Category Archives: Strategy

What is Your Experience Outsourcing to Eastern Europe? Five Factors

Situation: A company is in contact with an Eastern European company that seeks outsourced business from the US. The CEO seeks guidance on challenges managing as well as formalizing this relationship. What is your experience outsourcing to Eastern Europe?

Advice from the CEOs:

  • Location in Eastern Europe is important. There have been concerns with both corruption and IP protection in Russia. Some other Eastern European are more aligned with US/European values and farther up the ramp as outsource partners.
  • Experience of other US companies suggests that your spec must be written much more tightly than if you were doing the work here. If you can’t write a tight spec on the work, don’t outsource it!
  • Contract outsourced work on a fixed fee basis with the bulk of payment due on completion. This helps to assure that you receive timely delivery and the quality of work required.
  • Set up thresholds for the circumstances to engage an outsource partner.
    • Say one US worker is economically worth 5 foreign workers in your domain. Do you have enough work to support this?
    • Determine who will manage the outsourced work. A European is fine, as long as they have experience managing outsourced work.
    • Someone on your team will become their Project Manager. This can be VERY time consuming.
  • Consider setting up an offshore company to shelter some of the revenue from the outsourced work.
    • You want to locate the offshore company in a tax-free country, and to have them handle the funds connected with the outsourced work.
    • The contact in the tax-free country will likely be an accountant, lawyer or both. There are many reputable individuals who do this in tax-free countries, but be sure to check references and background carefully.

Key Words: Outsource, Eastern Europe, Challenges, Manage, Relationship, Experience, Concerns, Alignment, IP, Corruption, Contract, Protect, Spec, Fee Basis, Delivery, Quality, Parameters, Tax Shelter

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What Have You Done to Manage Rapid Growth? Five Foci

Situation: A company has experienced rapid growth. This is creating stress for the staff and CEO, who finds it difficult to break away from the day to day to focus on strategy. Employees are not keeping pace with the evolving needs of the company and turnover has increased. What have you done to manage rapid growth?

Advice from the CEOs:

  • The first task is to improve forecasting of business growth, and the infrastructure needed to support this growth. This includes:
    • Regularly updating your sales and production forecasts.
    • Updating staff and training plans to meet growth forecasts.
    • Updating infrastructure and support plans.
    • Without these, the organization will whipsaw in response to market demands.
  • Take a critical look at your staff development plans and staff training.
    • Look at those areas that are most impacted by business growth. Determine whether you have the right managers and support in place.
    • Evaluate whether you have the right people and whether they have the skills to handle new demands of their positions.
  • Critically evaluate each now job that you take on. Assure that you have the staff and infrastructure to meet client demands.
    • Always assure that you deliver on your company’s integrity, reputation and core values.
  • In addition to addressing immediate needs, look at long-term plans strategically. Ask where you will be in 10 years. Articulate this vision in detail, and drive plans down through the organization. Make sure that everyone is on the same page, aligned with the same values, aiming at the same targets.
  • Also differentiate your vision from your mission:
    • You vision is a 10 year time frame, not one year.
    • Your mission is what you will be doing this year and in 5 years – the activities you will undertake to realize your longer term vision.
    • Fine tune your vision and mission and drive these through the organization. This will give you clarity on how you wish to do business and will help you to make hard choices as you handle rapid growth.

Key Words: Growth, Rapid, Stress, Focus, Turnover, Forecast, Infrastructure, Training, Support, Values, Staff, Development, Skill, Plan, Align, Vision, Mission

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In Challenging Times Do You Cut Losses? Three Considerations

Situation: A company lost money last year, but turned the corner with a profitable final quarter. One of the company’s divisions continues to lose money, though the losses are small compared to the total picture. The CEO is considering cutting this business. What factors should the CEO consider in making this decision?

