Tag Archives: Test

How Do You Build a Young Company? Four Perspectives

Situation: An early stage company is positioning itself for growth. The CEO believes that they need to adopt a new model to grow. She is focused on a new channel – an affiliate model using the web. How do you build a young company?

Advice from the CEOs:

  • Introducing a new product to a new market is very difficult, especially for an early stage business that is still establishing itself. Shifting from direct sales to ancillary services presents a new challenge and a new demographic. In addition, in your market there are low barriers to entry so it may be too early to diversify. You are more likely to be successful marketing to your core.
  • Evaluate and decide whether there is growth in your core business. If so, stick with your core plan. If not, then you either must change or decide that your core market is not what you thought it would be.
  • You offer a valuable, important service. The issue is branding and a clear vision of what you want to be. Start by identifying your revenue stream. Then assess ways that you can move from one-time sales to an annuity revenue stream without major adjustments to your model.
  • Is it feasible to build a revenue share model for ancillary services with your core business partners? Here are the steps:
    • Develop a model.
    • Talk to both your business partners and customers – test the concept. See how they respond.
    • There are two things to look for: does it turn out that that the model is easy to sell and implement, with little effort or distraction from our core business, or does it compliment your core business. If either or both is the case, you may want to pursue it.

How Do You Test a New Service Delivery Model? Seven Thoughts

Situation: A company targets mid-sized clients with pricing that is similar to its competitors. They believe that their principal differentiation is their relationship with their clients. The problem is that this is also what all of their competitors claim. They are considering testing a new pricing concept – a monthly fixed fee that will provide a pre-negotiated set of services at a favorable discount, with a weekly presence in their clients’ offices. How to you test a new service delivery model?

Advice from the CEOs:

  • This looks like an appealing concept. With this arrangement there is no clock ticking and the client may view your various services as a more open menu of options available to them.
  • Another company has a similar relationship with their CPA firm and have both enjoyed this and are using more services from this firm.
  • Just a regular presence in the office is worth the retainer.
  • Another appeal is that this allows regular participation in management and Board meetings.
  • Another CEO offers a similar program for her professional service company’s clients and have found it successful.
  • Since there appears to be strong support for this model within the group, what is the best way to implement this new offer?
    • Negotiate an initial monthly rate for a set level of services as a retainer without a clock.
    • Agree to a periodic review and adjustment of services and pricing – perhaps quarterly – based on the time and services that have been provided during the preceding period.
  • How do you sell this program to those within your own company who are skeptical?
    • Try the program with three clients on a limited trial basis and measure it.

How Do You Forecast Sales & Revenue? Six Suggestions

Situation: A company is developing new forecasting metrics for both sales and revenue. The immediate future does not look robust, and they are concerned about mid-term future revenue. Ideally they want to extend a 3 month forecast window out to 6 months. What is an effective methodology for forecasting revenue out 6 months? How do you forecast sales and revenue?

Advice from the CEOs:

  • Get your team together and gather impressions on the direction of business through the end of year. How many see sales going up, staying the same or declining through the end of the year. Discuss the rationale behind each member’s estimate so that you fully understand their thinking and what metrics each sees as important to their forecast. Work to make the estimates and metrics as rigorous as possible.
  • Based on the metrics discussed, develop an algorithm that you can monitor on a monthly or quarterly basis, depending upon your needs.
  • As you develop your algorithm, test it against past sales forecasts and history. Can it accurately plot past performance based on the metrics that you had at the time. If not, what needs to be adjusted or better understood.
  • Do you ask clients for forecasts of their purchase needs and do you track the accuracy of their forecasts? Weigh their responses by the quality of their past predictions.
  • As an alternative to trying to predict demand, assemble your resources to fit the needs of your market and customers and arrange your resources for flexibility.
  • Look at industry resources. How far out do experts in your industry claim to be able to forecast demand and sales or purchases? How reliable are these forecasts? What can you learn from this exercise that will improve your own forecasts?

Is It Wrong to Hire Family Members? Six Considerations

Situation: A small but very profitable business was founded and has been run for two generations as a family-owned and operated business. To boost performance, the CEO hired a general manager with a good background who is not a family member. The general manager has told the CEO that he feels that there are too many family members in the business. The CEO likes hiring people she trusts, particularly friends and family that she has known for a long time. Is it wrong to hire family members?

