Category Archives: Technology

How Do You Execute the Product and Market Timing Plan? Five Points

Situation: A company’s CEO is operating in a complex marketplace. Product pricing and consumer acceptance are issues. Consumer education about the product is an important part of the market plan. It may take a couple of years for the market to develop. How do you execute the product and market timing plan?

Advice from the CEOs:

  • Important issues are survival while the market develops and maintaining a unique technology advantage.
  • As a small player in a busy and rapidly evolving market, a critical element of the strategy will be to rapidly gain the attention of the people that Seth Godin has named the “sneezers” – those who have significant influence on their consumer and business peers and who can quickly help to create the momentum that will drive the company’s market position.
    • Examples: give the product to the key influencers at target companies.
    • Make it easy or free for the key influencers within your partner organizations to experience, love and spread the word about the product. Allow them to give a few free copies to friends.
  • To avoid becoming roadkill, fly under the radar.
    • Look for opportunities as they occur in this evolving market. They may come from many players.
    • Have a solid strategy in place to execute once an opportunity arises: What do you want to achieve? What is the timeline? How will you measure achievement?
    • Have multiple back-ups to the key partners that the company is currently courting.
  • Instead of looking for VC funding to fund the next round, why not secure the additional funding from the company’s original backer?
    • To earn this the company will have to demonstrate: interesting partnerships, traction in the marketplace, and assurance that an existing major player won’t squash the company.
  • A perceived barrier is that the product is not quite ready to deliver the experience that customers will expect.
    • What is “not quite ready”? Most successful products are not 100% ready on introduction. Look at Microsoft’s strategy. From their earliest products to the present, new versions are launched when they are 80-90% complete. They then respond quickly with updates based on customer feedback. Many other companies have done the same.
    • Historically, first to market has beaten later, more complete entrants.

[like]

How Do You Implement Your Vision for the Future? Seven Points

Situation: A CEO has a clear vision for the future of her company and what she wants to build. Her ambition is to revolutionize her industry. What are the most important things that she should to make her vision a reality? How do you implement your vision for the future?

Advice from the CEOs:

  • It is critical to take charge of the vision for the company and to see that the company has or hires the right people to implement the vision.
  • As CEO, remove yourself from the day to day.
    • Hire a Director of Operations ASAP.
    • With the right experienced Director of Operations, the infrastructure to support the program will fall into place. This individual will help to assure that this happens because he/she will be incentivized and motivated to perform.
  • Concentrate the focus for the next 4-6 months to scale the present operation to the point where the model can be “franchised.” Consider expanding the model through sites with managers who have an ownership interest.
  • An important initial step is rounding out the training process.
  • The greatest value of the present site is to serve as a demonstration site to show potential customers how installation of the technology in their operation would work. With this in mind, build a working demonstration model on the present site to the dimensions and scale that customers would see on their sites.
  • To shorten the lengthy sales cycle, create and sell a feasibility study for the technology. Agreement to a feasibility study represents commitment from the prospect and conducting the study will create buy-in on the part of the customer.
  • As the new technology is launched, CEO time will be spent away from the initial site. Prove that the site can run in the CEO’s absence before leaving for extended periods of time.

[like]

How Do You Establish the Company’s Brand? Four Approaches

Situation: A company has developed a leading local position in an important new technology. The CEO is concerned that the company’s suppliers may try to move into their market and replace them. What’s the best strategy to counter this threat? How do you establish the company’s brand?

Advice from the CEOs:

