Lessons I Learned Today 6/9/09 – Innovation Playbook; Turning the Titanic in a Bathtub

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*The Innovation Playbook by J.P. Donlon

“With almost $10 billion in annual revenue, Heinz has leading brands in some 200 countries. (Its top 15 brands account for 70 percent of sales.) In trying to build a platform for future growth, Johnson and his senior team had one major advantage. Heinz ketchup, according to a Harris poll, was identified along with Coca-Cola as the most familiar brand in the U.S. The company is also a brand leader in beans, soups and infant foods in the U.K. and Australia. But iconic brands are not enough in a competitive world food market dominated by numerous brands and tight margins. The challenge was to grow the core portfolio, accelerate growth in emerging markets, and leverage its brands on a larger global scale.”

“At this moment you have two choices. You either recognize the changed circumstances and deal with it and move forward, or you try to live in the past. I’m a forward-looking person. There was no point in going back and reliving that. The market had spoken to us.”

“You don’t turn the Titanic in a bathtub. You don’t make fundamental changes in two weeks.”

“Although we have wiped out the not-invented-here attitude, there are occasionally pockets where we want to do something, and somebody is resistant. There are two ways to convince those individuals. One is with facts and logic, and the other is to tell them to do it anyway. We’ve upgraded our capabilities dramatically, but we are nowhere near perfect. That’s what makes this job challenging.”

 

*My Boss Wants to Sell Me The Business by Tim Berry

“Where do I start? My boss said he would sell the business for $500,000. What would be the best way to go about getting this business; and what should I know?”

“Of course this might be the opportunity you’ve been waiting for, but let’s also understand that your question is even more open-ended and complex than if you’d been offered a house to buy. You start with the problem of what it’s worth, objectively, then add the problem of how you’re going to finance the purchase. And all of that rests on the problem of whether you want to run a business and know how to run it. Books have been written on this stuff. In fact, the amazon.com search for books on “buying a business” produces 18,623 results.”

This article provide links to resources on business valuation, and gives brief comments on issues such as leveraged buyouts and seeking professional advice when buying a business.

 

*Do You Have an Exit Plan? by John M. Leonetti

“As a CEO, and most likely owner or part-owner of your enterprise, you are responsible for grasping the big picture of how the company is performing; you make critical decisions in order to succeed and direct the future of the company. With that said, how well prepared for your company’s future do you think you are? Have you taken the time to outline your ultimate goal of how you plan to exit the business? If so, how confident are you that this move is the most profitable option, and, at the same time, the best strategic move for the company?”

“Creating an exit plan for your company should be considered standard practice, a regular component of your business planning. An exit plan does not, and should not, imply that you are currently considering selling the business or looking to retire in the near future. On the contrary, well thought out exit plans occur over many years and often times selling the business is only one of the many options considered in the plan.”

“What your exit plan should do is analyze the possibilities for the ultimate succession of the business’s ownership and control, the tax and business implications of each option, taking into account the wants and needs of the company’s ownership.  What then will creating an exit plan give you if you do not believe your company’s ownership is nearing an exit? The answer, it will give you confidence that the decisions you make today are supporting your ultimate exit plan as well as providing you with the maximum exit value when the time is right.”

The article discusses the various steps in creating an exit plan, including looking at the current ownership of the company to determine how prepared they are for an exit, understanding all the options, executing on the plan, and then protecting your wealth.

 

*Succession Planning Crucial For Corporate Image by Fayazuddin A. Shirazi

“For Ken Makovsky, succession planning is all about safeguarding a company’s image. According to him, if the succession issue goes unattended, it can seriously dent the reputation of the company. “One of the main responsibilities for a CEO and the company’s board is the development of a succession plan to insure the continuity of the company. The company’s reputation can be seriously tarnished if the succession issue is left unaddressed,” he says.”

” A survey of more than 2,500 senior HR executives by Boston, MA, based talent development consultancy Novations Group reported that despite having succession planning in place, more than a fifth of the survey respondents believed it was valueless because, more often than not, they ended up recruiting someone externally anyway.”

“The report which was released last year further revealed that barely half of US firms regularly update their management succession plans, meaning that when valued high-flyers depart for greener pastures, it is more than likely that their only option will be to throw money at the problem.”

 

*Succession in Practice by Beverly A.Behan, Jeff Kirschner and Susan M.Snyder

“To understand the perspectives of today’s CEOs on succession planning, we spoke with 18 sitting CEOs, one recently retired CEO and one sitting chairman, as listed in the sidebar on p. 30. To gain varied perspectives on this important topic, we spoke to CEOs from a variety of industries and different company sizes, with our sample group admittedly weighted towards larger public companies.”

