Situation: A company has clients who are interested in projects for which the company’s partners already have partial designs. There is an opportunity to leverage these partial designs into development of full solutions for their clients. How should the company approach this in a way that satisfies their customers and is fair to their partners? How do you set up co-development partnerships?
Advice from the CEOs:
Given this opportunity it is no longer important who performed what part of the development. As long as your partners have quoted you what they believe to be a fair price for their development pieces, you are free to accept their price, complete development to your clients’ specifications, and sell the full solution to the client at market prices.
What you bring to the table is the opportunity to rapidly monetize the technology. This is something that your partners can’t do, so by filling this role you are acting in the interest of all parties.
What you charge for your work and the full solution depends on the potential value to the client. Time is money, and delivery now is worth a premium price to a client who needs your solution and wants to release their product as soon as possible.
This strategy is particularly applicable to early stage companies who need to release their initial products and start generating revenue.
Take a note from Bill Gates – sell the product for a good price and then buy or acquire the supply.
Situation: A company has an opportunity to use equipment supplied by a partner to create a demonstration project that will highlight their capabilities. They want to create the best buzz possible through this effort. One idea is to work with local service agencies to create a demonstration that will be highly appealing to news outlets. How do you create the best buzz?
Advice from the CEOs:
In addition to working with local agencies in your target localities to create publicity and awareness, work with the local newspaper reporters who write about the areas served by these agencies. City reporters are always looking for fresh stories, and will help you to generate instant news that may be picked up by other local and possibly national media. This form of building awareness virally is much more effective than traditional advertising campaigns.
Use industry trade shows of potential partners as demo venues by collaborating with the trade show organizers for a live demonstration that benefits the organizers. Let technical trade publications know about your demos. Stories that catch the attention of technical publications can also get the attention of national media and give you visibility far beyond the trade shows.
Use YouTube to highlight use and the impact of your service. Assure that your YouTube videos are interesting and attention gathering. This will help generate viral awareness.
Look at how Google helped to make Mountain View, CA a wireless city. They worked with the city and created great excitement both locally and nationally.
Consider using actors to stage demonstrations, followed by actual demonstrations.
Situation: A CEO wants to push project ownership down to lower levels of the company. This is not happening unless the CEO pushes. How do you delegate yet stay informed as you push authority down the organization chart?
Advice from the CEOs:
The company needs systems and guidelines to clarify on what and when the CEO wants to either have input or hear back, and what can happen without the CEO’s knowledge.
Set levels of approval – dollar impact or decision type – and clarify what decisions can made at what level, what decisions need higher level approval and at what level, where they must inform you, and where you must sign off.
Similarly, establish regular reporting and meeting schedules, along with guidelines as to what is to be reported – again by budgetary impact or decision type – and assure that this reporting takes place.
“The Great Game of Business” by Jack Stack describes a company which has implemented these systems with astounding results. It provides a template and describes in detail how the system is implemented and what bumps they encountered along the way.
Invest more time in setting roles and responsibilities for your direct reports.
Keep reporting systems aligned across the company.
Expect over time to adjust levels of authority as individuals grow in responsibility and accountability.
Most importantly, lead by example. If a team member comes to the CEO for guidance on a project, refer them back to the proper manager for advice.
2015 Top ranked software systems to manage projects and processes from selected searches:
Capterra: Microsoft Project, Basecamp, Atlassian, Wrike, Podio
Situation: A company’s motto is that they serve the customer first. As an unintended consequence company projects get lower priority and action than customer projects. Frequently, the CEO finds that company projects are only half completed. What have you done to make company initiatives a priority? Who do you serve – the customer or the company?
Advice from the CEOs:
This is a great question. Clearly serving the customer has to be top priority. However, you also have to complete company projects, particularly those which are critical to company function or which will enhance your ability to serve your customers.
Define the company as a customer for important projects. Call this “billable hours” to the company and credit them as such on these projects. Accompany this with employee training on how to prioritize “company” versus “customer” projects when priorities conflict. It may take time to work through this, and for the message to sink in.
Add completion of company initiatives to the company kudos list. LInk company award eligibility to completion of company initiatives. For mission critical projects, grant double credit for completion of company projects. Adjustment of incentives will help to get the message across.
In employee communications, include updates on company projects along with customer projects and give equal or greater emphasis as appropriate.
Have you defined your “ideal customer”?
Include internal customers within your definition of ideal customers.
This will help to clarify and prioritize opportunities and shift the mindset.
