Wayne Wilson on Companies in Transition

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.

---

[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.

---

[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

Where there's a will, there's a way (or two or three)

Entrepreneurial success in business is often driven by the combination of three forces:

1. Opportunity - someone has an unmet product or service need

2. Ingenuity - an entrepreneur figures out how to address that need and make a profit doing it

3. Hard work - the entrepreneur stays the course, doing whatever is necessary to make the product successful

And sometimes, the entrepreneur must overcome additional or unusual obstacles to reach his / her goals. Here's an example from Smartbrief on Entretreneurs about Doing business the old-fashioned way:

"Miller Farm, a Pennsylvania producer of nutrient-rich foods, has more than doubled its sales to $1.8 million in just four years -- without the benefit of cell phones, Web access or office machines. The Amish-run family business relies on snail mail and a single landline telephone to maintain connections with the outside world. The company also uses trade show appearances to help bring more foodies into the fold." (Read the full article at BusinessWeek )

The Amish farmer in the story is a classic entrepreneur - he saw an opportunity, figured out how to meet the customer need while staying faithful to the Amish community's constraints and way of life. And he did it with a farm!

Maybe some of our best business opportunities are just outside our windows.

Partnerships can be perilous

Partnerships, joint ventures, and strategic alliances seem to be all the rage. Companies engaging in these activities are usually seeking leverage beyond their means, either by marrying their ideas with other people’s money or by gaining access to markets and customers not easily reach on their own. These are all good reasons.

But partnerships and alliances often have limited useful lives. Managements change on one side or the other, their interests diverge, the world changes, or frequently the arrangement just fails to create the expected value for one or both of the parties. And then divorce looms – sometimes messy and protracted depending on how complicated or intertwined the arrangement had become.

Here are a few partnership arrangement rules of the road:

1. Don’t rely on a partnership or alliance as your principal business strategy unless no other avenue to market exists.
2. Consider any industry precedents as a basis for negotiating the best possible governance and dispute resolution provisions up front.
3. Assume the relationship will eventually break down and begin planning for its successor early on.

Expect the best but plan for the worst.

The demise of professional services firms

The headline of a recent article read, “Consulting Firms Must Become Real Businesses to Survive”.

The theme of the article is obvious and the author went on to enumerate some of the areas in which professional services firms must change their ways. Like all periods of transformational change, there is good news and bad news here.

Improving business practices has clearly been necessary for many professional services firms including architects, accountants, attorneys, and consultants. I have advised and worked in such firms and the opportunity for improvement has been enormous.

On the other hand, most professionals join professional services firms to “do the work” rather than run or be part of a business. Something important is at risk of being lost when clients become “customers” and not “clients.”

Advisory professionals have a higher calling than just making sales and booking hours or fees.  Their job is to be there when you need them and do for you what is in YOUR best interests, not what is in theirs.

Truly good advisors become successful because their clients become successful. It should not be any other way.

The flywheel begins to turn

A few weeks ago I wrote about a new business development project in which I am involved. The flywheel is finally beginning to turn, but there is still a lot of panting and I’m wheezing for breath (mentally) some days.

Project activities have become more routine (read: several hours of grunt work each day), but interest is building slowly, bit by bit, and a few other people have signed on to carry part of the load. Missionary work is slow, tedious stuff.

That chance lunch encounter last month brought me three business opportunities last week, none directly related to the biz dev project and yet all were potentially complimentary. I had to pass on the first due to a conflict, the second sounds really exciting and the third can only help the cause.

And to top those off, a fourth opportunity appeared in last night’s email!

What would we do without a bit of serendipity?

Doing the Biz Dev Dance

Someone invited me to lunch recently to pitch their concept for a new business service. I am familiar with the target market and therefore was a reasonable sounding board. [1]

Obeying the Golden Rule – Having recently pitched a new biz dev project myself, I was keenly sensitive to listen intently and respectfully to the new idea. The concept is high-minded and potentially of high value, but I questioned whether the market timing was right for the proposed offering.

I offered several suggestions for test marketing the proposed service, including targeted roundtables and an email survey, to see if it might develop some legs. The conversation was engaging and stimulating as we massaged the growing variations on their original theme, but I also sensed some disappointment that I did not personally embrace the proposed service.

It’s a delicate balance – you don’t want to get a reputation as a naysayer lest you lose out on the opportunity to hear early on about interesting new ideas. On the other hand, concepts left unchallenged can become expensive failures, and that’s not in anyone’s interest.

---

[1] Lesson #1 from Biz Dev 3.0 Fundamentals in 5 Easy Lessons

Biz Dev 3.0 Fundamentals in 5 Easy Lessons

Biz Dev 3.0 [1] is hard work. There is all that messy business of actually talking to potential customers, and even worse, having to modify your grandiose plans to conform to external reality. What a pain…

Biz dev would be a lot less painful (and costly) if you followed a few simple rules. Herewith are my Biz Dev 3.0 Fundamentals in 5 Easy Lessons.

