Category Archives: Strategy

What Are The Best Ways to Create a Presence in China? Six Suggestions

Situation: A company’s major customers are expanding their manufacturing in China. They want the company to be able to service their Chinese locations. If you don’t already have a presence in China, what are the best ways to create a presence in China? In addition, how do you get the cash produced by these operations out of China?

Advice from the CEOs:

  • Increasingly, multinational businesses with operations in China seek vendors who can seamlessly handle all of their domestic and international needs. In China, the objective is to be able to translate service output into English so that US managers can monitor the output and assure that Chinese operations are meeting the same or similar basic standards as their domestic and other foreign operations. If your company can’t do this large contracts are at risk.
  • Look for local partners, including partners located in Hong Kong or Japan who can deliver service in China to your standards. You want partners who you can risk-manage.
  • It is interesting to look at the Japanese approach to China. Japanese concerns known to CEOs around the table only transfer highly developed, late stage manufacturing projects to China.
  • As you look at partners who have capabilities in China there are a number of qualities that you want to investigate:
    • Competence and honesty.
    • Loyalty – a partner who will stick with your company and not just take the new knowledge and start to compete with you.
    • Absence of graft and record of compliance with the Foreign Corrupt Practices regulations.
  • If you work with Chinese partners, work with two of them. Do not give them exclusive agreements, and do not tell them about one-another. This is critical to protecting any IP that you will be using in China.
  • We’ve learned over the past year that taking cash from your Chinese operations out of China is difficult. The Chinese government imposes heavy fees and levies on companies exporting earned capital because they want this capital to remain in China. Given this, you must ask yourself whether this is important to you. [like]

Can You Do Business With Competing Companies? Three Guidelines

Situation: A company has received RFPs from two companies who regularly do business with each other, but who are also competitors. The projects specified by the two RFPs might compete with each other. Under the terms of the two RFPs, the company can not disclose the existence of either RFP to the other company.  Can you do business with competing companies, and how do you protect the company if you do?

Advice from the CEOs:

  • The principal concern for the Company will be assuring that there is no violation of the CDAs that you have with each company.
    • Assign the RFPs to two different groups within the Company, with strict instructions that they must maintain their respective client’s confidentiality both internally and externally.
    • Emphasize the importance of confidentiality in responding to the RFPs to the Project Manager responsible for responding to each RFP.
  • Respond to both RFPs, but do so such that if both projects are contracted you can disclose this to both companies.
  • Prepare a set of talking points – the same talking points – to both companies and disclose the situation to both immediately after the project has been contracted.
    • Let them know what happened, share the timeline, share your obligations under your CDAs with both companies, let them know what you did internally to preserve their confidentiality, and that as soon as you were able – i.e., as soon as both projects was contracted – you informed them of the situation.
  • Companies commonly get involved in similar situations. The beauty is that you get business under either scenario. The challenge is that you must take all steps necessary to assure that the interests of both potential customers are preserved.
  • If you can successfully demonstrate to both companies that you have acted in an honorable fashion, they are more likely to trust you to do the same in the future.

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How Do You Evaluate A New Business Opportunity? Six Questions

Situation: A company has been presented with a new business opportunity. The opportunity is compatible with the company’s current business, but also involves skills and markets with which the company is not familiar. How do you evaluate a new business opportunity?

Advice from the CEOs:

  • There are at least four critical questions to assess as you evaluate any new businesses opportunity:
    • What is the total available market, and what is the immediately convertible market for the product or service?
    • Can you acquire expertise in the new markets that this will open to you?
    • Do you have a track record starting and nurturing new business within your company?
    • Is there sufficient seed money available – through company funds or outside investment – to keep the effort going for at least a couple of years as you develop the core team that will operate this business and gain traction?
  • If there is an offer of outside investment, consider how many months this funding will support the salaries of the team that will build this business, plus operating and overhead costs. You want to be sure to give yourself an adequate runway.
  • New business development opportunities typically require huge energy, creativity and focus for the first few years. Key management will have to devote all of their effort during the start-up period. Can the company afford to lose the services of key personnel for the time that you estimate this effort will take?
  • Before deciding to pursue this opportunity, take the time to investigate the market for this opportunity.
    • In particular, look for other companies that have tried to enter this market, and learn from their experience.
    • Develop a network of advisors who understand this market and can help you understand both the workings of the market and why companies may have struggled trying to enter the market.

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How Do You Shift From Regional to National Operations? Three Foci

Situation: A company has a network of regional offices, operating under loose oversight from the home office. Increasingly, large customers are asking for national service agreements, but the company struggles to coordinate uniform national service delivery. How do you shift from independent regional to coordinated national operations?

