Category Archives: Blogologue

Dead Company VI: New SI Offerings

As my fellow blogger astutely pointed out last week in what is by far the best rant he’s ever penned title “Friday Rant Spending and Buying Polarization” on Spend Matters, supply and spend management companies are approaching the recession in one of two ways. The minority camp is taking the correct approach and aggressively ramping their marketing, human capital acquisition, and new product development efforts — seizing the unprecedented opportunity the recession provides to a company that can actually save its customers money and deliver rapid ROI. However, the majority camp is taking the exact-opposite dead-wrong approach and bunkering down until the downturn is over. They’re razing marketing to the ground, aggressively slashing headcount starting with the highest paid (and, often, the best performing) employees, and killing all new product development. As I explained in Part II why you’re not going to last if you’re hoarding cash, they’re digging their own graves.

When you cut marketing, you cut visibility. As a result, the pipeline starts to shrink and before you know it, your sales people are wasting 90% of their time doing cold-calls, desperately trying to find the smart minority who are salivating for the type of product you are offering. Even worse, by the time they’ve identified a customer, there’s a good chance the customer, anxious to see savings and ROI in this economy, has selected a competitor’s solution, because that was the only one they were aware of.

When you cut talent, you cut capability. In a technology-based offering, your biggest asset, and most valuable offering, is your people. Technology advances rapidly, and anything you build can usually be copied AND improved upon by a new start-up rather quickly. Customers look for providers who can help them. Customers look for providers who have done this before. Customers look for providers who understand where the market is going and who are actively working on solution enhancements that will meet their future needs. Those capabilities lie in your people, not your platform. Furthermore, when your competitors are shedding talent, this is the best opportunity to acquire talent, because it won’t cost you thousands of dollars in recruiter fees, signing bonuses, and raises to acquire them. Top performers want to perform. They want to work. All you have to do to attract them is to match their most recent salary and give them a challenge, and they’ll start tomorrow. (Alternatively, you can wait until the next upswing and then try to lure them from a competitor … but it will cost you a lot more to do so, even if you’re successful).

When you cut new product development, you give away your edge. Smart customers — precisely the customers who are buying in this market — know that it usually takes at least a year to bring a new kick-ass product to market, by the time you get through design, market need verification, initial development, alpha testing, tweaking, beta testing, and release. They know that any company not actively developing the next version or next solution now will not have what they need next year when the market moves forward. And smart competitors won’t want to be left behind. As a result, even a weaker competitor who is actively working on solution improvement will look much better to them than you. And you’ll lose more sales.

But if you’ve been paying attention, you know all this. And the reason you’re not spending is because, as my fellow blogger pointed out in his Friday Rant (Spending and Buying Polarization), and as I have come to understand, your venture capitalists have lumped you together with the rest of their underperforming portfolio because they don’t understand that downturns are precisely when sourcing and procurement firms shine. They see the rest of their Web 2.0 portfolio flailing (as it should, because, unlike B2B 3.0, Web 2.0 offers no value in the B2B marketplace) and therefore they assume that you will start flailing, too. They cannot differentiate value-add technology from valueless technology.

So, to help you convince your VCs otherwise, I’ve decided to offer three new services.

VC-ED Service #1: Why <Your Company Here> is The Future

I’ll spend one day reviewing your product and solution offerings, one day on a marketplace competitive analysis, and one to two days putting together a customized 1-2 hour presentation explaining why your VC firms need to invest in you now, backed up with a full report on your uniqueness and market opportunity, and I’ll deliver the report in person at your (North American or Western European) Headquarters.

VC-ED Service #2: The Time for Procurement/Sourcing/Supply Management is Now

I’ll join you in a one hour conference call as an independent market expert while you attempt to explain that your opportunity is now and that, if you miss it, you may not be around long enough to experience another. (And if you like, I’ll explain why I think anyone who doesn’t invest in the opportunity now is missing the boat. As you’ve probably figured out by now, I have no problem being passionate on this point.)

VC-ED Service #3: Pre-paid Corporate Obituaries

OK, so this is my little joke. Nevertheless, if marketing, consulting, and headcount has been slashed across the board, you probably don’t have enough cash left for VCED Service #1 (really just a light-weight version of my Total Solution Assessment, as described in What Does the doctor Do … For You). There’s also a good chance that your board is not interested in hearing any viewpoints that contradict their own views, so while you might be able to raise the $500 for option 2, you probably won’t get any commitment of their time. Thus, I am offering a pre-paid corporate obituary, because there’s a good chance that the VC’s “cash saving initiative” won’t allow you to hold out long enough for revenue to start flowing again*. However, you deserve to be remembered in style — hence, my pre-paid corporate obituary service. I will do an in-depth post on SI (and archive it on the resource site) covering your solution offerings, their value, and why you will be sorely missed if your doors close forever. You are free to use this material when you try to fire-sale your company, and maybe, just maybe, there’ll be one last lifeline from a smart VC firm who’ll see the value you have to offer.