Advice from the CEOs:

  • What expense factors contributed to the loss?
    • The biggest factor was allocation of vehicle and space expense. This division has seasonal revenue but carries the allocated expenses for the full year.
  • Make sure that your allocated expenses are fair to the business. Do overhead allocations reflect utilization? Unless closing the business eliminates vehicles or space, if you terminate this business these expenses will be borne by the rest of the company.
    • Study your allocations by shifting the allocation made to this business to other businesses. What is the impact on their profitability?
    • If you find that the current allocation does not reflect utilization and adjust accordingly, does the business still lose money?
    • If this division covers its direct expenses along with most of its allocated expenses, a small loss in this division may be preferable to a reduction in profitability of other businesses from closing the division.
  • How strategic is this division to the overall business mix?
    • Is this business essential to your product/service mix or just a customer convenience? If you terminated the business will customers be upset?
    • Do competitors offer this service, and would you be disadvantaged by discontinuing it?
  • What are the alternatives?
    • Can you raise prices to increase profitability and refuse business that does not meet this pricing?
    • Can you restrict the offering to less price sensitive customers?
    • Can you refer customers to other vendors or sub out this business?
    • Can you reduce the scope of the offering while adjusting pricing to enhance profitability?
    • Can you source other labor alternatives to reduce cost?

Category: Strategy, Service

Key Words: Profitable, Loss, Division, Business, Critical, Factors, Expense, Allocation, Seasonal, Overhead, Loss Limit, Customer, Price, Competition, Offering, Scope, Labor, Skilled, Contractor

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How Do You Bridge The Supply Demand Gap?

Interview with Jim Hogan, CEO, SView LLC

Situation: The rapid evolution of mobile devices creates new opportunities to build mobile enterprise application businesses. However for businesses there is no clear path to mobilizing business applications. How do you bridge the gap between supply and demand in mobile enterprise apps?

Advice:

  • There are three legs to the stool of a successful SMB business model: developer platform, go to market strategy, and licensing and maintenance sales strategy. There is a consolidation play available for a small company that can generate traction in all three.
  • As to developer platforms, Microsoft originally got traction for Windows by being maniacal about building great developer relationships. Over time they leveraged this and just got better and better.
    • There are several platforms available that show promise, including Rhomobile, Mobile Nation HQ, and Appcelerator.
    • All are small now – in the $1-20 million revenue range. Their principal challenge is identifying a viable go to market strategy.
    • Another platform that shows promise is IBM’s Eclipse IDE.
  • Next is go to market strategies. Yahoo recently launched a search engine for mobile apps in Yahoo for Mobile. This is important to the creation of a viable market place for apps regardless of platform. If a viable platform developer can do a deal to generate a market for business apps this will go a long way to developing a successful go to market strategy.
  • The third leg, development of a long-term licensing and maintenance sales strategy, will most likely occur through acquisition of a company with the first two pieces. The lead would be an initial developer platform but could spin off to others.
    • Apple has started looking into this play with its iCloud strategy; the challenge for Apple will be making it enterprise-friendly.
    • Who else could do this? RIM and Microsoft both have a long history serving business customers, huge customer bases and  and the marketing capabilities to support mobile business applications. The wild card may be HP – currently the largest hardware purveyor in the enterprise and consumer space, and with the new WebOs platform from their purchase of Palm
  • It will be fascinating to watch how this market develops.

You can contact Jim Hogan at jahogan@jahogan.net

Key Words: Mobile, Device, Enterprise, Application, App, Opportunity, Scalable, B2C, Gap, Supply, Demand, Developer, Platform, Go to Market, Licensing, Maintenance Sales, Rhomobile, Mobile Nation HQ, Appcelerator, Microsoft, Yahoo, RIM, HP, Palm

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How Do You Introduce New Information into a Negotiation? Five Thoughts

Situation: A company is negotiating an agreement to resell another company’s software. In due diligence the company encountered a customer who was offered a single user license for the same software at one-third the price that they have been asked to pay upfront. What is the best way to approach the vendor for additional information without divulging the source of his intelligence? Does this change the negotiation?

Advice from the CEOs:

  • There is no need to divulge your information source. Just say that you have done some research and quote the price that you found. Ask them to explain this to you. See how they respond. This may tell you a lot about how they operate.
  • What rights do you receive under the arrangement that has been offered by the firm? What exclusivity and guarantees will they offer? Will they write these into the agreement? How will they handle direct inquiries?
  • Perform a careful financial analysis of the opportunity. Model the market and the full cost of sales that you will encounter. What is customer purchase behavior? Is it changing?
  • Counter the vendor’s offer to you with a pay-down option that pays the vendor more over time, but allows you access to the software without a substantial up-front payment. This limits your exposure if sales do not ramp as you anticipate.
  • Visit the vendor and sit down with the President. See how this individual responds to your questions. You may get a much better deal through this approach than through the sales team. You also may develop other partnership options that can benefit you long-term.

