Situation: A CEO is faced with three strategic options that the company could pursue. He seeks guidance on how the company should evaluate the three options. What signs should they be watching for in their marketplace? Are there steps that they should take while completing their evaluation? How do you decide between strategic options?
Advice from the CEOs:
Go with what sells! Listen to the market, and your key customers. Make sure that you have ears out there that will give you early signals.
Until there is a clear indication from the market place as to which is the stronger strategy, keep your options open. A hybrid strategy – maintaining your current strategy while evaluating the strongest strategic option – will allow you to do this and continue to drive revenue from your existing base while the market determines dominance among the new platforms.
Look at the cash flow from your current strategy and each of the new options that you are considering.
What difference is there in upfront payments versus ongoing residuals?
Look closely at your cash flow needs compared to the timing of receipts from each option.
Are there ways that you can strengthen your cash flow depending upon which strategy you select? How will you bridge the gap between current and future cash flows from each strategic option?
Consider hiring a full-time manager in business development.
This will help you to learn more about your customers and what they will buy.
Select someone who has relationships with the key people in your target markets, and who knows what the insiders are doing at important existing or target customers.
Select someone who can give you access to new opportunities and help steer your strategic development.
Consider a long-term strategic partnership with a leader in your market.
Situation: A web-based software solution company wants to expand their customer base. They have several large clients, and want to expand their presence both geographically and to additional sectors. How do you position the offering to appeal to a larger audience? How do you expand your customer base?
Advice from the CEOs:
In customer presentations, talk about out-tasking versus out-sourcing. This is less threatening to the customer’s existing IT and analyst infrastructure. It allows you to focus on your strength and to build a pitch that augments the customer’s current capabilities.
Is there a trade-off between customer depth and breadth of adoption?
Test doing both on a limited scale. Go deeper in four accounts, and simultaneously focus on one application that you can rapidly sell to 20 accounts.
This exercise will help you to find the right balance.
Look at customers with whom you have had early success. Those customers are proof cases. Look for similar prospects who will respect the experience of the early adopters.
Take a current client who has had success with your applications. Go to similar state and regional companies who will respect the first company’s experience. This will help you to create a national presence in a sector or industry.
Build strategic alliance partnerships.
For example, take a potential customer that wants to be an application service provider.
Look for other companies serving that customer who could benefit from an alliance with your company. Build an alliance to offer bundled services to the potential customer.
If you do not have someone in this important business development role, you need it.
The Association of Strategic Alliance Professionals is a great place to start strategic alliances.
Work more deeply with your current clients. Offer additional applications, subscriptions and offer combinations of services.
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’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.
Situation: A company has been approached by another company with complimentary technology concerning a partnership. The other company is young and rapidly growing, though at this time they are much smaller. The two companies are already collaborating on a project. There have been hints that this could develop into a merger. Under these circumstances, what’s the best way to develop a partnership?
Advice from the CEOs:
It’s always best to date and get to know the other party before exploring a deeper relationship. You are already collaborating with this company, so just continue on this path as you get to know them. See how the relationship and value of the partnership develops before exploring options that could result in loss of ownership and control.
Partnerships and moves beyond partnership are really about culture and values. Cultural fit is a huge question that is too often ignored when companies discuss partnerships and mergers. This requires more investigation than you’ve done to date. Wait until real challenges develop, and see how the two companies respond. Do they collaborate effectively to develop a solution or does the relationship become contentious. This will tell you whether a deeper relationship is worth exploring.
To be successful, relationships have to offer a win-win value that surpasses the cost of collaboration. There is always a cost to collaborating with another company if only in time and effort put into the relationship. Find a way to measure this cost so that you can compare it to the value received. The other company should be doing the same.
If you could buy the other company right now would you?
If you can’t tell the value of the company based on the information that you have, why would you consider a deeper relationship at this time?
Interview with John Hollar, President & CEO, Computer History Museum
Situation: Traditional media for reaching audiences – television, newspapers – have broken down. Audiences are atomized and increasingly “what you want when you want it.” How do you aggregate an audience in this environment?
Develop partnerships that align with you both in terms of audience and purpose.
We just finished a $20 million expansion. With 1.5 million technology workers in Silicon Valley, how do we spread the word?
We work with corporations in the tech sector, corporate alumni groups, tech retailers, convention centers, hotel concierges, and schools.
Our new campaign – Silicon Valley Starts Here – encourages Silicon Valley visitors to start their Silicon Valley journey with us.
School field trips are booked through the end of the year. Local foundations support transportation costs.
Leverage the digital world to expand your presence.
Everything physically present in the museum is also available digitally to a global audience.
We use Facebook, Twitter and LinkedIn to generate viral networking.
Live events are captured in HD and broadcast through our YouTube channel to 2 million viewers.
We update our Facebook page and tweet daily. Facebook is fun and playful with “Today in Computer History” and Friday YouTube films.
Tweets include a quiz – “Who Am I?” – of famous figures in computer history with prizes.
What are the implications for companies and institutions?
We must embrace the notion of living in parallel worlds – having both a physical presence and a broader digital presence.
Expert knowledge is here, but we must be able to access an increasingly digital audience that is global.
Digital capabilities can’t just be bolted on to an old structure. This must be a marriage that connects our knowledge and expertise organically to our audience, their needs, and the knowledge and expertise that is happening in the world.
