Sunday, December 19, 2010

The Power of "Yes"

As a corporate manager, one of the things that used to amaze me was how certain entrepreneurs had the ability to create something out of nothing.  It used to baffle me how someone with just an idea and no other resources could end up creating a multimillion dollar enterprise three years later.  I, on the other hand, could make things happen as long as I had resources to work with but creating something from nothing was beyond me.

And then I met "The Chief."

The Chief was a serial entrepreneur with an uncanny ability to create value out of thin air.  I met the Chief when he hired me to be manage the operational side of his startup.  We used to joke that while I could take the bricks lying around and build a house, he could conjure up bricks out of thin air.  Now, I had a chance to learn how it was done.

So I watched him for a year.
I watched how he pulled in investors.
I studied how he pulled in specialists.
I worked with him as he created partnerships and deals and alliances.

What was the secret?  Vision was certainly part of it, but not sufficient unto itself.  His people skills? Ditto.  Confidence?  Communication skills?   Ditto, ditto.  Then finally, I figured it out; how he pulled rabbits out of a hat.

Underlying all was the power of yes.

How to describe the power of yes?  Partially a decision mindset, partially a habit, it worked like this:
  • Say yes to a lot of meetings - The Chief met with anybody and everybody that took an interest in, or could potentially advance the vision.  He never failed to take something away in terms of knowledge or revised thinking from every meeting.  And while many of these meetings never developed into a working relationship, he always left the door open for future contact.
  • Say yes to some uneconomic opportunities  - Especially in the beginning, the Chief said yes to a few economically marginal projects just to get a working relationship going, to start exercising the company's operations, and to get us down the learning curve.  To use an analogy, the Chief understood that to learn to sail, you eventually have to put the book down and get into the boat.
  • Say yes to seemingly unrelated opportunities - In defiance of conventional target marketing wisdom, the Chief said yes to many seemingly unrelated projects.  The reason? To create a critical mass of experiences that enabled him to take the next step which was to...
  • ...create interconnections between opportunities - With a broad enough set of experiences, the Chief was then able to see the interrelationships and patterns between them.  Doing this enabled him to strategically determine which ones to pursue and which to abandon going forward.
  • Follow up on the ones that gained traction - The other advantage of working a broader scope of opportunities was that while some inevitably fizzled out, others gained momentum, opening the door to new opportunities.  The Chief didn't worry about the ones that fizzled out.  And he alwas left the door to them reigniting.
  • Say yes to incorporating the vision of employees, partners, investors into the grand vision - By being open to the influence of others, the Chief gained their buy-in and their voluntary contribution of creativity, time, skills, and money.  The Chief was able to get hundreds of thousands of dollars worth of expert technical advice and the use of multimillion dollar facilities for a fraction of the true value, all because he allowed our vision to be their vision.
In short, the Chief had mastered the practice of Stone Soup.

Several years later, when I decided to start my current business, I applied the power of yes.  With just a vision - that I could improve a startup's chance of success by providing expert, affordable back office services on a timeshare basis - I started to meet with prospective clients and partners to talk about the idea.  One meeting, led to my finding my business partner.

Further discussions led to our first lead clients, whom we offered highly competitive deals just to get going.  As we worked, we found ourselves developing capabilities in areas we had expected, dropping them in others, and creating service offerings in unexpected places.  We began to acquire clients with more demanding requirements, further enhancing our capabilities.  And as critical mass built, we were able to start connecting client and partner opportunities, improving economies of scale start and operational efficiency.

Today, while the vision remains the same, the implementation of the vision with respect to our service offerings is different than what we had predicted.  But that's okay because at the end of day, we now have a stable, core business model on which to base future growth.

Is the power of yes always appropriate?  The answer is no.  Yes has power is when you are trying to to create your business model or in business development when you are trying to establish a new partnership.  It is for the Stone Soup phase of a project.  But once the business model is known or the partnership established, it takes a different power to execute and scale it.  In fact, in the growth phase, the power of yes can be deadly.

So what is the secret to growth?  Stay tuned for my next 2011.

Merry Christmas and Happy New Year!

Monday, December 13, 2010

Activity is Not the Same as Effectiveness

"It is not good to have zeal without knowledge, nor to be hasty and miss the way." - Proverbs 19:2

The other day, I received an email from a client with whom we are working to develop an appropriate strategy to unblock sales growth.  We've completed a preliminary analysis indicating probable root causes and, as these things usually go, several potential tactical actions have popped out of the study.  The email was to tell me that they've already put these latter into action.  Great right?

Groan. Here we go again.

One of the biggest frustrations of doing strategy consulting is having clients rush into action before the full analysis is done?  Why?  Because without a comprehensive review, it won't be clear what the actual root cause issues are vs. aren't.  Strategy issues almost always have surface symptoms which can be caused by several different root causes.  For example, take the common problem of stagnant sales.  First of all, is it a strategy or execution issue?  If strategic, is the problem caused by poor product/market fit, misaligned channel strategy, shift in the competitive market dynamics, etc. etc?  It does no good to change one's product targeting if the channel strategy is wrong! A proper diagnoses is critical to determining an effective course of action.

Inevitably, when I explain this to clients, they all nod their heads vigorously then most of them promptly leap into action anyways.  The result in most cases?  NOTHING happens.  No impact.  Just money out the door.

