Category Archives: Strategy

How Do You Build Meaningful Participation on a Social Web Site? – Six Thought Starters

Interview with Ken Ross, CEO, ExpertCEO, Inc.

Situation: We have built a good online community. Between our site and newsletter, we are in contact with tens of thousands of executives weekly. We constantly seek new ways to encourage active participation in our discussions. What have you done to effectively build regular participation in meaningful discussions?

Advice:

  • Know your audience and focus on topics that engage people. For example, we do a semi-annual compensation survey and get a great response when we publish the results.
  • We often learn more from mistakes than we do from success. Also, people love to talk about business blunders, particularly if the discussions include some well-intentioned humor.
  • Reach out to individuals with interesting backgrounds, experience and situations. Encourage them to post, or feature them in a discussion.
  • We send out weekly emails with titles and synopses of articles posted in the last week. This enables newsletter recipients to quickly scan topics and click on those of interest.
  • A common challenge is filtering posts which are trivial, self-promoting and lack relevance to the focus of the site.
  • The bottom line is that there is no magic bullet. Social networking sites are rapidly evolving so you must continually seek creative additions. This takes time, work and investment.
  • Now it’s your turn. What has drawn you to a social networking site? What have you done to effectively build regular participation in meaningful discussions?

You can contact Ken Ross at ken@expertceo.com

Category: Sales & Marketing, Strategy, Technology

Key Words: Online Community, Social Network, Social Web Site, Participation, Discussions, Mistakes, Humor, Newsletter, Creative

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How do you Research the Brutal Facts of a Business? Seven Options

Situation: The Company wants to enter a new market, but does not know much about it. Jim Collins advises understanding the brutal facts of any business as an essential part of strategy. How do you research the brutal facts of a business or market?

Advice from the CEOs:

  • Determine the key players in the market, and closely observe them – their mistakes and successes. Identify and interview clients and look for gaps in products and services offered. Use this research to develop a differential advantage for your product/service.
  • Use allied resources. For a general contractor this includes real estate professionals and other allied professionals who know the marketplace and the performance/reputation of other contractors.
  • Business consulting firms conduct surveys of markets. Look for and purchase published surveys. If you participate in their surveys you can get the results at a reduced cost.
  • Trade magazines and business journals like the San Jose/Silicon Valley Business Journal publishes surveys of the “Top 25” local businesses by industry. These help to assess local competition and gather information about revenues, principals, etc.
  • Leverage industry associations. Attend conventions and learn the lay of the land from the attending sales people.
  • Leverage Internet resources: Hoovers.com, Dunn & Bradstreet, HarrisInfo.com, and IndustryBuildingBlocks.com. 
  • Have your best sales reps talk to customers in the new market about their needs and desires, and their current suppliers. Ask them to gather information and present to marketing and sales competitive reviews of the market based on what they learn.

Key Words: Market Assessment, Customer Needs, Customer Survey, Differential Advantage, Consulting Reports, Trade Associations  [like]

How do you Respond Strategically to Market Uncertainty?

Interview with Kevin Moser, CEO, Dfine, inc.

Situation: The medical device industry faces uncertainty due to potential changes in reimbursement, increased regulation accompanying health care reform, longer FDA approval timelines and the economy. How does this impact strategy for an early stage medical device company?

Advice:

  • First and foremost it puts a premium on focus. We compete in a market dominated by large incumbents. When introducing new products in the past we would have blanketed the market to maximize early market share. Now we are being much more selective in terms of where we compete and putting more effort into targeted geographies.
  • This focus is accompanied by more caution and control of spending. We will only hire a new sales rep, for example, if we are assured that there is a significant customer base in the market that rep will serve.
  • Similarly, we are being much more cautious in our capital equipment decisions, and if an employee leaves we do not automatically replace that individual.
  • In terms of price planning, where in the past we would have counted on annual price increases, we now plan for the potential of prices decreasing over time to reflect new pressure on reimbursement and cost containment. As another example, in 2012 there will be a new tax on medical device companies. We assume that this will reduce our margins where in the past we might have passed it on to the buyer. Reduced margins will also impact our new product investment strategy.
  • The big change in long-range planning is that we are focused on slow, sustainable growth – maintaining both gross and net margins and profitability. This is a major change from five years ago when our focus was on maximizing rapid market penetration for new products. We want to be self-sufficient financially and thus avoid having to rely upon future fund-raising rounds.

You can contact Kevin at kevinm@dfineinc.com

Key Words: Medical, Device, Reimbursement, Regulation, Health Care Reform, FDA, Focus, Product Introduction, Spending Control, Hiring, Pricing, Growth  [like]

Can you Justify Differential Pricing for the Same Services? Three Approaches

Situation:  The Company struggles with differential pricing. They want to be fair to clients but feel that a one-price policy limits growth. What tiered pricing models work, and how are they rationalized?

