Reality vs. Technology Bubble You Decide

This was too entertaining to pass up so I just had to share it with you. Did you ever wonder about all that hype regarding a technology bubble? It seems that companies can create incredibly advanced technology yet, if the market perceives it in any sort of negative way, the product (regardless of how good it is or how many problems it solves) does not stand a chance to succeed. On the other side of the spectrum, you have large multi-national companies that produce less than adequate products (Microsoft Vista is a good example of this) but they manage to push the products into the market and then reap the rewards of success partly due to their talented marketing team’s efforts in self promoting by creating enough buzz to fool the market into believing that the product is a raving success. Amazing, yet scary – all at the same time. If you would like to know more about making your products a raving success, let us know your thoughts.

httpv://www.youtube.com/watch?v=YuAJHaXKgFk

Mantra Mantra Mantra

I just asked the key managers employed by my latest Client to tell me what exactly it was that their company did – the response was so shockingly bland that I decided to escalate my curiosity on a more personal level. I asked the same folks to tell me what they do at the company – After an hour I was speechless. You see, a few months ago this company hired a consultant for $20,000 to help them bond as a team and then use the synergy of the moment to draft and approve a new mission statement that would help propel them forward, somehow… magically. The statements I listened to lacked purpose, focus and cohesiveness among other things. To put it bluntly, several managers were fighting with their counterparts in other divisions – Sales was determined to place some form of blame on Engineering and Engineering had it out of the folks in Finance. This is not healthy – nor is it productive so when the CEO asked for my help I wanted to be sure that I understood what I was getting into. I’d been tasked with making a positive change in the work environment so that the team could identify and then achieve common goals yet the issue seemed to stem from something much more basic and a lot less complex.

In many ways this situation reminds me of companies that hire a consultant to conduct a two day ‘broaden your horizons’ type of company event away from the office with team building exercises leading up to a brainstorming session designed to create a mission statement, a USP (Unique Selling Proposition) or something in between. The event usually goes like this:

Day 1: A day of exercises, games and puzzles designed to improve relationships within the company and encourage trust among colleagues. One such activity includes turning your back on the group, closing your eyes and then falling backwards hopefully into the arms of your co-workers. Another one involves sticks and ropes to encourage the team to work together to achieve a common goal.

Day 2: Usually the rain day plan (an indoor activity) where the entire group assembles to create a mission statement. The room is usually too small to contain the entire team and there are pens, paper, white boards and usually a facilitator who knows nothing about your business. Everyone in a managerial position and above in the company is present and encouraged to contribute. After several hours you typically get something like:

‘The mission of Moevenpick is to deliver superior quality products and services for our customers and communities through leadership, innovation, and partnerships.’

Don’t get me wrong. I love Moevenpick, but I’ve never thought I was participating in ‘leadership, innovation, and partnerships’ when I ordered an ice cream there. The basic reason for mission statementosis is that people contributing to a company’s direction usually worked for McMinsey or Boston Consulting Group, have a MBA or some combination of all three.

These days, it is probably more helpful to have a mantra than a mission statement. A mantra contains 6 words max (the fewer the better) and if your receptionist is able to retain it for more than a day, you probably have something interesting.
A few examples:

• Domino’s Pizza “You got 30 minutes”
• YouTube “Broadcast Yourself”
• UPS “What can brown do for you?”
• McDonald’s “i’m lovin’ it”
• PHILIPS “sense and simplicity”
• M&Ms “melts in your mouth, not in your hand”
• Red Bull “Gives you wings”
• INTEL “Leap Ahead”

So, although you may have wanted to hire that consultant for $20,000 to help build some team spirit and get everyone to pitch in and create a mission statement – think instead about taking a weekend off to relax – do something you really enjoy and then on Monday, dedicate time to creating a memorable mantra for your company. If you still want to outsource this to some creative types, get in touch, we may be able to help.