*It will be at least a year from the time the VCs allow cash to flow again before sales pipelines, new product development, and new hires get on track. Since the recession will last at least a year, if not two; since it will be six months after that before the ultra-conservatives in the VC firms let cash flow again; and since most VC-backed companies in this space don’t have much more than a year or two of cash in the bank, there’s a strong chance that many companies just won’t make it.

Dead Company V: More Ways to Avoid the GraveYard

In our last post, we talked about twelve smart things a smart company could do to avoid the graveyard that many of its dumb company peers are heading too in this down economy. Today, we’re going to talk about ten more smart things a smart company can do, courtesy of Christopher Lockhead who guest-posted ten “essential strategies for weathering the economic storm” on Dan Farber’s Outside the Lines CNet blog (and one really dumb strategy, that I exposed in Dead Company II, so we’ll skip it).

  • When you really screw up, fixing it will take longer than you think it will.
    Much longer. So heed good advice and don’t screw up!
  • Get the Facts Yourself
    If you’ve got a problem, you need to get to the heart of it fast, and fix it. Real leaders get real facts and take real actions.
  • Get 2 Top 10 Lists
    Gather the smartest, most courageous people in the company to brainstorm the top 10 ways to drive revenue and the top 10 ways to cut costs. For example, to drive revenue you could assign every promising deal in the pipeline to an executive, focus on core markets first, and design a competitive replacement program. To cut-cost you could pull out of under-performing verticals, sell under-performing assets, and stop all stupid travel, off-sites, and trade-shows. (After all, your money is much better spent on Sourcing Innovation.)
  • Tear off the Band-Aid
    Assume the worst and take the necessary action to turn the situation around.
  • Fire Executives
    If you need to reduce head-count, don’t cut the people who actually do the work. As I’ve reminded you again and again, marketing and new product development are your salvation, so don’t cut them — reduce the top-heavy C-suite instead.
  • Chop the Dead Wood
    Every company has underperforming ‘C’ players, especially on the sales team. Take the opportunity to eliminate the worst performers and make the ‘A’ and ‘B’ players happy in the process — no one wants the ‘C’ players around anyway. After all, the money is better spent on additional training for the ‘A’ and ‘B’ players to help them identify ways to find even more cost savings for you.
  • Tell the Truth
    Some executives think that lying, misleading, and otherwise obfuscating will “soften” the blow in bad times. Wrong! If you have to chop the deadwood, kill the entertainment budget, and reign in the travel and training budgets for a few quarters, be honest — brutally honest. Otherwise, you’ll lose all respect, the ‘A’ and ‘B’ players you kept will start looking for a new job, and you might just end-up in jail if you mislead the stakeholders.
  • Communicate Clearly and Powerfully
    The truth is never as bad as rumors that start with a “No Comment”. Deliver the truth, and also the actions you’re taking to improve the situation.
  • Sign a Pact in Blood
    Stick to your guns and don’t waiver, no matter what.
  • Drive It Like You Stole It
    Legendary teams execute their turnaround plans like it is the last thing they will ever do. Take action. Bust your butt. Get on planes and meet with all of you key customers. Rally your teams in town hall meetings in all of your key offices. Refine your strategy. Focus your efforts. Get your people focused on results. Meet with your top investors to tell them how and why your turn around will work. Get help from some wicked advisers. Recruit new talent to the company. Sell, sell, sell, and lead, lead, lead.

An Update on the Kiva Micro-Finance Experiment

Last September, I introduced you to Kiva, the world’s first person-to-person micro-lending initiative in a post where I posed the question Can Micro-Finance Make a Macro-Difference? after being referred to the site by a fellow hoser.