Advice from the CEOs:

  • Differential pricing by client demand.
    • For high value services, you must have a compelling value proposition.
      • Research comparative premium pricing for similar value propositions and set prices accordingly.
    • For price sensitive clients, offer two alternatives:
      • Senior staff services at one price or associate services under supervision for a lower price. Let the client choose between price and quality.
  • Differential pricing by market risk.
    • Early stage clients want high service but may not be able to pay bills. This justifies a premium price, as you are not assured of collecting for services. The differential is a risk premium that covers non-payment risk.
    • Well-established clients are less risky, and support lower pricing due to a lower risk of non-payment and are assigned a lower risk premium.
  • Differential pricing for bundled vs. non- bundled services.
    • If a client purchases individual services, then there is a set cost for each service.
    • However, if a client wants to purchase a bundle of services, then it is reasonable to discount the bundle. You are not necessarily charging less for the bundle, because you have now received additional business at a lower acquisition cost. Your “discount” reflects the savings that you have enjoyed in reduced marketing and sales cost.

Key Words: Pricing, Pricing Models, Fairness, Value Proposition, Service Pricing, Market Risk, Bundled Services, Risk Premium  [like]

What are the Best Current Avenues for Raising Capital?

Interview with Sandy Lawrence, Past CEO, Therative, Inc.

Situation: The technology sector is growing following a couple of lean years. Whether you want to fund a new company, or a new effort within a smaller company, what are the best avenues to capital? How has the game changed?

Advice:

  • Funding and credit markets are opening but still tight. The bar has been raised because too many people are chasing too few available dollars.
  • The venture capital sector has consolidated. Over 80% of current focus is on technology, software and medical. Under 20% goes to the consumer sector.
    • It is important to target VCs who specialize in your technology, market and business model.
    • Research current VC portfolios.
  • Angels now act more like VCs – particularly structured angel groups.
    • Initial investments are typically under $1 million.
  • If you have a technology, investigate the grant world – e.g., NIH or DARPA. These organizations fund research, but not marketing, etc.
    • Look for specific programs or RFPs that align with your technology.
    • Target your grant request toward prototype development and studies.
    • Search LinkedIn for military people who can introduce you to contacts within programs like DARPA.
  • Investigate SBA Grants, and foundations with an interest in your technology or application.
    • Foundations sometimes will grant funds ($100k) to support the work of individual scientists and researchers.
  • Call on friends and family who believe in you and your work.
  • Whoever you approach, these rules apply:
    • Do your homework. Choose sources that align with your project and profile.
    • Presentations must be crisp and easily understood. Investing in professional assistance is wise.
    • Be able to make your case in 15 minutes or less. The first minutes are most crucial, so have your ‘elevator’ pitch perfected.
    • Your model and financials must support a high multiple exit, 5-10x their investment in a reasonable period of time (~5 years).
    • Team, Team, Team – credentials, experience, presentation – be a team with whom the investor can work.

You can contact Sandy Lawrence at slawrence@therative.com

Key Words: Fund Raising, Credit, Capital, Venture Capital, Angel, SBA, Foundations, Military, Presentation   [like]

How do you Maintain Morale in the Face of Uncertainty? Three Guidelines

Situation: The industry is changing and the Company must adapt both structure and focus. This may require a layoff of staff not aligned with the new focus. How do you maintain morale in the face of uncertainty and possible layoffs?

Advice from the CEOs:

  • Ask for employee input as to industry trends and what possible directions for the company.
    • Employees are closer to the customer than the CEO and have valuable insights.
    • Gather input in small group meetings to prompt discussion and ideas.
    • Make this a research talk. Leverage the “wisdom of the crowd.”
  • Research other industries that have undergone similar changes.
    • What strategies did the most successful companies pursue? Could these work for you?
    • If faced with protracted uncertainty, what did they do while waiting for market clarity?
  • If a layoff is necessary, conduct it in one day:
    • Monday is better than Friday.
    • Do it early in the day. Give final checks the day of the layoff.
    • Provide instructions for filing for unemployment assistance via the Internet.
    • Hold a company meeting for remaining staff immediately after the layoffs. Focus your message on the future and positioning the company for the future.
    • Prepare a brief summary of your message, to distribute as a take-away.
    • Be prepared for a grieving process following the layoff. Consider outside assistance on grieving to overview the process.
    • Following the company meeting, have key employees conduct smaller group meetings to lead discussions and allay fears about the layoff. Fully prep these individuals about the situation with written responses to likely questions.
    • The benefit of a Monday layoff is that you will see everyone on Tuesday, and the team can continue to address their concerns.

Key Words: Strategy, Layoff, Change, Morale, Employee Input, Analysis  [like]

Are Your Employees Living the Company’s Values? Four Recommendations

Situation: A tenet of the Company is that all decisions are made consistent with Company Values. However, some of my managers are asking for guidance on how to do this. How have other CEOs encouraged managers to make decisions consistent with company values?