As for my Client, we were able to identify the issue within two days. Our team addressed the major concerns in a consultative session called Potential Problem Analysis and created viable solutions within one day. We were then hired to implement 2 of the 6 solutions and project manage the remaining 4. The solution that seemed to make the most difference at the end of the day was the mantra. I still can’t believe it – the mantra was missing and when it was selected and put in place, 20 very different managers walked back into their arenas to fight the competition instead of each other. This case was fun, rewarding and delivered with excellent results. Does your company have a mantra yet? Tell us about it.

The Right Clients

Someone recently asked me why I chose to capitalize the words ‘Client’ and ‘Customer’ in my texts. Well, the simple explanation is that I appreciate their business. As a sign of respect and acknowledgement of their importance to my company, I want to show my appreciation in every article that I write containing these words.

It’s wonderful to have successful, paying Clients but even better to do business with the right Clients. To start with, we are either big fans of our Clients or we become big fans as we get to know them better. I hear our employees and freelancers raving every week about some of the great things our Clients are doing to grow their businesses. I want to maintain this positive culture and have therefore decided that our sales teams will only target companies that we really want to do business with. I want to be selective with the people that we do business with so that the result is and continues to be a positive experience for all involved.

Today we have four business relationship guidelines that steer our Client acquisition decisions:
1. Essential elements of our Client’s business culture MUST match ours or at the very least, are similar to those that we value and respect on both an ethical and moral basis. We take pride in our reputation and credibility and wish to work with those with similar ideals.

2. The potential for success is reasonable to fantastic. We want to ensure that we have the necessary competencies and availability to deliver the project successfully and exceed our Client’s expectations. Should a prospect have what we determine to be unrealistic goals, we will gladly recommend a competitor. We will never try to convince a Client that an apple is an orange or that we can deliver something that we know we are not capable of delivering because we want to help each of our Clients solve their problem(s) and, as a consequence, recommend our services to others.

3. Profit = Fun. It is a simple equation and there is a ton of truth behind it. A project must be profitable and have the potential to be carried through to successful completion with high levels of motivation and contributions to our bottom line. In essence, we ask for a win-win deal. If our Client wins, we win as well and if our Client is not able to achieve their objectives, we reconsider our role and our efforts to provide the necessary ingredients for success. Competing on price has little merit in this equation since the team requires rewards for a job well done.

4. Bandwidth is an annoying topic for us because our product is based on people with specific skills and limited availability. We want to give our Client’s the best possible service and that means that we need to have a well rested, physically and mentally fit team ready to jump into action. Success brings with it some level of frustration as you learn that you simply can not please everyone all the time. Our people tend to be booked solid for 60 to 90 days out and that means that there is little available bandwidth to acquire new business unless we add additional people to the team. On some occasions this is exactly what we did because we were interviewing superb people at the same time as we acquired a new Client that required the type of services that these new people were capable of delivering. That was a lucky situation and in 10 years has only occurred twice. Most of the time, we are approached by prospects that were referred to us by Clients or read about a Client success story that we created. These prospects usually have some urgent needs and therein lies our challenge. We want to help such companies but only if we can put the right team together to increase the probability of success.

Naturally, there are exceptions to the above guidelines but truth be told, we learned our lessons in the past and such exceptions are rarely worth the time and effort when a win-win is simply not possible.

We count on people like you to understand our thought process and although it may seem in some ways to be rather exclusive given the way that we filter our opportunities, please know that we really appreciate new business opportunities, they are the lifeblood of our business model. BoxONline is currently undergoing some growing pains and thus further expansion is necessary to achieve our objectives so, if you know of people who may fit into and support this Client oriented model of exceeding expectations, please do get in touch with me directly using this form.

Protect Your Plan

In most businesses there is a plan to follow. In many businesses however, a plan needs to be created, agreed upon by the decision makers and then applied to the business.

When you establish a plan of action chances are that you want your plan to succeed. We help our Clients with a process known as PPA to protect their plan and ensure that it has an above average chance for success. If this is what you want then it is essential to identify, evaluate and understand the risks that could possibly undermine your plan and prepare (in advance) to face each obstacle with preventative and contingent actions.

