Important lessons shared by the Panel of Experts at the NSS CEO Workshop, Sept 28, 2011.
Many CEOs are so busy right now working in the business, that they lose sight of the longer term goals. Our panel of experts proposes ways to take a longer view and maximize the impact value drivers can have in achieving success.
The uncertain economy demands disruptive innovation, yet that implies risk that is harder to achieve. Agility is more important than ever. The 6 Value Drivers below show you how to incorporate hidden values into your strategy and how to achieve value short-term and for the future health of your company.
Carol Kunik, Vistage | Value Driver 1:
Culture and Communications are often overlooked and viewed as a soft skill. In your work with CEOs, where do you see the pitfalls and breakdowns in communications of the mission, goals and objectives and why is it so important?
The CEO/leader is the creator of the culture. He creates dedication to a “noble cause” by winning the team’s commitment to the cause, communicating that “we are in this together” and developing a compelling saga in language that inspires passion for strategic results. This becomes the Mission of the company. High passion companies out maneuver the demoralized competition. The leader also stands for what is not tolerated on his/her watch in terms of ethics, relationships and work.
In the book “Better Under Pressure” by Justin Menkens the research indicates that great leaders strive relentlessly to maximize their own potential – as well as stoke people’s innate thirst for their own triumphs. He says they all exhibit three essential attributes (that are rare, but can be learned) realistic optimism, subservience to purpose and finding order in chaos. It is up to us to create the environment we want to work in.
Steve Wishner added that leaders must have ‘town meetings’ and execute against goals. Everybody needs to focus on mission and goals.
We spent some time going around the room to share our Mission Statements and how to think about crafting one:
- What drives you?
- How are you uniquely successful?
- Why does it matter?
- Re-communicate to highlight mission and goals
Dan Adams, NENS | Value Driver 2:
Technology is ubiquitous these days yet widely under leveraged. What are some of the key aspects to consider ensuring our investments in technology will create value for our businesses?
Technology is a value driver if it is truly understood. Most companies are winging it when it comes to a solid IT strategy. There are two key areas we see companies lose control, efficiency and money. The first is creating a real IT strategy and the second to understand the resources required for efficient technology usage.
IT strategy needs to include your business objective and goals, an accountability chart, a budget including human capital, timeline, operational support, cultural integration and metrics to measure outcomes. This plan is a map to follow, to hold IT accountable for the targets you desire to hit.
Different skill sets are required to accomplish the tasks all businesses have. Think of it as a transmission on a car. You have different gears to enable different driving requirements. In IT there are 5 basic levels which are help desk, network administration, specialized engineering, operational practices, and CIO skills.
Technology is a value driver if it is truly understood. Most companies are winging it when it comes to a solid IT strategy. You want to have a clear strategy and also a multiple gear box which refers more to the different levels of IT expertise you want to consider and don’t forget the roadmap.
Ron Adams, Capstone Partners | Value Driver 3:
A strong Brand with product and services visibility is an important value driver for a business. How can a business enhance their valuation through brand recognition?
Brand recognition is an important value driver. Make your brand visible, recognizable and tie it to your mission statement. Brand awareness is a key intangible that is reflected in your workforce, customer relationship and distribution of products.
How does one quantify a brand, a CEO asked? You can analyze the average lifetime of a customer, customer retention from the history of your client list. You then want to figure out what it costs to acquire one client. Looking at loyalties of other brands will give you ideas, based on your sales, 3-4%should be spent on branding.
If you find your brand diminishing, identify the problem, develop an action plan and ask yourself if you are still accountable for your value you bring to your customers.
Beth Arnold, Foley Hoag | Value Driver 4:
Intellectual property in form of patents and trademarks are essential in managing competitive risk. How should a business look at its IP Portfolio today and have you seen companies benefit from repurposing IP?