For mission critical projects hire additional personnel or contractors.
Situation: A company’s CEO wants to segue from rainmaker-project manager to leader, with others taking the lead on projects. He has tried raising prices on his time, but clients are willing to pay the higher price so this hasn’t worked. How does the CEO set boundaries so that he is not involved in day-to-day project management?
Advice from the CEOs:
The most important question is: where’s the real battle – is it in the client’s or your own head? Is this really a client problem, or are you unwilling to let go? You need to answer this question before alternate strategies will work.
Look for the right project managers. You will change your hiring when the goal is for you to not be deeply involved.
Hire people who are better than you.
Gradually phase existing relationships to others.
In early work with a new client, set expectations so that your involvement is at the appropriate level and your team handles the heavy lifting.
Instead of attending meetings in person, use electronics – video conferencing. This saves the travel time for the meeting.
Don’t respond to client emails too quickly when you are copied – let others respond.
As one company grew, they invented new roles with high profiles but little work. These roles were figureheads for project leadership.
Project emails were set up so that all client emails went to the team, as well as the CEO, but the team would then respond to client questions.
Situation: A company has a long-term client that stopped a project suddenly 6 weeks ago with no explanation. Later, the client called saying that they do not intend to pay for work completed to date. Would you pursue either arbitration or injunctive relief to settle this dispute?
Advice from the CEOs:
If you have evidence of acceptance of a project contract or other documentation that the work proceeded under agreement with the client, this strengthens your position.
There may be other circumstances of which you are unaware such as financial or cash flow difficulties. Inquire through discrete channels to clarify this. Knowledge of the inside situation provides leverage as you negotiate a settlement.
Do you want to retain this client? If they have been valuable over the years this may just be the behavior of a single individual. If this is the case, work with your key contacts to bring this situation to light and try to solve the problem without legal action.
Because you have a long-term relationship with the client, focus your communications on the President rather than the VP who shut down the project.
Established your documentation, and complete your research on whether the client has cash flow problems; then call the President to work out an amiable resolution.
While you are justified in feeling miffed about the situation, business is business, and in this case it appears that your long-term relationship and the value of the ongoing business with the client outweigh the emotion of the present situation.
Focus on resolution of the dispute between the parties and do everything possible to resolve it between the companies rather than through legal avenues. This will help preserve the relationship with the client. Provided that you continue with this client, clean up the portion of the contract specifying notification and acceptance requirements and other areas of the contract that require attention.
Situation: A company is doing well, but the CEO is concerned about emerging hurdles that may stall momentum. The key issue from a systems development perspective is changing a “one-off” project based focus towards a modular mindset – essentially shifting a short-term to a long-term view. How do you align expectations across the company and transition to a broader focus?
Advice from the CEOs:
Start by clearly communicating your expectations. Work with your managers so that they communicate a consistent message to developers. Look for organizational changes to better align talents of individuals to roles taking advantage of these talents. You may want to refresh the gene pool by bringing on additional people.
One company with multiple teams creates healthy competition against performance objectives between teams with recognition and rewards to the top team.
If the change involves creating greater alignment between functions, create opportunities for individuals from different functional areas to work together. For example, have an engineer accompany a sales person on a critical call to close a deal. If the deal meets spec objectives, is closed, and the project completed on schedule and on budget, the engineer is bonused on the sale.
One company rents a lake cabin every year. Use of the cabin goes to teams recognized for meeting objectives, deadlines or other outstanding performance. An added benefit is that on the way to and from the cabin as well as while they are there, teams spend time talking about the next performance coup that will get them the next use of the cabin.
Look at your organization – both your Org Chart and the physical space. One CEO found that his engineering organization was stove-piped both in terms of reporting and incentives, and physical barriers prevented groups from easily interacting with one-another. To create better coordination between design engineering and manufacturing engineering, the teams were relocated to a new shared space, without physical barriers. Also, the Org Chart was adjusted to increase incentives for collaboration between the functions.
Situation: A company has a key relationship with a major corporation. They recently completed work in Phase I of a multi-phase project which was fraught with difficulties. Now they are evaluating whether and how to proceed with Phase II. Do you continue a difficult partnership?
Advice from the CEOs:
What made Phase I difficult?
Initial work was done to original specs and on time. The partner then asked for additional work and a change to the original specs, but would not agree to pay for these changes. As a result, the company lost money on Phase I.
What alternatives exist?
