Situation: A CEO is concerned that the current management team is not mature enough to support planned growth. Sales skills are necessary to start an office, but there is a wide range of business acumen and people skills among the managers. How do you develop current managers to support growth?
Advice from the CEOs:
Company policy requires manager candidates to demonstrate competence in at least three of five areas: sales, technical skills, customer management, customer management, and business acumen. A coaching or mentoring process from senior management would be beneficial.
A minimum number of clients is required to start an office. There are important differences in the skills needed to grow and sustain an office. More evaluation of the managerial skills of manager candidates will help.
Another CEO shared story of a regional office with a manager who was technically competent but had poor business development skills. This created a growth issue. Clear, mutually agreed upon, written goals helped. Office growth requires good administrative performance as well as technical or sales skills.
Frequent group meetings with managers and a deliberate agenda help. There is merit in allowing the field people to contribute to the agenda, having a “round table” type of review, and peer dialogue. In addition to current individual weekly telephone conversations and quarterly operations reviews, there is an opportunity to modify the format.
Sometimes there is a double loss in taking a good individual contributor and making them a poor manager. For example, of a good salesperson may turn out to be a bad sales manager. The transition may not play to the person’s strength. A more rigorous selection process will help.
Another CEO shared a story of one of his plant managers who reached the limits of his competency and could not continue to grow the plant. He was moved to a support position and a new plant manager was hired. The former manager found new satisfaction in the support role and was successful sharing his knowledge and skill with the new manager and a broader audience within the company.
Situation: A company is facing the expiration of the principal patent for its main product. There are subsidiary patents which still have life. Currently, there are no competing products, but several companies understand the technology. How do you plan for patent expiration?
Advice from the CEOs:
Think of this as a two-step process:
Step 1 – Step back and look at what the company has:
Patents – including the claims that have been awarded on all company patents.
Facilities – capable of manufacturing current products, but also additional products, perhaps with a minimum of additional equipment.
People – competent staff running manufacturing operations, and tight office operations.
Step 2 – Loot at where the company could go and evaluate the markets where the existing technology is applicable:
Work with outside, imaginative people who can take a fresh look at the options.
Looks carefully at the claims in all the company’s patents.
What do they cover?
Is there an opportunity to extend current claims through process patents?
Caveat: a company can file for a process patent on anything that has been for sale on the market for less than a year. However, if they have been selling a product covered by this application for more than a year, they cannot.
Look at other markets – companies that could license the company’s technology, or with whom the company could partner to provide new consumer-oriented products:
Is there inexpensive, affordable equipment that would enable the company to produce additional products in the current location?
Think outside the box: what business is the company in? Think more broadly than the current market about where high value opportunities exist. These can be low to medium volume, high price/margin or high-volume lower price/margin.
Patents are not the only protection – trade secrets also work. 3M’s primary IP strategy, particularly on their adhesives, etc. is through trade secret – both for low and high-volume products.
“Product” patent extensions have limited utility. They are easy to design around. “Process” patents have more utility. These can be licensed at low cost per application in high volume applications and provide a nice royalty reserve stream.
Situation: A CEO has an option to purchase another company with whom they have a long and good relationship. A smooth transition will be important. The owner’s relationship with their customers is central to their success, as is his employees’ knowledge of their key accounts. How does the CEO assure that these relationships are retained? How do you construct a business acquisition?
Advice from the CEOs:
Based on the CEO’s responses to the Forum’s questions, the owner of the other company needs this deal more than the acquiring company needs him. This creates a strong bargaining position.
The owner of the business is the business and the key to a smooth transition post acquisition. Retaining his ongoing involvement – at least for a reasonable period – is essential to gaining maximum value from this acquisition.
The value of this business is its people: the owner’s relationships, and both the owner’s and his employees’ knowledge of their key accounts. His employees know the inner workings of their customers’ businesses. These are the relationships and the knowledge needed to assure that the acquisition is profitable post-close. Retention clauses and penalties must be part of the agreement.
If the owner wants 50% of the net income generated from his piece of the surviving company during a transition period, this is fair. However, the financial and operational details of the transition and his share of the income must be spelled out in the agreement and the agreement must assure that there is proper follow-through to qualify for the payments.
The income from the owner’s accounts must support his salary. However, even with this the owner will still cost the acquirer time and energy. Plan for this and budget for it in the agreement.
Situation: A CEO is concerned that her #2 is being challenged by others in the company. An option is to hire a technical project manager; someone who carries the CEO’s authority and who can get things done. What are the obstacles to achieving this? How do you boost company morale?
Advice from the CEOs:
The technical project manager must have a non-threatening role – they shouldn’t challenge the technical skills of the developers. The role is to oversee schedules, progress, and to resolve barriers – both technical and personal. The job is to get things back into shape.
