Wayne Wilson on Companies in Transition

Using Web 2.0 Tools to Run Your Business

David Spark just published a fascinating article at Socialmedia.biz about using web 2.0 tools to run and promote your business. He describes the experience of Stephen Jagger, CEO of Ubertor when he decided to take his entire company virtual:

"Rarely, though, do we get an opportunity to see one person or one organization completely open up the kimono and show us step by step how they deploy all of these time and cost saving techniques to actually run their business.

"Last week, Stephen Jagger (@sjagger), CEO of Ubertor (web pages for real estate professionals), Reachd (web marketing training courses) and Outsourcing Things Done (high level virtual assistants), spoke to a group of entrepreneurs of the San Francisco Entrepreneurs Organization (EO) at Samovar Tea House at the Metreon in San Francisco. Here’s a summary of his presentation in which he talks about each of the tools he uses and provides an explanation of the value it brings to his business."

Read David's article and learn about the latest web productivity tools.

The recession grinds on

At ground level the recession grinds on, despite recent optimistic comments by various government and other public figures, A recent survey of corporate chief financial officers [1] highlights the gap between hope on the one hand and reality on the other.

Fifty-four percent of U.S. CFOs surveyed were more optimistic this quarter than they were last. But on average, the “CFOs say the recession will last another 10 months,” and they are continuing to maintain tight control over spending.

This is a classic pattern: management actions tend to lag changes in the environment. At the beginning of a recession, managers hope for a quick rebound. They begin to seriously reduce spending only when it becomes clear that the revenue decline is not a brief aberration. On the rebound, managers must be absolutely convinced that revenues are turning up before they ease up on spending controls.

The key strategy is watchful waiting. Those business owners who have the courage to begin investing again before the pack does will have an advantage over their competitors.

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[1] CFOs Hoping for the Best, Planning for the Worst, www.CFO.com, June 3, 2009

How can I protect myself from supply chain failures?

Michael Gonnerman had some great advice for business owners in his “Ask Mike” newsletter this week.

Question: "We depend on a lot of companies in our supply chain, from vendors who supply components to several retail chains who sell our finished goods. I'd love to get an early warning about companies that might be in trouble so a failure won't catch us by surprise. Suggestions?"

Mike: In my experience, there are always warning signs whenever a big manufacturer or distributor begins to have financial problems. Industry rumors, news reports, SEC filings, layoffs, an uptick in "lost" paperwork, declining stock prices, negative opinions by auditors, high turnover among key executives--it's all evidence that you're dealing with a supply chain partner with problems. Especially during tough economic times, you should make a serious effort to track information about all the companies you rely on.

And if you depend on a company that's public, buy a few shares of their stock and attend their annual shareholder meeting. Chances are, you'll be the only customer or creditor there, and you'll have plenty of face-to-face access to the directors, the CEO, and the CFO. Feel free to ask questions like, "Why aren't you paying your bills on time?" or "What are you doing about the defective goods your Oshkosh factory is shipping?" Believe me, you'll get attention.

Bear in mind that your warnings may ruffle some feathers inside your own company. Your purchasing department may be sending too much business to a single vulnerable supplier, or your sales reps may be happily writing big orders to a distributor who can't pay his bills. Make sure your have a company-wide buy-in on reducing supply-chain risk, or the information you collect won't do any good.

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Michael Gonnerman is the Founder and CEO of Michael Gonnerman, Inc. (http://www.gonnerman.com) in Sudbury, Mass. He may be reached at 978/443-1340 or through email at michael@gonnerman.com .

Invest During Hard Times

-         Craig Barrett, former Intel CEO

Owner/CEOs often find it difficult to invest during difficult economic times. And yet, it is the investments made now which will drive revenue growth when the current economic recession ends. The challenge is to reduce spending while preserving or increasing investment. What’s the difference?

Investments support or drive increases in revenues and profitability. Spending is the cash disbursed for everything else which does not meet the investment definition. Like politicians, spending sponsors will argue vociferously that their particular program / budget / personnel are necessary investments and are absolutely essential for the health and even the survival of the enterprise. It is simply not true.

Finding funds for investment requires reducing large amounts of spending. Most managers are tempted to start with the free coffee in the employees’ lounge and the travel budget. There is often not enough money here to make a difference. Instead, challenge programs, markets, product lines, customer concentrations, and significant research and development programs.

Can the particular program or activity make a difference in the trajectory of the business and if successful will it be big enough to matter? The chief decision maker must be brutal in choosing among all of the good ideas. Only the very best should be funded; everything else must be jettisoned. The future of your business depends on it.

Pricing Pitfalls

It takes a strong manager to consider raising prices in a period of declining consumer demand and falling profitability. And yet pricing is one of the most important tools available for improving margins, strengthening customer relationships, and trimming the business’ overall profile.

There are right ways and wrong ways to manage pricing. Per Sjofors, [1] a pricing consultant, recently offered his list of the Top 10 Pricing Mistakes Most Companies Make. [2] Here is an abbreviated version:

1. Basing prices on costs, not customers’ perception of value
2. Basing prices on the marketplace (whatever that is)
3. Trying to achieve the same margin across multiple product lines
4. Failing to segment customers
5. Holding prices for too long at the same level (too high or too low)
6. Compensating sales reps on revenue rather than profitability
7. Changing prices without considering competitor reactions
8. Failing to actively manage pricing practices
9. Failing to establish internal procedures to optimize prices
10. Spending too much time serving the least profitable customers

Improve your business’ prospects for prosperity by taking charge of the product or service pricing process.

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[1] Managing partner at Atenga Inc., a Newport Beach California, strategic pricing consulting company

[2] Financial Executive, May 2009, p 30.

Are you focusing on what’s strategic?

