CEO Advisor Newsletter July 2019
The Role of Consultants -
Excerpts from The Private Equity Handbook
I have to say that my own personal opinion of consultants has changed dramatically over the last two decades. As a young guy, I used to joke with a bit of arrogance, "If you can't do, teach or consult." Since then, I have totally changed my tune. As a leader, as a CEO, I recognize that there is a time and a place to bring in consultants. EBITDA: Consultants represent an add back. Even though you're expensing cash, it's not a permanent expense. Consultants can be expensive, but it's a one-time cost, and if you have the cash, don't sweat it! Best Practices: Consultants spend a significant amount of time working with companies, and they pick up best practices. They come into an organization and impart wisdom that the company itself does not have. Different Views: Within a company, everyone has a job, a task list to complete, and so it's not always easy to take a step back and conduct a successful self-assessment or assess a project when the goal is to focus on serving current and existing customers. Consultants come in with a fresh set of eyes and will quickly spot what you can't. We bring in consultants frequently. They help us look for process bottlenecks, help redesign existing processes, and help us build a better mousetrap. In this way, we can serve existing customers and future customers more efficiently and cost effectively, increasing your EBITDA by improving margin.
As an example, I'm working on a large redesign of the sales organization and account management in my current company. Sure, I could probably solve this problem by hiring a couple of employees and taking a few years to do a project, but the consultants can provide the capacity and completely redesign the sales process from the top to the bottom in a couple of months. At the end, I have a new comp plan, new job descriptions for the different players, and a manager's playbook that discusses metrics and the cadence that should be put in place.
You built the business and know every aspect of it. There's not a single consultant out there who can come in and tell you how to run your business better.
That was my attitude when I came into the world of Private Equity and running companies, but I very quickly rethought that position. The consultants aren't necessarily experts in your business, but they are experts in certain areas of running a business. I now fully embrace consultants.
The key is to assess exactly where you are. Do you know everything? Do you have the expertise? And more importantly, do you have the bandwidth? If you do, fine. Consultants probably aren't necessary. But if there are problematic areas of the business or ones that could use improvements and you don't have the time or expertise to attack them, consultants can help.
Ask for help and move forward.
Contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.
Top 10 Reasons Tech Companies Fail
Evaluate your own management decisions and practices and seek help from a business consultant or business advisor to address yourspecific needs.
1. Lack of Market Focus
Emerging technology companies often do anything possible to generate revenue and in the process try to be all things to all people. Worried about losing business they avoid segmenting the market and refuse to focus on one to three key vertical markets. As a result, the company is unable to effectively serve any market segments effectively and management is suddenly swamped with support problems and competitors.
2. Undifferentiated Products
Most technology products and services that fail do so because of a lack of differentiation. Successful companies differentiate their product from all other products on the market. Differentiation is possible on the bases of five fundamental factors: function, time utility, problem solved, price and positioning. These five elements are critical to uniquely positioning your products and services to achieve success and profits.
3. Poor Market Research
Many companies routinely perform the wrong type of market research. Statistical surveys of customers alone do not provide the qualitative information that is needed. Because your target audience often relies as much on perceptions as on facts, qualitative research intended to identify existing needs has equal or greater value in assessing, planning and executing a company's marketing strategy.
4. Excessive Product Improvement
Technology products and services are generally used over an extended period of time, are integrated with complementary products and impose learning costs on customers. Customers require time to implement and recover their investment in high-tech products. The rapid introduction of new and improved versions can make a customer regret a previous purchase, delay all new purchases, and agonize over similar purchases in the future. Additionally, the time and costs related to excessive product development can delay product launches and delay sales opportunities and revenues.
5. Incomplete Products
Customers view products very differently than the technology companies that create or supply them. Technology companies tend to try to sell products on the basis of price, special features and technical specifications. These technical factors are often favored by the engineers who typically run technology companies. The problem is that most customers consider factors such as product support and company reputation to be more important.
6. Failure to Establish the Right Competitive Barriers
Traditional barriers to competition are of little value in the technology industry. Patents can be effective but are very expensive, divulge trade secrets and take years to come to fruition. Conventional techniques are mostly designed to prevent market entry and tend not to work in technology-based businesses. The most effective competitive barriers in high-tech are the perceptions held by customers and prospects of product differentiation and first to market with a specialization in a market segment.
7. Using Price Alone to Drive Market Transformation
It is easy to misinterpret the role price plays in the market. And it is a mistake to believe that a technology product or service would be widely used and purchased if its cost was low enough. Price is a function of value and utility, and products and services should be positioned and marketed accordingly.
8. Improper Marketing
Marketing is both an art and a science. Positioning, pricing, sales strategy, target vertical markets and other factors contribute to the success or failure of your products and services and the corresponding sales. A well-crafted marketing plan is critical to success. Improper marketing or lack of marketing can be a product killer or cripple your company as a whole.
9. Sales Mismanagement
There's more to sales management than most companies realize. Specific skills are required to effectively manage each type of sales channel and those skills must be developed internally starting with an effective direct sales force. Unique management challenges exist for each primary type of sales channel: direct selling, online sales, dealers, OEMs, alliance partners and value-added resellers (VARs). Seek a business consultant or business advisor to assist you in optimizing your sales strategy as a critical factor in your success.
10. Misinterpretation of the Technology Adoption Lifecycle Model
The primary technology adoption lifecycle model describes the market acceptance of new products in terms of Innovators, Early Adopters, Early Majority, Late Majority, and Laggards. The process of adoption over time is illustrated as a classic normal distribution or "bell curve".
Because the technology adoption model is expressed in terms of a standard bell curve, it means statistically, a random sample of any given market or population must contain: 2.5% Innovators, 13.5% Early Adopters, 34% Early Majority, 34% Late Majority, and 16.0% Laggards. So no matter what industry you tend to be in, there will always be a sequence of adoption by different types of buyers.
To further evaluate your management decisions, grow your business to the next level and increase your sales, margins, profits and value of your company, contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at mhartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.