Wayne Wilson on Companies in Transition

Business is based on relationships, not referrals

My best leads and assignments come from people who already know me and my work. Sound familiar? That's because people want to do business with people they know or who are referred to them by people whom they know and trust.

Why is that?

There are probably numerous reasons, but these three come to mind:

1. Separating the wheat from the chafe -

The world is full of lots of people selling lots of things - some good, some not so good, and some really bad. Figuring out which one you're dealing with often takes a lot of work. Trusted introductions reduce the time and effort required. If you make it too hard for customers to assess the quality of your product or service, many of them will simply pass you by in favor of someone else.

2. Quality assurance -

Trusted introductions also tend to raise the average quality of the work received. No one wants to look bad to their current clients, colleagues, or friends. As a result, professionals who rely on trusted introductions will more likely go the extra mile to ensure that you, the prospect or customer, come away with a positive experience from the encounter regardless of whether you choose to purchase their product or service.

3. Life is too short to put up with stuff you don't want to, if you don't have to, for very long^TM -

Gatekeepers and spam filters are designed to winnow the hordes of those seeking your attention to those you choose. And that's before consideration of all the people lining up to sell you something through social media! Trust is so important. When I finally develop that relationship of trust with someone, I am loath to make a change to someone I don't yet know, let alone trust. Your clients and customers are the same way.

Does your product or service "spell relief"?

Remember the old television commercials for Rolaids? The tag line was "Rolaids spells relief." The man or woman in the ad had a real problem - serious heartburn pain, which could be alleviated by eating some Rolaids. And with 10's of millions of heartburn sufferers, the makers of Rolaids had a large market opportunity.

Some time ago, I pitched what I thought would be a hot new web-based service. One of the people whom I believed would be a natural user and booster of the service failed to see the value. His response? "Sounds like a hammer in search of a nail." I had an idea in search of a market rather than a real market opportunity.

The success of Rolaids illustrates some important principles about product and service development:

1. Utilize market research to uncover unmet customers needs, i.e. real problems which cause real pain and therefore need real solutions (which people will pay for).

2. Determine the size of the market opportunity. How else can you determine whether the costs of developing the product or service will be justified by the likely sales?

3. Focus your efforts on problems which have large market opportunities. That's where the profits are.

4. Be disciplined. Finding large market opportunities takes some work. Don't settle for the first Idea that comes along. Look for the real winners.

Taking social media seriously

Since we last wrote about social media for business, the social media universe has exploded. According to USAToday¹, there are now:

• 800 million users on Facebook
• 150 million on LinkedIn
• 100 million on twitter, and
• 15 million using location service FourSquare

Who would have thought it?!

With legions of businesses of all sizes plowing time and money into social media, every business owner/CEO needs to think about what social media means to his or her business - both threats and opportunities.

Advertising ROI models have been emerging but each company still must determine how social media fits into its business model. FourSquare may be great for Starbucks but it's not likely to do much for a professional services firm where blogs and active discussion sites remain important thought-leadership building tools.

On the other side, social media has the ability to become a large (useless) time sink if committed to indiscriminately. Unless you're Jeremy Lin, it still takes time to build a following.

Consider your:

• Business model
• Marketing plan
• Available marketing tools
• Social media's place/niches among those tools
• If you decide to use social media in your marketing mix, which platform(s) are appropriate?
• What approaches to use?
• Who will do it?
• How much will it cost?
• What results should be expected?

The same principles used for other major business initiatives should be applied to social media:

• Plan
• Execute
• Monitor
• Evaluate
• Revise

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¹ USA Today, February 17, 2012, p 3B

When failure is not failure

“A failure is not always a mistake, it may simply be the best one can do under the circumstances. The real mistake is to stop trying." -- B.F. Skinner, American psychologist, inventor and author

Failure is often the one thing people try to avoid – sometimes to their detriment. But should they? I prefer to think of failures in three varieties:

• “Bet the ranch” failures – generally to be avoided, they should only be undertaken in dire circumstances and with the full knowledge of owners or boards of directors. In the recent financial crisis many financial firms were “betting the ranch” without knowing or explicitly acknowledging the gravity of the business risks being undertaken.

