What’s New for 2011

The move to share the 20/20 Outlook process is accelerating in 2011!

First, we were asked to develop a sidebar article for the cover feature of the Jan/Feb issue of TexasCEO magazine. Watch for a notification here when it’s available, plus a tweet and a LinkedIn update. (By the way, the twitter name is @2020outlook, and buttons for email, LinkedIn, Skype, RSS, and twitter can be found in the upper right corner of the 20/20 Outlook web site.)

Secondly, chapters of a book in process will soon start showing up on a new blog site that’s under development. Each chapter will feature a dialog between a new CEO and their mentor, with each conversation based on a principle contributed by a different serial CEO friend.

After leading companies to success for years, serial CEOs develop valuable principles that don’t often make it into business school classes. Having repeatedly seen the same situations and outcomes, he/she develops “intuition” in the form of simple rules of thumb for how to handle specific business circumstances.

This new site will help aspiring business leaders manage and grow their businesses by absorbing simple yet profound lessons from successful serial CEOs.  It offers these CEOs a chance to give back by sharing these precious principles  with new and aspiring business leaders. Written in the form of a dialog between a new CEO and their mentor, some are amusing and some are painful, yet each offers a  valuable lesson about managing a business to new levels of success.

Just drop an email to bob@2020outlook.com if you’d like to see new chapters as they emerge every few weeks. If you choose to, you’ll be able to interact with the CEOs and others who will comment on and discuss the chapters.

We ‘ll be sure and let you know when the new blog site is ready.

Happy New Year!

Top IT Trends for 2011

Cascadia Capital LLC is a Seattle-based independent investment bank founded in 2000. They recently announced their top information technology predictions for 2011, based on insights from their work with private and public growth companies.

The six trends are:

  1. Increased competition between growth equity and strategic acquirers
  2. M&A, not IPOs, drive shareholder liquidity
  3. Web content management, analytics, marketing automation and customer
    relationship management (CRM) convergence
  4. SMB adoption of cloud services will drive consolidation of cloud vendors
  5. HIPPA compliance drives M&A for healthcare IT sector
  6. Technology enabled services companies become acquisition targets

Do you agree with their predictions? What would you add?

Every Portfolio Has (at least) One

Every private equity and venture capitalist investor I talk to has at least one portfolio company that stalls out. The company survives the original investment rounds to become an “established” business. Soon thereafter, the management team opts to focus on a single aspect of the business, e.g., “we’re going to focus on growing the customer base.” The monthly mantra becomes “keep the pedal down on sales, manage operational issues, and carefully manage cash.”

These activities are crucial to survival, yet the danger is that the CEO and management team can get comfortable working in the business and forget to work on the business. Neglecting to put a rational plan and adequate resources in place to enhance company value (including growing revenue) often leads to an abrupt plateauing of valuation that takes months and even years to recover from.

Initiating and maintaining productive relationships with relevant organizations at the right time establishes a decision-making context that maximizes the valuation of technology businesses. Created specifically to increase shareholder value, the 20/20 Outlook process enables a CEO to:

  1. view company value through the lens of potential acquirers,
  2. adjust market strategy and offerings accordingly, and
  3. initiate and maintain strong ties with key companies that can drive valuations ever higher.

The key is to intervene well in advance of a slowdown and put an enlightened process in place. Not doing so risks the ultimate loss of mega dollars and significant market share.

Surprise: Clients Tell It Best

It’s been awhile since the last post was published. Client deliverables, non-profit activities, and family priorities, as well as continual business development, have made it a hectic time.

The 20/20 elevator pitch is that “it is a process that helps a company get ready and stay ready for an exit,” but it’s more than that. While helping shoot some videos during that non-profit work, we were close to Infoglide’s offices, so I asked CEO Mike Shultz to stand in front of the camera and share his thoughts on his use of the 20/20 process.

Mike has started and sold several companies, which enables him to speak with authority in this 2:47 of unedited footage. With just one take, Mike captures the essence of the process better than any marketing firm I could have hired. Enjoy.

