Wednesday, 29 October 2014

David and Goliath - A Quick Date or a Long-Term Relationship?

Much as these days many corporate Goliaths are actively looking for entrepreneurial partner Davids, it’s often the case that entrepreneurs have to make the first move in developing a strategic relationship.
The right kind of relationship with a Goliath and its customer base can be transformational for a David, providing the rapid growth at predictable margin that other early-stage companies can only hope to achieve by other means.

It’s worth the effort too because well-managed Goliath relationships provide the credibility and experience that assures organic business growth outside of the engagement. But like all relationships, they should be entered into with eyes wide open and that starts with understanding the nature and motivations of both parties.
The difference between customer and partner

Despite the deliberate conflation of the terms customer and partner in `marketing speak` there is a profound difference between `customer` and `partner` and this needs to be recognised. Essentially, it’s the difference between a quick date and a long-term commitment.

Certainly, the process of identifying and selecting potential customers or partners is pretty much the same: find out what it is that they need; identify how a product or service will meet it and target businesses accordingly.  It’s the context that makes the difference and that needs to be understood.
Common interests and goals

A successful tactical sale to a customer involves engaging an individual or team who are trying to address a particular challenge in their department or deliver on their responsibility in the business.

Creating a partner, however, requires the supplier to become part of the target company’s customer engagement and retention strategy. This means that opportunities to partner are usually much more difficult to find and require more resources to be successful, particularly given the significant differences that usually exist between corporate and entrepreneurial businesses.

To succeed, the two parties have to be aligned in many different ways.  Most particularly they must have common interests and goals or they will quickly diverge. The process requires Davids to deal with the existing and complex Goliath partnership structures, licensing and financial deals that are designed to execute successfully strategic decisions made at board level.

They involve many people of different disciplines because they go to the heart of the organisation’s purpose and, as such, have a greater impact of they fail.  As with most big deals, the level of risk increases with the level of opportunity.  And that means the bureaucracy around risk management also increases to a level that Davids may find tiresome and intimidating in equal measure.

The upside of this is that this process shines a light on what life will be like as Goliath’s partner and underlines the reality that Davids need to fully comprehend to ensure that there's both a cultural fit as well as a commercial one.  As ever, the devil is in the detail.

Proper preparation
Thus, when engaging with Goliath, proper preparation by Davids is vital.

A large organisation can absorb more failure that a small one, so, as a David, it’s more important to get things right up front. Davids should also remember that they may only be one of a number of strategic partnerships that a Goliath will be negotiating at any one time. So unless the partnership is going to save Goliath from oblivion it may be paying less attention to the deal than the David might be. 
Not being overwhelmed by the potential opportunity and knowing exactly how its product or service fits within the strategic plans of the target organisation is fundamental if any deal is going to succeed.

At a corporate level David and Goliath might share the same business goals and provide a perfect financial fit for each other. However, if the teams don’t get on, for whatever reason, or the David fails to get the right kind of buy-in around the deal champion then the relationship could be doomed and the benefits lost.
The human factor cannot be underestimated and the personal risk, imagined or otherwise, that the Goliath team may be taking needs to be appreciated.  Personal agendas vary. Doing a deal with a David might be viewed internally as an admission of failure to innovate from within.  At all times, Davids should seek to make Goliath look good and that requires a bit of ego control.

Play the long game
In all of this it’s important for Davids to realise when business growth planning, that working with Goliath partners is never going to be easy. Large corporates have established processes and structures that move slowly, are naturally very political and employ many people who are disconnected from other parts of the organisation, let alone the customer. And so Davids may have to get used to pitching their proposition over and over again.

For Davids, this can be frustrating as it clashes with their agility, quick decision processes and the need to maintain cash flow. But it’s vital that Davids have the confidence not to try and force the pace. In a strategic relationship the long game should be planned for and played from the start.



Wednesday, 15 October 2014

You Can Fool Some of the People Some of the Time...

During my childhood Monopoly was omnipresent, I was fascinated by the board game.  Rainy Northern days, of which there were plenty, would see me indoors gleefully piling plastic property onto the blue strips of Mayfair and Park Lane.  Usually mortgaged up to the hilt, the idea was nevertheless to speedily deliver a fatal financial coup de grace to whoever was unlucky enough to be playing my self-styled proto property magnate.
The other monopolies of my youth were even less fun to experience. The commanding heights of UK economy were at the time nationalised. This ensured that choice in everything from to telecoms to travel was scant, poor quality and expensive. The subsequent process of privatisation and the introduction of competition gradually ensured a much more effective - if still far from perfect - market economy came into play. 

