Order of Magnitude CEOs

Are You A “Lucky” CEO When It Comes To Partnerships, Talent Acquisition and Financing?

                                                             

      

 

I pulled into my street  Saturday night after visiting my Dad during the midst of a huge rainstorm that produced 60 mph winds in my town.  A large tree blocked the entire street so I made a U-turn and went around the block to the other side of my street.  Lucky, I did not live on a cul-de-sac.  I pulled into my driveway and pressed the garage door opener - nothing.  I looked down at my key chain and found a key that I had not used in years and tried it in the side door.  It worked!  Lucky, I had kept the key on my key chain.  In complete darkness, I tried switching on a light - what was I thinking?  I looked down at my key chain again and this time found my keychain flashlight.  Again - lucky.  Next, using the keychain flashlight as my guide, I went downstairs and got my blackout kit which consists of a tiny generator and 4 very bright flashlights.  Lucky I had bought the set and knew where I left it.

All of this “luck” kept a bad day from getting worse reminded me of three CEO that recently made their own luck.

“Lucky” CEO #1

Ben Lilienthal:  Ben launched his company, Vapps, back in 2002 to sell hosted high quality audio conferencing services to businesses.  A few years later Vapps struck a deal to resell the service to Citrix.  So when Citrix decided to buy a hosted audio conferencing service, guess who they bought?  Citrix bought Vapps that at the time had only around 18 people for around $30 million dollars.  Lucky Ben.

“Lucky” CEO #2

Marc Benioff:  Back in 2002 with $25 million in revenue, Salesforce.com CEO Marc Benioff was already thinking about radically scaling his firm and taking it public.  Typically if you are going to go public, it helps to have a CFO with a track record of taking a firm public.  So Marc called up a neighbor who was the CFO of billion dollar software provider Autodesk, Steve Cakebread, and asked him to recommend a CFO that could continue the journey with him. Steve Cakebread decided he should be that CFO.  Lucky Marc.

“Lucky” CEO #3

Roger Franchisee:  In 2004, Roger opened up 3 franchises and although it required him to be in the business every day, the business was profitable.  So much so, that he took a loan to open up an additional 11 locations, starting immediately with an additional 5.  With 8 locations, there were too many locations for Roger to manage the business himself.  The business now required managers at which point the business became no longer profitable for Roger.  To get profitable again and support his management infrastructure he would need to add more locations.  It was a good thing Roger had taken out a big enough loan to get him through the unprofitable phase of his growth, credit had tightened and several of Roger’s colleagues in a similar situation could not get a loan.  Lucky Roger.

There is a saying “Better Lucky Than Good”, for ambitious CEOs perhaps it should be, “The Good End Up Being Lucky”. 

What moves are you making today in the areas of partnerships, talent acquisition, and financing to ensure you maximize your chances to get “Lucky”.

(By the way, Pandora, who’s founder Tim Westergren was in my freshman dorm at Stanford, just announced Steve Cakebread as their new CFO, Lucky Tim)

Not Sure What Move To Make Next? Steal.

"Immature poets imitate; mature poets steal”

T.S. Eliot

“Good artists copy, great artists steal”

Pablo Picasso

 

“Jeff, if you come across any great stores that want to carry my “Shoes”, please let me know”.

I had coffee last week with Ted, a CEO friend of mine that happens to own a great piece of property.  The property is not a deluxe 5th avenue address but a great website name for e-commerce that draws about a million unique visitors per month (think “shoes.com” as I am not going to name the website).  Ted’s business model is selling “Shoes” that he designs, builds and markets himself. 

For clarity, think of Ted as owning Shoes.com and instead of carrying brands like Nike and Ugg, Ted has his own shoes and sells it under the Shoes.com brand.  Also by carrying only a limited selection of shoes, most of the people visiting the website are not targets for the shoes Ted sells.  Ted’s shoes are well made and the business is profitable but I question whether this is the most valuable use of Ted’s “location”.

I  asked Ted how he planned on scaling his Shoe business to match the ambitions of himself and the other owners.

Ted currently has two growth initiatives;

Innovation:  His first strategy, is to seek out “innovative shoe” manufacturers and carry their products most likely under his brand name.  In other words designing a better Shoe. (as an added benefit, there will be a little Shoe more selection)

Brick & Mortar Distribution:  Ted is seeking out physical distribution partners to sell and carry his Shoes.com brand

Both of these growth strategies make sense (kind of) if Ted views himself as a Shoe brand.  I expect with each one he will have some success and possibly could make his business more valuable.

A bigger and bolder bet to create Order of Magnitude value is for Ted to maximize the value of his location. Where to get ideas?  Steal them from another industry or even within his industry. 

Here are two great examples, one intra-industry:  Google stealing Overture’s idea for monetizing search traffic

and one inter-industry:

Salesforce.com, stole its famous No Software concept, from the old anti-smoking campaign (and yes, M5 Networks, my prior company, stole its No Phone System concept a few years back from Salesforce.com).

For Ted, how about stealing from an e-commerce distributor with a brand like… Shoes.com (even better is Zappos) or the distribution and brand strategies of Zappos’ parent company, Amazon.com (which I blogged about in July of last year).

