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Archive for the ‘Management’ Category

Blog of Corporate Transformation MAXIMIZING CORPORATE SUCCESS AND SHAREHOLDER RETURN AT STRATEGIC INFLECTION POINT

Posted in Beatriz Infante, Blog of Corporate Transformation, Corporate Renewal, Leadership, Management on December 14, 2012| Leave a Comment »

Leaders who have been recruited to take over a company or organization in order to lead a transformation and turnaround must address all of the items laid out in the section on Transforming the Business – A Three-Step Process for Business Transformation, including completing a Transformational Goal, Transformational Arc, and Twelve-Month Goals. In addition, they will have to deal with a host of immediate personnel priorities.

You will have no more than two to three months to demonstrate to your management and peers that you were the right person for the job, and that you can create the positive cycle of change that leads to corporate renewal or transformation.  That doesn’t mean the transformation is complete – that may take twelve to twenty-four months or longer – but the actions you take in the first 90 days will determine the ultimate success or failure of your corporate transformation effort.  This is why the First Six Months Plan provides a proven template and timeline for all the things that need to be accomplished in that timeframe.   This chapter is a step-by-step guide to the leadership skills you will need to succeed during this demanding challenge as you implement your First Six Months Plan and beyond.

The First Six Months Plan

The First Six Months Plan provides a highly structured, urgency-based, top-down approach that has been proven to work in many situations requiring rapid turnaround and crisis response.   This methodology is appropriate to a “hit the ground running, no time to waste” approach; however, once a level of stability has been reached, the First Six Months Plan format and timeframe flows seamlessly into the 12-Month Goal format.  This drives lower level goals in a cascading fashion from the Transformational Goal, and directly ties team MBO’s to corporate goals and the desired results in the Transformational Arc.

The First Six Months Plan is a one-page summary of the most relevant actions you must accomplish in the six-month timeframe and should serve as a measure of your progress and a communication mechanism with your boss or your board.  By its very nature, the Six Months Plan will be somewhat more fluid in the latter months – there will be many unknowns and inevitably surprises.  Nevertheless, best practices in corporate turnarounds dictate a rhythm and timing to sets of actions that are universal across industries and situations.  While the actions outlined below may appear to be extremely rapid, in most circumstances the timeframes below are completely achievable, and in many cases dictated by the financial constraints of the business.

Immediate Strategic Priorities

In any new transformational or renewal role, regardless of industry or situation, there are certain invariants that must be immediately addressed.

Stabilize and Secure Sources of Cash.  In any transformation, it is of primary importance to understand how much cash runway you have available to effect the transformation, and if the company has a cash cow business, how quickly it is likely to decline.   Debt may need to be restructured, vendor contracts re-negotiated or deferred payment arrangements made.  But, if the company is in a negative cash flow situation, especially if total cash is also low, all necessary steps should be taken to reduce cash outflow and reduce overall expense burn.

Establish Trust with Customers.  Particularly in situations where there have been visible misses in terms of forecast revenue, or where there have been customer-impacting issues such as product or support problems, customers may have concerns about the future of the company, and a management change at the top may increase that concern.  Therefore strong customer outreach is essential in order to reassure and stabilize, as well as open channels of communication and receive feedback on customer needs and requirements.

Analyze Prior Financial Performance and Issues.  Having a qualified CFO as trusted partner is essential to a thorough analysis of past financial statements.   The cleanest situation will be a public company with clean financials.  However, even in this situation a thorough analysis should be undertaken.  Companies that have had revenue reporting issues and private companies must receive the highest level of scrutiny, and if a qualified CFO is not in place, contract resources must be utilized. Smaller private companies in particular will need a complete examination of past revenue recognition practices, reconciliation with contract T&C’s, verification of receivables and payables, as well as validation of bookings and commission payments.

Model Financial Plan, Downside Plan, and Worst-case Plan.  While the company likely has a current operating plan, an immediate responsibility is to examine the plan and make a business judgment about its accuracy.  Based on this risk assessment, a Downside Plan should be modeled which reflects a significantly reduced risk profile.  Finally, Worst-case plan should be developed which models situations of increased risk such as a more rapidly declining mainstream business than historical precedent would indicate, or a greater falloff in planned revenue.

Establish Forward-going Spend Levels and Take Immediate Action.  Based on the sensitivity analysis above, it will likely be necessary to take immediate cost containment actions to ensure the financial health of the business.

Examine all Functional Areas.  Since the activities cited above will be time-consuming, triage should be performed on the functional areas that appear to need the most focus.  For example, support margins may have been significantly decreasing, so the support organization may need to be examined first, or product issues may be at the forefront, in which case an analysis of the product organization may be needed.  Often the initial flash point may prove to lead to a different root cause; for example, support margins may be increasing because of decreased quality in the product.  The First Six Months Plan should encompass deep operational reviews of all functional areas, but the timing should be adjusted so as to address the most critical areas first.

