2014 Issues for a 2016 Exit

Joel Trammell requested a guest post for his American CEO blog, and it’s called 2014 Issues for a 2016 Exit. You’ll find many other great thoughts for CEOs there, and since it’s a two-part article, subscribe there and/or here to make sure you get the second half next week.

Non-Tech Companies Are Buying Tech Startups. So What?

Think your non-tech company won’t be impacted by this trend? Has your market been around awhile? Are things likely to continue pretty much as they have? Think again. A recent article in TechCrunch suggests that the market has reached a tipping point that could affect you. Many non-tech companies acknowledge that success increasingly depends upon how well they leverage technology, and they’re making bold moves to acquire software and other technology companies to strengthen their competitiveness. If you’re in high tech, you should check it out; if you’re in another industry, it’s imperative to learn more.

CEOs are increasingly aware that the technology-based operations of their company are critical to gaining market share and growing revenue. Large companies shop for technology that will make them more competitive. Business combinations that would have seemed baffling in the past are becoming commonplace, for example:

  • a chemical and agricultural company bought a weather technology company;
  • an auto company bought a music app company;
  • an insurance company bought a health data analytics company.

As technology becomes increasingly accessible, astute organizations are leveraging this trend with several key business objectives:

  • Erase the hard line between online and brick-and-mortar commerce;
  • Deepen interactions with customers;
  • Gather and incorporate more data intelligence on their business;
  • Add critical technical talent.

If you lead a non-Fortune company, following their lead in making startup acquisitions may be imprudent or impossible. However, frequent conversations with astute CEOs suggests taking three straightforward steps:

  1. Get an outside audit of current software systems to learn how dependent upon technology your company is and whether it’s time to modernize in order to compete more effectively.
  2. Talk to thought leaders in your network about how the intersection of business objectives and spending on technology work in your market.
  3. Recognize that, as each operating division begins to understand how critical technology is to their business, information technology (IT) departments are decentralizing (believe it or not, there was a time when mature companies had a mail and logistics department with an actual mailroom.)

Computing has changed the way every type of business happens. Savvy CEOs understand the value of technology to their businesses and are exploiting it in every functional area.

Mandela Story Offers Key Business Principle

In reading and listening to stories of Nelson Mandela’s life, one in particular jumped out at me. F. W. de Clerk told of Mandela’s focus on ensuring that Afrikaner desires were reflected in the agreement they negotiated to break up apartheid. Mandela apparently insisted that forming a successful partnership required adequately addressing the opposition’s needs, so he probed de Klerk to learn what they were.

Hearing this while driving away from consulting with a CEO and his leadership team about how to create partnerships, I found it fascinating that a political leader embraced a powerful principle that many business leaders miss. Strategic partnerships are often underutilized as a path to faster growth, and making them work requires the kind of transparency and active listening suggested by this story.

Leveraging another company’s resources (e.g., technology, branding, geographic presence) can accelerate growth (e.g., product development, market visibility, revenue), but three obstacles face any brave CEO who decides to drive a truly productive partnership:

  1. Stories of unsuccessful partnerships abound.
  2. Doing it right requires a high level of transparency.
  3. Deciding when to partner requires deliberate thought.

Stories of failed partnerships leads many CEOs to see diverting resources from organic growth to partnerships as overly risky. In fact, without adequate planning and process, they’re right. On the other hand, consider the huge payoff from a wisely crafted partnership like the one Apple consummated with AT&T to launch the iPhone. Apple got accelerated distribution into a large and growing customer base, while AT&T used the hottest product on the market to accelerate the growth of its base for several years before its competitors gained access to the iPhone. (By all accounts, Apple approached Verizon first but the two didn’t come to terms.)

The second issue of transparency is all-important in the partnership process. When do you play your cards? How many should you show? While controlling information is important in all negotiating, successfully initiating a partnership discussion requires a level of openness beyond the norm that doesn’t come naturally to many CEOs. Minimizing the risk requires investing the effort it takes to identify who best to partner with and how best to advance a compelling offer to them. That knowledge provides the confidence to move more openly toward a growth-enhancing relationship.