Advice from the CEOs:

  • Don’t try to change what you’ve already done – plan for the future.
  • Acknowledge the GM’s idea. Tell him that you appreciate his suggestions. Suggest that he test hiring more non-family members to cover one of your low risk market segments. Measure the performance of this team versus the other teams within the business.
  • The challenge with family members is accountability and objectivity. The question for the family owners is whether they have the freedom to act in the interests of the company. Can they put family ties aside when someone is not serving the interests of the company?
  • The essential question for the family that owns the business is – what do you want to maximize? If it’s loyalty and longevity – keeping the family together, employed and in harmony – they can be good. If it’s profits and performance – family and friends can be difficult if emotional ties cloud business objectivity.
  • The upside to family is loyalty and trust. That said, family and extended family friends are different. The latter don’t have the same ties or sense of loyalty.
  • Can you keep employees for too long? Yes. Make sure that you evaluate all employees every year. Establish job and performance standards and make sure that all employees – family and non-family – are held to the same performance expectations.

How Do You Simplify a Firm-wide Software Roll-out? Five Ideas

Situation: A company plans to implement a new CRM system. They have a project road map and have assigned a manager for the implementation. However, the CEO has concerns because this is the most significant software roll-out that the company has ever attempted. She wants to assure that the roll-out proceeds smoothly, and that and that sales, marketing and customer service functions are not hampered. How do you simplify a firm-wide software roll-out?

Advice from the CEOs:

  • Focus on company business objectives as you plan and implement the roll-out. Optimize the system to company business objectives, not just what the team wants.
  • Scope this out as a project management exercise.
    • Identify objectives.
    • Build and test.
    • Roll the system out to preliminary production and collect feedback on functionality.
    • Rebuild and test.
    • Plan and conduct system orientation training.
    • Set a date for the roll-out.
  • Don’t immediately roll the new system out company-wide. Conduct an initial implementation with a small scale test team. Make sure that everything works as planned and that day-to-day function is not compromised. From the information that you gather during initial implementation, tweak orientation training so that everyone is comfortable with the new system.
  • During initial planning sessions to set system objectives, meet first with managers whose teams will be impacted by the roll-out. Managers may not speak freely if their support staff are present.
  • Have a roll-out celebration and be generous complimenting personnel who have been involved in planning and roll-out.

How Do You Manage Multiple Products and Segments? Five Ideas

Situation: A company was launched on a single product with variations. Their R&D team has now developed several additional products which they are planning to launch. This will involve new product names and new customer segments. Having not done this before, the CEO seeks advice on managing multiple products, brands and market segments. How do you manage multiple products and segments?

Advice from the CEOs:

  • The most important element is the plan – write it carefully and build from a solid base.
  • When working with multiple products or market segments, match your segment strategy for each segment to your product strategy for that segment.
    • Build a grid that shows all products and all segments where you wish to sell them. In each cell, determine both the decision maker(s) and their top purchasing priorities. This will help you to build your Product/Segment strategy and optimize resource allocation while increasing sales and marketing effectiveness.
    • It may also help you to fire problem customers who cost you money and attention and reallocate these resources to more promising opportunities.
  • Analyze the customer’s decision-making process for each product and segment. Make sure that your marketing and sales effort makes sense within their decision process and focus on what is workable.
  • When introducing a new product or idea, focus first on smaller segments and test the fit of your product or idea. This is low risk if you fail, and you can leverage what you have learned if you win.
  • Build a one-page strategic plan that covers your full company strategy. Each department compliments the company strategy with its own departmental strategy to support the company strategy.

Special thanks to John Maver of Maver Management Group for his contribution to this discussion.

How Do You Expand Your Business Model? Seven Recommendations

Situation: To date, a company has performed a single set of services focused on collection and delivery of a stream of raw data to its clients. The CEO wants to add a consulting service based on the expertise that the company has developed over the years. The CEO seeks input on both how to position this new service, and how to organize it, either within or separately from the current business. How do you expand your business model?

