How Infoglide Enhanced Its Acquisition Options

How does a company get acquired? FICO’s acquisition of Infoglide provides an excellent example of applying deliberate steps to increase the odds and accelerate the process.

CEO Mike Shultz graciously allowed us to describe the backstory in a short case study. Read it to discover what you can do to attract potential acquirers. 

 

>> CASE STUDY: How Infoglide Enhanced Its Acquisition Options

 

 

Is Your Company Geared Up for Growth?

“Gear up” means “to prepare for something that you have to do” or “to prepare someone else for something” (source: Cambridge Dictionary). To assess whether your company is prepared to grow, ask whether your management team has clear answers to 4 questions:

1. Does the company offer something special enough to compel customers to spend money?

The instinctive answer is “of course it does.” After all, a customer base exists and the company is stable, even if growth is slow. But can the management team relate a shared, crystal clear vision of the company, its category, and its primary benefit? The kinds of companies it sells to? The roles of people within those companies that are involved in purchasing? Other unique qualities that differentiate you from competitors? Answers to these questions comprise a company’s strategic positioning, and a lack of team alignment on it leads to huge inefficiencies.

2. How does the company fit into the bigger picture of the market served?

Understanding which companies are competitors and which are potential allies is essential for sales success. Companies often assume competition exists when there may be a chance to partner effectively instead. Understanding the needs of other key companies leads to a clearer understanding of current opportunities, where value exists in your market space, and the potential to leverage the success of potential partners to provide better customer solutions.

3. What relationships with other companies can accelerate growth?

Most CEOs are skeptical about partnering with another company because it’s perceived as too difficult to be successful. While most partnerships fail because of poor analysis, poor planning, and poor management, a well-planned partnership can enable a company to leapfrog its competitors.

4. How can the company operate more effectively to bring the CEO’s vision to reality?

Having the right growth strategy is important, but execution ultimately determines success. Once a company reaches a certain size, growth can be limited by having outmoded or inappropriate processes in place. “We’ve always done it this way” is not an acceptable answer. Outside help may be required to drive the strategy into successful execution.

The chart below illustrates three levels of “gearing up” that a company can find itself in: stalled, moving, and accelerating.




 

 

 

 

 

 

 

Learning how to accelerate your vision and take your company from “stalled” to “accelerating” will be the topic of a subsequent post.

Messaging – the Holy Grail of Marketing

[Guest post contributed by Cathy Martin]

Have you ever read a company’s website or marketing collateral, or had a conversation with one of its execs, and come away from the encounter with absolutely no idea what the company does – or why you should care? Me too, all the time.

Obviously, the company in question has major issues with messaging. 

What troubles me most when I encounter ineffective messaging is that it’s usually an indication that the company lacks a solid positioning foundation. A well-defined positioning strategy is mission-critical for any business. For entrepreneurial companies, it’s pretty much a make or break deal.

Let’s talk about positioning for a moment. 

Positioning can be defined in many different ways. I often explain it to clients like this…

Okay, imagine the ideal impact you could have on your ideal target customer. Now, imagine marketing that conveys this impact in a way that creates the ideal perception in the mind of that target customer. The process of defining this perception, the “mental position” you want to occupy (in the mind of the customer), is the fine art of positioning.

Al Ries and Jack Trout said it best in the classic, The 22 Immutable Laws of Marketing: “Marketing is not a battle of products, it’s a battle of perceptions.”

Positioning is key because it shifts your focus from the internal issues of building your company/product, and aims it squarely on your real “reason for being” – the unique customer value that you offer (your secret sauce and greatest competitive advantage) Once your positioning approach is defined, then it’s a matter of crystallizing this positioning into clear, concise, consistent messaging that inspires and engages the target customer.

How’s your messaging working? 

Here’s a litmus test, in case you’re wondering… the most common messaging mistakes I see:

Kitchen sink messaging: When your messaging tries too hard to cover all the bases (be everything to everyone), the end result is that it speaks to no one. If your target customers can’t identify, quickly and easily, how your product offering relates to them, they’re off to the next contender (over and out).

Head scratch messaging: If your messaging is overly complex, vague or confusing – if it contains acronyms, “tech speak” or language that doesn’t readily resonate with the target customer – then you’ve lost a precious opportunity to create a connection with them. They quickly throw in the towel and move on.

