Author Archives: hippotential

Sacrifice Opens Door to Opportunity for a Leader

You need not to have been on this planet very long before you will encounter adversity. One popular adage states that we become stronger by going through tough times. Yet, not everyone who encounters obstacles is able to surmount them and achieve success. In Obstacles Welcome, Ralph de la Vega recounts his own “pivot points,” born of a challenging early life that shaped and molded him into a very successful businessman (currently, he serves as the President and CEO of AT&T Mobility and Consumer Markets. His positive responses to adversity formed the backbone of a successful values-based management system.

Rather than seeing separation from his parents at the age of four as a bad omen, de la Vega found a way to accentuate the positives in his life. He innately recognized that dwelling on negative thoughts and feelings was counterproductive. After that tough, early life challenge, he moved to Miami and had to overcome a language barrier in the classroom. He adapted again to his environment instead of letting it get him down in the dumps. 

Many people tack a passive approach to setbacks. They hope, wait, and some earnestly pray for a change in circumstances. The course our example provides, though, is one of planning, taking risks, and maximizing opportunities. In the book, he offers up the premise that obstacles should be embraced as a chance for personal growth. In the midst of living life, we come across those “pivot points” personally and professionally that define us–for good or bad. Getting in the right frame of mind can be achieved through his recommended 8 step process:

1. Hope is not a strategy. It is necessary to plan for success.
2. To achieve big goals and dreams, it is necessary to take calculated risks.
3. Big wins in life come from an ability to recognize opportunities. The most significant and important opportunities lie in problems that are waiting to be solved.
4. Embrace and overcome obstacles. Obstacles and adversity make stronger, wiser, and more capable leaders.
5. Be willing to unlearn old habits and relearn old lessons from life experiences.
6. Building winning teams involves effective, honest, and open communication.
7. The greatest successes always involve willingness to make sacrifices.
8. Leadership is not something inborn, but learned and practiced.

As a young executive at  Bell South Latin America, de la Vega experienced everything from military insurgency, economic meltdown, and political revolution, in addition to unstable markets, lack of uniformity in corporate leadership, and nonexistent profits. How did he respond? He took a chance and embraced the challenges as opportunities to lead an entire sector of the international communications market into profitability. What he advocates is to “become comfortable with being uncomfortable,” In order to do that, we may have to set aside what we feel we already know and become flexible in our approach to the challenges set before us.

A key habit to learn is to not allow the past to hinder the future. That is not to say, however, that our past(s) cannot be instructional. Previous experiences can help us deal with new situations only by using them to look backwards and forwards at the same time. It is important to think about how what we have done before might be useful down the road
in similar situations.  

Finally, de la Vega describes what he terms an “Extraordinary” leader, one who is able to consistently deliver excellence in all aspects of personal and corporate leadership. To achieve such status, a leader needs to do the following:

• Set the direction, create the vision.
• Establish values and lead by them.
• Select strategies and key initiatives.
• Build plans to achieve vision.
• Establish goals, priorities, and focus.
• Establish key metrics to measure progress.
• Align and inspire people.
• Empower and enable people to achieve vision.
• Create winning culture.
• Select, recruit, and develop other leaders.

 

Can Generalists Thrive in the Conceptual Age?

One of the questions I get most often is: “what do you do?” The answer to that question is not an easy one, as my work with companies ranges from start-ups to those almost middle market size, and the services I offer from advisory board member to turnaround artist. Yet, when my role is marketing consultant, I advise others to be able to answer the very same question crisply, concisely, and in a compelling way. What is poignant is that, as we gain more skills over the years, it becomes harder and harder to specialize. That is not to say, however, that I have not met people in business who are extremely specialized and who succeed in their field. For the moment, though, I want to write for others who have adapted to competitive market demands to embrace new skill sets, become masterful enough that others hire them to provide those new skills, and now are the proverbial “generalists.”

Don’t confuse “generalist” with “General,” however, as many generalists struggle to stay with one organization long enough to rise to the rank of top officer. Furthermore, a generalist has challenges in the unique realm of trying to keep up with evolution in many more topical areas, all of which are changing at a faster rate than at perhaps any time in history. The good news is that, as Daniel Pink points out in A Whole New Mind, we are now living in the Conceptual Age, having evolved from the Information Age to a day and time when creativity will be valued highly. Maybe that is not such good news for left brain folks who are not able to adapt, but for those (for whom the learning of new information was merely a means to an end, the end being to connect emotionally with others, build relationships, and find success while doing so) who embrace right-brained living, it is a brand new day!

Here are the new skills that are needed in the Conceptual Age:

  1. Design – the ability to create something that has significance as well as usefulness.
  2. Story – the ability to put facts into context and deliver them with emotional impact.
  3. Symphony – the ability to see the big picture, connect the dots, combine disparate things into something new.
  4. Play – sense of humor and laughter plus other components to balance the psyche.
  5. Empathy – standing in someone else’s shoes, feeling with his or her heart, seeing with his or her eyes.
  6. Meaning – working for something in which one believes with others who have similar values.