• Costly failures – these business failures occur frequently and systemically have much in common with the first group: all of the risks of a given course of action have often not been properly recognized, evaluated, and/or communicated to the relevant owners or boards. Anticipating risks and planning for their mitigation is an integral part of minimizing costly failures.

• Learning failures – these are or should be the most common and should be encouraged in most organizations. Sometimes, we simply cannot know what will work until we try something. A great example of encouraging “learning failure” risk taking occurs in direct marketing where the mantra is “test, test, test” before rolling out a major marketing campaign. The goal is to incur lots of small failures while working out the campaign details before risking large amounts of money.

Maybe we should change the conversation – instead of “try and fail”, let’s call it “test, test, test.”

Moms Rule

Every once in a while I come across a new article, book or blog that jumps out at me with "Hey, I'm different! You might want to take a closer look."

This morning's pleasant surprise was The Mogul Mom, a blog founded by Heather Allard and written by a team of contributors for Moms running a home business while raising kids. Too often, we forget that the world would eventually come to a stop if there weren't some moms raising kids. On the other hand, I'm the father of two professionally trained daughters, and I want them to have every opportunity possible to have everything they want.

The best part about The Mogul Mom is that many of the articles and tips are applicable to any type of business, not just home-based businesses run by stay-at-home moms. Here are two examples with refreshing twists on old topics:

7.5 Tips To A Better Testimonial

5 Steps To A Landing Page That Converts Like Crazy

And this one was the best - 3 Life Lessons I Learned From My 3 Parents

Life is short - take in everything you can!

The yin and yang of social media

Everyone below the age of xx (pick a number) is raving about some form of social media these days. Twitter is big and facebook is massive, supposedly, and they are going to change the world.

In today's Lost in a digital world, Seth Godin talks about how easy it is to hide. We think we're networking, building relationships, developing business, etc., but if we lose all human contact, all we're doing is hiding.

Owner/CEOs know that businesses are built by building relationships. And building those relationships requires a certain minimum amount of face to face contact. A lot can be accomplished from a distance electronically once you've established that eyeball-to-eyeball substantive contact.

Deal making is a great example. Teams can strategize by conference call and email, but due diligence requires your team to be on the ground touring facilities and talking to people face to face. And while document exchanges and haggling over contract language have been greatly facilitated by email and electronic document rooms, hard negotiations on difficult subjects almost always require physical meetings.

Web-based retail and internet marketing might at first appear to be different. Just look at the success of amazon.com and other online businesses. But amazon's business development officers are likely not meeting with publishers on facebook. They're in New York, or wherever, pitching them in person.

Once all the hype dies down, social media will be like all the great, but now mundane, business tools which came before (think telegraph, telephone, email - you get the idea).

By all means, experiment, test, and incorporate social media tools in your business wherever they make sense. But don't get carried away. You still have to sell stuff and make a profit to create real long-term value.

Stop dawdling

Are you sitting on your hands rather than taking action on those issues, which you know aren’t going to solve themselves? Focus on the big three.

Building the team – Few companies’ management teams are as strong as they need to be to compete in today’s economy. Now is the time to recruit and build. Candidates are available. People are hungry for opportunity. Spend some of that cash and seek out those gems who can ignite your company’s future.

Righting spending – Not every company has adjusted its staffing and spending to the new realities. That doesn’t mean ramping up the layoffs. It does mean becoming brutally honest about whether that pet project or program of yours is every really going to pay off. Figuring out where to cut and where to hold is hard work, but no one else is going to do it for you.

Driving revenue – The future is all about revenue and revenue growth. That requires investing significant amounts of resources. Spend the time to analyze your opportunities and then place your bets. If your current business, product, or service is not a good bet, better start looking for another place to play.

Borrowers and Lenders

An article in today’s New York Times [1] pointed out the price savers are paying through lower income on their savings as a result of the Federal Reserve’s near-zero interest rate policy. Not only does this policy favor borrowers, it clearly favors banks (at the expense of their depositors) amid the banks’ efforts to rebuild capital and profitability.

Such low rates will be counterproductive, however, if carried on too long in an era when consumers, businesses, and banks must de-leverage to right their balance sheets. Consumer spending, especially, ran way out on the proverbial debt limb. That limb has now broken off, and consumers are scrambling to survive the fall. In fact, the lower the interest rates, the more consumers must save and the less they will spend.

