Wayne Wilson on Companies in Transition

Managing Business Risks

Unfortunately, many owner/CEOs and other business executives manage risk as if they were Siegfried & Roy in the lions’ cage. The situation looks controlled, safe and predictable. But every once in a while, one of the lions may try to bite your head off!

Prudent risk-taking based on a creative business strategy is central to success in our capitalistic free enterprise system, but the emphasis must be on prudent. Risk-taking, which explicitly or implicitly involves betting the ranch, should only be undertaken in the direst of circumstances or with the full knowledge and consent of the owners of the business.

The current credit markets meltdown is a prime example of what a lion can do.

Taking control of your own destiny - Part 2

The October issue of our periodic email newsletter to clients and friends has been posted to our website at Companies in Transition – October 2008. This issue continues the theme taking control of your own destiny focusing on the success process and includes the following articles:

• The Success Process - Preparation for success alone will not bring you the success you desire; you must ACT on your dreams. And your actions must be part of an orderly and systematic process. What does this process consist of?

• Surviving the Credit Crisis – The current credit crisis is a reminder of the importance of having a sound financial plan to navigate through turbulent times. What can you do to respond to the current credit crisis?
  

• Doing What Matters – Many companies in transition suffer from several real maladies at once. What are some of these problems and what can you do about them?

In coming posts, we will illustrate some of the precepts of the success process for taking control of your own destiny.

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Crisis is inevitable – only the timing is in doubt

One of the great lessons of the current financial crisis is how many supposedly well-managed companies have been overwhelmed – forced into distress sales, bankruptcy, or highly dilutive capital raising – by their poor ability to foresee, plan for, and respond to events in financial markets.

As a result, risk management is a hot topic for publicly traded companies right now, but owner/CEOs of closely held companies are at risk as well in these volatile markets. What to do?

1. Make risk management a higher priority – think consciously and proactively, not just reactively
2. Conduct a vulnerability assessment – where are your risks? What could happen that would cripple your business?
3. Assume a problem will be bigger than it first appears – the iceberg theory at work (only the tip of the problem is visible)
4. Plan for multiple problems at once – when things start to go bad, they invariably come in sets of three or four, not one
5. Organize your response team now – key managers, as well as outside advisors

Surviving the Current Credit Crisis

The current credit crisis is a reminder of the importance of having a sound financial plan to navigate through turbulent times.

In a letter to clients and friends we offered some suggestions to help you assess your current financial condition and begin re-thinking your business plan in response to current economic challenges.

1. Don't panic. It's difficult to make sound decisions if you do.
2. Take a fresh look at your monthly income and expenses. Have you been meeting your budgeted projections? How much of a drop in revenues can your business withstand and for how long? Analyze your expenses and determine which ones can be reduced.
3. Reduce your reliance on credit by disciplining your spending. What are your cash-flow needs? Do you have sufficient cash reserves?

Continue reading our letter

Preparing for success – where are all the masterminds?

Andrew Carnegie’s mastermind alliance [1] is a universal principle – it applies to individuals as well as business owners. [2] Mastermind alliances are sometimes formal (boards of directors) and sometimes informal (President Andrew Jackson’s kitchen cabinet). Anyone who consults with others before making significant decisions is applying the mastermind principle.

How can you benefit from a mastermind alliance?

• Access to knowledge beyond your own
• Identification of unseen issues and alternative solutions
• Stress testing your plans through challenge and debate

Who makes a good mastermind alliance participant?

• Someone with broad knowledge and experience,
• With whom you have a relationship based on trust, and
• Who is willing to tell you what you need to hear, not what you want to hear.

Consciously and regularly applying the mastermind principle can significantly improve the quality of your decision-making.

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[1] Napoleon Hill, Think and Grow Rich
[2] This is the fifth article in a series illustrating the principles of Preparing for Success.