As you can see from the list, the emphasis and value will be placed on original thought rather than automatable routines. Computer power has now rendered many repeatable acts less valuable (not unnecessary, mind you, just worth less than previously because either low wage earners or machines can perform them admirably). What will come to be increasingly important is the ability to think up a new concept, develop it sufficiently, and share it so that it resonates with the heart of another. 

What’s the role of the generalist in this new economy? That depends–can you adapt, or are you trying to pour new wine into an old wineskin? Those of us who can adapt will be able to answer questions like “what do you do?” with less of an elevator pitch and more of a carefully crafted story that captures the mind, will, and emotions of the intended audience, hopefully in a multi-sensory way!

Cheers to you as you embark on the journey to greater relevance, enhanced value to others, and — I sincerely hope — a much greater sense of doing something truly meaningful (other than just adding to your repository of information.)

 

Risk Assessment for Small Businesses

When someone talks about risk management in a business context, usually the risk is of a financial nature. Yet, other kinds of business risk that cannot be taken care of with an insurance policy or other financial tool  are just as important for you to consider and make plans concerning.

New product roll-outs  mergers and acquisitions, and similar considerations all carry an inherent element of risk. If your company does not have cash reserves or strong current year cash flows, it is very hard to make up for a mistake in terms of something attempted that does not work out. The smaller the organization  the more a setback impacts your ability to recover. If the executive team understands this important principle, then you are well on your way to avoiding unnecessary risks that will kill your long term prospects for success and growth. Three areas of risk are significant:

Location risks:

Location risks include choice of where to offer your products and services, where your staff is located, and where your customers are located. It is extremely unwise to not think through these various parameters and how they impact your strategy and planning. Whether you are thinking of location in terms of geography or online versus in person, you have to wrestle this subject to the ground, develop a keen internal understanding within your team as to how to optimize your choices with regards to locations, and adhere steadfastly to your plan. Any forays into new locations–whether in terms of sales presence, staff, or customer preferences–should be scrutinized with the intent to preserve or improve efficiency in meeting customer needs. In addition to these considerations of location, there is also a need to think about your suppliers, strategic allies, and key advisers. You want to be as close as you can to key stakeholders who can drive your business success.

Locations that you choose should be that delicate balance between affordability and high traffic. being able, for instance, to  get banking and other errands done quickly will make your organization more efficient and, hopefully, reduce costs while improving customer service. Keeping in mind that you can’t spend too much money for a prime location, make sure that you have adequately researched alternatives before settling into a choice.

Design risks:

Market research should support all design decisions. Whether your company makes software, consumer goods, runs a retail store, or delivers a service, the design of your offering to your target market should reflect tat you have done your homework. Your offering should have strong appeal to each target buyer persona, with features and benefits that are tailored to identified preferences. However, designs can become  stale in a short amount of time, so it is advisable to create and revise based on prospect needs as well as initial customers. To only look to keep providing the same thing to an established clientele shuts your organization off from new opportunities and the need to replace customers over time with better ones. Once you have a series of strongly designed offerings, look to promote and sell as much of it as you can as quickly as possible because you will “iron out the wrinkles” and become proficient and prolific in delivery of something in which your fixed cost does not increase and you can exact better margins.

Sales risks:

Sales risks include the reputation of the sales force, distributors, resellers, etc, pricing competitiveness, and product price bracketing. Those who are charged with selling your offering are selected by prior performance in similar situations. Familiarity with your pricing, offerings, and market is a baseline–you want someone who will give you continuous feedback to keep improving what you offer. You need to educate some sales people on both the importance of this feedback  and what you require (and when).

Pricing should be within the boundaries  the market will bear. Not wanting to forego sales for higher prices, or profits for lower prices, it is important to devote a goodly amount of time to setting prices that will attract buyers from each target buyer category at profitable levels.

Being able to address each of these risks is vital if you are going to create and maintain a thriving business. Make sure that you develop plans for risk management in each of these categories, as well as the financial risk that most every business faces.

Small Business Management Information and Organizational Staffing

Different-sized businesses have different needs in terms of internal structure and systems, particularly during times of economic decline. As the entrepreneur adapts to changes in his or her competitive situation, the size of the business may vary enough to put it in competition with either larger or smaller competitors. Implementing systems to match competitive requirements is a necessary first step toward efficient organization and operation.

Management Information Systems

Small businesses usually enjoy the pace a smaller organization and a high level of personal involvement in decision-making. The systems typically in place range from a manual bookkeeping system inadequate in reporting timely developments to overly complex programs that require more attention than the small business leader can give. Therefore, the goal in a small operation should be to minimize company reliance on record-keeping as a chore and focus on the development of meaningful reports. With all systems tied together, the financial systems can work with marketing and operations systems. The reports generated can then be used by each department.

Accounting Information

Accounting information that should exist in at least a semi-automated form includes accounts payable, cash projections, expense estimating, and quotation systems. It is impossible to run an efficient operation with anything less than this skeleton. The payables are easily recordable as invoices are received and paid. Cash projections contain–at a minimum–information about loans, revenues, and disbursements. A basic expense estimating system posts invoice amounts  (direct costs) and allocates indirect  costs as appropriate to to specific projects or clients. Finally, a method of preparing quotes should be implemented to standardize pricing based on cost data.