Timing a partnership can be tricky, but when two factors are simultaneously present, then it’s time to consider partnering: (1) a high-impact threat or opportunity has arisen, and (2) your company’s ability to respond is weak. In this dual circumstance, gaining access to the resources needed to respond faster becomes a matter of defining your organization’s needs very clearly, identifying and prioritizing a list of candidates with the right resources, and most importantly, being intentional about creating a highly compelling proposition before talking to anyone.

When you finally open the conversation, listen ala the Mandela story to confirm and refine your understanding of their needs in order to uncover where your resources can best help them in their areas of weakness.

Content is King: 3 Steps to Enhance Your Narrative

The recent release of CocaCola’s new corporate site pivots from pushing products to delivering quality content. At first glance, it looked like a cross between CNN and a gaming site.

 

 

 

 

 

 

 

In “The corporate Web site is dead, long live the new corporate Web site,” Buzz Builders’ Michelle Mehl uses Coke’s site to assess the impact of richer web content on corporate messaging. “[The] Web site template of — ‘About Us, In the News, Services, Products, Contact Us, FAQ, a Search Box, Blog, Shopping Cart’ — will no longer work… we all have to start thinking more like publishers, reporters, bloggers, reviewers and authors.”

An all-time favorite book title is Seth Godin’s All Marketers are Liars. Seth’s bottom line? Companies need to create a clear, consistent narrative that others relate to. What CocaCola is trying to do with the new site is to aggregate and present engaging content that forms a narrative reinforcing the image they want to project.

Our immediate impulse to redo our business web site to emulate Coke’s cool presence “cools” once we realize the level of effort it takes, not just to create such a site, but to maintain it. Those responsible for most sites, even corporate ones, can’t afford to invest like Coke does to feed their big engine. However, what emerges is an imperative for smaller enterprises (i.e., almost all of us) to enrich our web site narrative.

To enrich your narrative, consider taking 3 steps that won’t require an increase in marketing staff:

  1.  Add engaging content. “Engaging” means video since that’s the most engaging format available. Instead of writing a 500 word article, make a 3 minute video that is certain to engage many more people.
  2. Change the content regularly. That can be as simple as adding a blog (or vlog) and updating it regularly, whether that’s monthly, weekly, or daily.
  3. Experiment with content. Employ some “disciplined dreaming” to deliberately step outside the usual topics and expand your audience.
Now that you’ve read this far, here’s the same information in a 3 minute video. Even though I’m not experienced with video, it likely has more impact than the written post. You decide.
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Successful M&A Requires a Clear Vision

An astute CEO can often augment organic growth with acquisitions, but a majority of acquisitions fail to deliver expected returns. CEO Carol Koffinke of Beacon Associates says that “60 to 80 percent of all mergers and acquisitions fail to meet their merger goals.” Why do they fail?

Much has been written about acquiring companies’ failure to realize the value they envisioned for their acquisitions and the why’s: a lack of proper due diligence, cultural mismatch, lack of integration planning, unforeseen market factors, etc. However, of all the possible reasons for failure, M&A experts put the lack of a clear vision at the top of the list.

Source: “Creating and Executing a Winning M&A Strategy,” Merrill Data Site and The M&A Advisor, October 2013

While a clear vision can accelerate execution of any growth strategy, successful M&A demands a level of clarity most companies fail to achieve. Why do companies launch into an acquisition without sufficient vision and planning? Here are the most common reasons we’ve encountered in working with top executives:

  • Some CEOs don’t naturally think strategically. A CEO who’s risen through the operational ranks can end up with a “make stuff, sell stuff” philosophy and a view that strategy is merely a set of slides for board and investors, while in fact, a clear strategy drives revenue and profitability.
  • A CEO can be overwhelmed by the daily pressure of running the business. Periodically answering the question “are you working on or in your business?” can prevent the urgency of daily concerns that distract from the CEO’s paramount responsibility –  increasing shareholder value.
  • Pressure to make quarterly goals can diffuse and erode the shared view of a company’s purpose. A process called business entropy (e.g., repeatedly accepting non-core business) can eventually dilute the strength of a company’s brand and slow its ability to generate new business.

How can a CEO be more intentional about growing the company through acquisition?