Think of it this way, “protecting the plan” has to do with a set of processes that help you to prepare for risks and avoid surprises that could sabotage your project. Here is how to get started:

a) Identify Potential Problems that could sabotage your project
b) Identify the Triggers that will inform you when such a problem has occurred
c) List Likely Causes for each potential problem
d) Create Preventative & Contingent Actions

You can plan and take preventative actions to reduce the likely causes for each potential problem and plan contingent actions to minimize the likely effects of each potential problem if and when they occur.

If you have an important plan that needs to succeed and you’d like some help protecting your plan – don’t hesitate, contact us today.

The Right Timing

I never wear a watch because for me the exact time is NOW.

Most of my tasks need to be completed – NOW.

My software developers need my input – NOW!

My Clients need some personal attention – NOW.

The dog has to go out – NOW.

The dinner party YOU organized needs to be prepared – NOW.

What good is a watch when everything needs to be done NOW?

OK, enough ranting; Perhaps it would be helpful to know that a bit of project planning, prioritizing and sorting come in handy to coordinate tasks and dependencies and plan your day more time effectively but the truth is that if you can focus on what you do best and delegate or outsource everything else – the primary skill will always be project planning in order to coordinate your life with your objectives and be able to have some peace and quiet at night. This is why we sharpen our saws each year with additional training and also why we offer our Clients the opportunity to benefit from our newly acquired skills as soon as we return from these trainings… such as NOW!

Ready to address your objectives and shift gears into a more productive state of mind?  Just drop us a line and we’d be happy to share some of our new time saving tricks with you and your team.

Compensation

This is always an area of discussion for my Clients. Rather than publish a list of current rates in several different countries and attempt to keep such a list up-to-date, I prefer to use a USD model which you can adapt to your particular situation and geography. The following are simply guidelines that we use in corporate restructuring projects. You may or may not agree with some of the line items but on the whole, the following has been helpful to many of us.

Investment Evaluation Guidelines

I have been asked many times for a guideline when it comes to evaluating investments that we (or our Clients) make. People ask why we invested in Company X and not in Company Y, Why are we interested in industry A more than industry B etc.

Well, the simple truth is that we invest to win.

We tend to strip out a lot of soft factors and focus on results.
Did management deliver?
Can they do it again?
A lot of investment decision making is based on an understanding of industry trends, a trusted relationship with players that perform consistently above industry average and some form of defensible proprietary technology that is in demand because it solves a specific pain for a given market segment.

If a company has a specific target market segment in their crosshairs, we know that they have done their homework – when management states that they serve all industries, our alarm bells start ringing.

Following is my personal guideline for what really counts when considering investment in a startup or early stage company.

1) Market potential
2) The Team
3) Results
4) USP

Investment Process

• The success of investment in an early stage company depends on people and their ability to execute on a detailed business plan, therefore a lot of emphasis is placed on the team.
• The structure of the investment is vital and requires creative and often complex terms.
• Pricing is a key factor which needs to be carefully analyzed and negotiated.
• An interesting exit strategy is required in order to maximize a timely return.

Investment Selection

• Management Team: Experienced, in-depth knowledge of business, results oriented.
• Innovative Products/ Proprietory Technology: Highly differentiable, superior, specialized expertise, meets market needs.
• Business Plan/ Milestones: Well thought out business plan including milestones and contingency plans.
• Substantial Investment Position: Ability to obtain a substantial investment position, influence the selection of executive management and the strategic direction of the company.
• Valuation: Negotiate and obtain a fair pricing structure.

Initial Investment Valuation

• Underlying industry assumptions
• Realistic income statement over 3-5 years
• Competition
• Major criteria:
  • Technology value
  • Capital requirements
  • Market potential
  • Capital structure
  • Operational cash flow

Determination of NAV for privately held startup companies

• The original cost: An approximation of the fair market value at the time of the transaction.
• Write off: NAV calculation at cost, less any write-off deeemed necessary if subsequent performance fails to meet business plan forecast.
• Capital increase: NAV calculation in principle based on the capital increase price, less 10% to 29% discount if deemed necessary based on valuation factors.
• Write up: A write up is recognized when a significant event occurs such as increased profitability and achievement of milestones.