So, thankfully, these days a monopoly of supply is a comparatively rare or transient thing of which ambitious legislators and the forces of digitally-enabled capitalism eventually take care.
Differentiate or die

That means to be a successful entrepreneur and generate decent profits then you do need to develop something to make your product or service stand out.  You need to be able to articulate a compelling reason why customers might continue to hand over their moolah to use your products or services.  If you don’t you are selling a mere commodity.  And probably not for long

Clearly differentiate or die applies because in commodity businesses the only real point of difference is price.  And pricing usually goes only one way – downward.  So if you want your entrepreneurial business to stay around, let alone attract further investment or even IPO, you need to have something that no one else has, that the market perceives to be different. And be able to sustain it, or quickly move on to plan B, C or D. 
Beards, brogues, bicycles

It’s easy to forget that in the economic good times these basic rules may not apply entirely as the investment market starts to resemble the antics of drunken punters at a casino.  A quick scan of recent investments in London’s Tech City makes me wonder about some of the criteria by which investors parted with their money.  Is the mere presence of beards, brogues, bicycles and haircuts last seen in the Great Depression now somehow a sure sign of superior returns to come?
The IPO market too certainly looks gung-ho both here and in the US.  Although proceeds from European IPOs in the traditionally quieter third quarter shrunk to €6.6bn (£5.2bn), they were still more than double those of Q3 2013. In fact, 2014 IPO activity has almost quadrupled compared to last year. In the nine months to September 2014, £31.8bn has been raised.

That’s pretty frothy.  In such rising markets the herd moves together and the fundamentals may get forgotten in the search for rapid returns.  But, all is not lost.  Some in the US and UK that have previously signalled their intent to raise funds publically seem to have rapidly got over the sudden rush of blood to the head.

Making a necessity out of Virtu

In the US earlier this year, high frequency trading firm Virtu Financial suddenly `delayed indefinitely` its IPO. Blaming regulatory approval for disrupting its intended float turned into a wholesale retreat in the face of journalistic expose of some of the less savoury but fundamental aspects of its business that would have seen potential investors run a mile.

In the UK conventional `bricks and clicks` fashion clothing retailers Fat Face and BlueInc pulled their UK IPOs blaming `market difficulties`  and have recently been joined by challenger bank Aldermore which, despite its modern digital platform, AnaCap, is still a bank established at a time when the mere word has become toxic to many firms requiring finance.

Back in the US Square and Box, on the other hand, have not used the word `indefinitely` but are dragging their heels having been re-scheduling their IPOs for most of this year. 
The ‘market volatility` or `weak demand for technology stocks`  excuses have, of course,  been rolled out by these two to a response of equally rolling eyeballs in the market.  But it strikes me as pretty obvious that the real reason is that the IPO process has highlighted to these comparatively early stage companies is that they have very little to differentiate them from better positioned competitors and they are frantically playing for time whilst they and their investors figure out what might save their blushes, if not their bacon. In contrast, most of the other firms had already worked out they had nothing and quit.

To reiterate, without a monopoly restricting choice customers need to be persuaded that there's something special for which it’s worth paying more. In the absence of obvious and fundamental difference expensive branding, marketing, sales and distribution have to deliver that in the mind of the customer.  Just look at the money mobile network operators spend on trying to convince you that you care about their brand, rather than the best value airtime package, so they can continue to trade on wafer thin margins.  

Queue-loving slavering sycophants

In direct contrast to the networks Apple’s marketing chops, that have reduced so many of its customers to queue-loving slavering sycophants, means it can make 40-odd percent margin on every phone it ships.  And a distinctive design aesthetic, rapid obsolescence and model cycle keeps the tills ringing.  Apple has other ways to ensure its super profits, of course.  Witness its voraciousness in its use of patenting innovation and patent infringement litigation to limit competition.  That’s how you become, and remain, the world’s most valuable public company.
The Holy Grail though, in digital age marketing is to profit from the network effect.  After all people join Facebook, LinkedIn, Twitter, Instagram et al because people join Facebook, LinkedIn, Twitter, Instagram et al and they sell that idea to themselves and each other. The same is true of Apple and apparently of Harley Davidson motorcycles. Although despite being one of a prime demographic for the message that hanging out with other owners of laughably crude yet eye-wateringly expensive motorcycles thrown together from obsolescent parts is an essential middle-aged male lifestyle choice it’s something I’ve never, ever understood.  