Acquisition Activity? Up, According to Corum’s Nat Burgess

Corum Group is a leading provider of merger and acquisition services to software and information technology companies. Because of their heavy involvement in  M&A, they are an excellent source of data about high tech transactions. Their president Nat Burgess was recently interviewed on CNBC about the current level of acquisition activity.

The Mystery of a Disciplined Process

“Mystery” and “process” aren’t often used together. A process is commonly thought of as a way to replace mysterious methods of accomplishing a goal with a well-documented, step-by-step procedure that, if followed precisely, always produces the desired result.

CEOs can be mystified when a competitor with seemingly inferior products and services is acquired by a larger company.  The response is, “Why not my company?” The answer often isn’t self-evident.

In his book A Whole New Mind, Daniel Pink proposes the need to combine left-brain analytical thinking with right-brain creative thinking for those who aspire to succeed in the 21st Century. They must combine both modes of thought in order to “connect the dots” faster than their competitors.  The 20/20 Outlook process demands right-brain and left-brain thinking from management teams who implement it.

A client CEO commented not long ago about how the process has precisely positioned his company for an exit. “At first we just wanted to determine where we fit in the marketplace. During the process, we identified twenty potential acquirers and then narrowed our focus to two industry groups. What we noticed over time was that a market for our products developed around those two groups as though the market was mysteriously growing toward us.”

The CEO came to realize that the illusion of the market coming to his company was the result of decisions he and his team made to follow the decision framework they had put in place. Now those decisions have put them in a position to achieve significant payoffs from relationships created using 20/20 Outlook thinking.

A Milestone for 20/20 Outlook

Exactly six months ago, 20/20 Outlook LLC officially opened for business. If it seems longer than six months, you’re right – planning started over 18 months ago. I felt “nudged” in a new direction and began exploring how to deliver value to CEOs of private companies. The answer ultimately lay in combining an unusual (some might say “weird”) combination of C-level experience in partnerships, acquisitions, and product strategy for startups through billion dollar companies to create the 20/20 Outlook process.

In February, I set a goal to achieve a certain level of business in six months, and we’re on track to surpass that goal this month. Experienced friends in the consulting business say it takes a year to get it off the ground, so it’s exciting to reach this milestone in the middle of what no one but Washington would call a booming economy.

Most new businesses move in different directions once launched, and this one is no exception. Connecting with great clients was planned, and working with some great CEOs to help them achieve their goals is exciting. What was unanticipated is how many people have said “you should write a book” (more on that soon).

No one could be surrounded with a more supportive group of industry friends, comprising serial CEOs, C-level execs, VPs, VCs, private investors, consultants, and other computing industry leaders. Thanks to each of you for being so open and helpful with your advice and encouragement.

Finally, a special note of thanks goes to Mike Shultz, Infoglide Software CEO. His willingness to be a sounding board and continual idea source for 20/20 Outlook is deeply appreciated.

Attacking “Business Entropy”

Not long ago, I wrote a post on how clarity affects the bottom line. It emphasized the importance of a sharing a common vision among a company’s management team and laments how often it’s inadequate. “The lack of this understanding is so common among $10-50M companies that I’ve stopped being surprised when they can’t articulate a clear positioning statement.” The point has since arisen in several CEO discussions, and as I continued to ponder how it happens, a relevant term suggested itself from the fields of physics and cosmology.

Entropy. According to Merriam-Webster’s Online Dictionary, entropy is defined as “the degradation of the matter and energy in the universe to an ultimate state of inert uniformity” and as “a process of degradation or running down or a trend to disorder.” These words could also describe how the purpose, meaning, and direction underlying a successful business can lose strength over time.

When brand new ventures pursue funding, investors want to understand the business and seek answers to questions like:

  • What category of business is this?
  • What is its primary offering?
  • Who are its competitors?
  • What are the competitors’ weaknesses that can be exploited?
  • What makes the company’s offering unique in the market?
  • How will it gain advantage in the market and keep it?

and so forth.  In a well developed business plan, these questions are answered clearly and formulate the company’s strategic positioning.

As a business grows, it naturally changes, causing the strategic positioning to evolve. New competitors enter the market. The product strategy and product mix react to external economic forces. Customer requirements result in development of new products and services. Acquisitions occur. Partnerships are struck.

