Situation: A growing technology company is faced with several opportunities. The CEO is too busy to devote the time to analyze each of these. In addition, the CEO wants to develop her staff so that they can take on more responsibility and mature into a full organization. How do you choose between opportunities?
Advice from the CEOs:
Everything starts with a strategic plan for the company. Either the CEO or an outside consultant should coordinate a strategic planning session to develop and rank the opportunities facing the company. The ranking exercise is best done as an open departmental or company-wide exercise so that everyone is involved in the process. This helps to build consensus and commitment to the opportunities developed.
Once the opportunities have been identified assign one to each of the employees that you want to develop. Each of the employees will be the champion for that opportunity.
Ask each champion to develop a business case and plan for their opportunity. This will include a development plan and ROI analysis. Allow each champion to access all company resources as they develop their plans. Set a deadline for all champions to complete their plans.
Once the plans have been completed, reconvene the group that participated in the strategic planning session and have the champions pitch their plans to the group. The group will provide feedback and suggestions for each plan. At the end of the session repeat the ranking exercise based on the new information developed and presented.
This will provide a wonderful training opportunity for the champions as well as valuable insight into their talents and potential for future development. In addition. Because the strategic planning sessions will be conducted as a company-wide exercise, they will act as team-building exercises and excite everyone about the potential facing the company.
Situation: A company’s goal is to replace an old, established market with new technology and, by owning the technology, to reinvent the industry. Given this aggressive goal, there is a temptation to go into volume production before establishing the cost advantages to make the technology profitable. The challenge is to establish disciplined, stable, qualified, scalable and profitable manufacturing. To accomplish this, the company must decide between alternatives as they cultivate new customers. How do you optimize your pipeline?
Advice from the CEOs:
There are two sides of the market:
Mega-markets dominated by large corporations which have long lead-times and potentially huge payoffs; however, these markets present long payoff delays for the company.
Smaller, quicker markets with limited volume but which will offer rapid PO acquisition and proof of concept.
The question is how much effort to devote to which market.
Look for early customers who are cast in your own light – disruptors who can help to catapult you into the marketplace
The trade-offs are strategic vs. tactical opportunities.
The immediate tactical need is to generate cash to show that you can. This is the steak.
The strategic need is to seed a foothold in a mega opportunity – to show the potential to revolutionize the market. This is the sizzle.
Identify a killer app that will gain tactical advantage and cash and help prompt maturation of a strategic opportunity.
Another CEO shared experience landing a large client.
They used a short, low cost pilot project to prove the concept to skeptical client staff. The client was surprised and delighted by the success of the pilot project. The pilot project was then articulated into larger projects.
Over time the company used incremental steps to gain a broad presence within the large company.
Focus business development on selling killer apps.
Find low hanging fruit for quick proof of salability and to show a revenue ramp.
Small design wins exercise the machine.
Is it possible to conserve cash to raise the impact of early wins to the bottom line?
Are all current staff during the next 12 months?
Early on, the game is business development – gaining key contracts and agreements with lead customers. Sales follows, with focus on the larger market. This may be 6 months to 2 years out. How many people are needed to focus on business development?
Situation: A company has strong technology and good top customers. However, the CEO is concerned that the company is too dependent on a few large clients. She wants to increase business among mid-tier clients. How do you expand the sales funnel?
Advice from the CEOs:
Get very crisp in identifying who your core customer is and focus on them near term. Look at what you offer that your competition can’t match and create appealing offers for new clients.
Simplify and clearly define your market position.
Here’s an example: First to market with the best, smallest, fastest solution.
This clearly defines who you are. Focus the company on delivering this.
In each high potential market find one company to whom you can offer a significant advantage.
Their current market position might be number 2, 3 or 4. Offer them a solution to gain an advantage on #1 and shift the playing field. This is a win-win for both you and them.
Horizontal business expansion could be the best near-term strategy. This lets each vertical market solve their own problems of technology direction, logistics, etc. Seek customers who have the resources to manage this in their respective market places.
Tailor contract minimums and pricing according to customer order commitments. Be willing to sacrifice price and some margin for committed purchases that match your timelines and resources.
Buyers often overstate their anticipated needs because they don’t want to be caught with short supply.