Marketing Information

Marketing information should include inventory listings, commission agreements, advertising schedules, and research into market demand and competitor product offerings. Inventory listings are a natural by-product of the job costing (expense estimating) system and should include gross profit percentages, inventory age, and a measurement of the relative sales priority of inventory based on carrying costs. Commission agreements highlight the sales force’s expectations for representation of company products. Advertising schedules will help the business leaders plan for regular promotions. Finally, research into market demand and competitor product offerings will require periodic updates.

Operations Information

While accounting information is preferably computerized or otherwise automated, operations information, like marketing, need not be automated as a first priority. Information systems for monitoring operations include purchase orders, scheduling, and either timekeeping or job progress. A purchase order system is essential for cost controls, order documentation, and verification of amounts and qualities delivered. Finally, scheduling systems provide for systematic fulfillment of orders.

Organizational Staffing

Small businesses must determine the organizational development and staffing levels based on their need to delegate tasks and thus free themselves for critical activities. Office management, marketing and operations managers should be hired only after careful screening. These individuals need to possess industry specific experience and a good general feel for how your business works. Sales people and administrative staff are not innately qualified to work for a particular organization. When verifying references and conducting interviews, then, look for a match in values!

Office Management Staff

In the management of the office functions, organization and attention to details are essential. One or two well-trained individuals–preferably capable of performing each other’s jobs–should be enough to keep the internal operations running smoothly and to help with some of the company’s daily busy work when necessary. Ideally, these office employees should be able to handle accounting, calls, filing, and word processing.

Marketing Staff

The marketing staff need not consist of one or two well-trained individuals either. One person must have responsibility for digital marketing–all things web-based including website, social media, and CRM. The other should handle strategy and supporting sales and other executive staff on marketing issues, including advertising, branding, collateral materials, proposals, etc.

Operations Management

A team of one or two should again be sufficient. Depending on the size of the organization, the complexity of its operation, and the rate of growth, a good rule of thumb is that one manager should have responsibility for no more than five to eight direct reports. These managers should be expert in keeping work on time and on budget.

 

How to Handle Lenders

In dealing with lenders, it is important for executive teams to understand the background of those with whom they transact business. Bankers, for instance, are often conservative by nature, have little experience running their own business, and can be a part of a corporate system that is bureaucratic and slow moving. Realizing from the outset that the word “risk” is a four-letter word to these professionals can prepare you to have better conversations. Furthermore, you must accept that most front-line bankers are not empowered to question the standards they must enforce on behalf of their employer or the banking system as a whole. All of this is especially true after the recent mortgage industry troubles of the 2008 recession genre. By keeping in mind who is on the other side of the desk when a loan request is submitted, you as a management team member can position your request in a way that gives the banker the best ammunition to give you an affirmative response.

How Lenders Think

Understanding how lenders think helps the entrepreneur better understand why lending policies are pragmatic rather than opportunity-driven, standard rather than adaptable, and monitoring rather than recommending. While market opportunities drive the entrepreneur, lenders approach the very same data with caution. The same unpredicted cash shortage that merely surprises a business owner may send a lender into a panic. Lenders are not in the business of selling advice–in fact, they can be held liable if found to be doing so and the business goes under. They are in the business of making money on loans. Therefore, their loyalty is to company profits and a return on their monies borrowed–and noting else! Anyone who wishes to test the strength of this premise should try missing a few note payments.

Consistency is the hallmark of the lender, due in large part to the constraints of a corporate directive of standardization. The seemingly two-sided face that the entrepreneur sees the lender wear is real; the lending officer truly wants to help and has empathy, but is governed by institutional guidelines. Overidentification with the needs of the borrower can cause a lender to lose her job. 

Consequently, the face the business owner sees is not reality but rather a front depicting what the lending institution would like to see happen. Rarely does a borrower learn the true acceptable level of performance that a lender would be willing to accept. Since lenders control the purse strings to the resources that keep the borrower in business, these lenders are impossible to control. Knowing a lender’s true bottom line enables the borrower to influence lending policies that permit operation under the best possible conditions.

How Lenders Act

During tough economic times, lenders are expected to:

  • serve as a flexible yet profitable source of capital,
  • monitor the performance of borrowers in their book of business, and 
  • provide sound references to inquirers on behalf of their clients.

Lenders must be allowed to continue to make money on the loans they have extended, but the borrower may request modifications of the terms of repayment based on business financial performance. Principal payment deferrals, interest accruals, and other methods can be used to create cash within the business operation, but one is ill advised to single-handedly embark on such practices without securing the commitment of the lending institution in advance.

To the extent they are able, lenders should be encouraged to visit the places of business of their borrowers and check things out. Outside assessment of company execution of its plans by this important stakeholder group can prove valuable to the management of the company. Hopefully, an open dialogue creates an environment where the lender reference in credit applications is always a positive one and facilitates smooth operations in your company!