2011: Design Equals Intelligent Growth

My initial blog entry of 2011 described the characteristics of business leaders who design their actions to execute plans versus default to the pressures of the market, economic cycles and the historical ways of conducting business.  With uncertainty and caution still the watchwords of small and medium sized businesses I searched to find a sustainable management framework that could power design and ward off default.  My search hasuncovered Intelligent Growth a very interesting concept extensively researched by the Corporate Executive Board for Fortune 1000 companies. Intelligent Growth is the balance of revenue expansion with cost efficiency to achieve consistent revenue growth and margin improvement across multiple business cycles. Check it out by following the link to Corporate Executive Board.  In 2011, we intend to focus our Business Revitalization Newsletter on translating the Corporate Executive Board research findings into pragmatic strategies and actions for small and medium sized businesses. 

Tobey Choate, Managing Partner

2011: Design or Default

With the passage of the Bush cuts, the rising Dow, increasing consumer and business demand and the general euphoria of leaving 2010 behind most small businesses see brighter days ahead. While the business environment will improve small businesses still face the daunting challenges of uncertain demand, increasing competition, a dispirited work force, and limited access to capital. To make 2011 a success business owners and executives must have a realistic and clear plan for profitable growth and slavishly execute against it.  As a business leader, are you able to design your actions to execute plans or do you default to the pressures of the market, competition, employees and the historical ways of doing business and execute tasks driven by these short term considerations? Recently I have given quite a bit of thought to what are the fundamental leadership characteristics of leaders who design the successful implementation of a plan. The foremost characteristics are:

• Discipline-will to take the actions to make the plan a reality
• Fortitude-fierce resolve to do what is right  in face of sustained resistance to change
• Integrity-cold blooded honesty to face facts, admit mistakes, and make changes
• Accountability-setting and living up to a standard of performance you expect from others

                                 
These leadership characteristics are tested every day in business. Your ability to base your leadership style on them means the difference between design or default.  

Tobey Choate, Managing Partner

Strategic Alliances-The Elephant in the Room

The prior posts concerning Strategic Alliances highlight their major advantages and challenges. As John Musser points out the Strategic Alliance is by its very nature a potential competitive disadvantage since both business typically operate in the market and are forced to share confidential information or relationships. While most information sharing can be adequately protected with agreements, typically the most troublesome information sharing concerns customers. In particular, the “elephant in the room” of Strategic Alliances is who owns the business relationship with the customer now and in the future. Succinctly put, who will benefit from future revenue and profit flow? Since the objective for many Strategic Alliances is to acquire customers that both or an individual business would not be able to acquire without it, this question of customer ownership is tricky. The following are some practical suggestions for addressing this challenge:
• Design the Strategic Alliance so that customer ownership is only paramount to one firm
• Limit the customer ownership to a person or function as opposed to an entire company
• Assign ownership to one partner and share revenue and profits at a level that declines over time
• Recognize the imperfection of a Strategic Alliance and agree up fron the openly compete for the customer after a defined period of time.

  Regardless of how you address customer ownership establish the “rules of the road” from day 1. Failure to come to grips with the “elephant in the room” will guarantee it is only a matter of time before mistrust and dissension creeps into the Strategic Alliance and destroys it.

Tobey Choate, Managing Partner

Strategic Alliances-Foundation for Success

As Tobey has pointed out in his previous blog, Strategic Alliances offer opportunities for win-win outcomes for the participants. A key factor for success is in choosing the right partners. Trust and communication among the partners is paramount to identifying and solving the many strategic and operational issues which arise on a daily basis. Honesty in setting objectives and balancing risks and rewards can keep an Alliance vital, since it can sometimes appear that one party is gaining more from the relationship than the other. Basing the Alliance on principals of openness and candor allows the relationship to evolve and grow as new opportunities are identified and executed. The culture for successful Alliances demands top-down commitment to the process of cooperation and a willingness to understand and embrace the relative strengths and weaknesses of the partners on individual initiatives.
The decision to share information between the partners carries the risk of competitive disadvantage, since the partners are usually operating in the same business areas. Starting the Alliance relationship with small, achievable projects allows the partners to get a feel for each other’s style and trustworthiness, and builds the foundation for expanding activities based on common goals. Since some Strategic Alliances end up being mergers or acquisitions, establishing the proper groundwork and culture can lead to exciting new business opportunities over and above the immediate objectives of the Alliance.

John Musser, Director

Strategic Alliances-Panacea or Trap?