Is Math Cool?

My father used to tell me that hard work and knowledge were the keys to success and furthermore, one needed to deliver 100% if you wished to succeed in anything. I asked him if math was an important factor in the equation and he confirmed that without math we would not have progressed very far on the evolutionary scale. So, I did a little research and discovered that from a strictly mathematical viewpoint one can not only avoid hard work but also achieve more than 100% and my mathematical proof goes like this:

What is 100% comprised of? What does it mean to give MORE than 100%?
Ever wonder about those people who say they are giving more than 100%?
We’ve all been to those meetings where someone wants you to give over 100%.
How about achieving 103%?

Here’s a little mathematical formula that might help you answer these questions:

If: A B C D E F G H I J K L M N O P Q R S T U V W X Y Z were represented as:
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Then:

H-A-R-D-W-O-R-K = 8+1+18+4+23+15+18+11 = 98%
and
K-N-O-W-L-E-D-G-E = 11+14+15+23+12+5+4+7+5 = 96%

But,

A-T-T-I-T-U-D-E = 1+20+20+9+20+21+4+5 = 100%
and,
B-U-L-L-S-H-I-T = 2+21+12+12+19+8+9+20 = 103%

Astonishing to me but obviously not to those ‘in the know’:

A-S-S-K-I-S-S-I-N-G = 1+19+19+11+9+19+19+9+14+7 = 118%

So, one can then conclude with mathematical certainty that: while Hard Work and Knowledge will
get you close, Attitude delivers the goods and both Bullshit and Ass Kissing will put you over the top!

Needless to say my father was not impressed and I got grounded for a week. If I remember correctly, my theorem put a smile on a few faces before the chalkboard got erased.

The Next Big Thing

I spent a good amount of time reviewing business opportunities in China both locally and from abroad in 2006/7. The overwhelming conclusion I drew was that there is enormous potential in almost every sector of the economy driven by both foreign demand and local consumption capacity. Some companies were not able to produce enough product to satisfy local and regional demand let alone national demand in China yet, as I stepped into the reality that is the China of today, I discovered that I needed to shed my preconceived ideas that China’s production capacity exists to serve foreign interests. Sure, international markets are of great importance to the Chinese manufacturing sector but, the number of companies I reviewed that produced product for export only were few and far between.

China is a gigantic market just getting ready to shift into a consumer oriented phase. So, what exactly was I doing in China? Well, I figured that if I could identify sectors with the strongest production growth this would give me some insight into a future global trend that helps to answer my number one question… what is going to be the next big thing? and… how can I come up with a best guess estimate before the world wakes up and smells the coffee?

So here is what I did. I reviewed the following industries and their largest manufacturing partners in China.
Lighting: including LEDs and Displays
Optics: lenses of all shapes and sizes including x-ray… yes, x-ray lenses!
Sensors: the kind that are able to sense 5 particles per million for security applications fighting potential terrorist threats
Actuators: MEMS, NEMS MOEMS and NOEMS… don’t even ask plus medical testing devices
Storage: mechanical HDDs are on their way out or are they? I had a 100 GB solid state drive in my hand
Semiconductors: What is the biggest obstacle to progress on Moore’s law these days… I found out!
Energy: Well, with the rising price of fossil fuels alternative is the only way and improving methods of harvesting energy were on the list of the coolest inventions I saw
Biotech or as it’s known today… life science – DNA manipulation seems to be all the rage but what caught my attention was the ability of some companies to grow skin and…

Ok, enough! if I haven’t bored you by now you are probably wondering what this article is all about.
Well, I thought that if I were able to analyze what is being produced today and get an idea of what is coming down the pipe to satisfy the needs of tomorrow then I could gain some valuable insight into who will manufacture the next big hit for tomorrow… for several different industries and kind of hedge my bet. I got lucky, I discovered something even more valuable.