Anyway, I digress.  Back to will-they-won’t-they Square and Box. What is it that they're doing, can do or will do, that prevents them from being viewed as just yet another small supplier of a standard commodity?

If I squint enough at financial services, merchant services aggregator and mobile payments company Square, I could convince myself that if they spend the vast sums necessary to get their readers everywhere, then the possible numbers could start making the small transaction charges mount up to something significant.
Massive ecosystems, resources and customer reach

And, of course, to get to that situation you have to overcome very high barriers to entry. But if your business is essentially a point of sale app aimed at replacing traditional credit card terminals and cash registers you are up against the big merchant services and consumer specialists – Visa, MasterCard, Amex.  These have massive ecosystems, resources and customer reach and could start to squeeze you very quickly if they wanted before any significant disruption could be possible.

But with Box any advantage is a lot more difficult to see. It provides cloud services, specifically online storage. The problem is that it is already in a mature commodity game. A different set of big consumer specialists with similarly massive ecosystems, resources and customer reach – Amazon, Google, Microsoft - now dominate it and, naturally, prices are being driven down by the day.
In neither case also would that other route to big profits – that of being the lowest cost producer - apply. That’s a game that's already been fought out by the established behemoths of the industry.  And as for the network effect, that just ain’t gonna happen.

So, the fundamental entrepreneurial challenge remains what is it that your company, or even your idea, can do that's different, cheaper, more convenient or simply better than anyone else?  And that’s a question too for any potential IPO audience, the VCs that have sunk their money into such companies and the management that sold the dream in the first place.
As the old saying starts, `You can fool some of the people some of the time...


Saturday, 4 October 2014

Are You Sitting Comfortably? Now You’re Talking.

Ever been in a situation where you have met someone for the first time in a business meeting and you just can’t warm to them? But they’ve said, or done, nothing unpleasant yet you are left feeling uncomfortable and fighting with yourself to play nice?

I suspect we all have. And the reason is we were tuning into the wrong things.  It’s not what the person said, or even how they looked, it was how they acted on our unconscious.  Up to 90 percent of our communication with others is non-verbal, which means that most of the time it’s our body language that’s doing all the talking. As human beings we’re programmed to pick up those messages loud and clear.
Entrepreneurs are driven to get things done and to get things done fast.  That means it’s important to get off to a good start and get the best out of every encounter. Why? Because your own experience will tell you that within the first few minutes of meeting someone, you are already making decisions about that person.  You are quickly deciding whether you think they are credible, trustworthy and what are their true intentions. In short are they someone you may or may not want to do business with?  And, of course, they are thinking the same things about you.
The negative and the contradictory
This can give you a gut feel about an individual which it’s very difficult to rise above at a later date.  People give themselves away with their body language but also unchecked it can even send out not just unintended negative but very contradictory signals too.  But the reality is people are much more likely to engage you in future conversations if you professionally observe and act on their body language cues and manage your own actions accordingly.

Assuming you want to use your body language to communicate the credibility and good intentions that make for great relationships here’s some things to remember.  For reasons too many to list here, no one likes a slacker, so begin by considering your posture.  You should sit upright but not appear stiff, shoulders relaxed so you don't look uptight or have just escaped from an Army square-bashing session. Align your body with the person you're talking, showing you're engaged and `not talking out of the side of your face` or anywhere else for that matter.
Don’t cross your legs or lock your knees together. Keep your legs slightly apart to indicate that you're relaxed and ready to receive information. Lean in a bit too, it shows focus and that you really are listening to what is being said.  Also by entering your interlocutor’s space it invests you with power in the conversation.

As well as being aligned try to reflect the body language you are observing, showing you are in agreement and that you like - or at least are trying to get on with - the person you are with.  If you genuinely like someone, you’ll notice that you do this unthinkingly anyway.  But, of course, you’re always going to be aware in future, aren’t you?
Fore armed is forewarned
What to do with your arms can be a bit of a problem and different cultures employ huge variations in arm signals but at least initially keep your arms relaxed at your sides.  This creates no barrier between you and your opposite number and shows, again, that you open to what someone else is trying to get across.  And, as with your legs, keeping your arms uncrossed helps you absorb more of what's going on.

Once the conversation has warmed up use your hands to gesture when you speak - this improves your credibility, your impact and is believed to improve your thinking - if only because it’s a signal that you are relaxed and confident in the situation.