Kool-Aid messaging: It’s all too easy to get caught up in your own world, aka “drink the Kool-Aid”, where the center of the universe is the product you’re delivering. After all, those bells and whistles are very cool, right? Unfortunately, folks aren’t going to care about all that, unless your marketing makes them care – by clearly conveying the unique value that you offer and precisely what it means to them.

Yeah, right messaging: Sure, your messaging should absolutely put your best foot forward in a way that’s bold and compelling. However, if it makes claims that seem too grandiose or unbelievable, then target customers are left to wonder about the reality of what you’re offering and the truth of your promises. Obviously, that’s deadly.

Me too messaging: I know, sometimes your competitors say things that you believe are “more true” about your company or product than theirs. But, if your messaging mimics theirs, or generally sounds like everyone else, your target customers are going to see you as just another sheep in the herd (or is that the flock?).

Messaging du jour: Here it is, the  #1 Hall of Fame messaging pitfall… messaging that changes as fast, or as often, as central Texas weather. When your messaging is constantly shifting – without a validated reason or managed approach – nothing sticks, nobody gets it, you stake no clear ground in the marketplace. Game over, time to pack up your toys and go home.

Any way you slice it, creating messaging that captures and conveys your unique customer value, with precision and impact, can be a challenging endeavor. If you suspect that your messaging isn’t working quite right, don’t take it lightly. Find a way to remedy that situation – and fast.

This post was provided by Cathy Martin, owner of Cathy Martin Consults, an entrepreneurial marketing consulting firm based in Austin, Texas. Over the last two decades, Cathy has worked with dozens of companies – all shapes, sizes, stages and flavors – to define positioning strategies, messaging platforms, practical marketing plans and programs. For more entrepreneurial marketing insights, see: www.cathymartin.com.

 

 

 

 

Crossing the Second Chasm

Two momentous tipping points threaten most businesses during their lifetime. The first is an external threat that challenges startups, and the second is an internal threat that challenges established, growing businesses. Failing to address either one adequately can result in disaster.

In 1991, Geoff Moore introduced a powerful concept in Crossing the Chasm that became a key concept in the universal business vocabulary. He observed a startup company must leap from (a) an early market dominated by early adopters who seek new solutions to (b) the mainstream market where buyers are more conservative but sustainable financial returns are available. To survive, an emerging company must cross this chasm to secure a beachhead in the mainstream market.

The second chasm is described in Doug Tatum’s 2007 book called No Man’s Land. While less publicized and not as universally understood, this second chasm is no less real and just as inevitable. It’s encountered during “the adolescent stage in which an established but rapidly growing firm is too big to be small, but too small to be big.”

Crossing the second chasm does not call for securing a second beachhead. Instead, the challenge is personal: the CEO must modify the way the business operates without losing the uniqueness that created its initial successes. Tatum identified four “M word” dangers confronting the CEO of a company negotiating this second chasm: misalignment, management, model, and money.

Misalignment of the company with its market requires clarifying the purpose and uniqueness of the company, then focusing all its resources on activities that leverage its best strengths. To paraphrase Tatum, avoiding the hard work of clarifying and systematizing the core business has killed many companies after they make it well past the startup phase. Understanding the strategic positioning of the company (e.g., primary audience and target customers, primary benefits delivered, competitors, and unique differentiators), then aligning everyone in the company with this shared vision is vital to survival.

Outgrowing its management team is the second danger of an established company attempting to grow. Small companies are highly dependent upon the talents of the founder and CEO, but a growing company inevitably exceeds the bandwidth of its CEO and early management. Getting to the next level requires that the CEO relinquish his/her tight control over every aspect of the business in favor of bringing in established managers in key areas. The CEO’s challenge is to retain direct responsibility for key areas, where he/she is most talented, while delegating the other areas to managers who have already developed critical systems and processes before at larger companies.

Outgrowing the model is the third challenge faced by companies crossing the second chasm. The financial model of most young companies depends upon high performance of cheap labor. The CEO works for little or nothing while dedicated employees work crazy hours too for lower-than-industry-standard pay, but this doesn’t scale. As the company outgrows its management, a new financial model accommodating competitive pay, more intense competition, and maintenance of profitability must be quickly developed.