While the business involves highly technical software, operationally it is people centered, not software centered. People centered means a team that collaborates and supports one-another. The important questions are:
Where do the needed people skills come from?
How do the model and reality transition to a people centered business?
Look for someone who can nurture talent. People skills are more important for this role than technical skills, with the caveat that individual must be able to understand technical challenges.
An option is a 3rd party within company to straighten this out.
“COO” Responsible for Technical Direction – title is important because it conveys respect.
The CEO’s voice and ears.
Run weekly meetings and is the go-to person when the CEO us traveling.
The focus is to manage the primadonnas and keep them focused on their jobs instead of on interpersonal conflicts.
This role focuses inwardly on company vs. the CEO who focuses outward on the broader vision, key stakeholders, etc.
The bottom line – this is your company, your vision. Make it work. The task is teaching maturity – learning to give rather than worrying about making a name for themselves.
Have regular lunches with each of the developers and have frank conversations with them. What’s up and what’s wrong? Listen and let them air their concerns. Talk them through these concerns, but make sure that they understand that the CEO sets the direction both for the company and the boundaries of acceptable and unacceptable behavior within the company.
Situation: A technology-based company has a very successful product in a niche market. The team has been brainstorming about additional markets into which the product could be introduced. The only experience that the CEO and team members have is with the existing market. While other markets are appealing, they lack the experience and contacts to penetrate new market opportunities. How do you introduce a product into a new market?
Advice from the CEOs:
Hire someone, either an employee or a consultant, who intimately knows and can introduce you to the new market. If you have more than one good candidate consider hiring them both.
Start with clients that you already serve in your current market but who also serve the new market. This can provide quick wins and proof of concept. Overlap is important because you will have a shorter sales cycle with these clients.
Another company moved from on-site consulting to turn-key services. They found the purchase process to be completely different. Originally, they were unprepared for this, so the transition took longer than it might have.
Talk to existing customers and learn about their companies’ purchasing processes to organize your fact gathering and strategy.
Read case studies of other companies’ experience moving a single platform between markets.
Another company moved from niche photography – holiday photos – to photos for Fortune 500 companies. This was the same expertise, but the market and decision processes were different.
Key to the successful move was understanding the people in Fortune 500s who were making the buy decision and the structure of their decision process. The CEO of this company registered for conventions attended by client prospects. This provided a quick way to meet and learn about key people and their decision processes.
Situation: A company experiences high revenue volatility from month to month, making it difficult to forecast expenses and personnel needs. The company has about 300 clients. Fifty percent of annual revenue is repeat business, with about 10 client projects ongoing at any one time. How do you boost revenue consistency and decrease month-to-month volatility?
Advice from the CEOs:
What you describe is the norm in a service business. Averages across service industries are for 70%-80% of revenue to be from repeat business – more than you have currently. Boosting repeat business reduces your volatility by smoothing revenue across months and quarters.
Ask how you got to this point in the first place. Here are some important questions:
Look at your account development process. Are your account managers cross-selling to other potential customers within a given client to increase service penetration within the client?
Are you talking to the right people within your client accounts? To whom do these people report – what are their most important needs?
Similarly, look at your clients’ major customers and suppliers – is additional business available here?
Do you have an account development plan for each of your major customers? Are there time and performance metrics to assure that the plan is implemented and monitored:
Plan creation by the account manager
Number of new business development meetings with client
Prospective pipeline of business within the account
Are you using the right incentives? Adjust your incentive pay package to encourage business development within existing clients.
How have your organized sales and service delivery? Consider two areas – delivery on existing business and gaining new business from existing customers vs. developing new customers. These require different skills and most likely different people
As an example, one company initially combined key account management and prospecting as a single job. Under this scenario, new customer development was dismal. As soon as the company split the effort into existing account maintenance/expansion, and new account prospecting, new customer development jumped 10x. There was an investment up-front but it quickly paid off.
Situation: A company has an engineering structure which emphasizes function over cost. As a result, there is little collaboration between design and manufacturing, and little design for manufacturability or cost control. This contributes to a last-minute mindset and expensive solutions. How do you shift design engineering and manufacturing from a craft to a lean mindset?
Advice from the CEOs:
Changing how people think and act may also mean changing people. Are you prepared for this? If not, then it may be difficult to achieve the change that you desire.
Let’s use a mindset change in another area – sales compensation – as an example. In this case, the sales team had previously focused primarily on revenue, with no incentive to drive margin. This impact was continuously eroding margins, though the company realized revenue goals. The mindset was changed by introducing a new system with dual incentives: to retain their position, a sales person had to hit at least 85% of their revenue target, however commission was based completely on the gross margin from their sales, with a bump in commissions when they hit 100% of their revenue target. This system drove both revenue and margin targets and was very successful; however, the company lost a few sales reps who couldn’t make the adjustment.
