How Do You Respond to a New Large Competitor? Five Suggestions

Situation: A mid-sized company has learned that a much larger company is entering their geography and market niche. This company is known to enter new markets with a low pricing strategy to “buy” market share. How do you respond to significant new competition?

Advice from the CEOs:

  • Accept the fact that you will lose some business; particularly from customers who driven more by price than quality and service. The flip side is that these customers are likely not your best customers.
  • Research the reputation and business practices of the new entrant in their traditional territory. What is their reputation? What are their weaknesses? Do your homework by networking with their current competitors and customers.
  • Take a lesson from those who have survived a move by Walmart into their territory:
    • Boutiques survive Walmart – especially those that focus on personal service. Upgrade your customer base based on personal service.
    • Use your knowledge of the marketplace and your long term relationships to your advantage – including your reputation with existing customers when going after new customers.
    • You may remain more profitable than the larger company, on a per transaction basis, based on your knowledge of the territory or business niche.
  • Don’t assume that all large companies are Walmarts. Walmart has a unique set of talents and a tightly controlled process. This may not translate to other markets – especially those involving personalized service.
  • If you are a family business, consider promoting your “old world skill” and established reputation and expertise.

Key Words: Competition, Geography, Market Niche, Walmart, Price, Personal Service, Reputation, Contacts, Boutique, Profitability, Family Business

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When Do You Focus on the Plan and When Do You Adjust? Four Guidelines

Interview with Phil Bookman, CEO, Assistyx

Situation: The dynamics of an early-stage business require balance between focus and opportunity. The challenge is in the balancing act. When do you focus on the plan, and when do you adjust?

Advice from Phil Bookman:

  • Never allow your friends to become statistics. We call our customers our friends. Our most loyal and vocal friends were our early adopters and got us where we are today. They remain important participants in the conversation and are always in our focus.
  • Along the same lines, when using social media to communicate to your audience, remember that this is a face-to-face conversation. This is a key point of focus.
    • Remove as much friction from online interactions as you can. Make it as easy as possible for people visiting your web site to buy. This requires both live interactions with users and attention to detail. If a question keeps coming up, answer it; put the answer right up front on your web site where it cannot be missed.
    • We’ve made hundreds of tweaks, each tiny. Each has removed a point of friction. As the company grows it is easy to lose sight of these details. Never lose sight of details.
  • Much of what we face in business is transitory. It is important to stay nimble so that you don’t get stuck fighting the last skirmish. For example, in 2009, we found that a subscription service was difficult for institutional users like purchasing departments in schools to understand. It isn’t now.
  • You must be careful not to chase bright shiny objects – opportunities that take you outside your principal market competence. Would you try to modify a hammer to put in screws?
    • Our principal product TapToTalk is a communication device for kids with verbal challenges. Some have suggested that it could also be a teaching device. Possibly in the future there will be room in our plan for a teaching device, but we will address this as its own market and application when we are large enough to diversify.

You can contact Phil Bookman at pbookman@assistyx.com

Key Words: Early Stage Business, Focus, Opportunity, Balance, Adjust, Early Adopter, Social Media, Friction, Detail, Nimble

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How Have You Attracted a Resistant Audience? Three Thoughts

Interview with Pradeep Bakshi, CEO, Foundation3

Situation: A new start-up has developed a SaaS application focused on helping sales people and small businesses leverage LinkedIn and other social media for prospecting. The Company’s customers build Private Shared Networks which can be used by sales people to accelerate the Pipeline. Their concern is that historically sales people have not adopted sales productivity and prospecting solutions.  What have you done to attract and accelerate trial and acceptance when addressing a resistant audience?

Advice from Pradeep Bakshi:

  • Keep it simple and make the application very intuitive and easy to use.
    • Do not try to change behavior; make it easier for sales people to do things they already like to do.
    • Create an instant “I get it” experience.
    • Bias the interface toward instant gratification. This is critical to generating viral marketing.
    • Make it easy to tell others what you’ve found – similar to a “Like” button to share a YouTube video.
  • There are 15 million sales people in the US.
    • You won’t get everyone, but you want to get the “believers” and avoid the “haters”.
    • You must quickly find segments of the market who are likely early adopters. For us, the early adopters are in the SMB segment (startups, 25-200 emp.) and the service provider industry.
  • Select channels which are open to your messaging and solution.
    • LinkedIn Groups are becoming an excellent way to network with like-minded people who can spread the word.
    • Look to past contacts to whom you have provided value and who value you. They are more likely to get your value proposition and introduce you to others.
    • Allow customers to collaborate with referral sources: potential business partners and collaborators who aim at the same audience that you will serve; and lead sharing partners. These individuals can help you find customers who will value your solution.

