and copy or improve on their practices where this will yield benefit.
  • If your sales development is based on referrals, enhance the rewards to contacts who bring you new business in your prime target markets.
  • Your principal concern may not be your client base, which is likely unaware of the differences in your versus your competitor’s approaches, but in the referral structure that is your primary source of new business. Focus effort and resources to shore up your relationship with your referral base.
  • Focus on your strengths – performance and excellence in managing client relationships.
  • If the competitor is focusing on down market accounts that you no longer cultivate, then expect them to succeed in this market. Become the provider of choice to up market accounts and the natural referral choice for these accounts. If the competitor stumbles, you may pick up unexpected business.

How Do You Work with an International BD Person? Seven Ideas

Situation: A company has been approached by an international business development specialist who wants to help them expand into Asian markets. The company would need to hire local resources to support business that was generated. Most of this would be cookie cutter as opposed to creative work. How do you work with an international business development person?

Advice from the CEOs:

  • Research the country markets where the specialist can help you and focus on the more developed and promising markets first.
  • If the specialist that has approached you has a local presence in the markets in which you are interested, lean on this person for help getting you started – office space, staff support, and so on.
  • One company started a subsidiary in Canada. The CEO believes that you must have a highly trusted person to own the project. Success is all about the relationship with this individual and their knowledge of both local and American culture.
  • Another company hired very promising business development person for a large Asian market. As the relationship progressed, they found that this individual was double dipping – working for them and their competition at the same time. Apparently this is acceptable in that culture.
  • Many cultures are relationship based. Local contracts are critical. Does your specialist possess these, and are they premier companies or also-rans.
  • Talk to individuals in your industry who have experience in the region.
  • Have your eyes open and recognize that this is will not be a quick process.