  • Exhibiting high growth is the company’s best shot – whether to preserve exclusivity in the company’s geographic area or to build the company’s brand. Aggressively build the company’s service presence to build a sustainable advantage.
  • The primary question is – What is the objective? The objective is to build the company’s own presence and brand.
    • What would happen if another, better technology was launched? Wouldn’t the company want to offer this?
    • Think Web 2.0+. Build the company’s website as the place to go to discuss the technology, share thoughts, designs and software, and easily source prototypes – provided by the company. Let users define the site and the market for the company.
    • The bottom line: exclusivity may not be in the company’s best interest if it inhibits access to the best technology. Strive to build the company’s brand instead and be opportunistic on the exclusivity issue.
  • What markets have gone through similar development? What can you learn from them?
    • Document other rapidly changing markets. Hire a current undergraduate or MBA student to research how these markets have developed.
    • Select a target vendor with multiple locations and do a deal with them to locate your technology and service in their locations.
    • Look at a franchise for which the company’s technology is a compliment and see whether franchise owners are open to adding the company’s technology in their locations.
  • Does the company have a partnership strategy? How can they accelerate strategic development?
    • Where is the place to focus?
    • Who is the perfect partner for this focus?
    • Identify the most promising markets and use partnerships to accelerate penetration of those markets. Write partnership agreements so that once an area is developed the company has the option to take it over. This is a classic market development strategy.
    • Give away some of the company’s margin to partners in lieu of salaries or commissions to support market development.
    • Look for partners in key locations in the company’s territory. Do a demo at a Starbucks where engineers like to hang out.
    • Hire a sales or business development person to work on partnership development.

[like]

How do You Minimize Inventory Damage by an Outsourced Manufacturer? Five Points

Situation: A company uses outsourced manufacturing but is concerned about inventory damage by the manufacturer. Tests have been established to assure both visual compliance and functional performance, overseen by a company employee. Still the company is receiving too many unacceptable parts. How do you minimize inventory damage by an outsourced manufacturer?

Advice from the CEOs:

  • It is perfectly acceptable for a vendor of consigned materials to bear the risk of product that is not to specification.
    • In any contract for manufacturing, require that the vendor carry insurance to cover the full cost of materials and processing in case of damage either during manufacturing or shipping.
  • It sounds like this is a new opportunity and situation for the company. In the process they have not guaranteed that both cost and risk are covered.
    • There is no point in assuming all this risk.
    • For future opportunities like this, take on the work as a time and materials project at an appropriate hourly rate for the market, and with a significant mark-up to cover risk as the project is transferred to a contract manufacturer.
    • Another option is to take on the project under a project management contract, and to bill engineering separately.
  • This situation sounds familiar for an evolving project. In the future try to unhitch the manufacturing piece from the engineering. Engineering should be more profitable, which will allow the company to more successfully manage the project into early manufacturing.
  • Strategically, this could be a good move for the company provided they partner with a reliable vendor to facilitate early stage manufacturing. One option for paying sub-vendors is to pay for yield – particularly if early stage work has a high failure rate.
  • If the market opportunity is there do two things:
    • Set up an organization with professionals who know early stage manufacturing.
    • Be aware this group will have a different culture and approach compared to design engineers.

[like]

How Do You Evaluate an Acquisition? Five Points

Situation: A CEO is evaluating an acquisition which could significantly contribute to his company’s financial position. Patented technology may add value to the deal. The founders of the acquisition target are willing to work part-time to facilitate the transition of their technology to the acquirer. How do you evaluate an acquisition?

Advice from the CEOs:

  • Set a timetable to close the deal or walk.
  • Two key factors in the due diligence process will be strength of the intellectual property and cost of the acquisition long term.
  • Another key factor to evaluation will be how this opportunity fits into the company’s larger financing plan. Currently the company is undertaking a financing round. How much will this acquisition contribute to or distract from the financing round?
    • If this is a primarily a value-add opportunity, will it add to the larger financing round?
    • Can the larger financing round be completed on time while pursuing this opportunity?
    • An option is to negotiate a white label agreement – an agreement that will keep the company in the game while completing the larger round.
    • If the founders are not amenable to a delay, what is the cost in terms of funds and effort versus the larger round.
  • The technology appears interesting, but the timing is bad given your need for the larger financing round. Here’s an option.
    • Go to the founders and start the discussion. Secure a license or hire their programmer. Let the technology go dark until the financing round is completed.
    • There is value here – but do this as a side focus if it’s not too expensive. Assure that the deal includes both rights and the underlying algorithms.
  • Delegate this to someone else in the organization. The CEO’s focus is the larger financing round.

[like

How Do You Improve Quote to Collections Flow? Four Tactics

Situation: A company is losing billings because individual billings are getting lost in their process flow. Requests for enhancements come from clients to Project Managers. Project Managers take on development of the enhancements but are sometimes too busy to keep track and don’t report their work to the billing department. How do you improve quote to collections flow?

