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Before the Business Plan Gets Written
A few steps before you write your next business plan
The other day a friend asked me if I had any business plan templates. Of course I have many plans that could be used as a template and there some good websites with information on how to build a business plan. Instead, however, I invited him for a coffee to learn more about why he wanted to make a plan. It turns out that my friend was entertaining the idea of starting a business. Like many good entrepreneurs, he had several good ideas, he was not sure how they fit together, he was excited, and he was scared. He had a potential partner, also good, and most of his business ideas could be done without external investment– perfect.
I then outlined a template to help form his ideas that looked like this for each idea:
- What is the business need in the market that needs solving?
- How are you (and your company) uniquely qualified to solve this?
- How will you identify such customers and how will you make contact with them? Read more…
Moral Skill in Sales
Barry Schwarz at TED talks
“Not just is it profitable, but is it right?” -Obama
I just listened to Psychologist Barry Schwartz give a lecture on “virtue” at TED Talks. If you have not heard of TEDTalks, they are Technology, Education, and Design talks, a free-form gathering and speaking by some truly intelligent people. I highly recommend it. In this season’s speakers, Barry was a standout. I also found his talk on moral intelligence and virtue particularly relevant to sales.
First off, we need to eliminate the “pusher” and “manipulator” salesmen as not “real” salesmen because the value of a true salesmen is that they connect need with ability to supply. A true salesman knows that discovery is key: “You probably did know we exist (or could do this) but….” While this is a necessary part of selling, it is only the first, smallest, step. The real bulk of the work begins when the salesman has identified a customer with a need his company can fulfill. After discovery, the salesman identifies an entire list of reasons why the customer will not make the obvious business engagement; They can’t decide; the order process is too complex; already committed to another (likely less good) supplier: we don’t trust your company; we are scared and can’t decide… There are also supplier side barriers that come into play: We don’t know that they will pay; they want special treatment; we sold to them before and had a bad experience…. Read more…
Lawyer Rant no.1
Numbered because I suspect there will be more….
When we enter into negotiations with our customer, we are distributing risk based on who perceives the lowest risk and who can best manage, absorb, or assess the risk. If your company is unable to manage any type of risk better than your customer, then you are in trouble. If you are doing complex selling, then you are trying to get paid for risks that you can handle more efficiently than your customer– that is the essence of large, complex, services (and often product) business. Unfortunately, there are a number of techniques corporate lawyers use to sabotage good, healthy risk taking: Read more…
Get the Fire Extinguishers
“What doesn’t kill us makes us stronger.” -Friedrich Nietzsche
My corollary, similar to that famous quote is, “Risk of being killed can have positive consequences”.
Years ago when I was Director of Engineering for a division of Honeywell, I was curiously following a long-standing problem facing my colleague, Tom Armfield. Tom was a seasoned manager who had just been promoted from field service manager to Director of Manufacturing. (See “Production vs Prototype Sales” for more on Tom.) The problem was with the work quality of the team that manufactured the electrical control cabinets was terrible and it was affecting the entire company. Read more…
Full Combat Business
Business in an era when 1+1 = 2 (not 3)
Most articles that discuss a company’s mission, vision, strategy, or even marketing often cite Nike and their tag line “just do it”. It is also well known that during an earlier time Nike had a different internal slogan of a completely different sort: “beat Adidas”. About the same time Nike had their aggressive slogan, the company I worked for had a similarly aggressive internal slogan of “kill Weston-Loral” (our geographically closest direct competitor).
Why is it that these old style, aggressive slogans, that target a competitor are now so rare? Why are aspirational slogans like “just do it” all the rage? What can we learn about the effectiveness of these slogans in their time? My thesis is that such slogans were the products of their market environments and that much of the same market environment has returned leading to the conclusion that slogans and their consequential real action need to change back to the old again. Read more…
Business Relationship by Design
The balance of alternatives
Almost every external facing business relationship requires activation in the form of a negotiation and a contract.. When I see good deals stall on small details it is usually because the discussions were initiated on a poor foundation. Getting the ‘big picture’ correct before getting involved in the negotiation and contract details is critical: Is this a win-win for both sides? How will healthy, normal communications take place during the execution period of the contract? What will happen when dissatisfaction, mistrust, or irrationality steps into the relationship?
This last question is rarely considered at the ‘design stage’ but it should be. Far too many contracts amplify the smallest conflicts by giving enforcement powers and ultimatums to one side or another. Look at the default terms and conditions from a big company like BMW and imagine that one or both sides are dissatisfied. The lawyers usually have ensured that there are lots of ‘sharp sticks’ and other weapons because they want to have a good foundation for a lawsuit. Courtrooms are “the nuclear option” where there are no winners or losers; there are only losers and bigger losers at the end of any court case. For this reason it is important that business people include a soft conflict resolution processes that will reduce tensions and that all ‘nuclear options’ in the contract have safety devices lest they be used too quickly. Read more…
Profitable Support Revenue
Cameras and Software Licenses after-sales
Yesterday, I was talking with a friend of mine who imports high-end Japanese consumer optical goods. He was telling me about how call volumes were increasing but sales were decreasing. Much of these calls were around service. I asked him if service was a big profit center for him. I was surprised to hear that it was not a profit center after 10+ years in the business. The following applies to someone reselling cameras as much as it applies to the creator of software licenses.
When product companies (factories, distributors, and retail) start, they often focus on initial product sales. As they mature (and their industry matures), the value of their customer base needs to be used and they focus more on services, support, accessories, etc. This is exactly the stage my friend is in– much of his product line is sold at zero margin because of intense market pressure. Read more…
Negotiating with a Clock
Patience is the key to favorable negotiations
In a business negotiation, the goal is not to defeat the other side. Instead, we want to gain favorable conditions for ourselves and have the other side feel good about the final outcome. If they feel that they in any way lost, then they will try to recover their dignity some time later by making you the loser.
The correct strategy is to ensure very good conditions for you, acceptable conditions for the other side, and then to give them a small gift at the end– like a small chocolate at the end of a nice meal to ensure that the last memory was positive. The difficult part, of course, is to gain the great conditions for yourself with enough buffer so that you will be able to give the ‘gift at the end’. The key is patience and understanding the clock. Read more…
Production vs Prototype Sales
“There are two kinds of welders in the world…” Tom Armfield
Tom Armfield was my manufacturing counterpart when I worked for Honeywell. Although Tom had little formal education and started his career as a welder, he moved through manufacturing positions, managed field service activities, and was ultimately put in charge of all manufacturing, test and field service for our division. One day, Tom explained to me how you hire and train welders. He said, “There are welders who can look at a new drawing and figure out the tools, techniques and sequences need to make what is described in that drawing.” Then he went on to explain, “There is another kind of welder who can produce the same piece over and over again while at the same time continuing to perfect the operation by reducing cleanup, lowering waste, creating more efficient processing steps, etc.” And then the wisdom: “You can make any welder better, but you will never transform a prototype welder into a production welder and vice versa”.
As I look at my career, there are production engineers and prototype engineers. I also see prototype and production people in a wide variety of other professions. I especially see prototype and production salesmen who like welders, cannot be interchanged. I believe that this is not an issue of training, but of basic and fundamental personality differences. Read more…