In an attempt to answer that question, I decided to conduct an experiment. Since last July, I have been making two loans a month under the hypothesis that if it works, after a year I will have enough capital in the Kiva system to help a new person every month as previous micro-loans get re-payed. To date, the doctor has made fourteen $25 Kiva micro-loans (which get bundled with other micro-loans to fund loans to individuals and groups through Kiva’s micro-finance partners):

Individual Institution Total Loan Loan Funded Disbursed Repayment Term Repaid to Date*
Gulchehra Rahimova LLC MLO Humo and Partners 1,175 June 28, 2008 July 12, 2008 12 months 33%
Din Ly CREDIT (World Relief) 250 June 28, 2008 July 12, 2008 18 months 22%
Araba Awotwe Christian Rural Aid Network (CRAN) 350 August 14, 2008 August 28, 2008 7 months 43%
Serigne Cisse UIMCEC (Christian Children’s Fund) 975 August 15, 2008 August 29, 2008 12 months 25%
Mavluda Tosheva LLC MLO Humo and Partners 450 September 1, 2008 September 15, 2008 12 months 17%
Mario Aguilar Fundacion Paraguaya 475 September 1, 2008 September 15, 2008 11 months 18%
Irene Microfinanzas PRISMA 1,200 October 11, 2008 October 25, 2008 6 months 17%
Sokhna Sene UIMCEC (Christian Children’s Fund) 300 November 1, 2008 November 15, 2008 12 months 0%
Essoneya Tchindo WAGES 300 November 1, 2008 November 15, 2008 12 months 0%
Guillermo Microfinanzas PRISMA 325 November 1, 2008 November 15, 2008 10 months 0%
Olinda Microfinanzas PRISMA 325 November 27, 2008 October 31, 2008 6 months 0%
Sron Chea Group AMK 200 November 27, 2008 October 28, 2008 4 months 0%
Kayi Lawson Microfund Togo 1,175 January 2, 2009 November 17, 2008 18 months 0%
Abdulhokim Azimov LLC MLO Humo and Partners 600 January 3, 2009 January 17, 2009 10 months 0%
Averages 508 11 months

The interim verdict? All loans over 3 months old have had partial repayments, and the partial repayments appear to be more-or-less on track with respect to the requested repayment term. With an average requested repayment term of 11 months, repayments starting an average of 3 months after disbursement for most loans, and the very low default rates common to most of Kiva’s partners (the global average default rate is less than 3%), this indicates that one should expect, on average, 5% of all loans three months or older to be repaid on a monthly basis. This indicates that once I reach a point where I have over $500 worth of loans that have been distributed for more than three months, I should expect it to be the case that the monthly repayments are sufficient to cover the minimum micro-loan of $25 to a new individual or group. As I am loaning at a rate of $50 a month, this indicates that I should be able to start making new loans from partial repayments in month 14, which is close to my original expectation of being able to make new loans from repayments on previous investments after 12 months.

Conclusion? Still too early for the final word, but it still appears to work great. The site continues to disclaim (in the footer of every page) that lending to the working poor through Kiva involves risk of principal loss, but so does investing in the stock market and mortgage funds, but if you had invested in Kiva last year, unlike a lot of people, you’d still have your principal this year and the satisfaction of knowing you made someone’s life better.

Thus, I would still encourage you, if you’re still lucky enough to have any discretionary funds, to take part of them and try lending through the Kiva platform. Considering that you can start for $25, or the cost of one good bottle of wine (at the liquor store and not your local 300% mark-up restaurant), it’s an endeavor that the vast majority of us should be able to afford. And if even half of the 1.2B people in the developed world made even one loan a year, think of the sustainable difference it could make. That’s something worth aiming for. And if you do lend, remember to tell them that jeff <at> hosernews <dot> ca sent you (because one should give credit where credit is due). (And if you’re a Nova Scotian, you can even consider joining his “hosernews” team.)

And remember, there is a supply chain lesson here for all of us. If a good supplier is in trouble in these hard financial times, key customers can band together to keep it financially solvent until times improve through faster payments, guaranteed orders, and low-interest loans. And, in addition to the good feeling these customers will get from knowing they did right, they can also secure long-term capacity at a strategic supplier. Let’s face it — most business people want to do the right thing when given the choice, and many will be quite happy to sign a long term contract or guarantee if you bail them out. This means that if you stick by a good supplier when it’s having a bad day, it’ll stick by you through thick and thin.

*As of January 14, 2009

Dead Company IV: Avoiding the GraveYard

In Parts I, II, and III, we talked about all the dumb things that many a dumb company failing the CIRCUIT are doing on the path to ultimate failure. So today we’re going to do something different and talk about the smart things a company can do if it wants to get off of the path to failure before it’s too late.