In these times of economic turbulence, the “holy grail” of all small business owners and executives is to minimize risk while maximizing your market leverage. Conceptually, strategic alliances have the potential to deliver this “holy grail.” A strategic alliance is a formal partnership between businesses to combine efforts to execute some aspect of the business together. For example, strategic alliances are established for bulk purchasing to get a better price, joint bidding on projects in a particular market, combining separate products into one offering to enhance customer value, and or utilizing a capability of one company to reduce costs at each company. Strategic alliances have the tantalizing potential to reduce costs, introduce new products or services, enable and accelerate entry into new markets, and provide needed experience and skills.
What is not to like about a strategic alliance? Why aren’t they used more often by small businesses? At a conceptual level most strategic alliances seem like a panacea. The business owners and executives are compatible, the companies have common needs and objectives, complementary capabilities, and there is a strong desire to enter into a strategic alliance. As the strategic alliance goes from concept to execution the traps start to emerge. Most commonly, they are:
• Day-to-day objectives are not aligned leading to frequent questioning of alliance value
• Coordinating business processes between companies is a continual struggle
• Each business maintaining an equal level of commitment to the strategic alliance
While detailed planning, strong management oversight, and periodic resetting of the alliance can minimize these traps, owners and executives need to understand that strategic alliances are imperfect by their very nature. They tend to be a point solution to a point in time opportunity and as time progresses the alliance dissipates or morphs into permanent arrangement. My advice to small business owners is to use them for what they are: a temporary low risk solution to a particular problem or opportunity. They are neither a panacea or trap.

Tobey Choate, Managing Partner

Achieving Big Change in Small Business

In a period of significant and sustained economic uncertainty, most small and medium sized business owners and executives view innovation and change as the “life jacket” of the present and “bridge” to the future. They have internally embraced innovation and change and started to plan for changing the markets and customers they serve, the products and services they manufacture, deliver and offer, the raw materials, components or staff they source, and the business model and organization structure they manage. An inevitable combination of these changes adds up to a fundamental, and many times jarring, departure from what has made a small business successful in the past. I call this “Big Change.” 

You would think that with a relatively straightforward business model and organization structure managed by a business owner or executive intimately involved with the day-to-day running of the small business Big Change could be achieved in short period of time with a modest effort and disruption. In my experience this is absolutely not the case.  Small business owners and executives know what to do but not how to do it. They lack the organizational capacity and skills required for Big Change. Typical shortcomings include:

• Understanding of what it takes to change a business deeply rooted in past successes
• Experience and skills critical to successful implementation of the required changes
• Loyalty to long time staff and past business practices ill-equipped to handle the changes

After years of working with small businesses loyalty to long time loyal staff and adherence to past business practices is the most vexing challenge for small business owners and executives. Essentially, they are forced to confront and change the people and practices which made the business successful. However they naturally have a deep steadfast loyalty and faith in these people and practices. The following are successful Big Changes strategies that small businesses employ to address these shortcomings:

• Turn Big Change into Incremental Change to minimize the amount, type, and speed of required changes.
• Hire a Change Agent with management authority and resources to make the changes including hiring, establishing new business practices, and producing measurable results.
• Build a Separate Organization to hire the staff with the required experience and skills with no obligation to use legacy staff or business practices.  

Tobey Choate, Managing Partner

Looming Worker Shortage-Hiring Fresh College Graduates

Several posts ago we discussed an impending worker shortage in a time of high unemployment. A tactic that most small and medium-sized businesses do not employ is to hire untrained students direct out of college. Rather, most small businesses follow the strategy of letting large corporations train college students and then after several years pick them off to work in their businesses. While still a sound strategy it is becoming rapidly obsolete for the following reasons:

• As evidenced by the current low employment rate of workers over 25 years with a college degree and well documented demographic trends the pool of college educated workers is steadily shrinking.
• Today’s  college students are more than willing to enter into short-term “training” arrangements to gain skills and prove their ability to contribute before accepting fulltime employment
• Freshly minted college students provide new ways of thinking (e.g. building business-oriented communities with social networking tools) and skills (e.g. team problem solving) not to mention the energy and vitality of youth . Most importantly, in a world driven by technology college students are technology savvy.     

The keys to successfully utilizing a recent college graduate in a small to medium sized business are: clear delineation of roles, responsibilities, and expectations, a mentoring and informal training program, and continual constructive feedback.

