Monthly Archives: February 2009

NBR’s Top 30 Innovations From The Last 30 Years

To celebrate their three decades on the air, PBS’ Nightly Business Report teamed up with Knowledge@Wharton to select the 30 most important innovations from the last 30 years, which can be found on the PBS Site. Without giving everything away, the top 10 were:

10. Non-invasive laser/robotic surgery
  9. Office Software
  8. Fiber Optics
  7. Microprocessors
  6. Magnetic Resonance Imaging
  5. DNA Testing
  4. e-Mail
  3. Mobile Phones
  2. PCs
  1. The Internet

And while #20, social networking via the internet, to borrow a phrase, really grinds my gears, I have to say that the top 10 are dead on.

Is Your Legal Team Ready (for Supply Chain Litigation)?

A recent CFO article on The Next Wave did a great job of pointing out that litigation is likely to spike again this year, starting next quarter. Noting that recession-related litigation last spiked in 2001 when the dot-com bubble burst, the wounds of recession often encounter a particularly painful form of salt as corporate attorneys stand ready to pour it on if they sense weakness in a rival, or a way to compensate for their own economic woes. Legal wrangling is already erupting across the board as aggrieved plaintiffs battle over breached labor contracts, unwarranted (executive) layoffs, dubious financial disclosures, broken supply chains, ailing strategic partnerships, ravaged 401(k) plans, unjust competitive practices, intellectual-property infringements, and curtailed credit lines. And as the article notes, that’s only a starting list.

Furthermore, the experts are expecting an avalanche in legal activity, starting as early as next quarter, with electronic discovery, intellectual property rights, anti-trust initiatives, and foreign corrupt practices leading the way, even though large companies are already spending millions a year on litigation. (In 2007, one in five large U.S. companies spent $10 Million or more on litigation, and the number of smaller companies spending more than $1 Million on litigation increased threefold.) As such, companies should expect their rivals to dust off their patents, pull out all the stops against perceived monopolies and their acquisition activity (under the “anti-trust” umbrella), report them on any practice that could be considered a foreign corrupt practice (in hopes that a resultant fine will bankrupt them), and challenge any e-discovery initiative as violating client-attorney privilege.

So what can you do to mitigate the risk?

  • Legal Team Readiness
    Make sure your legal team is primed and ready for unexpected, unwarranted, and ill-conceived litigation. They should be fully staffed; up-to-date on corporate policies, practices, and promotions; and supported by legal experts and support firms already on retainer.
  • Patent Perception
    Make sure that your legal team is well versed in the patents owned by your competitors and the usual patent trolls in your industry and that preliminary arguments as to why they don’t apply and / or why they are invalid (proof of prior art) are already drafted. In addition, they should be ready with counter-arguments as to potential violations of your patents by your competitors. Sometimes, nothing quashes a patent suit faster than the threat of a valid counter-suit.
  • Acquisition Acuity
    Avoid any acquisitions not already under way that could be seen as contributing to a monopoly, and insure that you have lots of facts, figures, and expert opinions ready to go as to why your current merger and acquisition plans will not result in a monopoly. If you do your homework, you just might be able to get the case thrown out before it ever gets to trial.
  • Practice Proofing
    Make sure your legal team has an expert (on retainer) on the laws with each country you are doing business with as well as the foreign corrupt practices act, alien tort claims act, and other laws that could be used to bring charges against your firm on home soil. Have that expert review all of your proposed dealings before any contracts are signed, before any money changes hand, and before any new operations are initiatied.
  • e-Discovery Deftness
    Have your legal and IT teams do a thorough review of the e-Discovery service(s) that you plan to use and insure that their processes are sufficient to prevent disclosure of attorney-client privileged information at least 99.999% of the time. (If you expect that from your SaaS offerings, you should expect it from your e-Discovery offerings! There’s no way that 800 documents should slip through in a batch of only 78,000, as that’s an error rate of 1.02%.) After all, every attorney-client privileged document that slips through is a piece of key evidence that you could be denied.
  • Quality Quest
    If you’re linked to a salmonella, melamine, or other food safety scandal in any way, shape, or form, you’re pretty much guaranteed to be a defendant in a class-action lawsuit these days. Your only defense (against criminal / federal action) is to prove that you exceeded every federal regulation and quality standard and were methodical and religious in your quality testing.
  • Security Strafing
    With the recent changes to the IEEPA that increase the civil penalty for a “person to violate, attempt to violate, or cause a[n export] violation to “an amount not to exceed the greater
    of (1) $250,000; or (2) an amount that is twice the amount of the transaction that is the basis of the violation    “, the introduction of 10+2 where an importer importers can be charged with fines equal to the shipment value if they fail to
    file and face charges of $5,000 per transaction with missing or inaccurate data    , and an increasing number of customs audits (especially against those companies without a solid C-TPAT history), it’s only a matter of time before your weak links are discovered … and if those weak links including non-compliance with one or more regulations, you could be risking a multi-million dollar fine. Do a security compliance audit before the fact, and if you find any discrepancies, voluntarily report them (under the guidance of external legal council) immediately.

