Test your BHAG

What is the uniting force in your business? Running and working in high growth companies is hard work and we are often losing sight of what we are all about.

Daniel Pink in his book Drive he outlined three core drivers for people: Autonomy, Mastery, and Purpose.  (Note:  For those who have not read this great book watch the 10 minute animated summary)

Nothing binds a business like a clear and succinct BHAG (Big Hairy Audacious Goal) and a clear purpose.  I am not talking about the traditional boring mission statements that lime the walls of corporate offices, full of: Corporate blah blah… typically lots of words taken from a corporate speak bingo competition.

What I am talking about is a mantra or Big Hairy Audacious Goal (BHAG) that is worth waking up for in the morning and going the extra mile.

Ingredients of BHAGs that work are:

  • Compelling and gripping: people understand straight away
  • Action orientated
  • Bold: bordering on arrogant and unattainable
  • Clear: who, what, where, by when
  • Types: target, common foe, role model, internal transformation
  • SUCCINCT: The power of message is inversely proportional to its length

Have a look at some of the founding BHAGs for some of industries great companies noting this is what they started with…

  • Microsoft: “A computer on every desk and in every home”
  • Amazon: “Every book, ever printed, in any language, all available in less than 60 seconds. Also: Earth’s most customer centric company”
  • Ford: “Democratize the automobile”  (1900’s)
  • Twitter:  “To become “the pulse” of the planet”
  • Giro Sport Design: “Become the Nike of the cycling industry”
  • Nike: “Crush Adidas” (1960’s)

Brian Gaynor spoke at Springboard this month citing “New Zealand  business owners, in comparison to Australian counterparts, lacked ambition”.  Check your BHAG against the above list. Do not fall into the trap of being another conservative Kiwi company without big ambition.

Here are a few ideas from local examples (note: not their actual BHAG)

  • Biomatters:  “Tools on every biologist’s desktop”
  • E-spatial : “THE location intelligence behind all major New Zealand enterprise solutions”
  • Sale finder: “New Zealand’s ultimate consumer research tool”

When it comes to purpose statements – these are just clear concise versions of your value proposition in the language of your clients. More on this later – a topic for another blog post.  In the meantime, you can read value propositions revisited, creating succinct messages, No value proposition = No business from old posts.

Example Purpose: Spike mail: “Building qualified and engaged buyers versus creating lists”  – note no reference to their core craft of email marketing.

Product Marketing – the missing discipline…

An effective Product Marketing team is most probably the best insurance policy for any new venture.   For a trading company the Sales team and CEO’s all have tunnel vision on next quarter’s revenue.  The role of product marketing is to build next year’s revenue and ensure that any investment in product development produces a measurable return. 

The finite definition of product marketing’s function is variable, but it unanimously does include the full range of marketing activities, rather than just promotion activities. Noting that for too many business people, marketing is just a promotion activity.

Key activities of pure product marketing that are often absent in businesses include:

  • Assessment and validation of marketsWill someone actually buy this product once it is created?
  • Access to channels to marketsmart go-to market strategies and distribution agreements that are workable and will not conflict with potential company exit strategies.
  • Return on Investmentworking out if this is the best use of the company’s capital and when and how will it get a return.
  • Development of effective sales collateral and messaging – that communicates what is relevant to customers, rather than a feature or technology list.

Check your company’s marketing activities against this great list from www.pragmaticmarketing.com

This is one area we have a lot to learn from American technology companies. New Zealand technology companies often make the first move of appointing product managers, to manage product road maps, product requirements definitions, and act as the referee between sales and development teams.

My suggestion following on from my recent  Rule of 10’s post is, at the very least, budget an equivalent amount of money in the complete list of marketing activities as you do in product development. Likewise, balance your marketing spend between strategic and tactical activities.

I would encourage CEO’s of companies, Crown Research Institutes and universities to explore this missing discipline. I would also welcome the Ministry of Science and Innovation to begin to invest in this crucial area of commercialisation, rather than just the science part.

Don’t spend all your money on development

The process of selling costs and it takes time…
A company without sales and a go-to market plan is a science project, not a business.

It blows me away every time I come across yet another business that has a product all finished, patents applied for, accounts done, but no go-to market strategy or any sales to speak of – AND NO CASH LEFT.

Worst still, licensing deals that have not taken into consideration cash flow and go-to market issues – AND STILL NO CASH LEFT.

It disgusts me that all the lawyers and accounts that the business spent money with never encouraged the business to save some money for sales and market.

Whether it’s science, technology, or products, too many businesses are running at Death’s door, because they have failed to budget for and spend appropriately on marketing of their products.

 

Rule of 10’s

One of the most basic rules any new product based venture should take into consideration is the Rule of 10’s.  If it takes $1 to create a business concept, it will take $10 to build a product, $100 to market it, $1000 to build a brand, and $10,000 for an international brand.