“I think the days of the imperial CEO are long gone but while they lasted, succession planning was a subject that a CEO could defer,” noted James Cornelius, CEO of Bristol-Myers Squibb. “In today’s world of governance, it’s impossible to defer what is probably the most important decision, namely who will be the next CEO.”

Most describe an effective CEO succession process today as a partnership between the board and the CEO. While the ultimate decision rests with the board, the CEO nonetheless plays a critical role in the succession process. “The board is the ultimate decision maker about who the next CEO should be,” explains Don Shippar, CEO of Allete. “The CEO, however, needs to weigh in on issues about what’s important in the CEO job, and the criteria for someone to be successful in that job, and should help the board to come to agreement on these things.”

Formal executive assessments are increasingly becoming an important feature of the CEO succession planning process. “We do 360 [reviews] with all of the executives, including me,” reports Carlos Cardoso, CEO of Kennametal. “As a result of those 360s, there’s coaching and feedback.”

“While the role of the CEO in succession planning may have changed, today’s CEOs feel their role in succession is more important than ever – in partnering with the board on succession, developing a pool of candidates and mentoring candidates to the point that they can successfully step into the CEO’s shoes. They emphasize the importance of starting early, incorporating formal assessment tools into the succession process and avoiding public horse races along the path. They recognize the CEO’s role in giving the board meaningful exposure to succession candidates and in giving candidates experience in learning how to work with a board.”

 

*Small Biz Blogging 101-Getting Started by NicoleR

“Most startup blogs are small, but with time and regular updates your audience can grow. As a small business it is important to start your blog early because this can be one of the most cost effective ways to start marketing your business. As your business grows so will your number of followers and those who become faithful, will appreciate your information and possibly become future consumers.”

The article lays out a few tips to get you on your way:

• Use other people′s blogs to establish yourself as an expert
• Use your blog as a form of communication
• Define you topic and stick to it
• Stay current and up to date
• Don′t forget about spelling and grammar

“It′s not necessary to be a professional author or multi-million dollar company to have a blog.  All you need is opinions, information and insight in your area of expertise.  If you prove to be genuine and knowledgeable your readers will notice and your blog will become one of the most cost effective marketing tools your small business could invest in.”

 

*Lifecycle Quiz for CEOs by Robert M. Donnelly

“Company’s, (sic) like people, go through a natural evolution from their entrepreneurial beginnings or embryonic phase, through the growth phase into maturity, and if they are not careful they can age prematurely and eventually die. The individual products that make up the company sales have their own product lifecycles as well.”

“The problem is that many CEOs do not know where their company lies on the lifecycle curve. Nor do they seem to know where their products fit in the natural evolution of product lifecycles. As a result they are frequently surprised when they realize that it is often too late to reverse their situation.”

“Nobody plans to fail…they just fail to plan.”

“The lifecycle of a business mirrors the biological cycle of humans. The stages of the business/product lifecycle have been well documented and are played out in the marketplace every day. The question is – where is your business in this age old evolution? Do you know?”

“Every company generates immense amounts of data. However, all that data has to be converted into information and that information used to develop insights to determine where the company and its products are in their natural lifecycles.”

“Each stage of the lifecycle of a business has natural strategies that can be implemented successfully to continue the profitable evolution of the company.”

 

*Small Business Networking for your Bottom Line by NicoleR

“Traditional means of marketing are not dead; in fact, they are still very much alive and proving to be effective. Tactics such as face-to-face networking and word-of-mouth is proof of this. When deciding on what business networking methods you will use, it is important to first, understand how networking can work for you. Second, research what groups are right for you. Third, make a goal for what you want to accomplish.”

“Business networking in the form of joining and meeting with trade groups, industry associations, chambers of commerce and similar organizations in person can flat out increase your bottom line. By meeting other professionals in person, on common ground and at a place of mutual interest, you will begin to form relationships among your community. Once you start building relationships and regularity among these groups, members will begin to remember you, your abilities and your expertise. The next time a member needs something in your field; they will remember you and therefore will probably reach out to your small business. In essence, you will form a loyal network of followers who may at some point need your business, refer your business or want to collaborate on a joint goal.”

“Business networking in the form of joining and meeting with trade groups, industry associations, chambers of commerce and similar organizations in person can flat out increase your bottom line. By meeting other professionals in person, on common ground and at a place of mutual interest, you will begin to form relationships among your community. Once you start building relationships and regularity among these groups, members will begin to remember you, your abilities and your expertise. The next time a member needs something in your field; they will remember you and therefore will probably reach out to your small business. In essence, you will form a loyal network of followers who may at some point need your business, refer your business or want to collaborate on a joint goal.”