You can contact Pradeep Bakshi at pradeep@foundation3.com

Key Words: Software, Prospecting, GUI, User Interface, Viral, B2B, Early Adopter, Professional, Customer Acquisition, SMB, LinkedIn, Private Share Network

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How do you Adapt Behavior as you Shift Focus? Five Points

Interview with Adam Kleinberg, CEO, Traction

Situation: The Company is shifting focus from project-based to relationship-based client interactions –from a short to a long-term perspective. This is a challenge. How do you adapt employee behavior to a new strategic focus?

Advice:

  • Assume the best intentions.
    • Everyone wants to do a good job. The challenge is making sure everyone knows what constitutes a good job.
    • Be clear on objectives, and why they are important. Be clear on the new roles.
    • This is most difficult when the shift is counter to a well-established company culture.
  • You have to have the right people.
    • Avoid smart people with no role, or a role for which they are ill-suited.
    • The organization IS the people. There must be absolute commitment to assigning the right talent on any job, and the right people to the right team.
    • Players must fit in terms of skill set and culture. The company is who, not what!
  • Focus efforts and objectives on the long-term vs. the short-term.
    • Paint the end state – the vision. Add tangible steps to guide people to the right path.
    • Don’t micromanage. Set direction and initial moves, but let staff blaze the path.
    • Provide feedback and recognition.
    • Negative feedback is always difficult, but best when delivered directly and quickly.
    • Recognize success and contributions both 1-on-1 and in all-hands meetings.
  • We hired an experienced manager with a strong track record. Initially this created discomfort; however discomfort was quickly resolved as this person produced positive impact.
    • We cited the wins in all-hands meetings to support the shift.
  • Make people feel that their opinions are heard, and their solutions.
    • Be clear on objectives and rationale. Assure that your perspective as leader is grounded in a credible reality that you can communicate to the team.
    • Conduct workshops which focus on the practical steps that will produce the desired result.
    • Listen to feedback from team members, and include what you hear in the agenda for future discussions. Involve the team in developing the solution. Delegate and recognize!

You can contact Adam Kleinberg at adam@tractionco.com or Twitter at well@adamkleinberg

Key Words: Focus, Client Interaction, Behavior, Role, Objective, Rationale, Right People, Culture, Feedback, Recognition, Workshop, Involvement

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What Are The Key Factors to Negotiating an IP Acquisition? Six Considerations

Situation:  The Company is interested in acquiring either the intellectual property (IP) of another company or the company itself. The target is a minor division of a larger parent company. The CEO contacted the parent and confirmed their interest in a deal. What are the key factors to negotiating an IP acquisition?

Advice from the CEOs:

  • You need to assure your rights to both current IP and future enhancements. This applies whether you or the parent is the final holder of the IP.
    • Look for clear language as to what constitutes base IP, derivative IP and extensions of the IP. You want to preserve your interest in future derivatives and extensions that you create.
  • There is a material difference between your position and the parent’s.
    • If the parent retains the IP, they also gain certain rights to IP extensions based on the current IP. If you own the IP, their potential rights to future IP are lost.
    • If the parent feels that the IP has strategic value – whether or not they are currently taking advantage of it – this will be one of the more difficult aspects to the negotiation.
  • What options are there besides acquiring the company?
    • The parent can grant a fully paid license to the technology, with access to the people and assets, waiving residual rights to future IP extensions, and no restrictions on transfer.
    • Another option could be a one-time royalty fee that is a perpetual license.
  • Within your due diligence, try to get a sense of the parent’s motivations and concerns for entertaining your interest in the acquisition. This will help you to frame a deal that works for both parties.
  • If the parent has been an active licensor or seller of IP, look for lawyers who know the company. Try to secure one of these as counsel for your negotiation.
  • From a liability standpoint, it is better to buy or license the IP and technology than the company. Liability travels with the company. Part of your negotiation will be who inherits any carry-over liability.

