Tag Archives: Specialty

How Do You Quantify Niche Market Potential? Five Suggestions

Situation: A CEO’s company focuses on a specialized niche market. One of his challenges is that there is little public or chamber of commerce information available on the size and characteristics of their market. How do you quantify niche market potential?

Advice from the CEOs:

  • Define the product / service very specifically. To narrow and refine estimates of market size look for the low hanging fruit.
    • What are the high growth segments of the target market?
    • What are the high growth industries of the target market?
  • To determine whether the market opportunity is $100M or $500M:
    • Define the company’s market more clearly – particularly the initial beachhead market where there is the potential to gain the most traction.
    • Recognize that there may be two markets: a high end market – relatively low gross sales dollars but high margins, and a low end mass market – relatively high gross sales but low margins.
  • Contact the originators of available market data to get their assumptions, comparative data and any other findings that may not be published but are beneficial.
  • Work closely with customers to build category / industry revenue estimates.
    • Segment the most active customers and increase the company’s share of their purchases.
    • Develop web site transaction capabilities to offer the company’s line as an adjunct to customers’ web sales.
    • Establish a Customer Council or Round Table to better understand the market dynamics and to differentiate the company within the market.
  • Sell the product and services’ features and benefits to the C-level, not just to engineers.
    • Sell to the CEO / CFO focusing on increasing shareholder wealth.
    • Determine a return rate for conversion to the company’s technology.
    • Reach out to professional segments that will naturally see value in the company’s process.
    • Seek an exclusive relationship with an industry leader to quickly launch new products.

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How Do You Grow Knowledge Workers into Servant Leaders? Three Methods

Situation: A company’s staff is made up primarily of knowledge workers. These are highly skilled individuals who excel in their roles. The CEO wishes to shift their focus to servant leadership – where the focus is the growth and development of the company. How do you grow knowledge workers into servant leaders?

Advice from the CEOs:

  • One option is to create a different set of incentives. Offering key managers the option to invest in and hold shares in the company will change their perspective. This, in turn, can change their behavior because servant leadership will improve company performance and the value of their shares.
  • Another option, used by Accenture and many Fortune 500s, is to hire a lot of the best and brightest individuals that they can find out of college and see who rises to the top.
    • The ratio in large firms is generally 15 hires to produce 1 high performer. Another CEO at the table is now shifting to this model at his company.
    • Create an entry level position for recent graduates that will allow for this sifting without disrupting the company’s culture.
    • Speed identification and retention of the best talent through annual evaluations of the company’s talent. This includes ratings by employees’ supervisors of both how the individual is doing and their ultimate potential within the company.
    • Be aware of the downsides to this model. One is that the two groups that tend to leave of their own accord are the best and the worst employees.
  • A third option is to create two career tracks within the Company.
    • One track is upwardly mobile. This is the track that identifies, develops and grooms future servant leaders.
    • The other track is a specialty track, which can produce servant leaders along a different dimension – breadth of experience and expertise in key skills of value to the firm.
    • This second track also allows for growth, characterized by levels of title, salary and recognition that reward the acquisition and perfection of skills in key disciplines.
    • Several “kinder, gentler” environments such as 3M have used parallel tracks with great success.

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How Do You Pursue a Market Expansion Opportunity? Three Points

Situation: A CEO is considering expanding market reach to include an additional specialty niche in the market currently served. He sees the opportunity to diversify the current offering, to make significant money, and to grow the company. The principal challenge is finding a person to build this capacity. How do you pursue a market expansion opportunity?

Advice from the CEOs:

  • Without a leader to build the new capacity, an individual who already knows both the technology and the market, it will be difficult to build the new capability.
    • Bring in a heavy hitter with a proven track record in the market to develop the new capability. Someone who can build a team to offer the same quality / delivery package that has been the source of the company’s success.
  • Once this individual has been identified and is onboard, gather top management and develop clarity on the company and its values – why the company is in its current as well as the new business and what the company does for itself and its clients.
    • From this exercise develop or update the values statement and a vision / mission statement.
    • Consider hiring a consultant with proven experience in the market to help develop the value statement, mission, and some of the strategic and planning capacity that the company has not yet developed on its own.
    • Communicate these openly and reinforce them frequently with staff. This will help them understand the company culture as well as the vision for the company. It will also help them to understand the decisions made to guide the company.
  • Is there another firm – or an independent consultant – with proven expertise in in the new field to work with the company on the proposals that are being submitted for the new market?
    • This will help to evaluate the market and to get a taste of what is involved in this work before making a major investment to support the new capability.
    • It will also speed the development of expertise to address the new opportunity. If it goes well, the company can consider either a deeper joint venture, hiring the consultant, developing its own capability with internal resources, or a combination of these options.
    • In the short term, this will impact cost and margin but will substantially reduce risk.

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How Do You Improve Your Company Presentation? Four Points

Situation: The CEO of a specialty company that is a leader in their market asked the group to review the company presentation. The members of the group were asked to put themselves in the place of a potential customer or investor. How do you improve your company presentation?