In my research I analyzed all major players in the above industry sectors and put together something like a roadmap for each. Although the time lines vary as each company plans to move its invention from the R&D phase into production and no one is able to forecast consumer or business demand for 5 years from today, there were some very interesting correlations. One was size. Products will be getting smaller – fact. Another was that products will be influenced more by market need (pull) rather than an inventor’s desire to create a new market (push). Lastly, ROI is playing a greater role in how long a particular invention is allowed to cook in the R&D labs before it is forced out the door to an awaiting and already expectant consumer market.

How about a summary of my thoughts? OK, take the current products manufactured today, do research on where they are headed, look into the components that enhance or add value to each of these products and see if there are a few companies that produce the next generation of these components – then limit the study to less than 10 industries where these components are bound to have major impact.

Do you see where I am headed with this now? If I can identify companies that produce something really small on a micro or even nano scale that improves today’s products and will be integral in moving tomorrow’s products forward, I will have successfully identified a winner in not one but several industries.

In my most recent estimation, there are not a lot of these players out there but they do exist and I am hunting them down one by one. Did I mention that I am already in discussions with one?

Yes, I believe that I have identified the first of several of these core component providers. If you have read my article this far, then you may want to contact me to learn more because information this hot, can not yet be published in an open forum. Alas, the search continues and a new project is born to narrow down the hunt for the next big thing.

Creating an Executive Summary

Most guides to writing an executive summary miss the key point: The job of the executive summary is to sell, not to describe.

The executive summary is often your initial face to a potential investor, so it is critically important that you create the right first impression. Contrary to the advice in articles on the topic, you do not need to explain the entire business plan in 250 words. You need to convey its essence, and its energy.

You have about 30 seconds to grab an investor’s interest. You want to be clear and compelling.

Forget what everyone else has been telling you. Here are the key components
that should be part of your executive summary:

1. The Hook
Lead with the most compelling statement of why you have a really big idea. This sentence (or two) sets the tone for the rest of the executive summary. Usually, this is a concise statement of the unique solution you have developed to a big problem. It should be direct and specific, not abstract and conceptual. If you can drop some impressive names in the first paragraph you should – world-class
advisors, companies you are already working with, a brand name founding investor. Don’t expect an investor to discover that you have two Nobel laureates on your advisory board six paragraphs later. He or she may never read that far into your doc.

2. The Problem
You need to make it clear that there is a big, important problem (current or emerging) that you are going to solve, or opportunity you are going to exploit. In this context you are establishing your Value Proposition – there is enormous pain and opportunity out there, and you are going to increase revenues, reduce costs, increase speed, expand reach, eliminate inefficiency, increase effectiveness, whatever. Don’t confuse your statement of the problem with the size of the opportunity (see below).

3. The Solution
What specifically are you offering to whom? Software, hardware, service, combination? Use commonly used terms to state concretely what you have, or what you do, that solves the problem you’ve identified. Avoid acronyms and don’t try to use these precious few words to create and trademark a bunch of terms that won’t mean anything to most people. You might need to clarify where you fit in the value chain or distribution channels – who you work with in the ecosystem of your sector, and why they would be eager to work with you. If you have customers and revenues, make it clear. If not, tell the investor when you will.

4. The Opportunity
Spend a few more sentences providing the basic market segmentation, size, growth and dynamics – how many people or companies, how many dollars, how fast the growth, and what is driving the segment. You will be better off targeting a meaningful percentage of a smaller, well-defined, growing market than claiming a microscopic percentage of a huge, heterogeneous, mature market. Don’t claim you are addressing the $24 billion widget market, when you are really addressing the $85 million market for specialized arc-widgets used in the emerging nano-sprocket sector.

5. Your Competitive Advantage
No matter what you might think, you have competition. At a minimum, you compete with the current way of doing business. Most likely, there is a near competitor, or a direct competitor that is about to emerge (are you sufficiently paranoid yet??). So, understand what your real, sustainable competitive advantage is, and state it clearly. Do not try to convince investors that your key competitive asset is your ‘first mover advantage.’ Here is where you can articulate your unique benefits and advantages. Believe it or not, in most cases, you should be able to make this point in one or two sentences.