In Europe many meeting protocols are in flux.  For instance hugging and multiple kisses are now firmly on the menu in follow up business meetings.  But, at least for the first encounter, a little more formality will serve you well.  So it’s a good idea to remember to greet others with a straight forward, traditional firm handshake - but not a bone crusher or one that is held for so long that it gets physically and emotionally uncomfortable.
Limp and flabby
Those of you that can remember the mass of negative messages transmitted by your experience of various outstandingly limp mostly dextrous but occasionally sinister encounters will concur a firm handshake is probably one of the most important bits of body language, not least because it sets the tone for the entire conversation. You can bet it’s pretty much certain that a limp handshake will be followed by an equally flabby conversation.

No matter how senior or serious, everyone likes to be encouraged.  Appropriate head movements and genuine smiles will show you understand, agree, and are listening to the opinions of the speaker.  But don’t overdo it or you’ll look like a nodding donkey.  Done well this’ll make them feel more at ease with what they are saying and you are likely to get more out of the meeting.  Laughter too will lighten the mood and picking up on humorous points can show you're paying attention.
Look the person in the eye when they are communicating, but don’t stare otherwise you’ll come across as aggressive. Keep eye contact going when you speak, but feel free to look away when you are thinking - it forms a natural break.  Beware of looking too wide-eyed in your enthusiasm too and be conscious of blinking too much. Rapid blinking could signal that you are feeling uncomfortable or in the case of a one-time colleague of mine, telling big fat lies.
Squeaking rarely adds gravitas
Work with the other person's facial expressions. Smile when they smile, frown when they frown and so on because once again, this demonstrates that you are in agreement and like - or are making an effort to like - the other person.
Monitor your voice, its tone is key giveaway to your stress levels.  Breathe easily and regularly, keep the pitch low and the delivery slow and clear. Make sure you have a drink handy if the atmosphere is dry, or you have spent your day talking, as squeaking rarely adds gravitas.  

Don't end every sentence as if it's a question unless, of course, you are an Australian where it’s well-nigh compulsory and is likely to be graciously ignored by those who speak other forms of English.
Final notes 
During your meeting, take notes, particularly when you have asked questions. It’s not rude, it’s almost rude not to.  It demonstrates that you are engaged and care about what the other person is saying. But remember to make eye contact regularly so the speaker knows you haven’t drifted off into your own thoughts.  Watch their body language for shuffling in the seat and other signs of distraction. It may be time to wrap up the meeting with a wish to meet again and that good, firm eye contact assuring handshake.

Watch your body language too until you are well out of sight of the building it can been read at a distance long after the sound of your voice has faded.

Thursday, 25 September 2014

Yahoo! and Alibaba: David’s No Longer Dancing with Goliath - He’s Writing the Tunes

Despite its continuing travails, the near 20-year-old web search company Yahoo! appears still to have a market capitalization of just over $40 billion. Not bad, you might think, considering its history of decline that mirrors the inexorable rise of Google.

But there are lies, damn lies and statistics. I’d estimate Yahoo!'s core value actually is only about $4 billion.  Why?  Because its 16 percent stake in the recently NYSE-floated Chinese e-commerce giant Alibaba is worth approximately $37 billion.

Toppled giants

Without what has turned out to be a very savvy investment its core value would put the one-time Goliath in a bracket with that other toppled giant in the war for internet domination, AOL, which currently weighs in at around $3.5 billion in value. To put that in perspective, Yahoo! made nearly three times that by selling Alibaba stock soon after the IPO

But Yahoo! has always been acquisitive.  It’s made over 100 purchases starting in September 1997, with the web search engine Web Controls, right up to September 2014 when it took over the Indian document handling firm, Bookpad.

Under CEO Marissa Meyer’s leadership, Yahoo!‘s attempts through acquisition to get off the bell curve of inevitable, laggardly decline and onto the `S` curves of re-inventive success  have massively increased with many months seeing multiple buys  announced.  14 Davids have disappeared into Yahoo!'s maw so far this year  - from Aviate which made an intelligent home screen for the Android OS to social media  transformation business Vizify  to Flurry’s mobile analytics.  And that was after a busy December 2013 when Yahoo! closed in on five businesses.

From saviour to nemesis

Of course, these are wholesale acquisitions, not partial investments, and it remains to be seen how they fare within Yahoo!

Alibaba too is a salutary lesson for any Goliath – that the David you invested in could not only help your survive and thrive but could start to dwarf you changing the markets in which you operate. The paradoxical ultimate outcome of your search for relevance being your own demise as your potential saviour becomes your nemesis. 