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CEO: Does Your Team Have Control of the Ball? by Jim McHugh -McHugh & Company, member Gerbsman Partners Board of Intellectual Capital

Posted in James McHugh, James McHugh- McHugh & Co., Management on October 31, 2012| Leave a Comment »

CEO: Does Your Team Have Control of the Ball?

The team watching the ball slip away…

“The only players who survive in the pros are the ones able to manage all their responsibilities.” – Tom Brady, Quarterback of the New England Patriots

Football, rugby, or any other sport organized around a finely-tuned playbook, requires players to understand roles and execute plays in both familiar or unplanned situations. Each player has defined roles and responsibilities based on his skills; that player is fully aware of his role, the roles of others and has studied the plays. A solid playbook enables a cohesive team to maintain control of the ball and win.

Does your company’s playbook have:

This all too common, weak people/process combination creates lots of broken plays. Basic things like roles, skills, processes really should be a given in any organization.

But if that’s what’s ‘supposed to be’, then why have I regularly seen many corporate fumbles, pigpiles, tangled situations and outright conflict over ‘who does what and how’?

Thinking Horizontally

Many organizations are driven (dominated?) by a particular function such as engineering, sales, production, or in the case of professional service firms, project delivery. In my consulting and coaching work, I’ve worked with strong CEOs that are able to push the business forward by being grounded in one of these personal skill sets. This functional strength can be a real asset, and in many cases, it was the driving force that launched the company and enabled it to grow.

In initial group meetings with company teams, to break the ice I often ask a variation of the question: “Who runs the company, sales, manufacturing or engineering.” After I ask the question, I wait to hear the noise from the pin dropping…:)

As a company’s overall operations increase in complexity, great execution only happens if all the business functions work together seamlessly. However, some of the same CEOs that are grounded in one strong functional skill set don’t make needed changes to their process/operational playbook as the company evolves. The CEO may ignore or trivialize the importance of looking at the overall business ‘horizontally’.

The Line of Scrimmage

Most of the confusion I’ve experienced related to process playbooks has been in organizations that have a complex sales process that involves:

  • custom or semi-custom products
  • customer orders with product/service specifications that could change from order to order
  • contracts/proposals that have unique conditions
  • high customer expectations related to quality, testing, product acceptance

Examples of a some of types of organizations that fit these order profiles are:

  • specialty boxmakers
  • magazine printers
  • specialty window, door manufacturers
  • precision machining
  • chemical formulations
  • custom industrial equipment
  • IT consulting
  • various professional service firms
  • lots of others you could name

Piling On –> Breakdowns in Key Processes = Trouble

What happens when the process playbook doesn’t exist, is getting dusty on the shelf, or needs a complete overhaul?

Piling on happens when: a) sales doesn’t get the order specs correct…there are flaws in design, scope, terms; b) estimating creates an inaccurately costed order with incorrect pricing; c) engineering designs what sales specified but not what the customer ordered; d) manufacturing builds what engineering designed; e) the product fails customer tests; f) rework is needed; g) you get the idea…

What are some of the negative impacts on the business performance when a company doesn’t have a clear playbook or deviates from the process playbook? Here’s a sample:

Solutions: How to prevent pigpiles, fumbled balls, and losing the game

Fixing process problems like those noted above is not a complicated task. It’s actually pretty simple to implement the necesssary changes, but the basics often get lost in the the day-to-day shuffle.

1) Establish process flows for unique as well as routine projects and stick to them

Breaking down the process into well-defined pieces facilitates successful execution – once processes are clearly articulated, people need to study their playook, understand their particular functions and own them.

2) Based on the particular process, define clear roles and responsibilities

I do this. You do that. (Why does this have to be hard?)
People need to do their job and be accountable for performance.
“That which is owned by all is cared for by no one”. (Unknown)

3) Establish a clear communication system horizontally across the process chain and vertically through management so that glitches are caught early

For example, if a key person in the chain will be on vacation or is ill during production, who needs to step up and carry the ball?

4) Management, through training, repetition, and even incentives, needs to reinforce the use of the process playbook

In organizations that tend to operate in a seat-of-the-pants mode, this may be the most difficult problem to solve. This is particularly true if there are employees who have difficulty sticking to their own functions. Commit to a cultural change program.

For incentives, why not reward the excellent winning ways of using the playbook? When the team(s) deliver excellent products, on time, don’t forget to recognize it.

5) Revisit processes on a regular basis

What’s working? What needs tweaking? Do we have the resources we need to keep our customers satisfied? What about the team? Changes in personnel, especially when the products involve technical expertise, might invite revisions to the playbook.

Does your company have control of the ball? If not, are you ready to ‘think horizontally’ and get your playbook in order?