6. The Model
How specifically are you going to generate revenues, and from whom? Why is your model leverageable and scalable? Why will it be capital efficient? What are the critical metrics on which you will be evaluated – customers, licenses, units, revenues, margin? Whatever it is, what impressive levels will you reach within three to five years?

7. The Team
Why is your team uniquely qualified to win? Don’t tell us you have 48 combined years of expertise in widget development; tell us your CTO was the lead widget developer for Intel, and she was on the original IEEE standards committee for arc-widgets. Don’t just regurgitate a shortened form of each founder’s resume; explain why the background of each team member fits. If you can, state the names of brand name companies your team has worked for. Don’t drop a name if it’s an unknown name, and don’t drop a name if you aren’t happy to give the contact as a reference at a later date.

8. The Promise
When you are pitching to investors, your fundamental promise is that you are going to make them a boatload of money. The only way you can do that is if you can achieve a level of success that far exceeds the capital required to do that. Your Summary Financial Projections should clearly show that. But if they are not believable, then all of your work is for naught. You should show five years of revenues, expenses, losses/profits, cash and headcount. You should also show a key driver or two, such as number of customers and units shipped each year.

9. The Ask
This is the amount of funding you are asking for now. This should generally be the minimum amount of equity you need to reach the next major milestone. You can always take more if investors are willing to make more available, but it is hard to take less. If you expect to be raising another round of financing later, make that clear, and state the expected amount.

You should be able to do all this in six to eight paragraphs, possibly a few more if there is a particular point that needs emphasis. You should be able to make each point in just two or three simple, clear, specific sentences.

This means your executive summary should be about two pages, maybe three. Some people say it should be one page. They’re wrong. (The only reason investors ask for one page summaries is that they are usually so bad the investors just want the suffering to be over sooner.) Most investors find that there is not enough information in one page to understand and evaluate a company.

Please remember that the outline above should not be applied rigidly or religiously. There is no template that fits all companies, but make sure you touch in each key issue. You need to think through what points are most important in your particular case, what points are irrelevant, what points need emphasis, and what points require no elaboration.

Some other general points:

• Do not lead with broad, sweeping statements about the market opportunity. What matters is not market size, but rather compelling pain. Investors would rather invest in a company solving a desperate problem for a small growing market, than a company providing an incremental improvement for a large established market.
• Drop names, if they are real; don’t drop names if they are smoke. If you have a real partnership with a brand name company, don’t hide your lantern under a bushel basket. If you consulted for Oracle’s HR department one week, don’t say you worked for Oracle.
• Avoid ‘purple farts’ – phrases and adjectives that sound impressive but carry no substance. ‘Next generation’ and ‘dynamic’ probably don’t mean anything to your readers (unless you are talking about DRAM) and tend to be irritating. Everybody thinks their software is ‘intelligent’ and ‘easy-to-use,’ and everyone thinks their financial projections are ‘conservative.’ Explain your company the way you would to a friend at a cocktail party (after one drink, not five).
• State your value proposition and competitive advantage in positive terms, not negative terms. It is what you can do that is important, not what others cannot do. With the one or two most obvious competitors, however, you may need to be very explicit: ‘Unlike Oracle’s sprocket solution, our software can operate…’
• Use simple sentences, not multi-tiered compound sentences.
• Use analogies, as long as you are clarifying rather than hyping. You can say you are using the Google model for generating revenues, as long as you don’t say you expect to be the next Google.
• Don’t lie. You would think this goes without saying, but too many entrepreneurs cross over the line between passionate enthusiasm and fraudulent misrepresentation.

Go back and reread each sentence when you think you’re done: Is each sentence clear, concise and compelling?

Finally, one of the most important sentences you write will not even be in the executive summary – it is the sentence that introduces your company in the email that you or a friend uses to send the executive summary. Your summary might not even get read if this sentence is not well-crafted. Again, it should be specific and compelling. It should sell your company, not just describe it. Venture investors are predisposed to like entrepreneurs. Many were entrepreneurs in prior lives, and all enjoy the challenge and excitement of starting up companies. Most are on your side. So please help them get to know you better by telling your story clearly and concisely.