In brief, you must fundamentally change the terms of engagement. You can convert everything to time and materials, so that when the partner makes changes or asks you to make changes, they pay as they go.
A second alternative is to reconstruct the project as a waterfall project with a fixed price up front. You agree to X iterations, at Y cost per iteration. Each iteration has a deadline and the work completed as of each deadline constitutes the final work on that iteration. You charge for additional iterations if the partner wants additional work after the final negotiated iteration.
A third alternative is to set a price that is 2x your estimated price, recognizing that there may be a need to change specifications during development. You will provide documentation of your time and effort. If at the agreed end of the project you have not used all of the funds budgeted, you refund the difference to the partner.
Adjust how you communicate with the partner as you renegotiate. Do not assume that silence constitutes agreement. Provide written documentation of your understanding at the close of each negotiation and invite them to correct any misunderstandings. Require that both sides sign this documentation to confirm agreement. Do not proceed until there is clear mutual understanding on all key points.
Purchase and use software to track any changes to requirements during the project. This will enable you to document both the changes requested and their waterfall effect on other portions of the project.
Interview with Anju Bajaj, CEO, Zuna Infotech, Inc.
Situation: The US economy is slowly trying to get back on its feet, but many potential obstacles remain. In the mid-west, there is good talent with deep enterprise-level IT experience, and lots of new young talent looking for positions. How can private business help to retool the workforce and boost employment?
Advice from Anju Bajaj:
Working in IT services to provide end-to-end technology solutions, we have found highly skilled talent in the American Midwest. In recent years, many seasoned IT professionals have lost their jobs as Midwestern companies downsized. These individuals have deep enterprise level IT skills, but may not be up to speed with the latest technologies. There are also many brilliant young people available who have good web-based technology skills, but no experience in legacy systems or the working of complex enterprises. Our focus is on cross-training both groups as they collaborate to build IT solutions for our customers.
We have found that by organizing these two groups into small teams, guided by a lead who knows both web-based and legacy systems, we can leverage their individual strengths to cross-train each other. It turns out that both sets of workers are smart, capable and, in live project settings, collaborate and acquire technical skills and domain knowledge relatively quickly.
The bigger and more subtle challenge is teaching younger workers about business processes. Each process must fit the workflow so that a process change in one area doesn’t produce difficulties in other areas. For this, you need to have people with deep expertise in functional and domain disciplines as well as technical experts. By teaming talent, we can produce functional experts who understand all areas. We have found that in three to six months of working together, about 25% of team members reach almost guru status; while the remaining 75% have become quite skilled.
Like most leading service providers, we at Zuna Infotech also build capability through our Centers of Excellence. We focus on developing practices within different industry verticals. With this comes knowledge and structure which we can then pass on through train-the-trainer programs.
We have been inspired by the desire to help keep US workers working while retooling their skills. The results that we’ve found to date have been very encouraging. We hope that this can provide a model for other companies.
Situation: A company is transitioning from a time and materials to a fixed price bid model. Estimators and project leads find this transition difficult. We need them to think like business managers. How do you help managers to see and think in terms of the big picture?
Advice from the CEOs:
First, set up a framework that repositions projects in a business framework.
All projects are business go/no decisions with expenses, minimum profitability targets, and incentives provided for beating initial projections.
This will help generate more consistency in bids and final gross margins per project.
Next, teach managers and employees industry and company standards within your new model.
Do post-mortems on all projects. Did we make or lose money versus initial estimate? How much? How did we perform against estimated time and expense? Were client expectations met? Were they exceeded? What was good or bad about the project? Were there errors in the original estimates? Where could we have saved cost?
Use this information to improve your estimating process over time.
You have a long history of T&M projects. Categorize these by project type. Look at the hours required to complete the projects – both engineering and management time – as well as other costs. Establish range and averages within each category.
Look for key variables among the project categories: scope of project, learning curves, efficiency of team members.
Work through known costs and outcomes on past projects as examples to teach the process.
For new projects, calculate best, medium and worst case hours and costs. Bid based on your worst case as you develop your learning curve.
Make sure to include a project management fee on top of your T&M estimates. Eventually you want to develop an overhead percentage to cover project management.
Team your estimator with the project lead both for project input, and performance against the bid.
Evaluate and compensate both based on project outcome.
The critical measure will be gross margin generated versus gross margin estimated on the project.
Key Words: Leadership, Project, Time and Materials, Fixed Price, Bid, Framework, Consistency, Standards, Variables, Estimator, Lead, Incentive