Advice from the CEOs:

  • Consulting services can be offered at a premium to current services because the company will be offering analysis and recommendations for a solution, instead of just raw data. Intelligence is more valuable than raw data.
  • Offer the consulting service on a project rather than an hourly basis. For example, price a project at $10k for the consulting package instead of $200/hour for data collection and reporting.
  • To add weight to the consulting offering, provide final reports and recommendations as a professional, written document supplemented by a presentation.
  • Test the concept and early options for the consulting service with existing clients.
  • Create a new division for the consulting service so the customer sees it as an additional option and value that the company provides. This will change both the branding and image of the business.
  • To increase the opportunity for success, develop a full business plan for the consulting model.
  • Focus on the new consulting business with the same discipline as the current data business.

How Do You Move a Live Online Data Center? Seven Suggestions

Situation: A company has run out of space and is planning a move to a new and larger facility. The biggest challenge is that they maintain a live online data center upon which their clients depend. How do you move a live online data center?

Advice from the CEOs:

  • This is not a rare event. Many companies with live online data centers have to upgrade their systems on a regular basis as equipment and software technologies evolve. Maintaining service during a move is not significantly different. Research what steps these companies have taken to minimize disruption during upgrades.
  • Don’t try to do it all by yourself. Seek outside expertise to help you plan the move, and to develop options that will minimize both downtime and service interruption.
  • Ask a trusted data center resource for a 3rd party audit of your move plan.
  • When one company moved, they overlapped their leases by one month, and their Internet connections by 2-3 months. This gave them breathing room as they completed the move and allowed them to stay live uninterrupted through the move.
  • Another company increased their back up servers and service. They also planned their move to occur during what they knew would be a low demand block of time. As a result, they were able to complete the move, plug in the servers and were only down for 30 minutes.
  • If it is feasible, consider leaving your old center in place as a back-up data center.
  • Conduct a number of practice shutdowns and restarts to test your systems.

How Do You Test for New Product Appeal? Three Suggestions

Situation:  A company was challenged by a client to design a product to demonstrate the capabilities of the client’s processor.  The result was a wonderful success, and has received very positive press. The client does not care about the product, only about their processor. How does the company test the appeal and potential marketability of the new product?

Advice from the CEOs:

  • Go to a local arcade, for example one operated by Golfland USA or a multiplex theater. Show them your product and ask whether you can test it for appeal with their customers. This will enable you to measure coin-drop numbers and generate demand and market appeal data. With these data you can assess the value of either selling or licensing the product.  The objective is to see whether the product generates sustainable demand, or whether it is just a short-lived curiosity.
    • The big issue with a product like this is very simple – is it addictive?
  • If your initial tests show that the product generates sustained interest and revenue it is similar to a console game. There are a number of avenues to pursue, including:
    • Early exclusives use agreements with casino or theater chains – it will have value if it helps them to drive traffic to their venues.
    • Novelty markets – corporate events, etc.
  • Other options:
    • Evaluate a lease model for target venues.
    • Consider selling the product to air table companies as a demo unit.

How Can You Best Reduce Costs? Six Points

Situation: A company wants to reduce their cost of engineering. They are considering outsource options, both domestic and overseas, as well as remote offices in lower cost regions domestically. How can you best reduce costs?

Advice from the CEOs:

  • An emphasis on cost may be misplaced. Consider instead of where you can offer the best value to your customers or clients. Focus on and compete in best part of your market – the place where you possess the strongest advantage; then worry about cost.
  • Outsource companies can be dangerous partners. Assume you only profit from the first job that you give them and that they may be your competitor the next time around.
  • We’ve learned from the last decade of experience in Asia that cost advantages are often temporary. Salaries for top talent in India and China now approach those in the US. This experience is likely to be repeated in Southeast Asia.
  • Focus on high dollar services and opportunities.
    • There are limitations to offshore talent – especially in complex, multi-step development projects. Keep high dollar projects in-house because they justify higher prices and margins.
    • When you outsource, negotiate retainer contracts with additional charges for work above and beyond the scope specified in the retainer.
  • What do you want to be? Consider your options:
    • Become a project management company and outsource development.
    • Be a development company and just look for cost effective sources of labor.
    • Start your own outsource company – a split-off staffed by your own employees – and feed them work.
  • Before you invest substantial time or money, do a test.