If you are a borrower with good credit and equity support, these are some of the best of times with home mortgage and corporate bond interest rates at record lows.

If you are a net saver, your investment options are poor, bad and worse. Bond yields are low and stock prices stagnant. Hard assets (gold, real estate) may look attractive but low/no inflation or out-right deflation are seldom kind to such assets.

How should owner/CEOs think about their companies’ strategies in this kind of environment?

It’s a time to be cautious but opportunistic:

• There will continue to be winners and losers – The continuing success of Apple’s gadget sales demonstrates that consumers will find the money to buy the things they want. Companies with second-rate or me-too products will likely continue to struggle.

• Nothing lasts forever – Just as the good times came to an abrupt end, the current malaise will also improve but over time. Any sharp economic improvement will require significant catalysts in the form of major innovations and/or dramatically more favorable governmental policy. Look for inflection points; be ready.

• You make money when you buy or invest, not when you sell – While there are “get lucky” exceptions, most investment returns result from buying the right assets at the right price. Be patient. Liquidity is your friend, not your enemy.

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[1] “Falling Rates Aid Debtors, but Hamper Savers” at http://www.nytimes.com/2010/09/09/business/economy/09rates.html

Driving Growth

The economy seems to be awash with anxiety about the poor prospects for business growth, not to mention jobs. We are at risk of descending into inveterate hand wringing from which no good can come. It’s time to look around for what’s working (somewhere, something is ALWAYS working out well) and figure out how to apply it to our business or company.

According to Peter Cohan, “[New] jobs [and revenue growth] are going to come from innovative companies that are either jumping on a wave of growth in demand or creating a new wave through path-breaking technology.”[1]

After studying more than 30 leading startup companies, Cohan suggests the following general lessons for managers in mature, established firms:

• Tailor your product to 1 million customers

• Lock in customers for the long-term and keep renewing the relationships

• Create more network value than competitors

• Reinvent the business from the customer’s perspective

• Use peer pressure to sell your products

Cohan’s lessons are not panaceas, but they look like a good place to start.

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[1] Peter S. Cohen, “Common Threads of Startups for Driving Growth,” financialexecutive, October 2009, p. 37

Desperately seeking serendipity

Companies and equity markets are engaged in one of those ugly dances around an old truth: piles of cash and earnings based on cost cutting are a poor recipe for improving stock prices and expanding multiples. Investors crave growth. Growth in revenues now often leads to growth in earnings later. Multiples and prices seldom move up until investors believe the story and see the path.

CEOs, in turn, are becoming a bit frantic. Where are the new revenues to come from? Especially those expanding streams of revenue growing into the future as far as the eye can see? Steve Jobs is unique and therefore a poor model for the rest of us.

What to do? An article in the current issue of The Economist [1] suggests an approach. The writer opines on the benefits of knowledge and ideas gained from chance encounters through greater attendance to urban networks, industry confabs and online social networks. There is certainly value here although unpredictable in frequency and adequacy. It’s a tough strategy to bet the business on.

 “One aspect of [the] original definition of serendipity that is often missed in modern discussions of the word is the "sagacity" of being able to link together apparently innocuous facts to come to a valuable conclusion.” [2] The potentially helpful chance encounter delivers a benefit only if the acquirer is prepared to recognize and receive it. [3]

Thanks to the global reset of the Great Recession, the coming decade will be unlike anything most of us have ever seen. Owner/CEOs and other business leaders must fundamentally re-think their assumptions, large and small:

• The earth has shifted beneath our feet. What does the new world look like?

• What parts of our framing worldview remain true and which parts must be discarded?

• The land is rising in some places and falling in others. On which do we stand?

Forget the past and open your minds to the future. Sit, watch and listen for new ideas. [4] They will surely come to those who are patient and focused.

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[1] “Schumpeter: In search of serendipity”, The Economist, 7/24/10, p. 67

[2] http://en.wikipedia.org/wiki/Serendipity

[3] “In the fields of observation chance favors only the prepared mind.” Louis Pasteur - http://en.wikiquote.org/wiki/Louis_Pasteur

[4] The notion of “sitting for ideas” was attributed to Dr. Elmer Gates by Napoleon Hill in Success Through a Positive Mental Attitude