You can meet and promise lower prices for higher volumes because they rarely order them. However, combine this commitment with higher prices for the lower volumes that they are more likely to order.
Look across markets and focus on promising targets.
Use a call center to queue up prospecting telephone calls.
Have sales people conduct scripted qualification calls with prospects by telephone.
Only send sales people out to talk to qualified prospects. This saves travel expense and increases the productivity of in-person sales calls.
Situation: A tech company has grown to twenty people. The CEO is concerned that if they grow much beyond this their culture will start to change. The principal question is whether team leadership structure will remain tight and focused, while teams will continue to be flexible and have fun. How do you manage culture as you grow?
Advice from the CEOs:
Other companies have grown to twice this size and continue to increase their number of employees.
One uses component owners as leads, with people under them. Leads are more technical than managers and aren’t expected to be superb managers.
They grow middle managers organically instead of hiring from outside.
If an individual’s plate is full, give them the ability to delegate work to an up and comer.
Active communication has number limits.
The optimal functioning group is 7-12; higher functioning teams are even smaller with 7-8 members.
Create flexible teams that maintain communication pathways and culture.
Consider using reconfigurable space.
When one company grew from 25 to 60, they noticed that at 30 people it became difficult to track people; they needed to develop systems and internal management tools.
Much more attention was needed on sales forecasting and expense elasticity. The solution was to study peaks and valleys and built a model that could function within historic peak /valley limits.
How do you maintain the contractor pool?
Keep a list and actively communicate with them about current and anticipated needs.
One company’s rule: consultants are 100% billable – functionally they are only able to realize 98%, but the rule keeps this number high.
Use contractor pools to supplement project tasks. If your primary differentiating focus is on successfully closing projects, focus contractors on ramping new projects.
Hire people who embody you and your culture. Hire in your own image.
Situation: A tech company is having difficulty with a customer. Given three options – high quality, low cost and rapid delivery – the company can deliver any combination of two, but the customer wants all three. When the company asks which two are most important, the customer responds that they want all three. How do you respond to unrealistic demands?
Advice from the CEOs:
The Devil’s Advocate response to this question is to look at your processes. Is it possible to do all three, and if so under what circumstances?
Think from the perspective of the customer:
What will you need and when?
Integrate the customer into the decision process as much as possible.
Demonstrate where trade-offs exist, and work through these in binary fashion until you reach agreement on the scope of work, delivery timeline and price.
The challenges change depending upon who within the customer company you are working. For example, the engineers understand the challenges and complexity of the product in question. However, the purchasing agents do not necessarily understand the product, its complexity, or how critical it is to their final product.
In this case try bargaining with the purchasing agent – if the purchasing agent goes back to the engineers and gets their agreement that your company can change the quality or delivery spec, perhaps you can be flexible in your pricing. Put the ball in the PA’s court – but make sure that the PA knows that he/she will be responsible for any project delays for not giving you the order today
Use stories to set expectations – better yet, use stories, combined with metrics about the costs associated with attempting short-cuts to develop authoritative arguments in support of your position.
Create a User Guide for your customers – paper and web formats – to sell your story. Sell fear, uncertainty and doubt; for example, if the PA wants to go another route here are the potential costs in terms of time, market share and profits lost.
In particularly difficult negotiations, use the real estate mantra: Some Will, Some Won’t, So What, Who’s Next?
Situation: A tech company competes in a rapidly changing marketplace. The companies they serve constantly evolve their platforms. The company must respond rapidly to assure compatibility with both hardware and software innovations. Users adapt to new platforms at different rates, and the company must address their needs, as well. With so much time spent tending these diverse needs, how do they plan for market evolution?
Advice from the CEOs:
In the market you serve you must constantly reinvent yourselves as technology changes. Some platforms make changes on a 5-year cycle, while mobile platforms are currently on a 6-month cycle. This may force choices as to which platforms to serve. You also may want to focus on platforms where what you bring to the table is most useful.
You have made the strategic choice to tie the future of your company to a few large companies that dominate their markets. It is imperative that you cultivate close relationships with the technology as well as strategic leadership of those companies. This will give you more advanced insight into their plans, and they may even involve you in discussions about how the market evolves. If so, you will have positioned yourself for that evolution. These relationships may also become your exit strategy.