Companies should do all that they can to strengthen the value of their IP- always. Patenting, in particular, can be very expensive. So you have to ask, do you really need a patent? Patents are critical for technologies that require long and costly development and/or that require regulatory approval. Example include drugs, medical devices and medical diagnostics. Patents may not be important for technologies that will continue to be improved and can be maintained as a trade secret- software, for example.
If you are planning to obtain financing from an angel or VC investors, it is important to understand what they think of patenting for your particular product/technology.
In the current economy, it has become increasingly important to be strategic about patenting in order to minimize costs. You may apply for patents in fewer countries, you may avail yourselves of international and regional filing systems. You may file provisional patent applications. However, it is critically important to spend the time and money upfront to fully develop the invention, make sure it is adequately described in the patent application and that the broadest claims available are supported and pursued.
Trademarks, names of your product, logos, tag lines, slogans are important intellectual property. Trademarks may be federally registered and it is not as complex to do that as it is to get a patent. Also state law provides certain trademark protections based solely on use.
As for repurposing IP, that is a tricky thing, since a patent is only as important as what it is protecting. For telecommunications and other technologies, what a patent actually covers may not always be clear. This is why some companies with money buy up all relevant patents. If someone sues them for patent infringement they hopefully have at least one patent that they can assert back.
Ben Weller, Next Stage Solutions | Value Driver 5:
We know that processes and methodologies are important to bring efficiencies and higher productivity for the business. How much impact do such value drivers have in a business and can you give us an example?
An often overlooked value driver is the process flow analysis. Find your bottlenecks or silos and figure out how to resolve them. Make people in your firm accountable for what they do. The value creation comes from the top down by setting business cultures where all employees are encouraged to problem solve at the grassroots level. Allowing everyone to contribute
will enhance your bottom line.
Rolling Forecasts is another tool that helps businesses stay agile and forward looking at the same time. When a business develops a budget, typically once a year, there is a tendency to work towards that budget, a static document at best. This process is not innovation enhancing, whereas with a Rolling Forecast, the CEO each quarter looks one quarter back and two ahead and makes changes and adjustments accordingly.
If for some reason projected quotas are not met, the rolling forecast model forces you to identify the reasons and either fix the problems or recalculate the projections. We love this model because it helps businesses stay nimble and encourages them to embrace ongoing changes in the business.
Steve Wishner, Corporate Advisor and Managing Director, Exigent, LLC | Value Driver 6:
Focusing on the right value drivers can prove critical in an environment such as this. Steve, could you address some of the value drivers that you believe are most important for CEO’s to focus on in this economy?
In a slow recovery it is especially important to maintain positive cash flow? How do you accomplish this? Firstly, size the business to realistic revenue expectations. If revenue is declining and you generate revenue below the capacity of the workforce you have hired, looking at layoffs may be inevitable. Think hard, act decisively, do it ONCE and get it over with quickly. Importantly, communicate right away with the survivors and assure them that the trauma is over and that they are the critical workforce that the Company will now be depending on as it moves forward.
Another aspect of keeping cash flow positive is to understand and analyze your variable and fixed costs. Move as many costs as possible from fixed to variable. Evaluate what is your core competency and outsource most non-competencies.
What does your web presence look like? Can you use it better and provide services online?
What does your collection rate look like and can you discuss with your customers how to speed up payments? How about on the accounts payable side? Be careful, but have a conversation with your vendors as well. Vendors and suppliers do understand the current economic situation and you can get almost always some better terms with the proper dialogue.
Analyze your inventory and make sure what you have is not obsolete and overstated in your books. Can you eliminate or lower inventory levels on lower turning sku’s?
Lastly, increase customer service, give your customers extra attention and demonstrate how you can be of increased value to them in multiple ways.
The session ended with additional Q&A from the enthusiastic CEOs in the room and hand outs appropriate to the topic.
Please join us for our next CEO Workshop, Thursday, Nov 17 at the Foley Hoag Emerging Enterprise Center on the topic of “How to Gain Access to Capital Markets“.