Illustration by Drew Litton

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Chart: What next for Spotify, as expansion losses mount?

Posted in Board Of Intellectual Capital, Business models, Economy, Entrepreneurship, Gerbsman Partners, Investments, Management, Market research, tagged , , , on August 28, 2012| Leave a Comment »

Article from GigaOm.

Spotify's Daniel Ek And Martin Lorentzon

Spotify more than doubled its revenue through 2011/12 after expanding to new countries like the U.S.. But the cost of doing so ballooned by the same proportion. The company spent 97 percent of the the €187.8 million it earned. So annual loss widened to €45.4 million.

In its 2011/12 Luxembourg filing, the company acknowledges: “In a low-margin business dependent on rapid growth to cover fixed costs, it is crucial that the group continues to penetrate existing and new markets as quickly as possible…”

With economics like this, global scale may be the only thing that can make Spotify truly sing. But, with Asia and Latin America build-out next on the horizon, it could be at least another year before roll-out costs ebb to the point where profitability is remotely in sight.

If Spotify is not yet a successful business, it is nevertheless a strategically significant one for others in the music industry. It has become the number-two income source for some labels in some countries. More interesting, however, is its direct relationship with labels, the four majors of which are believed to own 18 percent of the firm.

Through that relationship and through Spotify’s underlying API and third-party apps initiatives, it could yet become the industry’s de facto streaming platform – a fabric used by a thousand other services; part-operated by the labels themselves. As one friend described it to me: “A social not-for-profit for the good of the music industry, a rights clearing house.”

Herein may lay a dilemma…

As Spotify continues laying the costly groundwork for global dominance of subscription streaming, it needs more funding to make up for what is, so far, its unsustainability.

“To cover losses during the expansion phase, the group has been financed by existing and new equity owners,” Spotify’s Luxembourg filing says. “We cannot exclude the need or desire to raise more funds in the future.”

The problem is, if Spotify takes a fifth investment round to go on globalising, as has been rumoured, that could dilute the equity of its most vital partners – the labels.

To the labels, their stake is likely of more strategic than financial value – as already stated, they are helping create a digital streaming API that could bear great fruit. So they may want to hang on to the influence that they currently have.

If a new investment in Spotify diluted the labels, they may start charging Spotify more standard royalty rates, rather than the favourable rates it is believed it has been granted until now. That could mean Spotify’s costs escalate still further.

Spotify could dodge this problem by attracting investors only to spin-off regional subsidiaries in its next two target markets – Asia and Latin America – thereby ringfencing its core from dilution.

Four years after its foundation, trailblazing Spotify is the music business’ greatest chance at meaningful new revenue in a digital generation. But it remains to be seen exactly to whom it will provide the most value.

The well-run company is investing heavily in what could become a very valuable global business. But, until its international expansion is completed, we will be hard-pressed to ascertain its true value.

Read more here.

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Venture capital investments pick up with strong emphasis on mobile

Posted in Board Of Intellectual Capital, Economy, Entrepreneurship, Gerbsman Partners, Investments, Management, Market research, National Venture Capital Association, Social Commerce, Social Networks, Startups, Strategy, Technology, Venture Capital, tagged , , , , on July 17, 2012| Leave a Comment »

Article from GigaOm.

Venture capital investments picked up significantly this quarter, with a 37 percent increase in funding and 3 percent increase in deals over the previous quarter. The period also saw strong emphasis on mobile investments and seed funding, according to a report released by CB Insights. There was a total of $8.1 billion in financing for 812 companies, the highest totals since Q2 of 2001.

About 13 percent of the activity — or 102 deals — was in the mobile sector, marking an all-time high, with 30 percent of those companies involved in photo or video technology.

“Without being too self-congratulatory, the Instagram Effect we speculated about in Q1 2012 seems to have taken shape as the mobile sector saw 102 deals, an all-time high… For skeptics, it may also be indicative of a VC herd mentality. Time will tell.”

Below is a breakdown of investments by dollar amounts in the different subsets of mobile and telecom industry:

Some other highlights from the report include:

  • Seed investing also hit an all-time high, with 22 percent of all deals happening at the seed stage this quarter, as compared to 12 percent from the same quarter in 2011.
  • The most successful sectors with respect to number of deals were internet companies with 46 percent, healthcare at 17 percent, and mobile and telecommunications at 13 percent. With respect to dollars in funding, the top sectors were internet at 38 percent and healthcare and “other” each at 19 percent.
  • 50 percent of deals occurred at either seed funding or Series A rounds, although they made up only 19 percent of funding dollars.
  • California took the most number of deals per state at 45 percent of deals, up from 40 percent in Q1. New York remained in second place with 10 percent of deals, and Massachusetts in third place with 9 percent.

Read more here.