Businesses run on cash, or access to cash. As you cultivate relationships with your key customer companies, look for opportunities to invest in developing markets on a subscription basis which will provide ongoing annuity revenue. Figuring out how to leverage advertising or positioning options into your offering offers an additional revenue stream.
Situation: A company has a technology road map and a flexible set of technical capabilities. To date they have elicited broad interest from a variety of different markets. They currently don’t have the resources to pursue a large number of different markets, and will likely need their next round of funding within the next year to year and a half. How do you focus your sales and marketing?
Advice from the CEOs:
A race to generate interest from a number of markets is a valid strategy at this stage of your development; provided that you raise or generate the cash to survive. This caveat describes your critical challenge – determining how long you can afford to maintain and fund a broad strategy.
Look at your burn rate and timeline. Pursue options that will generate cash before your next round of funding. Your top objective is to validate your ability to generate revenue prior to your next round.
You haven’t yet found the fish. You are fishing and have nibbles but no bites. Look at what your people are doing and start to eliminate options that are less likely to pay off both short and long-term.
To preserve development cash, create a new rule. Any project that you accept must come with development dollars. This will eliminate some smaller prospects and targets but will help you to focus on others which are more immediately promising.
When one company was in this position, their rule was that the first PO gets the engineers. No PO, no commitment of resources.
Another’s company’s policy is that they don’t work for free.
A softer version is to give the prospective client 30 days to produce an LOI for the proposed project or you will go elsewhere.
Even better is an LOI and $50K up front.
A third company’s strategy from the beginning was always to hunt for elephants – even when they had no money. This has worked well both short and long-term. It represented the level of faith that they had in their technology and capabilities.
Situation: A company’s accountants advise them to make distributions for tax purposes. Simultaneously, the company’s future is based on technology and staying ahead of the competition. This requires ongoing investment. Do you focus on taxes or investment?
Advice from the CEOs:
The focus of the answer is distributions and company morale, not tax planning. Think about the impact on the team. Are there considerable differentials in compensation within the company? If so, this may be impacting morale.
Differentiate bonuses from variable compensation. Make bonuses special. This starts at the top. The attitude should be that if someone works hard, they will be compensated. Once bonuses become assumed, they are just regarded as part of the overall compensation package.
Smaller geographical units can help retain a small company atmosphere and drive. As a company grows, similar results can be achieved with Tiger Team projects.
If the organizational structure enables this, foster friendly competition metrics between offices – and publish the results.
One company distributes performance data to top staff – with color-color coded red/yellow/green metrics based on performance. All red and yellow numbers require an explanation. The company has seen a significant reduction in red and yellow metrics since they started this.
At company meetings – publicize and recognize top 10 performers in various areas. Recognition boosts morale.
Company events boost teamwork and morale. These may include company barbeques, in-house cooking shows created and run by staff, and quarterly outings – bocce ball, tubing, sailing on the Bay.
Growth is accompanied by change. When a company starts it’s a mission. After 15 years it’s a job. This is a function of growth, and it takes ongoing creativity to keep individual employees excited about their job and role.
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.
Situation: A CEO is evaluating a potential deal with an Asian company that is synergistic with the strategy of the CEO’s company. The structure would include a US entity, run by the CEO, and an Asian entity that would provide essential technology. How do you structure an international deal?
Advice from the CEOs:
Before you agree to a deal, raise your own level of trust with the key players of the Asian company so that you are comfortable with the investment of time and money that you will make.
Assure that you will have the focus and attention of talent that you will need within the Asian company. This is better done through mutual understanding and agreement than through contract. In Asia, relationships are personal, not contractual, though for legal reasons personal understandings must be backed by a good written contract. This will likely mean that you will have to travel to Asia to spend time with the key personnel upon whom you will rely.
Make sure that there is agreement on a clear road map for both the US and Asian entities.
You will need a solid bridge person who can speak both the language and culture of your Asian counterpart – not just someone who says that they can, but who can deliver. Test this relationship before agreeing to the deal.
Structure the deal so that the US entity owns exclusive rights to the technology world-wide with the exception of the home country of the Asian firm. Assure that you own an acceptable piece of the US entity.
Don’t complicate the exercise by creating additional shell companies in Asia. Shell companies can make it difficult to maintain accountability and assure that you gain the value that you seek.