Advice from the CEOs:

  • Don’t assume that the audience has a sophisticated understanding either of the company’s market or its technology. In any pitch either to a new prospect or for funding there will be individuals in the audience who are not experts. The pitch needs to deliver a message that any listener can easily translate to any colleague.
    • Give brief examples from the experience of current customers to make the technology and its advantages concrete.
  • What is the problem that the company solves?
    • State up front: What is the pain – why is it there? How does the company’s solution address this pain? What’s the impact?
    • Show market potential and explain why the company’s solution will be a home run.
    • What makes the company’s solution unique and gives it a sustainable advantage?
    • Assume Ignorance – KISS – Keep It Simple Silly!
    • The presentation should be high level, easy to understand, and crystal clear in 5 minutes.
  • Establish credibility by summarizing current success and list the names of current customers.
  • For presentations to investors have ready answers for the following questions:
    • How the funding sought accelerate development, and what is the expected return that this will produce?
    • Assure that timelines are realistic, particularly for a ground-breaking technology.
    • Do not be vague in answers to questions like “what is your market share?” Answers must be crisp and believable. If additional documentation is required to validate company estimates have a back-up slide in the presentation to address this. Keep the explanation in the back-up slide simple, even if the analysis is complex.
    • Add an expectation of return on investment. What equity will the company give for an investment of $X. State the company’s pre-money valuation as a believable number. Then give an estimated 3-year post money valuation with $X investment. Investors will discount anything number given but will not want a range.

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Does Your Company Have the Right Focus? Three Alternatives

Situation: The CEO of a specialty service company is curious about whether they have the right internal focus to drive their business. Their internal focus statement is to the most competitive, most responsive company in their market with high profit per job. One school of thought calls this focus the Main Thing driving the company. Does your company have the right Main Thing or focus?

Advice from the CEOs:

  • Look at the tie between your Main Thing and your financials.
    • Determine an appropriate measure of efficiency – for example, billable hours per field worker per day.
    • Look at cost per field worker versus efficiency.
    • Ask what will generate the profit to grow to the level that the company has established as the revenue target.
    • If you can boost the gross margin on services, this provides far more benefit than merely cutting expenses.
    • Look for market niches that support higher prices without a parallel rise in either expense or risk exposure.
    • Do leadership and staff have the right skills and talents to support growth objectives? What can be done to enhance skills and talents?
    • Consider the following – By increasing efficiency and margins from 16% to 20% on $10 million of job revenue, the company can increase the operating margin by $400,000. If certain staff cannot work within a more efficient structure, you may want to move them to jobs that are less critical to the business. Having the right staff in the right seats is critically important to bottom line results.
  • Look at the company’s customer selection criteria. Using the 80/20 rule – 20% of customers generate 80% of revenue and/or profits. How do you improve customer selection?
    • Rank all customers on measures of profitability of their business, payment time, and most importantly future business potential. Focus on customers with the highest scores, and “fire” low scoring customers.
  • Focus on cash flow: Look at early pay options or discounts to speed payment from large customers.
    • Incorporate a schedule of values in all contracts as an addendum to prompt earlier payment.
    • In proposals, include a payment schedule and finance the receivables through a factoring company – particularly in the case of slower paying or less desirable customers.

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How Do You Assure Consist Reliable Service? Six Solutions

Situation:  A company has remote employees who are on a wide variety of schedules. Retaining great employees is a challenge, and with this consistent service due to turn-over. How do they improve the relationships that they have with remote employees? How do you assure consistent reliable service?

Advice from the CEOs:

  • Guarantee employee income for a period after they lose a client and as you seek another assignment for them. Limit your exposure by setting hurdles – an employee must have served the company for X time to qualify for this benefit.
  • Create your own “down time” bank. Say you pay an employee $10. Give them $9 and put $1 into a bank so that you can pay them once they lose their current client. The fact that their bank is limited to the amount of these contributions creates an incentive not to draw down the bank.
  • Offer a paid day off per month of service.
  • How do you shift your business from commodity to specialty, as a value add business?
    • What Peace of Mind features could you provide to your clients to create added value and stickiness? For example, can you provide a portal into your system so that clients can access information on the services that you’ve provided, or enhance their ability to communicate with their own clients? What about access to time schedules, account notes, etc.
    • Look for a solution that will shift the industry.
    • Look at menu driven packaging and pricing options. Examples include discount pricing for purchase volume commitments or iPads for a significant level of investment.

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How Do You Respond to a New Big Competitor? Four Strategies

Situation: A company has just learned that a new, much larger competitor is moving into their market. They are concerned that this may severely impact their growth and even their existence. How do you respond to new competition in your market niche from a much larger new entrant, particularly if the new player comes in with a low pricing strategy to buy market share?

Advice from the CEOs:

  • Take a lesson from those who survive a move by Walmart into their territory:
    • Boutiques and high service specialty stores survive Walmart – especially those that focus on personal service. Walmart does not provide the level of service that you find in one of these stores and doesn’t know their customers as individuals. Boutiques may lose some price conscious customers, but these are not the customers that provide good margin to them.
    • Use your personal 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, especially on a per transaction basis, based on your knowledge of the territory or business niche. Walmart can’t tell you the best product to perform a home repair.
  • Focus on your strengths in the market, and 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 services which are very personal.
  • Research the reputation and business practices of the new entrant in their other territories. What are they known for, and what are their weaknesses? You may be able to learn this by networking with their current competitors and customers.
  • If you are a multi-generation family business, consider promoting your “old world skill” and established reputation and expertise.

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