Transferring this lesson to the engineering situation, design an incentive structure that drives both function and low cost manufacturability to achieve both targets simultaneously.
Task your VPs of Operations and Manufacturing – and the key managers of your design and manufacturing teams – to create a dual incentive system that meets both function and manufacturability objectives. Measurements may include:
Actual vs. initial estimated manufacturing costs.
Margin on final product.
Once the parameters are developed, clearly communicate these to all affected employees up front to set clear expectations for the future.
Incentivize your VPs and key managers jointly on collaborative efforts and their ability to develop joint solutions.
Another solution which will speed the process – put design and manufacturing engineering in the same work space instead of separating them. This encourages the teams to work together.
Interview with John Lima, CEO, Coffee Bean Technology
Situation: As with anything new, there are varying adoption rates for social media. Many top executives aren’t sure how social media can improve their sales. How can social media effectively enhance sale efforts?
Advice from John Lima:
Business is about people, and people are increasingly using social media to connect with others and to express themselves. Social media platforms encourage us to be ourselves – to take off the business mask that we normally present to the world. This enables the savvy company to better know their customers.
First, social media enable you to find customers more quickly. Almost everyone is somehow connected to social media. The problem is the inefficiency of searching for them through LinkedIn, Facebook Twitter, etc. Software-assisted search makes this more efficient. Develop a customer Social ID: a profile of what you believe your customers interests and buying behavior to be to serve as your social media connector.
Second, find people who fit this profile and engage with them in social media. Let them bring their conversations and interest to you, and refine your Social ID as you gain additional information. This gives you insight into the person – who they interact with and what interests them – and enables you to approach them as a human being. Envision an open marketplace where people connect first and then tell their stories. This allows salespeople to quickly build empathy and smooths the sales process.
Third, your evolving customer Social ID can help generate new leads. As the Social ID becomes more sophisticated you can develop key words to find similar customers. Software robots use these key words to find relevant conversations in Twitter or Facebook and flag then for a sales person who can then dig deeper to determine whether the individual identified is a competitor or a prospect.
To make this work efficiently, you want to have an integrated system with a set of tools that allows you to cost-effectively sift through the millions of daily entries logged through social media.
Situation: A company has grown largely through the determination and energy of the founding CEO who is still the principal business development resource. The CEO wants to move from day-to-day focus to a leadership role, planning for the future. How have you evolved from principal doer to leader?
Advice from the CEOs:
Start by developing and managing an organizational chart for the business.
Create the organizational chart initially by role and responsibility.
Match existing people to the roles. Individuals may fill more than one role, but be sure that the individuals are suited to the roles to which they are assigned.
Give ownership of areas of responsibility to others.
Make it clear for each area of responsibility that the individual assigned is now in charge.
Match projects or assignments with individuals’ abilities and available time.
Establish quarterly or annual performance objectives WITH as opposed to FOR each individual – objectives that support company objectives.
See that people are rewarded for their results – both soft and monetary rewards – as appropriate to the responsibility held by each.
While you continue as the lead of business development, hand off new clients to others as soon as you get them on-board. Let others take on the customer nurturing and maintenance roles. Establish a plan to replace yourself in this role.
The EMyth Revisited by Michael Gerber provides a soup to nuts recipe for moving from doer to leader of a company. Everything starts with your organizational chart.
Situation: The environment has become more complex for leaders. Not only must leaders perform classic roles, they must also deal with increased uncertainty and change. How do you build a new leadership paradigm to address ongoing change?
Jorge Titinger’s Advice:
There are three challenges facing leaders today.
First, given that change is constant, what does the next likely settling point look like in your environment look like and how is this different from past settling points?
Everything starts with the people.
Once you determine the likely next settling point, do a capability inventory within your leadership team to determine whether you have the right people to handle the new reality.
Can current members be trained?
Do you need to bring in new talent?
Second, are your processes limiting or enhancing your flexibility?
Do current processes encourage adaptability and cross-functional connection and communication?
If not how will you change them?
Deconstruct/reconstruct all critical processes to make them more agile.
Third, how are you linking desired outcomes with rewards and incentives within the company?
Growth in the past focused on building up infrastructure – adding more people and capacity.
Knowledge management focused on tools and processes to make people more effective. Individualized assessment and reward structures became an obstacle and had to be shifted to emphasize the importance of collaborative versus individualized performance.
Agile leadership and management focuses on reaching outside the boundaries of your own company. To deliver differentiated value suppliers and customers must be included in the exercise. We must reinvent how we engage with suppliers and customers so that they are part of the collaboration.
The agile paradigm focuses on the unspoken needs of suppliers and customers. This takes the conversation beyond the transaction and includes quality, on-time delivery, and other differentiators that are mutually important. It can include competing for your competitors’ suppliers by being a better customer!