Lesson #1 – What’s the concept? Does it make sense? Does anyone care? What’s the customer value proposition? Better yet, will anyone actually pay for it? Talk to some smart people in the target market. If no one salutes, it may be a mirage (in your head).

Lesson #2 – Is it feasible? Can you actually: design it, develop it, build it, and sell it? What should it look like? What will it cost? How long will it take? Rapid prototyping or iterative development can keep the costs of this phase manageable. Accelerate the learning process by a series of rapid failures. Figuring out what doesn’t work can help you zero in on how it might work.

Lesson #3 – Develop it – Now comes the hard part of actually translating all of that feasibility work into a high performance product or service. Time to turn on the investment spigot while staying flexible to fine tune, fix mistakes, and re-focus as necessary on the target customer value proposition.

Lesson #4 – Launch it – Contrary to popular opinion, a new product or service launch results in still more costs, not profits. The investment bulge in your P&L has merely shifted from development to sales and marketing. Your new “whatever” may in fact be the second coming of sliced bread, but if potential customers cannot see it, try it, and test it, they are not likely to use it, let alone pay you for it.

Lesson #5 - Promote it – And you thought launching a new product or service was the hard part! Sustained promotion over the long term is essential for any new product or service to attain a favored position in the eyes of customers. You must create value for your customers before you can expect to create value for yourself.

Only after the new product or service is well established with lots of customers singing its praises do real profits begin to flow. Think Amazon. Think Apple’s iPhone. It’s called long-term value creation for a reason.

---

[1] The Coming of Biz Dev 3.0

The Coming of Biz Dev 3.0

Business development (biz dev) is one of the most amorphous, even shadowy, of business functions. What is biz dev anyway? That depends on who you ask and when.

During the late 90’s tech boom, biz dev often meant strategic alliances and partnerships. The goal was to partner with a big guy who had big bucks and market presence. The little guy would then ride in the wake of the big guy’s fountain of funding to glory and profits. (Or was that just a big market cap?)

Before the onset of the current ice age (circa 2008 – 20xx), biz dev usually meant acquisitions funded by cheap money and high stock prices. The mantra – get bigger, quicker. Managements often touted (believed?) that it was cheaper to buy than build whatever it was they wanted or needed. Never mind that many of them did not know what their customers needed, nor did they really know how to build whatever it was. Besides, doing deals was flashy and fun compared to the difficult task of building a business one day at a time.

Now comes Biz Dev 3.0. Return with us to those thrilling days of yesteryear when biz dev meant inventing stuff, thinking up new products and services, actually engaging with customers to figure out what they might want or need, and then actually developing or building something useful which could also be sold at a profit. What a novel concept…

There is no lack of opportunity to build successful new products, services or businesses; there is only a lack of imagination and a willingness to put your head down and work – for however long it takes.

Brain streaming

You’ve probably participated in brainstorming at one time or another – one of those strategic offsite retreat exercises where you try to solve a problem by coming up with as many potential solution ideas as possible in a short amount of time. No analysis or commenting on each other's ideas is allowed. That’s for the staff/management team to crank through back at HQ after the session is over.

But have you tried "brain streaming"? No, this does not involve hard-wired video streaming directly into your brain, although someone, somewhere is probably working on an app for that.

I am blessed / cursed (depending on your point of view) in being an external thinker. External thinkers do their best thinking while interacting with others. Few deep thoughts occur in the solitude of your office. But connect with someone else in a mutually stimulating discussion of a challenging topic and it’s like sticking your finger in an electrical socket. Your brain goes into overdrive; it’s been zapped.

Brain streaming is most exciting in a pitch or sales meeting when you find yourself connecting with the personal across the table and the ideas begin to flow about how they could benefit from your product or service. (What did I do with that order form?!)

But brain streaming is probably most effective in the context of a finely tuned management team where several senior members are external thinkers. (Internal thinkers don’t need a team – they get their ideas directly from the cosmos.) When this group bears down to tackle an issue, it’s like everyone just grabbed onto a hot electrical wire – the kind you can’t turn loose of until someone turns off the juice. (It’s a fantastic endorphin rush without all that sweaty exercise.)

If you are an external thinker and your teammates are not, a consigliore will do just fine. In a prior life, I had a close adviser who tended to be more of an internal thinker, but he was very good. When I wanted to develop an idea, I would call him in, shut the door, and work the whiteboard for an hour or so. I would sketch out the ideas / options. He would comment, elaborate or push back.

The beauty of this approach was that he (like all good advisers) had no agenda other than helping me develop the idea/issue at hand. Nor was he invested in any of the options. His was a pure intellect; he was only interested in what would work.

Brain streaming is not for the faint of heart (figuratively or literally), but try it. You might like it.