Please make sure you have some time, energy, and money left for taking your product to market.

As an ex-engineer I get it guys, you want it finished and perfect before you go sell it – but get over yourselves, go sell vaporware. Trust me, the sales cycle will take 10 times as long as you think and cost you 10 times as much.

STOP spending on technology and products. START spending on marketing and sales NOW.  It appears that most professional out their patent attorneys, accountants and the like have no knowledge of product commercialisation – otherwise they would be advising businesses to save some cash for this crucial activity.

At very least, consider how you are going to sell and market your product and budget for it now.

9 Traits to Excite an Investor and Prosper…

Will your company get investor interest and, more importantly, will it prosper?

Too many companies I see pitching for investment pitch a product or a technology, not a company.  Fixing the product pitch is a relatively easy task in comparison to fixing the business pitch, mainly because most businesses don’t have a strategy or even a plan. Sorry, “build it and they will come” doesn’t count. 

Test your company against this list to see if you are investment ready:

  1. A product that we understand –  the problem and the solutionno matter how complex the science is behind your company, it must have a simple explanationof the problem you solve for customers and the value you give your customers and end users.
  2. Validated market demand for the productif it’s a new venture what third party proof do you have (eg. market research, etc) that people will buy your product at a price, you can make money from it. If it’s in the market already, excite us about your sales growth story.
  3. A trend driving increased demand – creating the “perfect storm” – what is going on in your target market that says this demand will continue and ideally increase?
  4. A sustainable competitive advantage how are you going to defend yourself against the competition when it wakes up?
  5. Clear, quantified metrics as to how the business makes moneyhow well defined is you business – finance model? Can you model your sales process (eg. x dollars spent on Google ad words = y dollars sales)? At least understand the financial model and your capacity constraints.
  6. A clear and easily communicated business plan/strategy – including go-to market –  a clear and concisestrategy and plan is a long way towards achieving greatness. Give us confidence you have a tangible way to reach customers and meet demand.
  7. An experienced teamNothing happens without a committed and well-equipped team. What relevant experience does your team have? Remember always employ people smarter than you.
  8. Clear return for investoris your valuation set at a point where the investor can actually make a return? Remember no exit plan = no investment.
  9. Fun people working on cool stufffun and cool mean different things to different people – but like pornography it is obvious when it is, or isn’t. 

I consistently see in the New Zealand market place, time and time again, businesses get caught up with the product, technology or science and are wasting their efforts because they failed to stop and look at the bigger picture of a full go-to market plan and strategy.

Debbie Humphrey and I have launched a new investment ready programme called Business Dominoes to help business owners both recognise this strategy gap and fill it. All of our clients from the first intake are raving about the transformation their business stimulated from this programme. Debbie and I believe you are expert at driving your company, you just need a hand as to where to drive to and who you should take with you.

Milestone Map-Plan

Need to communicate your business plan to attention deficit stakeholders? … or perhaps just get smart feedback on your plan.

Creating a one-page milestone map-plan on a chart is a great way to keep you, your team and advisors focused. With a small list of tactics and key measures you have a far greater chance of achieving your desired end result.

Many business growth strategies fall apart at the transition point between creating key strategic themes and establishing a set of measurable tactical tasks and goals.  Too many businesses end up with huge lists of tactics, most of which will only get token attention, with the end result being  the plan never being executed.

This technique will force you up front, to prioritise and rationalise your tactical list of things to do. The milestone map-plan is a great way to succinctly communicate your business plan both past, present and future to all stakeholders of your business. Particularly when you are seeking intelligent feedback and buy-in from potential investors and staff whose attention spans are limited.

A fictitious example of a web company is shown below to illustrate the technique. (click the chart image for larger view)

Tips on using the milestone map-plan:

  • Limit yourself to max of 10 milestones per year – prioritise the top 10 that will influence or measure success
  • Split your milestones across different functional areas.  Add rows to suit your business but make sure you include at least finance, market, process and people.
  • List the last 1-2 years to help provide flow
  • Include additional boxes on key risks and your competitor’s response, both historic and forecast.
  • Do not fill the chart with activities that will naturally happen unless they help with the understanding of the plan
  • This is not a product roadmap –list only major product releases/events
  • Put it up on the wall by your desk for daily review

The milestone map-plan is great for helping all staff members focus on tasks that will help you achieve your goals, as well as showing the dependencies of tasks.

If you find yourself or your staff overtime not executing tasks on the plan then its time to challenge the map-plan and test out whether “the plan is still relevant”. If not change the map-plan otherwise re prioritise your work.

Put your plan up for continual challenge with advisors and staff. Do not be afraid to throw it out when the environment changes. Do not fall into the trap of “the law of committees”

If a committee is allowed to discuss something long enough, it will inevitably vote to implement their idea, simply because so much work has already been done on it.”

