Give your Business some VAROOM

The first rule of fight club is….

varoom — Thu, 29 Sep 2011 15:55:53 +0000

I often advise early stage entrepreneurs to check with real customers that their perception of the value of the product is correct. This means speaking to people. BUT how do you do market research, on your new product idea, without giving away the farm? It’s very easy to give a clue to a prospective customer that you are thinking about developing a product to solve a problem the customer has. This may not be serious at first glance but it is very easy for these customers to ask similar questions of their current suppliers. “What are you doing to solve this big problem?” or even “someone else has proposed a solution to this problem so you’d better hurry up…” are easy questions that can let your new idea leak out into the marketplace. When this happens you risk allowing another competitor with greater resources, funding or technology to catch up with your thinking.

So the first rule of Fight Club is…NEVER talk about Fight Club! What I mean is you must do everything you can never to talk about your new product idea until it’s fully baked. You have to do market research in a way that hides the true nature of your investigations, research a wider subject area with potential prospects, create situations where the answers to your questions come from the customer without prompting. I make it sound easy…I know…but that’s what real marketing guys do best.

So my first rule for Entrepreneurs is …. don’t talk about your new product idea.

Grev

Hiring a sales guy is like buying a gun

varoom — Mon, 07 Mar 2011 15:52:36 +0000

Don’t worry it’s just an analogy…If you were to buy a gun, for arguments sake, and tried to do some target shooting but failed to hit anything you aimed at. What do you think the gun shop would say if you took the gun back claiming it didn’t work, because it kept missing the target?

In my analogy, when a new company hires their first salesperson I often hear complaints about the performance of said salesperson very early on in the relationship. I believe that hiring a salesperson is just like buying a gun. You need to select the right weapon that is suited to the target you plan to aim at and you must aim (direct) the weapon at the target accurately enough to stand a good chance of hitting it first time. You also must think about selecting the best ammunition in order to create the desired impact on the target.

A failing relationship with a salesperson is as much to do with the company engaging that salesperson, where they are directed and what ammunition they are armed with.

In this context aiming your salesperson is all about choosing the right customers/market sectors where your product has the best fit, arming them with the right tools & training in order to have the best chance of success in hitting the target the company wants to aim at.

The lesson to be aware of is this: If your salesperson is failing in their job, look at what you are doing first, improve your aim, supply more useful ammunition and stand back…. This is pretty much what the advice from the gun shop would be too.

Grev

It’s in your customers’ interest to pay royalty fees

varoom — Wed, 22 Dec 2010 10:14:54 +0000

I spent quite a few years selling technology in my career both in products and as licensable technology. In the latter part I spent 6 years acquiring technology for a large semiconductor manufacturer.

This experience gave me a good perspective, from both sides, on the subject of paying royalty fees for licensed technology.

I remember once telling a senior executive of a large US company that it was “in his interest to pay my company royalty fees…” much to his surprise. He demanded that I convince him. This is the explanation I gave.

There are three reasons (the 3 R’s as I call them, Reward, Retention and Rejuvenation) that customers should pay royalty fees.

Firstly REWARD: Part of the royalty fee is a reward to the inventor/creator for the initial innovation and the effort required to turn it into a product that the licensee can use. This reward motivates the inventor/creator to do it again.

Secondly: RETENTION: Providing an ongoing revenue stream that keeps resources & skills inside the company attached to the technology and available for the Licensee if required. If these resources are moved off to other more lucrative projects when the revenue is gone this could be an issue for the Licensee.

Thirdly: REJUVENATION: To motivate the inventor/creator to continue developing enhancements/improvements in the technology that the Licensee can benefit from in the future.

The key factor here is ongoing revenue stream that the Licensor can attach to the resources. If the fee is all paid up front (in a Buyout license) then a couple of years down the road these valuable skills will be working on another project and will have lost some valuable know-how regarding the licensed technology.

The customer (Licensee) can be convinced that it’s really in their interest to pay royalty fees, try it; you may be surprised at their response!

The answers Yes, what’s the question?

varoom — Thu, 09 Sep 2010 10:16:39 +0000

In tough times the temptation for small companies is to become driven by customers every demand to develop products on their request. In my own past experience I’ve said to customers “The answers Yes, What’s the question?” and they love it! This may seem a fine strategy and may get you some short to medium term success over the competition but in the world of ever reducing product life spans the customers “event horizon” comes nearer and their view of the long term future cab become less reliable. The customer is staring into their own crystal ball and they could be wrong about the future.

In addition product development cycles are not shortening in the same way and the danger of your developing a product, on request of your customer, is that when you deliver it the world has changed and your customer wants/needs something quite different. You may have won the market over with your revolutionary product and then held on with incremental or evolutionary improvements but nothing last forever and you need to look for the next revolution before someone else finds it.

Your survival depends on you having an independent view of what the long term product roadmap needs to be. You need to survey a wider market scope than a single customer, integrate information from multiple sources, develop your own expertise in the segment and create an independent vision for the future.