Advice from the CEOs:

  • If you want to act like a national company, then organize like a national company. Create a national account office which will take the lead in negotiating national contracts. That office will then coordinate with the regional offices to assure that service delivery occurs according to contract.
    • As the national office is built, it will be important for them to understand how service delivery may vary between states because of differences in state regulations. This will require a manager who is experienced and knowledgeable in your field. This may be a promising current regional manager or an outside individual from your industry.
    • You will also want to define customer categories which will enable you to classify current and prospective customers as regional or national accounts. You may want to consider three customer categories, for example Regional, Emerging National and National Accounts.
  • The key to success will lie in your incentive and professional development structures.
    • If region managers receive their incentives and promotions primarily for developing regional business, then this is where they will focus.
    • If you want the region managers to shift their activity and priorities to creating and servicing national contracts, then bias both your incentives and professional development programs accordingly.
    • For region managers, continuity of business will be a top priority, as this enables them to maintain region performance. To come on-board with the new program, they must perceive a value for both themselves and their customers.
  • Once you have determined your structure, look for high profile wins that drive the structure. Reward and promote those who produce these wins.
    • These producers will become your champions for change.
    • The message will spread quickly across the organization.

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How Do You Leverage an Advisory Board for Biz Dev? Three Guidelines

Situation: A company has a high-powered Board of Directors. This Board is focused primarily on company strategy. The CEO wants to create a separate Advisory Board for technical and business development. How do you create and leverage an Advisory Board for technical and business development?

Advice from the CEOs:

  • Be clear on the role and compensation of the Advisory Board.
    • Create a clear set of expectations to initiate the process, and refine these expectations in early meetings of the Advisory Board.
    • Early stage companies often pay out of pocket expenses for attending Advisory Board meetings, plus stock options. When business development is the focus, you may want to add a percentage of any new business brought to the company by the member.
    • More mature companies may add a stipend for Advisory Board service.
    • Not all Advisory Board members may be compensated equally, particularly if members receive a percentage of business that they help to create. You may also choose to compensate members differently based on their experience and influence.
  • Choose Advisory Board members carefully.
    • Go beyond personal contacts of the CEO and company officers. Look for individuals who are known and respected within the industry. You also want individuals who have exceptional contacts and who will agree to use them to benefit you.
    • Look for individuals who are highly positioned within target companies – for example a VP of Operations or of Business Development. Also look for individuals who have excellent relationships with personnel in target companies
  • Be open and clear about your expectations of individual Advisory Board members. Celebrate success.
    • Establish metrics that the members are expected to fulfill.
    • Record commitments made by Advisory Board members and include updates against commitments as part of Advisory Board meetings, as well as updates against metrics that expected of members.
    • Celebrate successes of Advisory Board members and note individual and team contributions whenever the Advisory Board meets.

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How Do You Shift Culturally from R&D to Production? Seven Steps

Situation: An early stage company needs to move from an engineering/R&D focus to a production focus. Cash availability and business plans dictate that this must happen very rapidly – within 4 months. How do you coordinate a rapid cultural shift from R&D to production?

Advice from the CEOs:

  • You will need an experienced VP of Operations.
  • Operations and production engineers are a different personality type than R&D engineers. The latter are creative and seek new and more effective ways to solve problems, while production engineers thrive on perfecting a process and getting it right every time. You will likely have to adjust the team to assure that you have both types.
  • Reorganize the current engineering team into R&D and Production engineering teams.
    • A core R&D team reports to the CTO.
    • Another team reports to VP Ops and will cover product manufacturing, process improvement and logistics and QA.
  • What are the most important steps to take first?
    • Have a heart-to-heart conversation with the individuals who you have assigned to production responsibilities.
    • Get back together in small groups or one-on-one with your production group and explain that to meet the company’s objectives – and everyone’s long-term financial objectives – there must be a change. Explain the cost in stark dollars of what the failure to make this change means to the company and to the team. Challenge them to assist you in developing solutions that will allow you to meet your corporate objectives.
    • Allow some learning opportunities to arise. Let team members make the occasional mistake and use these as coaching opportunities for the group to show what happened, why it happened, and why it can’t be repeated.
    • Separate standard and special order production into two groups. Each group will have to meet their own performance objectives and metrics – but all objectives and metrics must support the company’s objectives.
    • Early on you may want to require CEO sign-off on production sheet changes, but within a system that allows you to easily determine material from non-material changes.

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How Do You Shift from Craft to Lean? Four Steps

Situation: A company has an engineering structure which emphasizes function over cost. As a result, there is little collaboration between design and manufacturing, and little design for manufacturability or cost control. This contributes to a last-minute mindset and expensive solutions. How do you shift design engineering and manufacturing from a craft to a lean mindset?