So why does this happen?  In my experience, for three reasons:
  • Confusing operational speed vs. strategic speed - A recent Harvard Business Review article(1) "Need Speed? Slow Down,"  addresses this well.  Operational speed is simply moving faster. But this assumes that one is doing the right things. Strategic speed means reducing the time it takes to deliver value.  It's about making sure you are doing the right things.  The key to this is holistic alignment - of initiatives, elements, resources, and priorities. 
  • Action is exciting, thinking is not - Action is exciting, visible, fun, satisfying, and worst of all, it's easy.  It gives the illusion of solving a problem when in actuality, all you may be doing is going nowhere fast or even worse, swiftly scaling the wrong wall.  Thinking, on the other hand, is unglamorous, boring, and hard.  Substituting action for thinking just because it feels good has a name:  laziness.
  • Buying into the Conventional Wisdom of Ready, Fire, Aim - Reinforcing the second point, particularly with Silicon Valley startups, is the idea that "ready, fire, aim" is a virtue (don't get me started on this one...).  There is a definite bias towards action (not a bad thing), a disdain for big company "analysis paralysis" (also not a bad thing), and the urgency to move fast, fast, fast.  We celebrate the entrepreneur who has ten meetings before noon followed by another ten before the evening networking event and then codes all night.  We love the caffeine buzz which keeps the fifty coffee houses in downtown Palo Alto in business.
Unfortunately for many of the adrenaline junkies, activity is not the same as effectiveness.  Many startups would be better served by ceasing all work for four hours, sitting down, and really think through what they're doing.  Good strategic thinking is a resource multiplier; one effective action is worth 100 pointless ones and a darn sight cheaper.

Now don't get me wrong.  This is not to imply that there isn't a lot of work in a startup and that effective strategic thinking is going to make it all go away.  The fact of the matter is that there is a lot of work, where cranking out the volume is necessary, but it only makes a difference if they are directed at advancing the company's goals.

So instead of booking those ten angel meetings to raise another $250K so that you can hire five more people to handle all the work, it might be worth turning off the email, silencing the cell phone, and locking yourself in a quiet room with a whiteboard and marker and think.  Make sure you're scaling the right wall.

You might not need that $250K after all.

  1. Davis, Jocelyn and Atkinson, Tom, "Need Speed?  Slow Down," Harvard Business Review Reprint F1005E (May, 2010).

Monday, December 6, 2010

How to Make Your Professional Services Firm Rich

One that got overlooked by WikiLeaks...

Rackem, Sokem, and Sulese LLP
666 Griedisgud Way
New York, NY  10002


To:  All Partners and Associates
Re:  Proper Target Client Acquisition

It has come to our attention that Y/Y revenue growth is running below target.  Finance's most recent analysis show that the root cause is the unacceptably low acquisition rates of Class A vs. Class B clients.  Specifically, Class A clients constitute a mere 35.34% of our revenue base, well below the target of 55% called out by this year's budget plan.

In case it has escaped your notice, in order to retain clients in the current recessionary climate, over the last year alone, we have been forced to reduce hourly rates by a net average -10.2%.  Therefore, it is imperative that we find ways to increase actual billable hours.  And the method decided upon at this year's  Strategic Planning Review meeting was to focus more on Class A profile client acquisition and reduce the amount of Class B profile clients.

As a reminder, the Class B client profile is as follows and is to be avoided:
  • Provides Complete and Timely Information - By doing this, Class B clients reduce or eliminate the amount of time Associates spend chasing information.  Phone tag, multiple calls, or multiple visits enable us to increase the number of Billing Units (BU).  Because BUs are in six minute minimum increments, multiple contacts allow us to significantly increase billable hours.  In-house data shows that each incomplete information request results in 2.3 additional contacts or 4 BUs.
  • Provides Prompt and Timely Approvals - In addition to eliminating chase time, Class B clients who do this also eliminate the potential for additional billable hours solving problems with their customers caused by the late approvals.
  • Provides Reliable Follow Up on Action Items - Reliable follow up means action items get closed resulting in a lean open work docket, rather than the more desirable situation (for us) of having a large open docket that can lead to subsequent confusion thus creating opportunities for unnecessary problem resolution, all involving billable hours.  Reliable follow up also means that a Class B client rarely ends up with missed deadlines and subsequent crisis mode, thus eliminating the potential to charge premium rates.
  • Batches Work - By batching work, Class B clients minimize the number of interruptions that stretch out billable internal time.  Industry studies show that for analytical work, such as the type we engage in, it takes 20 minutes (3BUs!) to get back into the flow or work following an interruption.
  • Plan and Schedule - The worst.  Class B clients engaged in these work habits tend to be the most efficient in terms of time usage as they tend to exhibit all of the undesirable traits listed above.  As you may recall, there was even discussion at the last partner's meeting to reclassify any client or prospect exhibiting this trait as Class C.
All Rackem, Sokem, and Suhlese Partners and Associates are to take immediate steps to ensure that we focus on Class A client acquisition.  Unless we can increase the number of clients who are disorganized, with poor follow up skills, and who confuse frantic activity for effective action, we will not hit our financial targets for the year.  Needless to say, this could have a negative on all of our year end bonuses.

I.M. Suhlese
Managing Partner