Key Words: Intellectual Property, IP, Acquisition, Rights, Enhancement, Derivative, Negotiation, License, Royalty, Legal Counsel, Liability

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How do You Fund a New Venture in a Mature Market? Seven Strategies

Interview with Chuck Gershman, Founder and Former CEO, Bay Microsystems

Situation: Following a consolidation of equipment suppliers, the broadband network market has matured with a few large players. This potentially reduces diversity and creativity because barriers to entry are now enormous. How do you fund a new venture in a mature market?

Chuck Gershman’s Advice:

  • If you can get the venture off the ground, the opportunity is tremendous because competition for new approaches in a mature market is limited. Large players don’t move quickly. Their incentive is to change slowly to lengthen product life cycles.
  • The downside is fewer financiers interested in the space because of the barriers to entry, and because the likely exit is an M&A play at low multiples.
  • Given this, how do you attract investors?
    • In the hardware space, you must demonstrate a convincing go-to-market strategy with modest investment and a moderate cost of market penetration. If the cost of success is high, it requires too much investment and risk before you can accurately assess the possibility of success.
    • You must be able to show a substantial total available market.
    • You must be able to show that your capability meets the needs of the market.
    • You must be able to show that the customer base will respond en masse. This is critical!
    • With fewer investors willing to look at your product and technology, it takes more time and work to find interested investors.
  • Investors invest on perceived risk, so the task is to show that the risk is manageable.
    • In the past, investors were convinced by a committed strategic customer that would finance bringing the product to market.
    • In the current market, an effective strategy is to develop an early customer who is a strategic investor in your company from Day 1. This raises the likelihood of an exit, and appeal to investors, but reduces downstream options and ROI.
    • Another strategy is to pursue a creative IPO exit. For example, launching the IPO on a smaller foreign exchange. This reduces the long-term payout to founders, but may increase appeal to investors who prefer an IPO to an M&A exit.

You can contact Chuck Gershman at charlesg_98@yahoo.com

Key Words: Mature Market, Diversity, Opportunity, Investor, Go-To-Market, Risk Assessment, Strategic Partner, Strategic Investor, Exit, M&A, IPO

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How Do You Maintain The Focus to Stick With Your Plan? Five Suggestions

Situation: The Company has both an annual and a 5-year plan. These are discussed in both company meetings and in 1-on-1s with managers. The CEO fears that he’s starting to sound like a broken record. How do you maintain the focus to stick with your plan?

Advice from the CEOs:

  • Break the 1-year plan into quarterly objectives. Don’t just divide annual objectives by four. Vary objectives for each quarter so that the total sums to the annual plan.
  • Divide your broad plan into a series of milestones. Celebrate the achievement of each milestone. This helps to maintain momentum and keeps everyone engaged.
  • Establish metrics to assess your progress against the plan. These will enable you to evaluate progress against plan and the degree to which you are above or below plan. It will also help you to evaluate whether underperformance is a matter of externalities or a flaw in the plan itself. If there is a flaw, fix it as soon as you find it.
  • Evaluate your “worst case” scenario so that you know the implications. This enables you to compare current performance against “worst case.”
  • In his book “Good to Great,” Jim Collins found that an important difference between G2G and non-G2G companies was the ability of the G2G companies to maintain faith and to slowly build momentum regardless of the apparent obstacles faced. This allowed good companies to establish the momentum that eventually made them great. Non-G2G companies continually changed direction and never built sustainable momentum.

Key Words: Plan, Annual, Long-Term, Objectives, Milestones, Celebrate, Momentum, Engaged, Underperformance, Worst Case, Good to Great

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What is an Agile Leadership Paradigm? Three Perspectives

Interview with Jorge Titinger, CEO, Verigy, Inc.

Situation: The environment has become more complex for leaders. Not only must leaders perform classic roles, they must also deal with increased uncertainty and change. How do you build a new leadership paradigm to address ongoing change?

Jorge Titinger’s Advice:

There are three challenges facing leaders today.