The fourth challenge is money. Entrepreneurs are often surprised that, when the growth they crave starts to happen, cash becomes more scarce rather than more abundant. They are even more surprised by the difficulty they find in getting the financial backing needed to finance more growth. What looks like good news to the CEO looks like significant risk to investors. “The key to raising money is reducing the real and perceived risk of the company” and the key to reducing risk includes taking the previously described three steps.

If you’re a CEO of a growing company and you missed No Man’s Land when it came out, reading it will provide a clearer picture of your business and the challenges you face in growing it.

 

Three Steps Will Recharge Your Business

Washington Post, July 2, 2012: “Outlook for U.S. economy dims as manufacturing shrinks for the first time in nearly 3 years… ‘Our forecast that the U.S. will grow by around 2 percent this year is now looking a bit optimistic,’  said Paul Dales, an economist at Capital Economics.”

Being the CEO requires committing to a “no excuses” life. Others may offer plausible reasons for non-performance, but if your company plateaus, CEO excuses aren’t an option – you must take action:

  • Softening economy? Find a way to take advantage of a changing business landscape.
  • Lengthening sales cycles? Determine how to identify highly motivated prospects.
  • Shrinking margins? Examine whether your company is leveraging its strengths.

Changing your business to address these and similar challenges incurs risk, but the risk of doing nothing is greater. How can you adopt an effective breakout strategy that will recharge you and your executive team?

Here’s a rational, three-step process guaranteed to provide direction: (1) reexamine your company’s true value and what sets it apart; (2) in light of market conditions and competition, determine an altered direction that will maximize value; and (3) identify new business relationships that will open doors to new business. In other words, you need to clarify, comprehend, and connect:

Clarify – Who are you as a company and what sets you apart? What truly separates companies like Apple, Southwest, Berkshire Hathaway, and the NE Patriots from the rest, year after year, is a sense of purpose. Clarifying the organization’s purpose and unique assets beyond a simple mission statement actually increases efficiency. It’s imperative to get this right.

Highly successful companies perform at a high level because they focus on a clearly identifiable market with a differentiated solution. Even successful companies eventually let pressure to increase revenue force acceptance of business outside their primary focus. Since profitability grows by exploiting core competencies, losing focus erodes margins. Having a crystal-clear shared vision of who your company targets and what customer problems it uniquely addresses enables employees to make decisions more rapidly (fewer meetings and emails needed) so more gets accomplished faster and margins increase.

Comprehend – Once you understand your company better, update your understanding of your immediate market. What change in direction will maximize value? Finding the right direction in a complex and competitive market accelerates growth. How do you define who’s in it and who isn’t? What is your relationship to other companies in your space?

One proven method is to pretend you’re selling your company and identify a number of companies that could acquire you and another set that you might acquire or partner with.  By comprehending the needs of potential acquirers, acquisition targets, and partners, you will develop a value framework that identifies high value opportunities.

Connect – Which relationships will increase business the most? Whether your company is B2B or B2C, strong relationships with other companies can help it grow faster. That said, many CEOs have been burned by partnerships that failed due to poor planning, unrealistic expectations, and unmonitored execution.

The solution? Design self-fueling partnerships that continually reinforce each partner’s objectives. Partnering with potential acquirers and industry leaders will drive new revenue by providing access to new markets, extended geographies, enhanced product and service offerings, better branding, and staff augmentation.

By following this three-step process, breaking out of flat growth may be easier than you think.

Breakout Strategies

The best time to evaluate the direction of your business is while it is thriving. I’m currently rethinking 20/20 Outlook’s strategic positioning, and it’s focused on creating breakout strategies.

What are breakout strategies?

The work “breakout” implies constraints. Most companies fail early, a precious few like Amazon, Google, and Facebook rise meteorically, and the remainder become “established” businesses. These established companies often hit a plateau in their growth, resulting in flattened revenue and profit. At that point, it’s common to find a CEO frustrated by a period of constrained growth and experiencing the “CEO dilemma.”

Breaking out of a growth plateau implies change. Most CEOs are visionary, so it’s their business vision that defines targeted outcomes for the company. The CEO’s vision may point the company toward an inspiring destination, yet without clear strategies, employees may be clueless about how to get there, or even worse, may waste resources by taking conflicting routes.

