Situation: A CEO faces challenges with clients. The first is vague customer specs because they don’t understand the product. Second is misunderstandings as to timelines. Third is insistence on strict timelines while simultaneously demanding revisions to previous work. How do you add more discipline to quotes and pricing?
Advice from the CEOs:
Is the company’s technology strategy aligned with its capabilities? Currently the company is trying to build advanced solutions in multiple international markets with a small staff. There does not seem to be the technology or development discipline to convert current capabilities into a sustainable market advantage.
For near term focus, because of commitments and milestone payments due from the key customers, focus resources on finishing the last piece of these projects. Once this is done, step back. Look at options and determine the company’s technology strategy moving forward.
The key challenge is to define ONE beachhead on which the company will focus and which they can dominate. The objective is to leverage existing engineering creativity to create a sustainable competitive advantage.
As this exercise is designed, start with a clean slate. Don’t burden the process with a lot of restrictive assumptions. Consider using an outside facilitator to help facilitate this process.
Until this exercise is completed does it really make sense to seek additional work or to commit the company to the next phases with current customers?
Once the company has selected and committed to a technology strategy, the decision process becomes different.
The objective is to develop laser-like focus on the technology. Minimize distracting the team with other opportunities.
It may be OK to lose money on development projects if this work will significantly impact or accelerate the development of the company’s core technology.
How does the company justify asking for payment for development for future projects?
First, determine and clearly state the company’s technology strategy. Evaluate all future development projects and decisions in terms of their alignment with this strategy.
Second, if a particular project is completely aligned with the technology strategy, the company may waive the requirement of payment for development. This, ideally, will be the only exception.
Ask for a limited time/scope project to jump start and define new projects. This provides proof of company capabilities and establishes its credibility.
If is it necessary to negotiate or bid, start high and bargain down to but not below the best estimate of the cost of development.
Remember that deciding what NOT to do or quote is often harder, but just as critical, as deciding what to quote.
Situation: A CEO perceives that the company has a conflict between performance and planned timelines. Of concern is performance against key metrics like pipeline performance and closing new business. A sense of urgency isn’t present. How do you create and communicate urgency?
Advice from the CEOs:
Management knowledge of company financial status and performance against key metrics – particularly key drivers like pipeline performance – is critical to their being able to assist the company.
A company decision to focus on project profitability may have the unintended consequence of exacerbating the lack of urgency. If revenue growth lags, the only option for managers who are tasked to hit a profitability target is to cut expenses. This delays projects and can negatively impact morale.
Accountability comes from meetings. Not 1-on-1 meetings but team meetings. Peer pressure is an important component of accountability. Nobody wants to be the individual who is consistently behind on projects or initiatives.
The challenge may be more external than internal. When business closes more slowly then everything else slows down: hiring, new development, investment and profits. All of these are driven by new business acquisition.
Another CEO has same issue with her contracts. All contracts include a timeline. If work or deliverables slip, the customer wants to slow down delivery and billings. Her solution is to include stop work and delivery delay fees in the contracts.
What actions would others take to address this?
Institute progress payments. For example, instead of charging 50% up front and 50% on contract completion, shift to, for example, 50/30/20 with the 30% due on completion of project framework. This way, only 20% can be delayed due of customer timing issues.
Built financing into total pricing. The customer is free to delay projects, or aspects of projects, but there is a charge calculated into delayed delivery which covers the cost of money and additional management.
Situation: A company recently changed their BHAG (Big Hairy Audacious Goal) to focus on premium customer acquisition, but as a small-to-medium sized company has a 3-year focus instead of the typical 10-20 year focus of a larger company. They want to make this a company-wide effort. How do you make the most of changing your BHAG?
Advice from the CEOs:
First, it is measurable and specific – grow to 10 times your premium current customer base in 3 years. Your marketplace is changing quickly, so a shorter-term BHAG makes sense. Call it your 10/3 Program or 10/3 Challenge.
Is it too shallow? No – this is something that people can rally around. It represents significant company growth.
What happens when you achieve the goal? Celebrate in a big way, and then set the next BHAG.
How do you create excitement? Every time you hit a milestone, bring in pizza, or conduct a special event. Celebrate.
Success = Change. What does that next milestone mean for the company and your capabilities? This isn’t just about new clients, but also includes scaling your delivery systems and customer service. Rally your non-sales staff around these important tasks.
Create milestones not just around sales numbers but also around timelines. Tie incentives to achievement of BHAG milestones.
Conduct a company meeting to announce the BHAG, and announce progress in future company meetings.
Progress against milestones.
Share pipeline data to maintain excitement.
Develop scale-up programs and share progress of non-sales departments as they ramp up services.
Think about building a competition around the goal. As long as this fits your culture it can add excitement to achieving both milestones and the BHAG itself.
Note: The term ‘Big Hairy Audacious Goal’ was proposed by James Collins and Jerry Porras in their 1994 book entitled Built to Last: Successful Habits of Visionary Companies.
Situation: A company is resource constrained and faced with a serious trade-off: do they focus on short term cash needs – immediate product improvements that will speed new product iterations to boost sales; or longer term strategic concerns – assuring that they have good IP protection on their technology before they launch new versions? When you are resource constrained, does it make more sense to focus on initiatives that will quickly produce cash or strategic concerns that will protect your future?
Advice from the CEOs:
Build two timelines – one for shoring up the patent portfolio so that you can safely build and launch new IP-protected versions of your technology and one for quickly completing product improvements to speed development of new product iterations which will generate cash. Assess both the energy requirements and the dollar risks and implications of each timeline. If you do not have the resources to do both in parallel, this analysis will help you to determine your best course of action. The risk analysis of each timeline should take into account what would happen if another company were to duplicate your technology and get to market with improvements before you do.
As a compliment to the above exercise, ask what happens if I don’t do either A or B? Do a SWOT and investment analysis on both. Which is the greater risk – launching with insufficiently protected IP or risking not being first to market?
These analyses will help you assess whether it may be feasible to accomplish part or all of either task with dollars in lieu of your own resources.