  • First, given that change is constant, what does the next likely settling point look like in your environment look like and how is this different from past settling points?
    • Everything starts with the people.
    • Once you determine the likely next settling point, do a capability inventory within your leadership team to determine whether you have the right people to handle the new reality.
    • Can current members be trained?
    • Do you need to bring in new talent?
  • Second, are your processes limiting or enhancing your flexibility?
    • Do current processes encourage adaptability and cross-functional connection and communication?
    • If not how will you change them?
    • Deconstruct/reconstruct all critical processes to make them more agile.
  • Third, how are you linking desired outcomes with rewards and incentives within the company?
    • Growth in the past focused on building up infrastructure – adding more people and capacity.
    • Knowledge management focused on tools and processes to make people more effective. Individualized assessment and reward structures became an obstacle and had to be shifted to emphasize the importance of collaborative versus individualized performance.
    • Agile leadership and management focuses on reaching outside the boundaries of your own company. To deliver differentiated value suppliers and customers must be included in the exercise. We must reinvent how we engage with suppliers and customers so that they are part of the collaboration.
    • The agile paradigm focuses on the unspoken needs of suppliers and customers. This takes the conversation beyond the transaction and includes quality, on-time delivery, and other differentiators that are mutually important. It can include competing for your competitors’ suppliers by being a better customer!

You can contact Jorge Titinger at jorge.titinger@verigy.com

Key Words: Agile, Uncertainty, Change, Paradigm, People, Training, Talent, Process, Communication, Reward, Incentive, Supplier, Customer

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How Do You Reset Pricing When The Game Changes? Five Parameters

Situation: The Company sells customized products and pricing has been per product/per customer. A large client has proposed to purchase product rights across a number of products and uses. The technology is early in its expected 5-year life span. How should the Company set pricing to this customer?

Advice from the CEOs:

  • Start with a series of questions:
    • What is the value of your technology to the customer?
    • How much competition do you face?
    • What other solutions are available to the customer?
  • Based on this framework, ask contacts within the customer company open-ended questions that will reveal what is important to them including:
    • Licensing objectives,
    • Planned use of the technology, and
    • Any protections that they seek.
    • You need to understand these before you can make decisions on pricing.
  • There are several pricing scenarios:
    • Set up a scale with a declining pricing driven by volume.
    • A large lump sum payment now, non-transferable if the customer is acquired by another company.
    • A large annual fee to cover a preset number of uses and volumes, with small increments for additional purchases.
    • The final arrangement will depend on the priorities of the customer.
  • Find out what the customer is willing to pay, but you set the terms.
  • Ask what guarantees they desire to protect their position. This includes:
    • The customer’s key risk factors.
    • Whether they want exclusive or usage rights. Exclusive is worth more.

Key Words: Pricing, Custom, Technology, Life-span, Value, Competition, Licensing, Objectives, Protection, Scenario, Scale, Lump-sum, Annual Fee, Guarantee, Exclusive, Usage  [like]

What are the Three Clarities that Every Start-up CEO Needs?

Interview with Naeem Zafar, President & CEO, Bitzer Mobile, Inc.

Situation: Starting a new venture is a daunting task. You must determine market need and land your first few key customers on tight timeline and budget. What are the most important foci for the start-up CEO?

Advice from Naeem Zafar:

  • The answer lies in what I call the Three Clarities.
  • Clarity #1 – Deep Knowledge of Customer Pain Points
    • The fundamental point is that your eventual success is not about your technology – it’s your ability to understand and address the needs of your customer.
    • Research and talk to potential customers. Ask them about their pain and problems (and not about your product). What makes their job or their lives difficult? Learning these facts takes time, patience, persistent questioning, and open listening both for what they are saying and what they are not saying.
    • Once you have a clear idea about their need and can succinctly define it, you must determine whether your capabilities can address the customer’s need.
  • Clarity #2 – Understanding the Purchasing Behavior
    • Once you have identified your target customer, their need and your ability to meet that need, you must understand their current purchase behavior.
    • Have they ever bought from a startup before? What happened when they did? Are they happy or unsatisfied? Where are the gaps in satisfaction?
    • Particularly for a start-up with limited credibility, it is critical to identify those purchasers who will take the risk to buy from a new company.
    • From what you find, determine how you will frame a personal relationship with the likely buyer – how you will frame both your solution and the buying experience – and build a psychographic of the buyer so that you can quickly determine likely customer candidates.
  • Clarity #3 – Understanding the Decision-Maker’s Sense of Urgency
    • Who makes the purchase decision? In B2B sales is it the CEO or someone further down the organizational chart? Who approves the purchase budget?
    • Why now – do they have their ”hair on fire” so a decision must be made now?
    • The essential question is: what are the alternatives to not having your solution?

You can contact Naeem Zafar at naeem@bitzermobile.com or check out his six books at www.NaeemZafar.com

Key Words: Start-up, B2B, Customer Need, Domain Knowledge, Purchase, Experience, Psychographic, Competition

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