In addition to fattening up the marketing budget, keeping new development on the front burner, and bringing in expert consultants to insure the company stays on the straight and narrow, in his post Fear Kills Businesses, Dead, Brian Solis of TechCrunch offers twelve (12) targeted and affordable suggestions that a company can use to not only sustain, but grow in this economy.

  • SEO Optimization
    Keyword and organic search optimization is an inexpensive and effective means for gaining strategic presence and if you want the most bang for your buck, optimize your entire web campaign.
  • Blog Relations
    Creating a consistent and visible brand requires the inclusion of the authoritative, peer-to-peer blogs that your customers and influences read for information, help, and perspectives. And in this space, Spend Matters and Sourcing Innovation get more daily traffic than most, if not all, of the web sites that correspond to the traditional print publications.
  • Media/Analysts
    Analysts can position you as an option among your customers. Even though more and more professionals are turning to the blogs for their insights, the old school still listens to the analysts that they fork their money over too.
  • Direct Sales
    Some of the most successful companies concentrate on direct outreach to decision makers … and it doesn’t hurt to have some good positioning materials to support your sales people either!
  • CRM
    Building a customer-focussed business saves money and increases revenue.
  • Participate
    Participating across the social communities where your customers and prospects are active and vocal provides a looking glass into their thoughts, requests, opinions, dislikes, and recommendations. The companies that interact with their customers are the companies most likely to keep them.
  • Thought Leadership
    Share your thoughts openly and freely.
  • Blog and Blog Comments
    Find the time to contribute to a blog and demonstrate the expertise of you and your team. The opportunity it provides you is priceless.
  • Network in the Real World
    Industry events, local association meetings, and other gatherings are a great opportunity to get in touch with potential customers.
  • Involve Your Community
    Include your customers in the development process and get it right the first time.
  • Websites are Not Just Web Pages
    They’re a statement about you … and it better be one that your customers can connect with.
  • Innovate
    If it ain’t broken, don’t fix it, is the surest path to obsolescence. ‘Nuff said.

Dead Company III: Fear is the Enemy

After I penned CIRCUIT, Dumb Company, and Dead Company, but before I penned Dead Company II, Brian Soils authored a great post over on TechCrunch on how Fear Kills Busineses, Dead. Noting that recessions naturally inject fear and panic, Brian also noted that fear is not a catalyst for productivity. Fear, and the dissemination of distress, slowly erodes hope, vision, and ambition, ultimately killing businesses instead of guiding them.

For example, just look at the deeply misguided advice that Sequoia Capital has issued in fear: don’t worry about getting ahead, instead, just survive … cutting deeper and quicker is the formula to survive. As I explained in Part II, it’s actually the formula for a slow and painful death! You’d be better off doing a Boo.com and wasting it all on lavish parties … at least you’d have some fun before you joined your brethren in the unemployment line.

As per Brian’s post, you need to instead take the advice of CEO Steve Larsen of Krugle who advises don’t be stupid. Have enough cash to run your business, but … look for opportunities. Difficult times are when they’ll most likely occur. When we’re at a ‘steady state’ and things are normal, good opportunities are much harder to find with GREAT opportunities nearly impossible. It is during periods of tumult and transition when you can spot things that lead to the greatest returns — if you are alert.

More importantly, as I pointed out yesterday in Part II, if you choose to stop vying for customer attention, the world will move without you. In other words, you’d be better off putting up a “going out of business sale” sign than cutting your marketing budget … at least the former will garner you some attention. As Brian notes, the recession is temporary, but business is constant, and, more importantly, if you’re in spend management, this is the time when your business can pick up sharply. In other words, if you haven’t increased your marketing budget lately, this is the year to do it. As long as you develop an innovative and cost-effective marketing strategy, you’re sure to get a return on your investment … and if you play your cards right, you might see a return beyond your wildest imagination. After all, as Brian notes, customers are and will continue to research, invest, and procure the solutions, services, and products that will help them succeed, offer entertainment, or streamline aspects of their day-to-day workflow.

Focusing energies on generating revenue, increasing visibility, and enhancing customer loyalty are the most effective strategies for underwriting longevity, and [hopefully] growth, especially during an economic downturn. Remember, customers do not typically go out of their way to “discover” your products. If they don’t see you in the places, like Sourcing Innovation, that they typically go for information, they’re not likely to see you at all. Smart marketing is your conduit to connecting prospects to your business.

Tomorrow’s Leaders Are Born Today.

So what are some things you can do to keep you off of the dead company path? Stay tuned for part IV!