If the plan is no good say so and do something about it.

Succinct visual tools like this and the business model canvas, create powerful discussions very quickly and maximise interaction time.
More importantly they increase the probability of success.

Pigs and Chickens – Business Model

Is your business a pig or a chicken?

Harold Star’s book “Chicken and Pigs – Business Models and Competitive Strategies” puts  businesses into 4 categories.

These models are referenced by transaction frequency and revenue contribution from each transaction.

My takeaways from this book are:

Business models are about customers not end users, often people get these stakeholders mixed up. Customers are the ones writing the cheques.

  •  Few companies know why their customers came to them and why they stay
  •  It takes different skills to attract customers and retaining them
  • Once established a business model is very difficult to change. This comes from the customer behaviours and required skills associated around maximizing operational efficiencies working each model.
  • Business models are predicated around decisions made by management around three model elements (strategic DNA) : Customer, Resources and Capabilities and Value Proposition.
  • Many companies operate multiple models,  as such they need to be conscious that each model requires different skills and behaviours

Through his book it he never actually mentions why he calls them such, perhaps obvious, but my take is:

Chickens: Lay eggs – lots of regular contributions
 Pigs: good for bacon and ham at the end, lots of reward once
 Black Widows: Mate and kill their prey, like big customers who consume your business leaving you  at risk with a small number of large customers
 Locusts:  lots of them and they move in packs, short life expectancy

Check out both Harold Web Site and his book for more detail on this pragmatic approach to classifying and developing strategies to manage your customer pools and business model.

The web site has plenty of great information. Click on each model to get more information.

The Entrepreneurs Guide To No – test your last decision

Being in business is addictive and just like alcoholics, business owners loose objectivity –wasting too much time on the wrong idea or activity.

It’s my ambition to accelerate the growth and failure of NZ companies by removing clutter and simplifying business growth. For most business people I speak with, it’s not a lack of ideas or things to do, it’s about deciding what NOT TO DO.

Do not end up being a great jockey, riding a lame donkey.  Success is just as much about keeping an objective eye out for distracting activities or ideas, as it is about finding opportunities. Don’t overdose on the “go hard or go home” attitude; make sure you are applying some rational thought to your venture.

After reviewing thousands of NZ business ideas, by far the biggest success factor is focusing on stuff that generates revenue and its beautiful cousin profit. Without profit you at best have a great hobby, something you are passionate about and good at.

So before you leap into your next venture or addition to your existing business, test your idea against my “GMC 6 reasons to say NO”:

1: Does it solve a problem or desire big enough for some one to pay money for it?
your value proposition

2: Can you differentiate your product or service from the competition?
    – your sustainable competitive advantage

3: Can you make money from this venture?
     – your business model

4: Do you have a team with enough skills to make this idea –  venture work?
– your talent

5: Is it fun?
– Your culture – motivation

6: Will it stack up against some non-emotive challenge
– Governance

This rule set works whether you are starting a new business or simply trying to improve your current business, use it to test your ideas so you can grow or fail fast.  It’s amazing how many great craftsman we have in NZ creating solutions for problems that don’t exist or are not big enough to warrant someone outside your mother and mates to open their cheque book and purchase.

So Test you last three decisions against the 6 rules….

Straight Talking Strategy – Rockefeller Habits

“Mastering the Rockefeller Habits – What you must do to increase value of your growing firm” by Verne Harnish was referred to me by an entrepreneur who thought it was my style of book: pragmatic, full of useful tips and to the point. He was on the money, in fact I found the book addictive – I could not put it down. For me it went well beyond the promise of another one page business plan template to consider, its goes on my top 10 must read business books list.

What I liked was the way Verne brings business strategy and plans back to simple lists, questions and statement. Below I have given you a taste of what is in this great read.

The right things model – 3 basic decisions Executives need to make:

  1. Do we have the right people?
  2. Are we doing the right things
  3. Are we doing those three things right?

Base Strategy:

Let’s face it, business is basically the act of Getting, Keeping and Growing – Customers, Staff and Shareholders and we get better at this when we sell stuff, make or buy stuff and measure stuff.

Verne has simplified all business strategy into two dimensions best illustrated with the diagram below.

Often in business we can make things more complex than we need to. Verne’s one page business plan and measurement framework is well worth exploring.

Note: you can download a word version of Verne’s one page plan from www.gazelles.com.

For me it’s not necessarily the exact template as much as the principles behind concise “Succinct”  business plans and measurement models.

  1. A simple framework that documents your position
  2. Use of a common language to express the strategy
  3. Develop a habit of using the framework and a language to continually evaluate process. (Like the GMC guide to NO).

This one pager is a good mix of strategy, execution and measurement and complements the business model canvas and balanced score card approach I use.  My take is, you need to work with a model that works best for you, perhaps a hybrid of all of the above.