Advice from the CEOs:

  • Create cross-functional teams to address initiatives, solve problems and develop new processes consistent with company values.
    • This builds understanding other departments’ perspectives, and awareness of the impact of decisions on the company as a whole.
    • It builds awareness of company values and fights unhealthy competition between functions.
  • One company created an employee task force to encourage living company values. Their solution includes:
    • Review the company’s values and consider revising how they are stated for easy learning.
    • Involve employees in discussions of company values and how they are applied in their departments.
    • Create a cross-functional employee task force to address inter-departmental conflicts and to suggest solutions in line with company values.
    • Expect everyone to know the company’s values, and occasionally test them.
  • Build a vision of what the company looks like as an expression of its values.
    • Make living this vision part of your role.
    • Include living company values as a formal responsibility of managers.
    • Reward initiatives that build company values into company efforts.
    • Regularly review with your mangers their execution of company values.
  • Create “SMART” objectives around implementation of company values, and hold individuals accountable for achieving their objectives.

Key Words: Company Values, Decisions, Employee Involvement, Initiative, Vision, Role, Objectives, Accountability  [like]

Opening a Branch Office – Five Preparatory Analyses

Situation: The Company plans to open their first branch office. There are considering several possible locations. What are the most important considerations as they prepare?

Advice from the CEOs:

  • Perform an ROI analysis for the planned office. How is the ROI for the branch office different from your primary office? Look for potential economies of scale in your business model. This may prompt a rethinking of how you generate your products or services.
  • Simultaneously, look at your potential costs per location and the level of business required to (1) break even and (2) to match/exceed home office return in the new location. As you consider different geographical locations, compare costs and potential contribution of each against the others.
  • Decide whether you need to build full operations in your branch offices, or whether you can use a distributed services model, working from a central hub that performs some operations that need not be replicated in the branch offices.
  • Once you have completed these three analyses, perform a make/buy analysis to determine whether you get a better return from setting up your own office or purchasing a local company, if one exists.
  • Lower risk by starting with a relatively low cost operation – essentially a satellite office with minimal staff. As the new office develops initial business, they can be supported by your home office operations. They will serve as local feet on the street to evaluate the true potential and local barriers to entry within the new market.

Key Words: Branch Office, Location, ROI, Economies of Scale, Make/Buy, Barriers to Entry       [like]

Working with an Off-Shore Business Partner – Six Recommendations

Situation:  The Company has an off-shore business partner. Primary concerns involve team performance, process documentation and anticipating sales/marketing problems before they become issues. What have you found effective to monitor these areas?

Advice from the CEOs:

  • At the executive level, keep things simple – identifying the major goals and pieces of projects that are the make-break points.
  • Simplify the high level summary and make sure that all of the supporting activity is aligned with and supports key project or company goals. Some members manage projects with weekly or bi-weekly meetings.
  • The benefit of keeping it simple in your own mind is that you can always return to this simplicity when dealing with detail level queries from the partner. It keeps you grounded and on track.
  • One company uses project timelines that clearly show each of the teams where they fit into the project and how important it is for them to complete their portion of the project on time and to spec. Keep everything simple and direct.
  • Sales tracking and management is different from development projects. Drive monitoring off forecasts, pipeline, and achievement of metrics that track with the forecasts.
  • In working with your off-shore partner, organize your presentations so that the key points of emphasis are readily visible. Have back-up slides to show detail aspects of particular projects or initiatives, and be prepared to cover the details if needed. This will help to build confidence between you and your business partner.

Key Words: International, Partner, Performance, Process Documentation, Sales, Marketing, Alignment, Project Management, Communications                 [like]

Merging or Selling the Company – How do we Retain Key Staff? Five Suggestions

Situation: The Company has a merger / sale of the company pending. While most direct staff will be retained, roughly half of the indirect staff may be at risk. The CEO’s objective is twofold: to retain key indirect talent before and during transition, and to do right by those who have made strong contributions to the company.

Advice from the CEOs:

  • One member dealt with this a few years ago. They set up a retention fund for important but potentially impacted employees in advance of the anticipated transaction. The longer the employee stayed with the company through the transition, the larger the payout for which they were eligible. In the case of no transaction, the funds were to be returned to the company.
    • An alternate version of this option is to use insurance to fund a retention package for a group of key employees. This package may or may not be required depending upon the transition.
  • For potentially impacted employees, consider a retention package that rewards them for staying long enough to train the purchaser in their areas of expertise.
  • Look at outplacement services as part of the package for employees. Let employees know that this is part of the package if they are not retained post transaction.
  • Seek outside consultant expertise to assist in the design and administration of a retention package. Also look at your own network, and seek the advice of others who are well-versed with the technical aspects of employee transition.

Key Words: Merger, Sale, Employee Retention, Insurance, Outplacement  [like]