Tag Archives: Scenario

What are the Keys to Successful Strategic Change? Six Foci

Situation: A company wants to execute a strategic shift in direction – taking it into a new business which will diversify its offering to customers. The CEO needs to assure that everyone is on-board to both speed the shift and minimize cost. What are the keys to successful strategic change?

Advice from the CEOs:

  • Be front and center with your vision. State the vision clearly, in terms that everyone will understand. Focus on the benefits of the change for the company and employees and be realistic about the challenges involved.
  • Be enthusiastic. This is critical to all change efforts. Be cheerleader as well as leader.
  • Plan ahead and begin to communicate well in advance of the anticipated change. Plant seeds and encourage the team to generate options or solutions. Give all levels of the organization the opportunity to become involved and participate in both design and implementation of the change.
  • Be consistent in messaging and support across the team. Don’t vacillate or promise what you can’t deliver. Employees will watch for the presence or absence of consistency. If it’s absent, they won’t join in.
  • Conduct scenario analyses. This enables you to try out different futures and implementation options.
    • Identify critical issues. Look at possible results – first consider the “most likely”, then “best” and “worst” possible outcomes. Considering best and worst generates new alternatives, and improves the perspective on the most likely outcome.
  • Conduct visioning exercises. Create a graphic vision of possible futures.
    • This increases group participation and sparks creativity.
    • It improves group function, thereby enhancing results.
    • Visual representation is more memorable than standard bullets and lists.
  • Special thanks to Jan Richards of J G Richards Consulting – jgrichardsresults.com – for her insight on this topic.

What is Your Opinion of Maintenance Agreement Models? Four Thoughts

Situation: A plumbing company wants to broaden their market and is intrigued by building maintenance agreement models. They have looked at one franchise offering that would cost $120K in purchase and monthly fees the first year. The up-front investment per new customer would be $10-50K with no guarantee of closing a maintenance contract with the customer. What are the pros and cons of maintenance agreement models

Advice from the CEOs:

  • Don’t look at just one company’s maintenance agreement model. Investigate companies that provide similar services.
    • Ask the company who their principal competitors are, and what companies have similar or differing models.
    • Investigate each of the competitors. One of them may be more appealing for a company your size.
    • If the company is unwilling to share this information, be VERY careful.
  • You should be able to talk to the franchisees since you would not be competing in their territories. Tell them you are evaluating the company and its model and want to learn about their experience. Ask about training, processes and procedures, and any upside or downside that the current franchisees have experienced.
  • As you evaluate this and other offerings, calculate worst case scenario in terms of risk and expense. Is this something that you can afford? If not, the model doesn’t look good.
    • Can you write in exclusions to your maintenance agreements to limit your liability for large ticket items?
    • Analyze the potential of your market. Conservatively estimate the number of clients that you could generate, and what you would earn. Do a cash flow analysis of your upfront expenses, risks and revenue.
  • Watch for red flags in the agreement models. For example, in one model the vendor is responsible for the maintenance of a building; however, they can’t require any tenant to use their services. This means that they would effectively be guaranteeing the work of other companies, or the impact of this work on the building’s services, with no control over the quality of the other companies’ work. This could expose them to significant potential losses.

Key Words: Maintenance Agreement, Franchise, Investment, Pros, Cons, Red Flag, Due Diligence, Worst Case, Scenario, Market Potential

How Do You Reset Pricing When The Game Changes? Five Parameters

Situation: The Company sells customized products and pricing has been per product/per customer. A large client has proposed to purchase product rights across a number of products and uses. The technology is early in its expected 5-year life span. How should the Company set pricing to this customer?

Advice from the CEOs:

  • Start with a series of questions:
    • What is the value of your technology to the customer?
    • How much competition do you face?
    • What other solutions are available to the customer?
  • Based on this framework, ask contacts within the customer company open-ended questions that will reveal what is important to them including:
    • Licensing objectives,
    • Planned use of the technology, and
    • Any protections that they seek.
    • You need to understand these before you can make decisions on pricing.
  • There are several pricing scenarios:
    • Set up a scale with a declining pricing driven by volume.
    • A large lump sum payment now, non-transferable if the customer is acquired by another company.
    • A large annual fee to cover a preset number of uses and volumes, with small increments for additional purchases.
    • The final arrangement will depend on the priorities of the customer.
  • Find out what the customer is willing to pay, but you set the terms.
  • Ask what guarantees they desire to protect their position. This includes:
    • The customer’s key risk factors.
    • Whether they want exclusive or usage rights. Exclusive is worth more.

Key Words: Pricing, Custom, Technology, Life-span, Value, Competition, Licensing, Objectives, Protection, Scenario, Scale, Lump-sum, Annual Fee, Guarantee, Exclusive, Usage