  1. Find a way to set aside time to think and discuss new directions. In this new social media world, it’s easy to develop a chronic short attention span. Focused thought is required to create breakout strategies.
  2. Take an honest look to make sure you’re not hanging onto more than you should. How to cross the second chasm, i.e. growing a company from small to big, is described in Doug Tatum’s insightful book, No Man’s Land. Pick up a copy and read it this weekend. (If you think you don’t have time, you need to read it.)
  3. Discuss growth challenges with objective trusted advisors. Use CEO peers at Vistage and experienced consultants as soundingboards to call out any “elephants in the room.” They will help you establish the clear vision needed to drive your acquisition initiatives.

How to Increase Your Influence

Some people have more influence and impact than others, and these same people always seem to have incredible networks. They may not be wealthier or brighter than their friends, but everyone leans in when they talk and remembers what they say. 

What’s their magic? Having spent decades observing highly influential friends and acquaintances in my business network, here are a few thoughts about habits that increase influence:

Check Your Ego – How long do you want to interact with a self-absorbed person?  When a colleague needs help, be willing to sacrifice your goals for theirs. It’s not all about you; it’s about making good things happen around you.

Leave More Room – While “no plan is a plan to fail” is a good thought, it’s equally true that too tight a plan leaves no room for creativity that results in breakthrough ideas. Plan sufficiently, but leave time in your calendar for serendipity.

Pick Your Battles – When faced with a decision, ask 3 questions: Is this urgent? Is this important? Is this reversible? Realize that urgent matters far outnumber critical ones. Act on the most important matters in a timely way, then when a truly serious problem comes along, you’ll have more time and energy to address it.

Share Your Insight – When you find useful and positive information, consider who would be most helped by this knowledge, then share it with them. I’ve practiced this for years, and the instant communication we have now (email, text, social media) makes it much easier.

Keep It Cool  – When panic strikes, the coolest head prevails, and influence grows. A doctor long ago taught me to start deep muscle relaxation exercises reflexively when stress arises. You too can train yourself to relax and think clearly under stress. Remember that few decisions in business are life-threatening or irreversible.

Keep the Faith – Most importantly, choose to look at things from a higher perspective, and place your faith in something beyond yourself. (Again, it’s not all about you.) Determine your purpose in life beyond making money and buying more toys, then operate with that foundation as your core.  Start each day by reconnecting with that larger personal identity before the relentless battle for your consciousness begins and you’re drawn into darkness, irrelevance, or time-wasting activities.

To summarize, don’t strive to be an influential person. Instead try to deliver value in every interaction, and influence will follow.

 

Backstory: What’s the Genesis of Self-Fueling Partnerships?

The word “coopetition” has been around much longer than most people think. I first encountered it when my boss Ray Noorda, Novell CEO, brought it back into use in the early 1990s to describe his insight about the then-emerging market for local area networks (LANs).

Novell was one of a number of companies competing to become the LAN market leader. Ray decided to encourage his competitors to focus on “growing the pie”, i.e. the networking market, rather than continuing to fight for a bigger slice of a small market. We created the Networld trade show (later renamed Networld/Interop) and invited every company related to the networking industry to participate, including our closest competitors. The show rapidly grew to become the largest tech gathering of its time, engulfing Las Vegas for a week every year.

Working in and leading a group of a dozen highly talented people who built partnerships with the largest companies in the industry was one of the most exhilarating experiences of my career. During that time, Novell’s partnership efforts helped it hit a billion dollars in revenue faster than any company to that point. In addition to a network of over 20,000 resellers who depended upon us for a significant share of their revenue, we grew partnerships that aligned leading companies (e.g. CA, Compaq, HP, IBM, Lotus, Oracle) behind our network operating system and encouraged them to develop new solutions for our customers.

Observations made during that time led me a few years ago to coin the term “self-fueling” to describe partnerships carefully constructed to last. Like most useful concepts, the definition of a self-fueling partnership is simple:

“a relationship structured so that positive results for the first party drives it to act in ways that increase positive results for the second party, and vice versa.”

The partnership between ATT and Apple is an excellent example. It lasted several years enabled each to them to capture significant market share. We all owe a debt to the late, great Ray Noorda for pointing the way to self-fueling partnerships by selling the idea of coopetition to the industry.

 

CEO Flow v. Multitasking

In a recent article in Small Business Trends, CEO Curt Finch of Journyx contrasts the benefits of “flow” over “multitasking” in achieving optimal employee productivity. Recent studies show that multitasking can be highly unproductive, while flow is much better:

“As defined by author and psychologist Mihaly Csikszentmihalyi, flow occurs when you enter a state of intense and effortless concentration on the task at hand. It is often referred to as ‘being in the zone,’ and employees are far more productive while in this state than at any other time.”