Advice from the CEOs:

  • It appears that two processes are missing:
    • A formal trigger mechanism to assure that a PO is in place BEFORE Project Managers undertake enhancement work, and
    • Managers are incentivized to assure that the client is billed and revenue collected for the work performed.
  • Formalize the process and do not allow Project Mangers to initiate any work until a work request is logged in the billing system and a PO is received from the customer to cover the expense.
    • Develop a process to track customer requests, estimate development and transmission to billing, forwarding of estimates by billing to the customer with a request for a PO, and upon receipt of PO authorization by billing to initiate work.
    • This can all be tracked and managed by most accounting software packages.
    • This process will:
      • Facilitate tracking of actual expense vs. estimate;
      • Tracking of requests for which no POs are received, for client follow-up; and
      • Tracking of enhancement requests to guide future product development.
  • Compensate Account Managers to track and manage the process.
    • If an Account Manager receives a commission for enhancement work they will have an incentive to keep track of all ongoing work, both for timely delivery and to assure that the customer invoiced for the work.
    • Commissions paid to the Account Mangers will be a small percent of the extra revenue collected.
    • To improve process management, schedule regular meetings to review all enhancement and other work being done for clients. Review and assure that all work has accompanying POs, that the work is being completed on a timely basis and in line with original estimates, and that the company is invoicing and being paid for the work. Empower Account Managers to organize and conduct these meetings. Their incentive will be the commissions they will collect on payment for the work.
  • Build upgrades and a certain number of enhancements into the product price.
    • This enables to company to increase prices and to collect prepayment for enhancements and upgrades that may or may not be requested.
    • Use the process outlined above to track enhancements which are credited against the prepaid accounts, and to assure that enhancements above the prepaid limit are invoiced.

[like]

How Do You Create Predictable Costs and Profit? Seven Suggestions

Situation: A company finds that it’s costs and profitability vary greatly by season and during economic fluctuations. Some of this is due to hourly rate fluctuation and payroll costs. They also have excess capacity during slow periods. However, new projects arise quickly, and the company must be prepared. How do you create predictable costs and profit?

Advice from the CEOs:

  • Here’s the grim reality. In volatile markets, forecasts are meaningless. Instead of fretting over forecast accuracy, focus on increasing billable rates and managing expenses.
    • To generate additional revenue per project, add a flat percentage charge for project management on top of time and materials. This is often treated by clients like a sales tax or a gasoline cost adjustment and may not penalize contract negotiations.
  • Is it possible to build a sustainable revenue source to resolve profit lumpiness? There are options:
    • Application maintenance projects. After building a box add a provision for maintenance/upgrades as new capabilities and technologies are developed. This can cost-effectively extend the life of the box and long-term profitability of the product that the box supports, while gaining an annuity revenue stream.
    • Add a maintenance add-on service to leverage the company’s core competence on an ongoing basis. Provide technology upgrades through a maintenance subscription similar to software companies adding optional access to all new releases over the course of a year for a fixed subscription cost. The cost to the company for upgrade downloads is essentially nothing, but it gains an annual annuity revenue stream.
  • Investigate a help desk service to sell via subscription to small companies. Most clients use less than they anticipate; however, they prefer the security of a flat price subscription service.
  • What additional info can be gathered through sales to better drive sales forecasts metrics? Look at the past several years: is there any seasonality in a multi-year analysis. It may not occur every year, but if you there’s a pattern it may enable the company to proactively reduce costs where there’s a predictable dip in project demand.
  • Are sales people responsible for both maintaining client relationships and creating new business?  Most companies split these functions because maintenance is like farming while new business development is hunting – few sales people excel at both.
  • If, in development, the company develops IP, can this be used? When there’s down-time can capacity be leveraged to develop the company’s IP portfolio? Look at IP licensing opportunities. This provides an additional potential source of annuity revenue.
  • While it is important to figure out an annuity revenue stream, the principal lesson from the discussion is that most CEOs say that margins are better on fixed price projects than on time and materials. The key is to control to client requests for add-ins or adjustments and to include provision for these in contracts.