Situation: A company has an opportunity to form a marketing partnership with another firm. The primary potential benefit to the company from this partnership is gaining access to new customers. On the other hand, partnerships may bring complications. What is your experience with marketing partnerships, both positive and negative?
Advice from the CEOs:
Marketing partnerships can certainly work, provided that both parties see benefit to the relationship, and both are committed to make it work.
Be sure to clearly define boundaries with the partner.
If either company can perform a particular service, whose customers are who’s?
Is there alignment throughout the partner’s organization regarding the partnership? Or are their conflicting priorities within different branches of that organization? Test the waters ahead of time and assess how these will potentially impact the partnership.
There are potential pitfalls:
What is the in-house/outsource attitude of the partner? If there are strong voices for in-house production or service provision, these will not be supportive of the partnership.
Watch the quality of the partnership over time.
Successful partnerships are based as much on friendly cordial relations as on business priorities. Are your business cultures and ethics compatible?
Who is the champion for the partnership on the other side? What will happen if the champion leaves? Is there a back up champion?
Build an exit strategy into the partnership that will allow you to leave gracefully and mitigate financial or good will consequences if the partnership sours.
Situation: A rapidly growing company is expanding both in its primary market and into new verticals. A number of companies are interested in strategic partnerships. How do you select the right partner in the right space?
At the end of the day it’s about a connection with the partner which extends across both organizations.
Look for cultural synergy with the other company. Do your and their managers and employees “click” or are they oil and water? This is a gut assessment.
Is the quality of people in both companies complimentary? Is there similar drive for quality and attention to detail?
Will technical integration be smooth? Are systems complimentary? At a minimum are there the right skills on both sides so that this won’t hinder the project.
Are sales and marketing approaches compatible? Will teams be able to work together? What about other departments?
You need to have strategic commitment across both organizations.
Partnerships don’t work if there is only alignment at the top. Executives can’t shove a new opportunity down the throats of those who report to them. There must be excitement about the opportunity across both sides of the partnership.
There must be complimentary competencies, capabilities and commitment.
Is there a clear understanding of the goals and objectives succeed?
Reward structures and incentives must be aligned down through the two parties. Conflicts will lead to struggles.
There must be a strategic alignment between the two organizations so that both see the partnership as complementing their broader strategic plans.
There must be a fundamental strategic win-win. The venture must be seen by each party as core to their business, plans and results. If this isn’t present, the collaboration can be drowned when a better opportunity that comes along.
Look for some gauge that the partnership is as important to the other party as it is to you. What other partners do they have? Is the size of the opportunity enough so that you are assured of their ongoing attention?
Interview with Jennifer Choate, President, Green Country Integrated Resources, Inc.
Situation: There are many opportunities to team with other companies, whether through partnerships, joint ventures or M&A. This is accompanied by the challenge bringing together different teams to succeed in new roles and tasks. What are best practices for bringing teams together?
People are an investment. Just like the stock market is not up every day, neither will be the performance of your people. Bringing people into new relationships, roles and responsibilities takes patience, work and nurturing to build skills and to get the best out of people.
Build the organizational chart of the new organization that you will build. Fill in all spaces with the individual who currently holds responsibility for each role. This means that some people will have several different roles. This is OK. As you add additional people, they will fill many of these roles.
Build a set of company or project values to guide individuals through the trade-off decisions that will drive future growth. Involve the full team in this exercise so that ownership of the resultant values is broad.
Develop and express in a consistent way the boundaries of the company or project. If Enron had had as one of its boundaries “we don’t embezzle” a crisis would have been averted.
Focus on systems and processes, not just on tasks. The core of any organization is people and relationships. These are best expressed through systems and processes, not tasks. Tasks express discrete roles, even if these may be sophisticated, but don’t encompass the richness or complexity of systems, processes or the people involved.
When dealing with people always ask “What is my role?” and “What is their role?” In each situation, work to understand the other’s perspective and what opportunity or concern they are bringing to the table. Trying to make someone into someone that they are not doesn’t work.
Particularly in a company or venture that focuses on high levels of customer service, act urgently, but avoid emergencies. You want your response to customer needs to be swift, but do not want to destroy operational rhythm.
Situation: The Company is moving from a specialty solution to a complete solution. They have identified a partner with intellectual property (IP) that will help them fulfill this vision. How should the CEO approach this company to access their IP?
Advice from the CEOs:
There are two aspects of any deal: technical feasibility that will produce value; and the emotional needs of the principals.
The technical aspects are the most straightforward and easiest to value.
Frequently, a favorable deal hinges not on technical feasibility, but on the desires of the principals and their ability to trust one-another.
If you are convinced of the value, you must convince the other party that their best option is to work with you. Then you can negotiate the specifics.
Sell your vision: the technologies together are much more valuable than they are alone: 1 + 1 = 5!
If control of the technology is an issue, you must negotiate an arrangement where they are comfortable with your control.
Do you and the other party have a trusted advisor in common or is there an individual who is respected by both of you? This person can help communicate your good intentions.
If your best efforts do not produce an appealing arrangement, your fall-back position may be a partnership. If the partnership is backed by modest investment with options for future purchase, this may be another way to for you to eventually gain control of the technology.