 

*BizEquity: What’s Your Business Worth? By Tim Berry

“If you own a business or want to start a business, then you care about valuation and how it works. Even if you don’t now, you will later.”

“Businesses that seek investment need to anticipate valuation as part of the exit strategy, which is how the investors make money. You get investment now, but only if investors believe they’ll make money when the business sells later. “

“For estate planning, you need to estimate valuation if you deal in shares of a business for your wife, partner, significant other or children. Tax code defines how much you can give in any given year, and that depends on valuation. “

“Lots of people who never thought of exit during years of running a business start thinking of selling as they get into their 60s and 70s. And that means selling the business. “

“Valuation is obviously critical for buying or selling a business.”

The article outlines a trial run of BizEquity.com where “you can search your ZIP code for estimated valuations by type of business. You can search for your specific business by name. Most interesting, and a new feature, you can sign up and run through a valuation based on your business numbers.”

 

*Do You Really Want to Find Investors? by Tim Berry

1. Are you really sure you want to go that way?

2. Do you have a business plan?

3. Do you need enough money to interest investors?

4. Can you grow your business a lot, in a few years?

5. Do you have a convincing team?

Investors are going to want track records, people on your team who can run the production, marketing, sales, and administration of your business. They want people who have done that kind of thing before, successfully. If you don’t have them on your team, then the investors won’t be interested.

If you can answer yes to all of those questions, then you’ll likely be able to get investment

 

What I Think

I think, as Donnelly’s article points out, “nobody plans to fail…they just fail to plan.” Many of the articles posted on this date demonstrate both sides of the planning equation. Those entrepreneurs who think up front about their businesses and their own mortality, should do better than those who don’t. Those who start their planning too late in the life cycle of their business or their own lives, have corresponding less chance of success. Those who plan on the basis of incorrect or insufficient data, as well as those who don’t understand the data, are as likely to succeed as they are to be able to “turn the Titanic in a bathtub.”

These all seem like pretty basic rules, but that is a matter of perspective. If you understand the rules, they become obvious to the point of being second nature. If you don’t know the rules, perhaps because you are in unfamiliar territory, you don’t know what you don’t know.

A perfect example comes with the employee whose boss and company owner offers him an opportunity to buy the business. With the economy in the shape it is currently, this is likely to be happening at a record rate. So, what are the rules in this situation? Perhaps they not so easy to tell.

Based upon some of the articles posted on this date, the issue of valuation arises. There are certainly many ways to value a business, each method having its own rules. Once again, in this economy, many of those rules are changing, but all according to a higher level of rules.

The stages in the life cycle of a business or product are sometimes so long and so subtle to the uninitiated, they are harder to see than the movement of the hour hand on a clock. Likewise, other than gray hair, the life cycle of a business owner can be deceptive for both the employees and the owner too. Following one rule from these articles, starting early in the process, whether it be working toward buying a business or finding a successor to run your business, may just allow you to turn the Titanic, but not to make fundamental changes overnight.

 

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.

Lessons I Learned Today 5/19/09 – Free to wander off the path

This is a digest and recap of highlights, quotes, and comments from articles and discussions posted on this date on the Applied Entrepreneurship, LinkedIn group site.

 

*Disowned; Is it time for the family and the business to go their separate ways? by Patricia Schiff Estess

What happens when a likely buyer offering big money approaches a family business? Business motivations aren’t the only reasons to think twice about selling the company.

Look at the business’s future and examine the foreseeable external and internal conditions that might affect it. Consider whether this is the optimal time to sell the business given its stage of development and the market. And then determine whether the succeeding generation is in place, competent and interested in taking over.

There are a number of commonly believed fictions surrounding a possible sale:

• Fiction 1: We have to make a decision to either hold or sell as opposed to recapitalizing, considering a leveraged buyout, developing an ESOP (employee stock option plan), going public, bringing in outside management to run the business and selling some of the stock to an unrelated investor.
• Fiction 2: We’re great negotiators, so we can easily negotiate a sale. It’s naive to think you have more expertise in this field than the professionals.
• Fiction 3: We have a profitable business, so it should go for top. If the family is divided, it translates into a discount in the value of the business that a buyer can realize.
• Fiction 4: Even if we don’t go through with the sale, there’s no harm in seeing what the business is worth, just in case one day we decide to sell. You risk key people leaving and setting up a competing business next door.”
• Fiction 5: We’ll make certain our employees get a good deal. You might be able to negotiate a good deal for yourself and your employees, but you can’t expect it to hold for any length of time. Even if you and your relatives stay in the employ of the original buyer, things change once the contract has been signed.
• Fiction 6: It won’t change our relationships with each other or the community. If you and a relative dislike each other or don’t have similar business goals, then a sale, which limits regular contact and takes you out of a partnership role, might enhance that relationship. If you enjoy and get sustenance from each other on a daily basis, you might feel a tremendous emotional loss when you no longer have that.