Verne also shares his philosophy on people and management – including effective use of meetings.

We have all heard people say they don’t need help; Verne says it all “if your staff do not have bottlenecks, then more than likely they aren’t doing anything at all”. As a manager always find out your teams top 3 -5 bottlenecks, remember that it’s your job to clear those.

On KPI’s he also follows the “keep your KPI list small” model, he sights one CEO who had three critical numbers engraved on watches that he handed out to his execs’

Having worked with a number of high growth companies I have come to realise that high growth companies operate with a different measure of time and pace. Verne confirmed this with the statement:

“If you’re growing at 20-100% per year – think of each quarter as if it were a year”

Oh and the link to “Rockefeller”…. well to be honest, you’ll need to read the book for this, for me it got lost in all the great gems I took from the book on how to help companies grow fast.

Managing change or riding the wave? – Lessons from a futurist

Are we managing change or adapting to it? 

Success in the future will be determined by your ability to ride the wave of change. Not on the false premise you create change.

That was my big takeaway from an inspirational session with David Houle – self claimed futurist, at an open TEC event this week.

David spent the first half of our time together building the scene: giving us a technology history lesson and then motivating us (NZ)  to get our act together with broadband.  To be honest the warm up was a bit slow for me (maybe I am an impatient bugger) , but then came the really good thought-provoking stuff.

David labels the current decade (2010 – 2020) the Shift Age, with three main characteristics:

  • Flow to global
  • Flow to individual
  • Accelerated connectedness

 David describes a futurist as someone who helps transform shape and form of business. Stating there is always opportunity in danger.

 The main takeaways from this event for me were:

  •  Don’t kid yourself we can no longer manage change – we can no longer be change agents – we live in a world of every increasing change – future winners will be the leaders who can read and adapt to it, rather than attempt to control it. Effectively riding the wave of change.  We need to become a “morph corps” – how well structured for constant change is your business?
  • Forget traditional office environments – we need to separate the concept of place and work.  Modern workers need space to collaborate and cross fertilise. So how about pulling down cubicle farms and create thinking rooms – for staff to get together and collaborate in. Then let them to work at home for the rest of the time? It’s interesting us baby boomers still cannot get our head around teenagers working with distractions around (music, tv, etc) it is time we consider how the new generation thinks and creates best.
  • The new high touch – tech world – “hugging is in” – check out the teenagers – look at the Apple retail concept “the temple of cool” – designed to  get people using stuff. How are you integrating this concept  into your business?
  • Future wealth will be defined by Intellectual Property (IP) – interpreting his case studies my take on this was that it will be  IP + Brand Experience that will drive future wealth.  The emotional attachment to brand experience is real and consuming in this modern world. David gave a great example of this  “whose kid wants a HP or a Dell Laptop?” “Apple is the cool one” – Hell my daughter is fixated on her new ,MacBook experience this year.
  • Watch out for the “digital natives” those young ones coming through – who have no experience of the pre digital world – they are different – adapt and find ways to maximise their talent.
  • People hold the power not traditional corporations / structure – the individual needs to be engaged with. Interesting to still hear people failing to adapt to the new channel of customer/stakeholder communications of social media.

A great morning of inspiration:  If you are interested in more of David’s theories, he does have a book – “The Shift Age”. By all accounts he is another American who has fallen in love with Australia and NZ , so I am sure we will see him as a regular visitor on the NZ speaking circuit. Well worth a listen to.

GMC Business Model Canvas

Often business owners get distracted by the complexity of their own business and end up wasting time and energy working on the wrong stuff. The business model canvas is a technique that documents your business model with a simple diagram. I have found it invaluable in helping businesses gain greater clarity about what activities add value to their business.

Having now used the canvas for some time, I have generated my own version of it, that better suits the type of businesses I have been working with. Often just filling out this template or canvas, creates many powerful discussions that benefits the business.

Below is my adapted version of the canvas: (you can click here for a pdf)

In the formative stages of growth of a company, it is particularly important not to loss sight of both the quantifiable value proposition and what your sustainable competitive advantage is.

In my incarnation of the canvas I have included two new boxes:

  • Problem – What is the problem your product or service solves?
  • Unique Proposition – What do you have that makes you unique and keeps competitors at bay? Particularly ones with deep pockets.

If you are new to the “business model canvas” , here is a link to a book review and summary that I published a while ago on the original book. It’s great to see this book appearing on book shelves all around the country.My hope is that business owners are using it to accelerate decisions in their business on a daily basis and note just letting it gather dust.

PS: Like all tools it works better when you under stand how to use it. If you want a hand getting used to using this model on your business– come along to one of the GMC business planning workshops.

PPS:  I have just updated my version of the canvas read my V2 GMC Canvas post Oct 2012