Owner/CEOs frequently struggle with resource allocations, especially among tactical operating initiatives and potential game changing strategic moves. And strategic investing can be especially difficult in the current economic environment.

A proper prioritization might look like the following:

1. First, ensure current tactical performance and organizational sustainability,
2. Then, determine what’s strategic for longer-term success, and
3. Finally, hire key talent to support new strategic investments

Apple is a great example. It’s iPhone and iPod products are riding high, and now the company appears to be hiring to bring key parts of its chip design process in house as a way of protecting its proprietary strategies while differentiating its capabilities from competitors.

Another company is stretching out the introduction of a new generation of products to better match current market demand while shielding some of its newer technologies from pre-mature competitive challenges.

Working out what’s strategic and then committing sufficient resources is critical for every company’s long-term sustainability.

The power of militant simplicity

Igor Shindel introduced me to the concept of militant simplicity. Some years ago, I hired Igor to lead the development of a next generation B2B e-commerce web site for PC Connection. The challenge was to build a fast, robust web site on time and under budget.

Militant simplicity became the mantra. Keep the site fast, clean, simple (what would now be called the Google model) by providing the 20% of desired functionality that would drive business value and ignoring the rest. Everyone seeks simplicity until the requests start coming in. Can we do this? What about that? Soon the team is mired down by the 80% of stuff that will never matter.

That’s where the militant part comes in. Once the project strategy, core objectives and critical functionality had been thoroughly defined and vetted by both business and technical teams, the team became militant in resisting scope creep. They made a list of all the ideas coming in and promised people the new ideas would be considered for the next release (maybe). Having their idea on the list seemed to keep people happy even if you never worked on it. Strange …

The free dating web site, Plenty of Fish, is a great example of a business built on militant simplicity. Founder and owner Markus Frind is currently taking millions of dollars to the bank while retaining 100% ownership. His secrets?

• A “dead-simple,” web site that practically runs itself on eight servers while serving up 1.6 billion web pages per month
• A free service attracting millions of users and supported by ads (often from competitors)
• Avoiding any improvements to the site that do not support fast, efficient matching
• Fixing problems quickly and simply instead of throwing resources at them

How much more effective and efficient could your business be if you adopted militant simplicity as a guiding principle?

The Business Model Merry-go-round

Your business model is the process by which you create value for your customers and entice them to pay you for it so that you can do it again tomorrow. It’s not a business unless it has customers or clients who pay you now or will pay you in the future.

The business models of many companies and industries are in a death spiral because of the convergence of three great forces:

• Internet-driven disintermediation
• Credit-squeezed recession
• Schumpeter’s creative destruction

Some examples are all too familiar:

• Recorded music, newspapers, magazines – How do you compete with free?
• Leveraged investment banking – borrowing short to invest long
• Auto manufacturing – they can always be made cheaper somewhere else

Even lawyers are starting to offer packaged services as well as performance-based fees and fixed prices.

What‘s an owner/CEO to do?

1. Recognize that no business model is safe in periods of great turmoil
2. Become routinely paranoid about what may be lurking around the corner
3. Invest in innovation of products, services, processes, pricing – everything

Your future depends on it.

20 Ways to Cut Costs

Business owner/CEOs all struggle during turbulent economic times with the dilemma: revenue is falling and profits are disappearing; do I focus on stabilizing/growing revenue or do I cut costs to minimize the profit erosion?

The truth is you have to do both!

ZweigWhite, consultants and advisors to architectural and engineering service firms, is offering a DVD program 20 Ways to Cut Costs: Cut wasteful spending and improve profitability.

While their list is specific to professional services firms, it’s a great place for any business to start:

• Unbillable principal-level staff
• Sacred cow administrative assistants and secretaries
• Unused office space or overly expensive office space
• Outside professional services
• Insurance
• Lights, heat and more
• Company vehicles
• Excess luxuries
• Employee benefits
• Unnecessary overtime
• Principal salaries and perks
• Non-billable travel
• Dumb, dead, or too small branch offices
• Unnecessary meetings
• Recruiting expenses
• Family members on the payroll
• Training for the sake of training
• Library and subscriptions
• Professional society dues and meetings
• "Don’t be left out" marketing expenses

Costs come in two varieties:

1. Investments that support current revenues or generate new revenues, and
2. Other spending, which is the profit leaking out of your business

Click here to order the program.

Applying ‘The Only Three Questions That Count’

I have been reading Ken Fisher’s The Only Three Questions That Count: Investing by Knowing What Others Don’t. Ken’s focus and business is managing stock portfolios at Fisher Investments but his questions and methods can also be applied to running a business.

Here are Ken’s three questions:

Question 1 - What do you believe that is actually false?

This one really set me back because it can be applied to everything you do. Life, investing and business are filled with myths. You think you know what your customers want, but have you asked them? You think you know what your competitors are up to, but have you gone into the market to see? You suspect that some of your employees are not happy working for you, but have you tried to find out why?

Question 2 - What can you fathom that others find unfathomable?

This is classic specialist, niche marketing for business owner/CEOs. How can you own a particular market segment? What products or services could address an unmet need? Or meet that need better, quicker, or cheaper? What knowledge, organizational, facility, design or production investments need to be made to position your company uniquely in that market?

Question 3 - What the heck is my brain doing to blindside me now?

This question could be summed up as “we see what we expect to see and we are simply blind to what we do not expect to see.” Each of us have pre-conceived notions or screens that filter the information we receive from our environment. Problems arise when the information we expect to see is incorrect or irrelevant to our situation, or worse, the information we filter out (are blind to) is warning us of impending disaster!

Business success is partly about the ability to challenge and vet what we see and hear. We might do well to start by challenging ourselves first.