Maybe the CEO’s vision is unrealistic given a changing market environment that he/she fails to recognize. Maybe good strategies are hampered by bad or non-existent external communication. Maybe the company hasn’t learned to properly leverage relationships with other companies in order to expand their offerings, open new markets, or gain access to a broader prospect base.

In every instance, breakout thinking is needed to create breakout strategies that:

  • provide a deep understanding of the market situation,
  • develop a clear picture of the competitive landscape, and
  • provide credible data on which to base plans
  • give a clear rationale for action from which detailed department plans will flow,
  • lead the company to an optimal return on investment of its finite resources
  • last but not least, create energy and enthusiasm.

Truly visionary CEOs sense when an outside catalyst can challenge the status quo and illuminate new possibilities, then they act decisively to introduce change that leads to breakout strategies.

Too Broad, Too Narrow, or Just Right

Driving down a major boulevard in a city where we lived at the time, my wife spied a new restaurant in a place where many others had failed. In the window, it advertised food from multiple ethnicities, including both Mexican and Chinese! I’d be surprised if “Bueno Wok” lasted long.

There’s a truism about how a lack of focus can kill an enterprise. Being “a mile wide and a quarter inch deep” is widely recognized as a cause of failure.  Typically, a desire to increase revenue leads to pursuit of business that doesn’t leverage the company’s strengths and results in lower margins and muddled branding. But, are there instances where too narrow a focus can be just as harmful?

The diagram below categorizes organizations according to two attributes, focus and potential. The Focus axis ranges from single domain to multiple domains through all domains, while Potential ranges from restrictive to growing through saturated. Companies focused on several verticals are distinguished from those whose offerings are truly horizontal (i.e. domain-independent). Of course, each axis represents a continuum so that an infinite set of combinations is possible, allowing for the unique positioning of any specific company.

Back to the original question: is it possible to be too focused? Consider the example of a company providing a niche offering to several vertical markets. In the diagram it would be classified as “saturated domain-specific.”

Suppose you’re advising a new CEO hired to grow this “plateauing” company, Your first inclination may be to assess each of the company’s currently targeted vertical markets in hopes of focusing on the one with greatest growth potential. However, if the frequency of opportunities within each vertical domain is found to be sporadic and sensitive to changing business cycles, it may make more sense to remain diversified. Finding additional verticals that the company can target may represent a more fruitful direction.

So a key factor in opting to narrow or broaden our focus ia available market opportunities. Other factors include strength of brand, plus the company’s ability to execute (e.g. capitalization), integrate, partner, and acquire. These affect companies in each of the diagram’s nine categories in different ways. (NOTE: future posts will consider how, so if one of the nine categories is of particular interest, let me know when you sign up on this page to be notified by email when the next post is available.)

Translating the CEO’s vision for growth into breakout strategies requires careful thought to determine the best way to target and deploy finite corporate resources. Too often a new direction is based on an unrealistic view of the company’s position and capabilities. While it takes an optimist to run a company, it takes a realist to lead one toward its highest value.

 

Two Reasons for Five Common Strategy Mistakes

Growth relies on having a superior strategy, and in her recent HBR post, Joan Magretta identifies five common strategy mistakes. In reading the piece, two common antecedents became apparent. Hopefully, naming them will amplify rather than oversimplify her points, since she expertly explains how to correct each of the five.

The twin antecedent causes are a lack of clarity and a lack of focus:

  1. Confusing marketing with strategy – While good marketing is important, simply identifying your value to customers is insufficient to win big and often. A clear understanding of why you’ll win using focused execution is vital.
  2. Confusing competitive advantage with “what you’re good at” – Just being good at certain things isn’t enough to win business. Most companies are good in multiple areas, but sometimes the “strengths” they identify are merely minimum requirements to stay in business, like good customer service. Clarifying what you’re uniquely good at and how your unique blend of products, services, and relationships delivers higher value than competitors’ offerings leads to real growth.
  3. Pursuing size above all else, because if you’re the biggest, you’ll be more profitable – A young, smaller company with a clear and focused strategy can maintain higher margins than larger competitors. It happens in many industries, and Joan’s example of BMW versus GM makes the point.
  4. Thinking that “growth” or “reaching $1 billion in revenue” is a strategy – Desiring to “grow the business” and “enhance revenue” constitute objectives; they don’t identify the strategic moves needed to fulfill them. As discussed often in this blog (e.g., see “Attacking Business Entropy“), clarity about positioning is crucial and fundamental to a successful strategy.
  5. Focusing on high-growth markets, because that’s where the money is – The retail sector was not a high growth market when Amazon entered it. It’s a classic example of finding a new, better way of attacking an old, slow growth market to take share from existing competitors.