Who can you Steal from to create Order of Magnitude value for your firm?

(of course consult your attorney to make sure you are not breaking any laws :-)   )

So You Think Your Company Is Too Small Or Your Industry Is Too Competitive To Create Order of Magnitude Value?

Technorati Tags: business

December 31st 2009 was a big day for our family room.  I went to CostCo around 11am and by 4pm, including a stop at Comcast for an upgraded set top box, our family room had an installed HD LCD TV complete with sound system and blu ray player from a 2 billion dollar consumer brand that started as a 3 person consulting business in 2002.

Imagine ending 2002 as a 3 person consulting firm with a single client. The next year you launch your own consumer brand to basically compete with this multi-billion dollar firm and other huge consumer brands including Sony.  You now have 5 people.  I hear quite often from CEOs that their space is very competitive or complex.   Try being Vizio in 2003 as a new entrant in the flat panel TV market with just 5 employees. 

What would be most important to you? 

Manufacturing team to build the TVs, Advertising/PR campaign to create a buzz, and an E-Commerce website to sell.

Not exactly, at least not for Vizio.

Quite simply Vizio focused on three types of partnerships combined with excelling on execution of a niche strategy:

Partnership Strategy

1 & 2. High Quality Component Suppliers and Original Design Manufacturers to build the Flat Panel TVs

3. One Large Retailer to carry the Flat Panel TVs

Niche Strategy

Vizio’s niche strategy was to provide high performance flat panel TVs at a reasonable price based on the  slogan “Vision Meets Value”.

A perfect fit for their only Retailer in 2003 and 2004 and this Retailer’s customers.  The Retailer… Costco.

 

Flash forward six years, here are some 2009 statistics about Vizio:

* #1 Shipper of LCD HDTVs in United States (Q1 -  Q3 2009)

* Vizio HDTVs can be found on more store shelves than SONY in July 2009

* Currently sold in CostCo (since 2003), Sam’s Club (since 2005), Circuit City, Sears, BJ’s, and Kmart (all since 2006), Walmart (since 2007), Canada (since 2008)

* TVs in over 10 million households

Vizio’s staff today, which incredibly is less than 200 people, is made up mostly of customer support and engineers.

The next time you start thinking that your company is too small or your industry is too competitive to create Order of Magnitude value, just walk into the TV section of CostCo (or Sam’s Club or Circuit City or ...)

New York Examples of Creating Value by Becoming the Safe Choice

I wrote an article that was published in the October 2009 print issue of The New York Enterprise Report which stresses the importance of third party validation to win deals and the steps to take.

Here are a few examples of successful New York area businesses that have used this strategy to significantly grow the value of their company.

1.  Seamless Web has had great success within the legal industry which I highlighted at the end of the article so I won’t provide any additional detail other than to point out that they were acquired by Aramark in 2006 (also I recommend reading The New York Enterprise Report’s 2009 interview with Seamless Web founder Jason Finger)

2. Infinity Info Systems  is another New York area company doing it right.  Check out Infinity Info Systems and their relationship with two of their key partners – Microsoft and Sage. From just a quick review of Infinity’s home page, one can immediately see that they are the safe choice for a New York firm that needs to implement either Microsoft Dynamics CRM or Sage CRM.

3.  Danny Meyer, owner of Union Square Hospitality Group, is a wonderful New York area thought leader in the restaurant/hospitality business.  They have won a number of impressive awards including Eleven Madison Park recently elevated by The New York Times from three stars to four stars- it may be helpful to know that Eleven Madison Park started out with only two stars from 1999-2006.  In addition Meyer wrote Setting the Table, which is now considered a must-read in many service-based businesses.

4.  M5 Networks, a hosted phone system provider, M5 decided to design an offer to specifically attract recruiters. Knowing that recruiters tracks phone usage as the number one metric to evaluate talent, M5 created a system to easily produce management reports on this metric.  To strengthen the solution further with recruiters, M5 sought out partnerships with service providers commonly used by recruiters - Applicant Tracking Systems (ATS).  These providers include ATS firms such as Bullhorn, JobDiva, and Encore (Cluen) as well as CRM providers like SalesForce.com.

(Note: I served as an M5 executive from 2003-2009 before launching Order of Magnitude Group)

Selecting the Appropriate Channel

I am participating as a panelist this Thursday afternoon in a Webinar sponsored by The Software & Information Industry Association (SIIA).

The topic of the webinar is Selecting the Appropriate Channel.

With my time, I will be discussing how your channel strategy is actually a key part of overall company strategy. Before rolling out a channel program, it is important to think through the motivations for your clients, your partners, and of course your company. Notice that I put clients first, partners second and your company last.

Why? Too many companies think about what's in it for them or leave it solely in the hands of a channel executive staring down at a large quota that they forget that unless your channel strategy provides real value for the client and the partner, the program will have limited success.

Below is a close to final draft of the slides I plan to use. Since the slides are mostly images without much text I speculate they may not be that helpful without my voice speaking to each one. You can at least get the gist and then listen in Thursday if the slides pique your interest.

Selecting an Appropriate Channel Strategy

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