Key Words: Reseller, Agreement, Price, Software, Due Diligence, Negotiation, Research, Exclusivity, Guarantees, Direct Inquiry, Analysis, Customer, Behavior, Counter, Visit

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How Do You Aggregate an Audience? Three Strategies

Interview with John Hollar, President & CEO, Computer History Museum

Situation: Traditional media for reaching audiences – television, newspapers – have broken down. Audiences are atomized and increasingly “what you want when you want it.” How do you aggregate an audience in this environment?

Advice:

  • Develop partnerships that align with you both in terms of audience and purpose.
    • We just finished a $20 million expansion. With 1.5 million technology workers in Silicon Valley, how do we spread the word?
    • We work with corporations in the tech sector, corporate alumni groups, tech retailers, convention centers, hotel concierges, and schools.
    • Our new campaign – Silicon Valley Starts Here – encourages Silicon Valley visitors to start their Silicon Valley journey with us.
    • School field trips are booked through the end of the year. Local foundations support transportation costs.
  •  Leverage the digital world to expand your presence.
    • Everything physically present in the museum is also available digitally to a global audience.
    • We use Facebook, Twitter and LinkedIn to generate viral networking.
    • Live events are captured in HD and broadcast through our YouTube channel to 2 million viewers.
    • We update our Facebook page and tweet daily. Facebook is fun and playful with “Today in Computer History” and Friday YouTube films.
    • Tweets include a quiz – “Who Am I?” – of famous figures in computer history with prizes.
  • What are the implications for companies and institutions?
    • We must embrace the notion of living in parallel worlds – having both a physical presence and a broader digital presence.
    • Expert knowledge is here, but we must be able to access an increasingly digital audience that is global.
    • Digital capabilities can’t just be bolted on to an old structure. This must be a marriage that connects our knowledge and expertise organically to our audience, their needs, and the knowledge and expertise that is happening in the world.

You can contact John Hollar at jhollar@computerhistory.org

Key Words: Media, Audience, Partnership, Purpose, Awareness, Campaign, Digital, Presence, Facebook, LinkedIn, Twitter, YouTube, Inflection Point, Digital Lifestyle

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When Do Marketing Partnerships Make Sense? Four Considerations

Situation: A company has an opportunity to form a marketing partnership with another firm. The primary potential benefit to the company from this partnership is gaining access to new customers. On the other hand, partnerships may bring complications. What is your experience with marketing partnerships, both positive and negative?

Advice from the CEOs:

  • Marketing partnerships can certainly work, provided that both parties see benefit to the relationship, and both are committed to make it work.
  • Be sure to clearly define boundaries with the partner.
    • If either company can perform a particular service, whose customers are who’s?
    • Is there alignment throughout the partner’s organization regarding the partnership? Or are their conflicting priorities within different branches of that organization? Test the waters ahead of time and assess how these will potentially impact the partnership.
  • There are potential pitfalls:
    • What is the in-house/outsource attitude of the partner? If there are strong voices for in-house production or service provision, these will not be supportive of the partnership.
    • Watch the quality of the partnership over time.
      • Successful partnerships are based as much on friendly cordial relations as on business priorities. Are your business cultures and ethics compatible?
      • Who is the champion for the partnership on the other side? What will happen if the champion leaves? Is there a back up champion?
  • Build an exit strategy into the partnership that will allow you to leave gracefully and mitigate financial or good will consequences if the partnership sours.

Key Words: Marketing, Partnership, Customer, Access, Pros, Cons, Benefit, Commitment, Support, Boundaries, Priorities, Pitfall, Quality, Relations, Culture, Ethics, Champion, Exit

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How Do You Negotiate a Tricky Merger? Five Thoughts

Situation: A company is considering a merger. The other firm competes with customers who account for 25% of the company’s current revenue. How do you maximize the value of this merger to the company while mitigating the negative impact on current business?

Advice from the CEOs:

  • The maximum risk from the combination is loss of 25% of current revenue. The merger makes sense if you believe you will gain upside which more than counters this risk.
  • Both companies have brand equity. Maintain both brands and to continue to promote them. Maintaining both brands will buy you time to replace business which is potentially at risk.
  • Talk to customers and get their perceptions of the pros and cons of the potential combination. Ask about any concerns that they may have. Understanding the pros, cons and concerns will help you to mitigate negative fall-out.
  • Legally, in a 50/50 split, the Chairman will call the shots. You will have little recourse to counter the Chairman if he decides to fire you. This individual has built his company through previous mergers. Visit and break bread with those who were principals of these companies at the time they were merged or acquired. This will tell you a great deal about the individual with whom you entrusting your future. You will also learn what the others did during their mergers to help plan your own moves.
  • Give yourself a back door or Golden Parachute after six months if the merger does not go as you anticipate.