This is a gamble! You might be wrong! But there is a saying, “Companies that innovate MAY fail, but those that don’t WILL fail.”

Grev

Ensure the Price is Right for you

varoom — Fri, 23 Jul 2010 14:56:37 +0000

In many early stage companies the price for a high value premium product is often set too low. In my meetings with Entrepreneurs a standard tip is “try raising the price and see what happens”. Later on I often see that many come back to me surprised that the customers did not query the higher price level. This is no surprise to me as many early stage companies do not realise, fully, the true value of what their product brings to the end customer.

In my blog of January 2009 I said “be careful to assess the true value, in the eyes of your customer, of your product before you set the price” this blog went into more detail about how this is done. But the reverse is true, many believe that dropping the price for a short time, to stimulate sales, would have the reverse effect. Maybe so but often all you do is devalue a premium product pricing level.

Buyers who normally favour a premium product would not respond to this pricing tactic. The best strategy for defining your pricing is to test your theories out in a controlled way with a restricted sector of your market. This way any negative reactions have a predictable impact. If you need to stimulate sales then consider offering more for the same price for a short period of time as an incentive.

The key thing in business is never make or trust assumptions, what you think is a reasonable price needs to be proven in a fact based approach. Remember you can always do special prices for individual customers, in exchange for something like earlier bookings, increased volumes or market share for a specific timeframe. As long as the customer recognises the real price level and understand the terms of the special price you can have a good chance of maintaining your premium pricing position.

Grev

Be careful not to telegraph your “tell”

varoom — Fri, 18 Jun 2010 16:03:59 +0000

In a negotiation you want the process to be a fair exchange of terms on both sides. Newcomers to the negotiating game often give too much away early on and have a fight to get back to a reasonable position later in the relationship. It’s often impossible to raise a price back to a preferred level once it has been sacrificed in a negotiation.
Just like in poker everyone has a “tell”, some kind of reaction, response or behaviour when in a tight negotiation spot. It’s in your interest not to communicate (telegraph) you’re negotiating pattern in negotiations with a potential or existing customer. One particularly bad pattern is if you always reduce your price when demanded, or accept a price reduction every contract or accept claims of competitive price pressures that you need to keep ahead of.
The best pattern to telegraph is one of inconsistency, on some occasions resist pressures to concede, on others exchange one concession for another given by the other party, on other occasions agree to concessions out right. But always remember when giving a concession make sure you always get something in return, increased volume, earlier orders, broader product range purchases, publicity, even better market information is valuable to you but maybe of little cost to the other party. Also in reverse sometimes a fair exchange from you is a reasonable explanation of why you can’t give a concession. In many cases the other party is ignorant of the challenges of making your product, maybe they don’t fully appreciate the true value, to them, of what you are delivering. In some negotiations the target of shaving a few more percentage points off the price becomes the challenge when in the scheme of things it make very little difference when the customers business potential is taken into account.
Don’t be afraid to negotiate, play your game like a good poker player, avoid telegraphing your “tell” and make sure to get something in return for every concession you make.

Grev

There’s a skeleton in the elevator

varoom — Tue, 01 Sep 2009 14:24:19 +0000

Elevator pitches are a key part of business, both for raising investment and winning customer approvals that 90 second explanation of your proposition can make a huge difference. The elevator pitch was coined, originally, in the USA to describe the opportunity arising from the chance encounter in an elevator (Lift for UK readers) with a senior member of an investor organisation. You have 60-90 seconds whilst the elevator is in transit to make your pitch. The recipient has nowhere to escape.

Most people make their minds up about you and your proposition in the first few seconds so you don’t have long to win their interest.

I coach people regularly in this skill and I begin the pitch development effort by laying out a basic skeleton to hang your pitch on. The advantage of this is that it initially focuses the development on the messages and not the structure. Of course there are an infinite number of ways to spend your 90 seconds but this way seems to work for those who’ve tried it.

Essentially it’s a form of key messaging, see my blog of 7^th Oct 2007 to read more on key messaging, where you extract out of your proposition the critical Key Messages that you want to get across and have retained in the mind of the receiver after you have parted ways. With only 90 seconds in total these key messages need to be sharp and to the point.

So back to my skeleton, I break the 90 seconds into 10 second blocks. The first block is 10 seconds to introduce yourself and your company. May seem like a long time to do that but remember first impressions are made in the first few seconds so get it right.

The next 6 x 10 second blocks are for your key messages. So here you need to choose the most important, exciting, valuable key messages and hone them down to a sharp 10 second statement. This ensures you don’t over state and spend too much time on one single point resulting in some key messages losing out altogether. Remember there’ll be more time later to do each key message justice if you succeed.

A single 10 second block is allocated to summarising all the 6 key messages in a high impact set of words that makes them memorable and easy to recall.

Finally the last 10 second block is the close. Too many people do a great elevator pitch but forget to ask for something or close the deal by getting agreement to move forward in some way. So you have 10 seconds, at the end of the elevator pitch, to ask for something. Maybe you want to arrange a meeting for a full presentation, a follow up call or arrange to show a demo. Whatever you do make sure you continue the engagement.