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FACEBOOK FALLOUT: Y Combinator’s Paul Graham Just Emailed Portfolio Companies Warning Of ‘Bad Times’ In Silicon Valley

Posted in Business models, Distressed Intellectual Property, Distressed IP, Economy, FaceBook, Inetellectual Property, Investments, Management, Silicon Valley, Startups, Technology, Uncategorized, Venture Capital on June 5, 2012| Leave a Comment »

FACEBOOK FALLOUT: Y Combinator’s Paul Graham Just Emailed Portfolio Companies Warning Of ‘Bad Times’ In Silicon Valley

Nicholas Carlson     | Jun. 5, 2012, 12:01 AM | 58,513 |


Facebook has flopped on the public markets, and now we have vivid evidence of how badly Silicon Valley is reeling in the fallout.

Paul Graham, cofounder of Silicon Valley’s most important startup incubator, Y Combinator, has sent an email to portfolio companies warning them “bad times” may be ahead.

He warns: “The bad performance of the Facebook IPO will hurt the funding market for earlier stage startups.”

“No one knows yet how much. Possibly only a little. Possibly a lot, if it becomes a vicious circle.”

He says that startups which have not yet raised money should lower their expectations for how much they will be able to raise. Startups that have raised money already may have to raise “down rounds,” or at lower valuations than they previously had.

“Which is bad,” he writes, “because ‘down rounds’ not only dilute you horribly, but make you seem and perhaps even feel like damaged goods.”

He warns:

“The startups that really get hosed are going to be the ones that have easy money built into the structure of their company: the ones that raise a lot on easy terms, and are then led thereby to spend a lot, and to pay little attention to profitability. That kind of startup gets destroyed when markets tighten up. So don’t be that startup. If you’ve raised a lot, don’t spend it; not merely for the obvious reason that you’ll run out faster, but because it will turn you into the wrong sort of company to thrive in bad times.”

Graham’s email is eerily reminiscent of the infamous “RIP Good Times” presentation another Silicon Valley investor, Sequoia Capital, gave its portfolio startups in fall 2008.

Here’s a full copy:

Jessica and I had dinner recently with a prominent investor. He seemed sure the bad performance of the Facebook IPO will hurt the funding market for earlier stage startups. But no one knows yet how much. Possibly only a little. Possibly a lot, if it becomes a vicious circle.

What does this mean for you? If it means new startups raise their first money on worse terms than they would have a few months ago, that’s not the end of the world, because by historical standards valuations had been high. Airbnb and Dropbox prove you can raise money at a fraction of recent valuations and do just fine. What I do worry about is (a) it may be harder to raise money at all, regardless of price and (b) that companies that previously raised money at high valuations will now face “down rounds,” which can be damaging.

What to do?

If you haven’t raised money yet, lower your expectations for fundraising. How much should you lower them? We don’t know yet how hard it will be to raise money or what will happen to valuations for those who do. Which means it’s more important than ever to be flexible about the valuation you expect and the amount you want to raise (which, odd as it may seem, are connected). First talk to investors about whether they want to invest at all, then negotiate price.

If you raised money on a convertible note with a high cap, you may be about to get an illustration of the difference between a valuation cap on a note and an actual valuation. I.e. when you do raise an equity round, the valuation may be below the cap. I don’t think this is a problem, except for the possibility that your previous high cap will cause the round to seem to potential investors like a down one. If that’s a problem, the solution is not to emphasize that number in conversations with potential investors in an equity round.

If you raised money in an equity round at a high valuation, you may find that if you need money you can only get it at a lower one. Which is bad, because “down rounds” not only dilute you horribly, but make you seem and perhaps even feel like damaged goods.

The best solution is not to need money. The less you need investor money, (a) the more investors like you, in all markets, and (b) the less you’re harmed by bad markets.

I often tell startups after raising money that they should act as if it’s the last they’re ever going to get. In the past that has been a useful heuristic, because doing that is the best way to ensure it’s easy to raise more. But if the funding market tanks, it’s going to be more than a heuristic.

The startups that really get hosed are going to be the ones that have easy money built into the structure of their company: the ones that raise a lot on easy terms, and are then led thereby to spend a lot, and to pay little attention to profitability. That kind of startup gets destroyed when markets tighten up. So don’t be that startup. If you’ve raised a lot, don’t spend it; not merely for the obvious reason that you’ll run out faster, but because it will turn you into the wrong sort of company to thrive in bad times.

http://www.businessinsider.com/facebook-fallout-y-combinators-paul-graham-just-emailed-portfolio-companies-warning-of-bad-times-in-silicon-valley-2012-6?nr_email_referer=1&utm_source=Triggermail&utm_medium=email&utm_term=Business%20Insider%20Select&utm_campaign=Business%20Insider%20Select%202012-06-05#ixzz1wxLb6QS

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