Key Words: Merger, Competition, Value, Mitigate, Upside, Risk, Market, Access, Brand, Equity, Customers, Pros, Cons, Concerns, Control, History, Golden Parachute

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How Can Business Contribute to the Future of Technology Education?

Interview with Muhammed Chaudhry, CEO, Silicon Valley Education Foundation

Situation: A critical component for the future of technology in the US is a workforce trained in math and the sciences. In Santa Clara County, California – the heart of Silicon Valley – only 49% of high school students complete University of California/CSU qualifying courses, and only 26% of Hispanic students. How can private industry contribute to the improvement of education and the training of future workers?

Advice from Muhammed Chaudhry:

  • Silicon Valley Education Foundation’s objective is to make Silicon Valley the number one region in California in student readiness for college and careers. It has been shown that the top predictor of college success is the completion of Algebra II in high school.  Our primary program – Stepping Up to Algebra – focuses on students and teachers to increase the number of students who are ready for Algebra I in 8th Grade. To date 2,500 kids have gone through our program.
  • We actively encourage private industry to get involved in our programs and to invest in solutions that work. We call this involvement Work, Wealth and Wisdom.
  • Let’s talk about Work:
    • Our aim is for every business person to make it a priority to invest time in public education. This takes an investment – we ask for a consistent investment of 4-5 days a year.
  • Next is Wealth:
    • We encourage every business person to sign up to our Sustainer Program. The commitment is modest – only $5 per month to support our activities.
    • We encourage corporations to Adopt a Classroom for $10,000.
  • Finally we have Wisdom:
    • We encourage business people to get involved. We need help designing technology products that enhance learning and in formulating a blended learning approach.
    • We need to improve the enabling of technology in our schools to improve individualized learning to maximize the potential of each student.
    • We need support and involvement in policy work by contributing business thinking. Education has lessons to learn from business.
    • There is room for innovators who are interested in social benefit and long-term investment with profit as a secondary consideration.

You can contact Muhammed Chaudhry at muhammed@svefoundation.org

Key Words: Technology, Future, Education, Workforce, Math, Algebra, Science, College, Preparation, Work, Wealth, Wisdom, Investment, Engineer, Software, Funding, Learning, Policy, Innovation

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How Do You Manage Opportunities in This Economy? Five Ways

Interview with Keith Merron, CEO, Avista Consulting Group

Situation: Ongoing uncertainty makes it difficult to clarify strategies going forward. What are the bases for these uncertainties and how do you manage opportunities in this economy?

Advice:

  • The world is moving so rapidly that they key to success is differentiation. There is so much information about how to do this that companies start to look similar very quickly. The ability to stand out as different is critical. Ask yourself:
    • What is my target market?
    • What are the needs that my offer will satisfy?
    • What is my unique approach that is distinct from other solutions which meet these needs?
    • Once you identify the answers, you need to back these up.
  • One has the opportunity to write the future. If you can get one step ahead of the curve this is a huge advantage.
    • Products that died were often two steps ahead.
    • Successful visionaries see patterns that are emerging, sense what is next, and speak to that.
  • Because information is at your fingertips through the Internet anyone can set up a business. The Challenges are viability and sustainability. If these are present the opportunities are huge.
    • The web is a place where you can share information. How to monetize this is unclear.
    • Once you have a following you can offer things for sale that are valued by your following. When this happens, the potential for fast growth is more available than ever. So is the flip side. If a restaurant gets trashed on Yelp this can kill it!
  • In a recession, M&A activity is faster. This enables one to establish a presence much more easily.
    • There are many virtual companies. You no longer have to be in the same place to work together! There are also many ways to partner or co-brand via the Internet.
    • What’s hard is to create tensile strength in the relationship. Because it is so quick and easy to cobble together relationships, the biggest challenges are creating loyalty and commitment.
    • The needs are communications, motivation, commitment and follow-through – just like in a traditional company but in a virtual space. This creates a true bond.

You can contact Keith Merron at keithmerron@comcast.net

Key Words: Uncertainty, Opportunity, Differentiation, Target, Market, Needs, Approach, Timing, Patterns, Visionary, Internet, Following, Community, M&A

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