Such changes affect the strategic positioning of the company and also the shared management vision. If the company positioning is ignored as these changes occur, the business equivalent of entropy can begin and proliferate. The previous “uniformity” of vision gradually erodes. A “degradation” of the company’s messaging about itself, its products, and its services follows a “trend to disorder.” The lack of shared vision within the management team causes inertia and delays in execution.

Thankfully, the remedy to this “business entropy” doesn’t involve a comprehension of cosmology.  All it requires is foresight and a willingness to take action. Periodically, especially during and after significant game-changing events, the company’s strategic positioning must be reviewed and revised. Senior management and other key players should reach a consensus vision about the company, its market, its competitors, and its direction. And of course, outside assistance can facilitate the process.

Important Indicators are Up

Because I help companies define an exit strategy and grow value accordingly, I’m always seeking better sources of data that capture the current state of the investment world. Pitchbook is one source that publishes particularly useful information about fundraising, investments, and exits. A recent Pitchbook presentation suggests that we’re on the verge of significant growth in private equity investment during the next year, and that’s good news companies moving toward an exit.

One factor mentioned in the Pitchbook prez is that capital overhang is high and growing. When that happens, valuations tend to increase because so much money is looking for a place to land and produce a return.

Additionally, chart below depicts that the number of quarterly private equity exits through corporate acquisitions, initial public offerings, and secondary sales is on the upswing after reaching a low in early 2009.

Finally, one of the best analysts in the business, Richard Davis of Needham and Company, commented in his newsletter that it’s been 25 years since he’s seen so many companies in a great position for an IPO.

Taken together, all these indicators suggest that, despite the continuing malaise in the broader economy, a CEO who keeps his/her company’s partnerships, product strategy, services, and partnerships aligned with potential acquirers can expect to see greater opportunity this year and through the next.

Little Mistakes Illustrate Important Principles

No one likes to see their stupid mistake to be plastered on the internet, me included. That said, it’s hard to pass up writing about a personal blunder that illustrates important principles.

A week and a half ago my supply of business cards was getting low and a business trip was nearing. It made sense to make the new business cards consistent with my web site’s newly redesigned graphic theme, so I redesigned them. When the card publisher’s web site refused to accept my design file, I called their 800 number.

For the next 15 minutes, a very competent customer service rep somewhere in the world explained why the format wouldn’t work and rebuilt the card using my graphic elements. He’d show me a new version online, I’d ask for a tweak, he’d respond, then I’d refresh the page to see the changes. We repeated the cycle until it was done, and I approved and ordered the cards.

The cards arrived on my doorstep the Wednesday night before I left early for the two-day trip, and I was very pleased with the graphic appeal of the cards. Happy to have my original idea for the design implemented, I packed a supply of new cards before crashing for the night.

During several meetings on Thursday, I handed out a few of the new cards. Friday morning while handing one to a friend, I noticed something wrong. In front of my twitter address “@2020outlook” it was supposed to read “twitter:” but instead it said “tweeter:”, and also the blog URL had an embedded “@” sign. For a few seconds I wondered why the service rep made those silly mistakes, and then quickly shifted the blame where it really belonged – me.

I have a few old cards left, and the corrected ones will be here in a few days. Still, it’s valuable to learn (or relearn) the general lessons apparent from this mistake:

Recognize when details need your full attention. In a rush to get to other tasks after I completed the order, I let my focus on getting the new design right distract me from the more important job of making sure the textual details were correct. The lesson: leaders need to continually and accurately evaluate how much time to devote to details versus the big picture.

Don’t waste time beating yourself up for mistakes. After a mistake is made, focus on correcting it and then move to your next task. If you tend toward perfectionism as I do, this can be difficult. The lesson: when a leader makes a mistake, it’s fine to do a post mortem to determine what could have been done differently. Once you’re done, however, move on without regrets and refocus on growing your business.

In my case, I devoted the trip home to self-flagellation. It didn’t take the whole trip so I used the rest of the time to do something productive – outlining this post.

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