[like]

Do You Expand Production Locally or Internationally? Five Points

Situation: A company has built a very successful specialty manufacturing business in the US. Their manufacturing operations are labor intensive, with manufacturing practices optimized using motion studies and sharing best practices developed on the production floor. The CEO is evaluating whether it makes more sense to expand production in the US or to explore international options. Do you produce domestically or internationally?

Advice from the CEOs:

  • There are trade-offs between domestic and international production. Quality labor is available internationally at lower costs than in the US. However, risks include potential loss of quality control and higher levels of waste.
  • While investigating international production options, focus first on less critical operations where savings from lower labor costs outweigh the potential cost of wasted material.
  • Do not try to move highly controlled operations. These will include critical operations which require both an elevated level of operator skill and close supervision.
  • Before evaluating international options, break down the steps of manufacturing or processing to identify specific subcomponents or subprocesses that could be outsourced at reasonable risk.
    • For example, look at high volume parts where quality and variation in tolerances is less critical. These will be the best candidates for production in a lower cost, potentially lower quality environment.
  • How critical are trade secrets or patented IP to production? In the US and Europe there are strong protections for IP. However, these protections are not as strong in all countries. If production is outsourced to countries with poor IP protection, this may enable IP theft and create future low-cost competition.

[like]

How Do You Expand into New Markets? Three Perspectives

Situation: A CEO is evaluating a horizontal market development opportunity to markets related to their current market. There may be branding implications. The new opportunity focused on a different sector and can add business unrelated to current customers. However, the new opportunity will stretch current resources and potentially impact current business and service delivery. How do you expand into new markets?

Advice from the CEOs:

  • Pros:
    • Because the new opportunity utilizes known capabilities the company should be able to segue into the new market relatively easily.
    • Because the company is already familiar with security and other issues relevant to the new market, compliance should present no challenge.
  • Cons:
    • Consider the impact on company time and resources. Building any new business will challenge current priorities and will require a careful balancing of efforts to assure that both current and new customers’ needs are being met.
    • Build workload and service schedules for both existing customers and the effort that it will take to develop the new opportunity including the time needed to create and build new customer relationships. Take your best estimate of resource utilization for the new effort and double it, then ask whether your current staff and capacity can handle both markets. If the answer is positive, then you can be more comfortable with the decision to expand into new markets.
  • As you evaluate the new market opportunity, look at both anticipated and unanticipated but predictable challenges that customers may face over the next five years.
    • For example, is there misalignment between future challenges likely to be faced and the current expertise and skill sets of managers who will be tasked with addressing these challenges? If so, tailor the sales pitch for new capacities to address these challenges.
    • Are there existing mismatches between products and services currently offered in the new markets, and do proposed solutions help to address these mismatches? If so, there may be significant opportunities in addressing these mismatches across multiple customers within the affected markets.

 

[like]

How Do You Finance Growth? Three Options

Situation: A mid-sized company faces challenges financing their growth. Investment of time, energy and resources precedes the reward of future revenue. It can be difficult to balance the cash needs of current operations with new growth opportunities. How do you finance growth?

Advice from the CEOs:

  • Have you analyzed growth opportunities and evaluated which could increase your cash flow? For example, if you increase manufacturing efficiency, can the savings help to finance growth?
  • If you produce parts or products for start-ups, can you structure the relationship so that if the start-up become successful and is subsequently purchased by a larger company there is a bonus payoff for the work that you’ve done?
    • Analyze – by project, not company – the jobs you’ve done that have eventually become large volume opportunities. Try segmenting your analysis based on the source of the original project: jobs for start-ups, mid-sized and large companies. This may provide insight on where to focus future efforts.
  • Another company performs clinical services for both big pharmaceutical companies and start-ups. To take advantage of the upside from working with start-ups they take payment both in cash and in stock.
    • One option is to set up a separate Investment LLC – not tied to the operating company but owned by the same people – that takes the stock position and can, at its option, provide limited venture funding to start-ups.
    • Start-ups are not yet threats to your large customers but are potential future acquisition targets. Because the stock financing is done outside of the operating company, it is more difficult to trace back to the operating company. Further, competing large companies have not tended to see these investments as threatening the way that they would view direct investment by the company in a competitor. At the time of acquisition by the larger company, the member’s ownership position in the start-up is liquidated.

[like]