Advice from the CEOs:

  • Changing how people think and act may also mean changing people. Are you prepared for this? If not, then it may be difficult to achieve the change that you desire.
  • Let’s use a mindset change in another area – sales compensation – as an example. In this case, the sales team had previously focused primarily on revenue, with no incentive to drive margin. This impact was continuously eroding margins, though the company realized revenue goals. The mindset was changed by introducing a new system with dual incentives: to retain their position, a sales person had to hit at least 85% of their revenue target, however commission was based completely on the gross margin from their sales, with a bump in commissions when they hit 100% of their revenue target. This system drove both revenue and margin targets and was very successful; however, the company lost a few sales reps who couldn’t make the adjustment.
  • Transferring this lesson to the engineering situation, design an incentive structure that drives both function and low cost manufacturability to achieve both targets simultaneously.
    • Task your VPs of Operations and Manufacturing – and the key managers of your design and manufacturing teams – to create a dual incentive system that meets both function and manufacturability objectives. Measurements may include:
      • Actual vs. initial estimated manufacturing costs.
      • Margin on final product.
    • Once the parameters are developed, clearly communicate these to all affected employees up front to set clear expectations for the future.
    • Incentivize your VPs and key managers jointly on collaborative efforts and their ability to develop joint solutions.
  • Another solution which will speed the process – put design and manufacturing engineering in the same work space instead of separating them. This encourages the teams to work together.

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How Do You Plan for Contingencies Post-Deal? Three Insights

Situation: A company is in the midst of due diligence for sale of the company. Chances of closing the deal are 50/50. The CEO, key staff and the Board must plan for both contingencies. How have you planned for contingencies whether a sale goes through or not?

Advice from the CEOs:

  • You have to assume that the company will be a going concern. If there’s no hope for the future, there’s no power in the present. Without hope, you can’t establish a motivating vision around which to rally the team. Whether or not the sale goes through:
    • It is essential that the owners and Board make a commitment to the key employees, if not to the long term business.
    • Absent a long term commitment to the business, customer initiatives and alliances may prove difficult, because major customers will know that an offer is on the table. They want to be sure that they can count on you for ongoing needs.
  • The Board and Leadership Team must create a strategy for moving forward.
    • Key to success will be material and financial commitments from the Board to motivate the Leadership Team to stay on-board.
    • Retention plans may include:
      • Sizeable retention bonuses to the team.
      • If an employee stock-ownership program is in the works, there must be assurance that this will be put into place.
      • Rules of engagement in the case of future due diligences that will preserve the financial interests of the team.
  • For the CEO, support of the Board is crucial. It is imperative that the CEO impress on the Board how critical their support is to both the company and their own financial and fiduciary interests. If the Board fails to make commitment to the team and company moving forward, it will be difficult to create a winning strategy.

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How Do You Manage A Late State Private Tech Company? Four Topics

A late stage private high-tech company wants to know what questions are most critical for managing the next stages of growth. This includes factors that can help differentiate good opportunities from poor ones. What questions would you ask about managing a late stage private high-tech company?

Advice from the CEOs:

  • Team
    • Never compromise on your team. Is this a team of individuals who will be effective together, and can you make changes where necessary to build and manage the team that you need?
    • There is no room for someone who is not a cultural fit – do the team members work well together and does everyone see and support a win?
    • Who are the key stakeholders, and what drives them? Are these drivers compatible or in conflict? Can you bridge potential conflicts, or will they defocus your efforts?
  • Market & Strategy
    • Are your market projections realistic or fluffed?
    • Will your value proposition appeal to a large enough market to justify the investment of time and resources?
    • Is there a strong, realistic plan?
    • If you do a full SWOT (strengths, weaknesses, opportunities, threats) analysis, is the net positive?
  • Finances & Capital markets
    • Are the revenue and financial projections done correctly and achievable?
    • Raise money when you can, not when you need it – will the timing of your deal or opportunity, given existing financial markets, allow you to raise the funds necessary to bring the opportunity to fruition?
    • Is there openness to all potential capital or financing options? Financing is a personal relationship – how strong is the relationship?
  • Boards & Governance
    • Investors are investors; don’t overestimate their industry savvy. Are they aligned or in conflict? Are they fresh or tired? Will they support your efforts, and do they have the ability to generate extra funds as required?
    • It is impossible for a CEO or deal to be successful without the full support of the board – will you have full board support for your opportunity?
    • Is there clear differentiation between governance and management?
  • Looking over these questions, is the balance positive or negative? That balance will help you to accurately assess whether a given strategy or opportunity makes sense for the company.

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