Negotiation Basics

If you’re a proactive organization, chances are that you’ve been trying to re-source your way out of this downturn by taking advantage of recent cost reductions in commodity categories across the board. This means that, if you haven’t started already, you’ll soon be entering into final-round face-to-face negotiations with your (new) preferred suppliers. This means that, if you haven’t already, you should be brushing up on your negotiation skills, starting with the basics.

To this end, Industry Week published a useful article last fall on the Powers of Persuasion that noted that while all good negotiators have the power to persuade in common, no two negotiations are the same and no single strategy will always be effective. Furthermore, some of the most successful negotiations are the result of knowledge and information and that comes from doing research, asking questions and listening. However, there are some basic skills that will always be useful to you, and that you should have mastered before starting any negotiation, including:

  • The Ability to Define Success
    What is a successful outcome to you, and where do each party’s interests lie? This will allow you to find a common denominator that will lead to an agreement.
  • The Ability to Identify Priorities
    What’s a real “need”, and what’s a “want” that can be sacrificed for the greater good? Is 10 days turn-around time essential when 15 days can give you a 10% reduction in cost?
  • An Understanding of Power
    Who has the power? You? The Supplier? And to what extent can the negotiation be influenced?
  • The Ability to Gain Leverage
    You need to insure that you don’t disclose unnecessary information and give the supplier leverage. You also need to do your research and understand your supplier’s situation.
  • The Ability to Deal with Deadlock
    Good negotiators know that a deadlock doesn’t mean a negotiation is dead. They’re prepared to walk away and then come back later with different information and a different perspective, and to even move on to another potential supplier if required.

In addition, good negotiators are aware of the common negotiation mistakes, covered in Next Level Purchasing’s Negotiation No-No’s mini-course, and they don’t make them.

Winning Though The Downturn as a Small Business

Last fall, both Chief Executive and Industry Week published some good articles on how to survive the downtown — and win — that are worth a quick review.

In Winning through the Downturn, Chief Executive starts off by telling us that as far as your business is concerned you should be seeking to harvest cash and be really hard-nosed about any investment. In tough times, an investment must generate an adequate, and expeditious, return on investment. It also tells us to be super cautious with the banks – they caused a good deal of the [current financial] problem and that we should not assume that we can trust them at this time. Hear! Hear! (I’ve read too many stories about how mortgage resellers during the housing boom convinced people making 40K a year that they could afford 400K homes. Not being a trust-fund baby, I know from personal experience that it is tough to afford a 200K home on 80K a year if you have a family to support! So how could a family making half as much afford a home that costs twice as much?)

