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.

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.