 

*When You Gotta Go  by Jacquelyn Lynn  

You don’t want to leave your business, but will you be ready if you have to?

You’re not ready to retire, nor are you considering selling your company-in fact, you see yourself running your venture for years to come.

So why bother with an exit strategy? For the same reason your mother always nagged you about wearing clean underwear: You just never know what might happen.

 

*Recruit a Virtual Sales Force With Your Blog by Mark Stevens

Put the internet to work for you and drive sales by connecting with your customers online.

“Hundreds of thousands of people read my blog, and then serve as virtual salespeople for me–suggesting that their friends and colleagues come into my universe and read the blog, too. I don’t control this growth; I don’t want to and, in the viral world, letting the growth flow unfettered is where the real power lies.”

To be effective, a blog must be:

• Educational as opposed to commercial. You don’t want to sell. You want to inform (which, it just so happens, is always the best way to sell).
• Compelling. People already have an overabundance of content to read. They will make room in their lives for you only if you are diligent in writing truly impactful blogs.
• Frequent and timely. I think once a week is ideal; but whatever your schedule, keep to it. A blog is a periodical of sorts. It must be available on the expected pub date.

 

*How to Start a Clothing Store by Laura Tiffany

Are you fashion forward? Do you love working with the public? Then it might just be time for you to marry your fashion sense and your business sense with a retail clothing business.

“Opening an apparel store is serious business. For some of you, it may mean giving up the safety of your corporate job with its steady income, paid holidays, vacations and the opportunity for advancement. All this, and guaranteed 12- to 14-hour days.”

“Running an apparel store is more than a full-time job,” stresses Nancy Stanforth, professor of merchandising at Oklahoma State University. “Running an apparel store is something you do all day every day.”

Here is a handy set of questions that will help you determine whether fashion is indeed your forte.

• Is this a business in which you have experience?
• Can you live with the inherent risk in the apparel business?
• Do you believe strongly in the apparel industry?
• Is your niche overcrowded or dominated by a few?
• Can you become a specialist?
• Do you have a competitive advantage?

Do all the following before you choose a location for your apparel store:

• Look at several locations before choosing your store site.
• Check into any local ordinances and zoning regulations that apply.
• Determine your store’s parking needs.
• Decide whether the site is worth the rent.
• Define the selling point of your store’s location.
• Determine whether the location is an area of potential growth.
• Define your store’s space needs.

 

*What Are Your Customers Thinking? by Jennifer Wang

There are existing technologies that businesses use to get a read on what customers are thinking.

Store design can influence what people buy. With next-generation advertising technology, you may not be able to read your customers’ minds, but you can get pretty close.

 

What I Think

I think we had a pretty good mix of articles on this day. Some dealt with good old nuts and bolts checklists of proven strategies, and some dealt with visions of the future. I love checklists for clients. Whether they follow them or not, they at least provide a frame of reference for what my clients actually do on their journey to start or run their business. They are kind of like a road map of a journey. Clients are free to wander off the path, to find better and worse ways to do things, to make mistakes and discover innovative new paths. If they get lost, however, they have a way to find their way back and figure out where they made a wrong turn.

Likewise, I like to throw at least a little future thinking at them too. No matter how solid the history of “traditional” or “standard” operating procedures, emerging technologies, “disruptive” strategies, radical shifts in the economy, an aging population, and many other factors tell me that my clients must be much more agile than were their predecessors just a few years ago.

I think that today it is more important than ever for entrepreneurs to know and understand how things have worked in the past. They must also truly have an eye for what is coming over the horizon. If they can get an early mastery of those two concepts, they have a chance of not only surviving, but of prevailing over the competition.

If you enjoyed my impression of these articles, why don’t you read them for yourself and see what you and I missed or hit? Join the Applied Entrepreneurship group on LinkedIn. Membership is free and I try to post about ten articles a day there. We have some great discussions going and if you are an entrepreneur, we hope you will join us.