Tobey Choate

Managing Partner

My Q4 Checklist

With the first week of Q4 upon us and 2011 looming around the corner you should contemplate how to end 2010 with sense of optimism and burst of personal and corporate energy. In no particular order this is my top ten list of things to do in Q4:
10. Vote on November 2nd –it is empowering
9. Visit Your Banker-they need to believe in your business
8. Personally Thank Each Employee-recognition goes a long way
7. Launch Top Three 2011 Initiatives-why not get a jump on 2011
6. Identify One Market Trend You Can Ride-momentum is a great enabler
5. Collaborate with Your Top 3 Suppliers- challenge them with your 2011 plan
4. Make a Game Changing New Hire-fresh faces bring new ideas and energy
3. Call On Your Top 10 Customers-they are the key to next year and have the ideas for the future
2. Establish a 2011 Plan and Budget-to give a sense of focus and purpose
1. Hit Your Q4 Number-even if means resetting your Q4 goal

Tobey Choate, Managing Partner

You Have a Plan, Right?

Time seems to be flying by as fall sweeps into New England, and we prepare to close another quarter.  I’m sure you’re noticing the same fast pace, and since time is at a premium I’ll keep it short, simply asking ask some provocative questions for you to ponder once your quarter closes.

The seasons aren’t the only thing changing – undoubtedly there have been numerous economic and industry changes affecting your business as well.  Does your business have a clear plan for to deal with those changes so sales and earnings can grow again next quarter.

And, what about 2011?   You do have a plan?  Really?

Does the plan spell out clearly which markets are off-limits? Do Sales and Marketing view your plan exactly the same way, or does Marketing generate leads in different markets from where Sales has been getting success? Or the flip: does Sales occasionally go stomping around in markets which Marketing hasn’t been conditioning?  Are you even doing any marketing?

Maybe you wrote off 2009 because of the recession – many did – but I’ll bet you and your key stakeholders are not willing to write 2010 off too.  2010 has to deliver, right?

So, back to the perhaps-too-pointed questions: Do Sales and Marketing agree (exactly) how many deals have to be won to make your Q4 and 2011 numbers? How about proposals? Does Marketing even know?  What about first- time meetings (you know, the “Hi, thanks for making time today, so tell me about your business” meeting)? Again, do Sales and Marketing agree how many of these you need to have to make your 2010 numbers? And do they agree how these meetings will be earned and conducted?

I could go on, but I’m sure you get my point.

Well, maybe just one or two more questions: Do Sales and Marketing agree how many qualified leads have to come from the hard work of your Sales team, and how many of those leads have to come from Marketing? And do they agree how they will each generate their share of those leads?

If you have just one ‘must-do’ in mind as you begin next quarter and start planning your growth in 2011, make it a singular plan for Sales, Marketing, Development, and Finance. And, have them build the plan together.

That’s right, having everybody on the same page, speaking the same language, and working towards the same goal could do wonders for your bottom line.

Daniel Holland, Director

A Looming Worker Shortage-Why and What to Do

With the New England unemployment level stubbornly stuck at around 9% why are CHOATE & Associates clients having difficulty finding qualified workers? They have openings and they are hiring. Where is the disconnect and what can you do about it? While there may be some structural imbalances between job requirements and worker skills, the primary reasons are shortage of qualified candidates and unwillingness of the employed to shift jobs. With many jobs requiring a college degree, the low 4.5% New England unemployment rate of college graduates over the age of 25 years of suggests the pool of available candidates is slim. Also, from my observations the employed who are unhappy or ambitious to get ahead are unwilling to take the risks of changing jobs. As the well worn expression goes “better the Devil you know than the Devil you don’t.”
To overcome or ward off a worker shortage companies need to make recruiting the top priority of the entire company but in particular all levels of management. Successful recruiting is based on the following principles:
Always Recruiting Selectively Hiring: In a competitive labor market you need to keep the recruiting engine running (i.e. sourcing and interviewing) and not limit your recruiting to just when you have a job opening.
Management is Accountable for Recruiting Not Human Resources: While Human Resources can assist and be accountable for specific tasks the owner of the recruiting effort has to be the hiring manager. They know what they need and when, how it fits into the business plan, and are best equipped to sell the candidates on the job and your company.
Employ Multiple Recruiting Tactics Not Just a Single One: To successfully source highly qualified candidates use a mix of proven and new tactics with the mix tailored to your target candidates. A range of tactics are: employee referral bonuses, job fairs, website advertisements and postings, internships, head hunters, dedicated contract recruiters, LinkedIn and Facebook outreach, recruiting webinars, and Skype “hour.”
When you hire and retain excellent workers and properly focus them on your strategic priorities building and managing a successful business is a lot easier.

Tobey Choate, Managing Partner