Why is it important to get strategy right? Operations-focused CEOs sometimes wonder if strategy is about hiring high-paid consultants to create pretty slides and well-written plans for consumption by boards of directors and investment bankers. As pointed out here before, clear and focused strategic thinking is the key to effective execution. Clarity and focus provide the foundation, and the value of the results – accelerated growth, higher margins, and increased understanding of the market – profoundly surpass the value of a new presentation.

Stuck? 5 “Non-Urgent” Paths to Growth

In companies who have plateaued, the leader may be absorbed with urgent matters like managing finances and addressing operational issues, while neglecting less urgent but critically important issues. In our work advising CEOs, five common “non-urgent” factors repeatedly arise that can hinder or accelerate growth.

Take a few minutes to think about where your company stands on these 5 issues:

  1. Clarify (who are we, and what sets us apart?)   A shared understanding of purpose and unique assets increases efficiency. With a crystal-clear picture of who the company targets, what problems the company uniquely addresses, and other elements of strategic positioning, managers and employees can act faster while reducing the number of meetings and emails; in short, more gets accomplished.
  2. Comprehend (what direction will lead to increased value?)  Finding the right direction in a complex and competitive market accelerates growth. By comprehending the needs of potential acquirers, acquisitions, and partners, you can identify and target those market segments with the highest growth potential.  
  3. Communicate (what key messages will attract prospects?)  In an interconnected world filled with noise, every business needs a brand that associates the company with its unique qualities. Identifying key messages that flow from the strategic positioning and repeating them frequently will reinforce existing customer relationships and open new ones.
  4. Connect (which relationships will help increase our reach?)  Too often CEOs have been burned by partnerships that fail due to poor planning, unrealistic expectations, and unmonitored execution. Self-fueling partnerships with potential acquirers and industry leaders drive new revenue through access to new markets, extended geographies, enhanced product and service offerings, and staff augmentation.
  5. Convince (how can we improve sales execution?)  Too often significant time is wasted on non-buyers. Eliminating them early through rigorous qualifying saves time and money. Based on clear positioning, high potential markets, strong messaging, and self-fueling partnerships, the right qualifying questions lead to rapid elimination of “no’s” and enable a focus on “maybes” – real prospects.

Obviously, other important factors (e.g., operational excellence, product and service strategy, customer relationship management) impact success, but less obvious, non-urgent issues are often the root cause of stagnation.  Dealing with them may be the shortest path to getting your company unstuck.

Strategy versus Tactics: One or the Other, or Both?

If you have trouble telling whether it’s your strategy or execution that’s lacking, you are not alone. When we don’t get the results we want, it can be challenging to distinguish whether the problem is what we’re doing or how we’re doing it.

In the Imperial Sugar cover story of the just-released issue of TexasCEO magazine, CEO John Sheptor describes how he did both, making tactical changes to stabilize the company before leading it through a more fundamental strategic transformation. For many CEOs, though, the dilemma is choosing one or the other – should I focus on improving execution or should I change the overall strategy?

Marketing expert Seth Godin offers one way to decide:

If you are tired of hammering your head against the wall, if it feels like you never are good enough, or that you’re working way too hard, it doesn’t mean you’re a loser. It means you’ve got the wrong strategy. It takes real guts to abandon a strategy, especially if you’ve gotten super good at the tactics. That’s precisely the reason that switching strategies is often such a good idea. Because your competition is afraid to.

Once you decide to change the strategy, begin by examining your company’s current positioning vis-à-vis the competition. Most businesses initially have a crisp vision of how they are positioned against competitors, but that vision gets fuzzier over time as compromises are made to land new business. Clearly understanding where you stand now by highlighting current strengths and weaknesses makes it easier to create a new vision for growth.

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