Other advice it gives is to consider outsourcing as opposed to increasing head-count, to consider increasing inventory in consumables when they start rising in cost (which currently makes sense for certain metals and plastics categories where the storage and capital cost are less than the expected monthly rise in raw material cost), and to make sure you are being tough enough with your suppliers. (You need to be fair, and always, always, always, pay them on time, but that doesn’t mean that they shouldn’t partner with you and share the pain of the current economic climate.) You should also focus on providing products and services that will make your customers go “wow” — as those are the products and service that they’ll spend their money on.

In Keeping Small Business Up, While the Trends are Headed Down, Industry Week tells us that a little bit of innovative thinking and belt tightening can go a long way and offers up eight suggestions. they are:

  • Show Me The Money!
    Now, more than ever, you need to get paid on time. Boldly (but respectfully) emphasize what you did, how much you are owed, and when payment is due.
  • Tech-Savviness
    Use technology efficiently and consider web-based accounting and CRM software, video conferencing, and multi-function office devices that keep costs down and productivity up.
  • Boost Sales
    Focus on selling more to current customers, who will be an easier sale than a new customer.
  • Market Smart
    Use targeted pitches through targeted mediums that are already reaching your audience. (For example, if you wanted to reach the sourcing, procurement, and supply management space, a great way to get visibility would be a Sourcing Innovation sponsorship. After all, it often comes up #2 for “sourcing” on Google.)
  • Stay Visible and Helpful
    Keep in touch with your customers and be their supplier of choice.
  • Inventory In Motion
    Unless it’s actually cheaper to buy in bulk when costs are rapidly rising or rapidly falling, keep inventory to a minimum. For most products, the storage costs and costs of capital are way more expensive than just spot-buying what you need when you need it.
  • Keep Workers Working

    Workers waste time on trips to the supply store, the post office, and Starbucks. Use on-line ordering and next-day delivery (which is typically free for business orders), use Stamps.com or a similar service for postage and courier services that pick-up, and buy that $500 cappuccino machine (but I’d avoid the $5,464.31 Inox) — you’ll make up the cost in increased worker productivity in the first week!
  • Don’t Cut the Perks (Completely)
    If necessary, reign them in and keep them reasonable, but free juice, soda and lunches (which keeps a worker in the office more and working more), the occasional party, and small bonuses for a job well done keep morale up, and productivity up. They should not be cut. (On the other hand, if times are tough, do you really need that private box at the track/ball-palk?)

But if you’re really serious about how to weather the downtown, consider checking out 10 Secret Strategies to Recession-Proof Your Business, a recent Executive Whitepaper from Coupa.

(More Than Ever) You Need Experts (if You Want Cost Reductions)

In his Friday Rant, Mr. Busch asked if kicking out consultants was a smart cost cutting strategy. I promptly answered, Hell, No and pointed out my posts on why Consultants are Cheap, it’s easy to get maximum value from consultants, and that any we don’t need no consultants here logic is flawed. (I also pointed out that there are better ways to cut costs, as I chronicled in my recent posts on ways to avoid the graveyard, more ways to avoid the graveyard, and even more ways to avoid the graveyard, and that if a company is seriously looking to trim labor costs, it should consider firing its overpaid, under-performing executives. [And if you’re wondering, I fully support Obama’s desire to limit executive pay. There’s no way you should get 20 Million for running a company into the ground. If it was up to me, I’d limit base pay to 1 Million and additional compensation to performance based awards as a percentage of total profit or revenue improvement. I’d still allow for unlimited pay with unlimited performance improvement, but you’d have to earn every penny.])

Let’s face it … with your head down in day to day operations, you’re not going to be up on the latest cost savings strategies, market conditions, or technology improvements … whereas an expert will be breathing the latest strategies and technologies for improving performance and cutting costs day in and day out. Furthermore, as pointed out in this recent article from Chief Executive, using external expertise is in harmony with the modern approach to business which is all about [staying] lean & agile, [being] virtual, and outsourcing. Furthermore, as the author astutely points out, economic turmoil creates unusual problems which might need extraordinary solutions … which are only going to come from an expert.