If you have done a good job the next step will come naturally but success will only come with practice.

Grev

PCWorld don’t sell Pizzas

varoom — Tue, 07 Apr 2009 19:43:49 +0000

Apologies to PCW as I’m sure they could sell Pizzas if they really put their minds to it! This point is related to the importance of choosing the right sales channel for your product based on skills and customer recognition. Two main problems with selecting the wrong sales channel, firstly the channel may not be skilled to sell your product and secondly, much worse, the customers will not recognise the channel as a supplier of products of your kind.

In order to select the right channel, initially you will need to do detailed analysis on buying practises in your targeted market and use this data to drive the development of your channel strategy. How do customers find products like yours, where do they expect to find them, how do they normally purchase these products and how ingrained are these behaviours? Getting customers to change these behaviours can be quite difficult, your sales channel strategy needs to take account of what behaviour change you need.

One sales channel strategy is a partnership with a major player in the supply chain. In one agreement you can avoid creating a new channel and also build credibility with customers by being associated with a known supplier. There will be some effort for the first channel partner to take your product, there is some risk too, so be ready for them to request some exclusivity even for a period of time.

Another mechanism is to adopt a disruptive approach. Enter the market deliberately through a unique channel to cause a breakdown in the existing pipeline and force players to change their approach. To do this you need a disruptive product or service which compels the market to take it seriously. Not all products can do this and you need to consider, carefully, which approach is feasible.

There are many past examples of channel disruptions, EasyJet with it’s internet based solution caused a behaviour change in the buying practices of travellers, Amazon caused a change in buying practices of book and music buyers, other examples being EBay, Google, and Dell.

The success of your product depends on having the best sales channel, gaining behaviour changes in the customer base is difficult unless there is a further disruption that helps your strategy succeed.

When you enter the marketplace not everyone will welcome you but adopting the right market entry strategy can make a big difference to your business.

Grev

37% of strategies fail

varoom — Sun, 15 Mar 2009 13:56:25 +0000

On reading a Harvard Business Review article by Mankins & Steele in 2005 I found it very useful to study the causes for failure in strategy development and implementation. The word strategy has become an overused and misused term in modern business. We attempt to make something more important by attaching the word strategic to it whilst failing to really make things change. Having set long term goals your strategy is a plan on how you will achieve them and this strategy must lead to actions or it is doomed to fail. So in short your goal is what you want to achieve and your strategy is how you will achieve it.
The Mankins & Steele article studies the failures of strategies and a lot of these failures occur during the implementation of the strategy. These failures fall into many categories but can be summarised into;

Inadequate resources
Poor communications
Poor definition of actions
Unclear accountabilities
Organisational culture blocking strategy
Inadequate monitoring
Inadequate consequences or rewards
Poor or uncommitted leadership
Inadequate skills

No matter how much time, effort and research you put into developing your company strategy if the organisation is not engaged or the resources are not available or you do not follow though with strong leadership, your efforts will be wasted.
So in order to be successful in implementing your new strategy you should;

Develop resource plans, and allocate resources to implement the new strategy
Define the required organisation structure to deliver on the strategy
Communicate to convince the organisation to engage with the strategy
Manage the change(s) within the organisation, avoid distractions
Monitor, measure, feedback, assess

Make your strategy more successful by ensuring change occurs then communicate the successes resulting from those changes.
Grev

Your investor proposition is like a 3 legged stool

varoom — Thu, 24 Jul 2008 16:52:30 +0000

As I regularly prepare companies for investment readiness I’m asked many times what investors are looking for. This is a tricky question especially in these credit squeeze times. However many significant investment funds were financed before the current crisis and may be in a position to invest if the proposition is right.

So what is the right proposition? The situation varies with each investor, timing of their funding, the mix of their portfolio between risky and conservative, between types of technologies or industry sectors, between companies needing a great deal of management involvement and those with a strong team who are self sufficient.

If we meet the ideal investor with money to invest, a healthy portfolio and management capacity to take on another investment. He’s looking for opportunities where his investment will take the company onto a high growth path at a time where the investment risk is at its lowest.

You just have to make your proposition in terms that maximise the potential for growth and minimise the risk.

Once you have passed this hurdle then you start being judged against many criteria in order for investors to choose between the many proposals they have.

In order to simplify this I’ve conceived an analogy. “Your investment proposition is a 3 legged stool”. If you have a weak leg you risk falling on your Ass.

So I believe the three legs are;

First you must have a market or business opportunity for growth. There needs to be a big enough opportunity, measured in terms of accessible market, market share, market growth or raw business potential.

Second you need to demonstrate that you have already got or will soon build a strong team that can deliver on the potential business opportunity reducing risk.

Thirdly defend your position, in the market, with intellectual property, trade secrets, patents, copyrights, know-how, first mover advantage which prevents other competitors from entry. Reducing risk and increasing value again for the investor.

If you can demonstrate that you have three strong legs to your proposition you may get through to the next round….

Grev