That made me wonder to what extent the same principle applies to CEOs and how they use their time. Most CEOs are paragons of multitasking. Each day comprises formal and informal meetings and calls that address a multitude of topics across multiple domains. A CEO friend once described it this way: “It feels like I’m walking the halls of the office and people are ripping off pieces of flesh as I walk by. At the end of the day, I’m exhausted.”

As with employees, multitasking would seem to be the natural enemy of flow for CEOs. Of course a CEO must necessarily handle more than one issue at a time, but if you continually find yourself without enough time to adequately address important but not urgent issues, multitasking may be slowing your company’s growth.

Finding uninterrupted time to consider how to grow the company is a common CEO challenge. Achieving “CEO flow” may require a level of discipline above what you’ve applied in the past. Delegating more tasks to your executive team, encouraging them to be more mutually accountable, and becoming more protective of open space in your calendar can enable you to become the chief visionary officer that your company needs.

Are you spending time in the zone that’s needed to create the right vision, or are you always multitasking?

Self-Fueling Partnership: Apple and AT&T

“In this new wave of technology, you can’t do it all yourself; you have to form alliances.”                           -Carlos Slim Helu 

Addressing startup entrepreneurs at RISE Week Austin, I asked, “If the richest man on the planet thinks alliances are critical, shouldn’t you?” (As a four-time startup survivor – 1985, 1995, 2000, 2002 – I’m driven to give CEOs the knowledge and passion they need to accelerate growth through partnerships.

The Apple/AT&T partnership was a classic: Apple sought broad distribution while AT&T needed new technology. Together they demonstrated how to create a self-fueling partnership, i.e. one that is structured such that positive results for the first party drives it to act in ways that increase positive results for the second party, and vice versa.

Let’s dissect this well-known business case to identify a few principles of “self-fueling partnerships”:

Principle #1   “Partner when the impact of a threat or opportunity is high, and your ability to respond is weak.” 

Apple had an innovative product that needed to be deployed rapidly in order to grab the top spot in the emerging smartphone market. The opportunity was huge, but the carriers controlled access to the customers. AT&T, on the other hand, wanted to grow its data services revenue, and a killer product would help to capture more subscribers.

Principle #2   “Develop a compelling approach before approaching the other party.” 

Apple based their approach to AT&T on its need to capture new subscribers by raiding other carriers. Since people are reluctant to change carriers, AT&T could afford to heavily subsidize the iPhone in exchange for the long-term annuity they’d build from people who switched to their network.

Principle #3   “Be willing to provide exclusivity if you can limit the time and geography.” 

While Apple wanted to grab the #1 spot with rapid deployment, they knew they’d later have to extend distribution through other carriers after significantly penetrating AT&T’s base.  A good bet is that Apple agreed to extend exclusive access to iPhone for as long as AT&T continued to meet aggressive growth goals, then at a later date, Apple would be free to sell through other carriers.

If you have other interesting partnership examples, let us know!.  

 

Acquisition: Result of the Original 20/20 Outlook Process

The original 20/20 outlook process evolved while I was CMO at Infoglide a few years ago. In early April the company was acquired by FICO (Fair Isaac Corp.), one of the top potential acquirers identified during the process in 2009. The acquisition resulted from a partnership formed between the two companies as suggested by the analysis.

In early 2010, I founded 20/20 Outlook LLC. The original 20/20 Outlook process is now the second of four processes used to identify and create conditions that lead to growth and acquisition:

  1. CLARIFY:  create bulletproof Strategic Positioning
  2. COMPREHEND:  develop a Valuation Framework
  3. CONNECT:  engage in Self-Fueling Partnerships
  4. COMPLETE:  develop Mutual Accountability to move from strategy to execution

At our upcoming RISE Austin session on May 17, we will focus on how to develop self-fueling partnerships built upon a solid valuation framework. (RISE session locations can be fluid, so please make a note to double check this link a day or so in advance.)

Hope to meet you there!

UPDATE: The Self-Fueling Partnerships session for RISE Austin (4pm, 5/17) will take place on the second floor at the LBJ School of Public Affairs, 2300 Red River Street. You may want to arrive early to find parking. 

 

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