Capital trumps credit

The common element among struggling businesses, under-water homeowners, stressed-out banks and investors overcome by margin loans is too much credit and not enough capital. For some strange reason, everyone seems to have equated cheap, easy credit with capital. They are not the same.

Capital cannot be borrowed; it must be earned and saved. Credit comes and goes depending on the whims of lenders – it is neither stable nor permanent.

Capital is both plentiful and scarce at the same time. Owners of capital will only invest if they perceive an opportunity for above average returns. If your business focuses on unmet customer needs with a product or service offering above-average value and potential for profits, the necessary capital will be available.

Preparing for success – how big are your dreams?

"All successful people men and women are big dreamers. They imagine what their future could be, ideal in every respect, and then they work every day toward their distant vision, that goal or purpose." – Brian Tracy

Before there can be real success, there must be a dream. [1] Dreams are like rainbows in the sky after the rain – they are the promise of better times to come. Where would we be if:

• Henry Ford had not dreamed of automobiles for the masses?

• Steve Jobs had not dreamed of a commercially successful personal computer?

• Larry Page and Sergey Brin had not dreamed up the Google search engine to organize the web?

I am a firm believer in big hairy audacious goals. Big dreams and big goals: they are prerequisites for out sized success. How big are your dreams?

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[1] This is the fourth article in a series illustrating the principles of Preparing for Success.

Preparing for success – is your head on straight?

People often say they want to succeed and that they truly believe that they can and should succeed but they fail to properly train and deploy their greatest asset – their minds. [1]

The mental preparation and training required for success is similar to the physical (and mental) training undertaken by all serious athletes. Such training requires:

1. Structure – What actions / activities are most likely to lead to the desired results? Write them down; commit them to memory.
2. Regimen – A proper regimen of diet, physical conditioning, and rest ensure mental as well as physical peak performance. Physical and mental training re-enforce each other.
3. Diet – Limit you mental diet to the proper foods (positive, re-enforcing messages and stories about how others have achieved success) and avoid foods that do not support your training plan (negativism, stories of failure, the downward tug of friends and relatives).
4. Practice – With a strong conditioning plan in place, focus your energy on practicing the specific mental (and physical) skills necessary to achieve success in your chosen field.
5. Discipline – None of these plans and programs will be effective unless you adhere to them rigorously.

Your mind operates like an unruly child. Left to its on devices, it will wander all over the place. But train your mind properly and it will serve you well. [2]

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[1] This is the third article in a series illustrating the principles of Preparing for Success.
[2] Proverbs 22:6 – “Train up a child in the way he should go, and when he is old he will not depart from it.”

ARIAD Appoints Radaelli and Wilson to its Board of Directors

Ariad Pharmaceuticals Inc., an oncology-focused drug developer, has added two new members to its board of directors: Massimo Radaelli, president and CEO of pharmaceutical firm Dompé International SA, and Wayne Wilson, an independent business advisor and certified public accountant who will serve as chairman of the audit committee.

Read the Press Release.

Harnessing Innovation

Continuous innovation is the foundation of long-term business growth and profitability but few companies have mastered the innovation process. Scott Anthony, et al, [1] suggest a three-part path through the innovation maze.

1. Planning for innovation involves:

• Gaining control over your core business –  where are you now?
• Developing an innovation strategy – where do you want to be in 3 to 5 years?
• Allocating appropriate resources based on a gap analysis of your current business versus your business goals

2. Building growth businesses involves:

• Identifying opportunities – consider tight markets with high prices and / or under served customers
• Developing high-potential ideas – what product or service changes would radically re-align these markets?
• Pursuing the ideas iteratively – test, test, and test. Don’t commit large sums of money until you are sure you are on the right track.

3. Establishing repeatable innovation processes requires:

• Market insight processes, which regularly include customers
• Human resource practices that recognize failure as part of the innovation process
• Measurement and tracking systems that do not lump innovation programs in with existing operations

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[1] Scott D. Anthony, et al, “Driving Growth Through Innovation,” Financial Executive, October 2008.