And as an entrepreneur be careful what you wish for, even with a minority investment, it seems, you could get more than you bargained for and may up accidentally end up running the show. On the other hand, that could suit you fine.

That’s something Meyer and her board will have hanging round their neck in coming months as financial analysts around the world work out how to value Yahoo!’s share price going forward. The share price, for instance, dropped nearly 10 per cent after the IPO as investors saw no need any more to hold Yahoo! stock in order to get a bit of the Alibaba action.

Maintaining meaning in the market

But such movements are the daily stuff of the financial markets and Yahoo!'s valuation being linked to Alibaba’s isn't necessarily a bad thing.  The partnership still presents a major strategic opportunity, one that Yahoo! has needed for years as it’s struggled to reinvent itself and maintain its meaning in the market.

One of Yahoo!'s  problems, which is shares with many US-originated corporations, not to mention sports organisations, is that, despite thinking itself a global brand, it is actually very US-centric in its operations , right down to the vast majority of its  acquisitions being from North America.  Note: for those of you European entrepreneurs thinking Yahoo! might be a good exit, the reality is 50 per cent of acquisitions of European Davids are done by European Goliaths.

But this US-centricity could work in its favour in this case.  It doesn’t take a great leap in imagination to work out that Yahoo!’s US brand presence and traffic – it ranks third in the US for total internet traffic – and historical relationship could make it good partner to enable Alibaba to build an online retail marketplace in U.S.

A man with a plan?

Some of Alibaba's recent activity in this respect may be portentous. It’s launched the Esty-alike speciality shop marketplace 11 Main and has made $200 million investments in both the daily deals site and messaging app company Tango.  All of these could be the building blocks of a sustained assault on the US retail market.  And, of course, Yahoo! may now be part of Alibaba's larger plan to drive traffic to expand the U.S. arm of its existing business.

If I was a book maker I’d be taking bets on Alibaba getting past the partner thing pretty quickly eventually swallowing Yahoo! Whole. After all, control could be acquired for what it might consider small change. However if I were the betting sort I’d be thinking just because it could do it doesn’t mean that it should. In trying to create ecosystems and deliver shareholder value why buy second hand damaged goods when you have the power and resources to build brand spanking new?

After all, look what happened when AOL acquired Time Warner.  It all seemed good on paper but a very expensive reality soon dawned.  He may be a man with a plan, but as an English graduate will Alibaba founder and CEO Jack Ma have learnt the lessons of history? Let’s hope so, if only for the sake all the Davids queuing up to form part of his future success story.  

Tuesday, 16 September 2014

Be Honest, Drive Change, Man Up - Dealing With Tech PR’s Perennial People Problem

I was recently a judge of `Employer of the Year` category of the UK National Business Awards.  That entailed spending a long day hearing ten successive presentations from a shortlist of firms derived from all sectors of the economy and all parts of the country justifying why each deserved the prestigious award. 

By the evening I could not be anything other than hugely  impressed with the way all the businesses were being run.  Particularly the way that they demonstrated that engaging and enthusing their employees was central to their business success.  

How different, then, to find that recent research conducted by recruitment consultancy Zenopa in the UK has identified that tech PR agencies are facing a mass exit of executive talent in the coming years unless they start listening to what really matters to their employees and act upon it.

Of those surveyed, just 25 per cent stated that they saw themselves in agency tech PR in five years’ time. The remaining 75 per cent were either unsure (50 per cent) or said that they will leave (25 per cent). Only a third predict themselves being employed in an agency in five years’ time, although 63 per cent believe they will still be in PR.

Culture and personal development

The study which surveyed 158 young tech PR professionals working in agencies highlights that PR employers are still failing to understand, and act on, what employees are seeking both in terms of company culture and personal development.

In this respect, 46 per cent of those surveyed craved a `family feel` to their working environment with a further 39 per cent preferring working in a `creative environment`.  Just 12 per cent wanted to work in a results-driven environment. One wonders in the latter case if they understand the relationship between giving the clients what they want – results – and the cheque that lands in their account at the end of the months.  That’s Generation Y for you, I suppose.

Anyway, overall, 41 per cent claim are working in a culture that doesn’t fulfil them.

Facing a talent drought

Of course now that we have exited the recession and business is back on track for a lot of tech PR agencies. Yet again, though, their owners are facing a very serious talent drought that, long term, will impact their ability to service accounts let alone build successful businesses and certainly, ultimately, exit by sale or MBO.

The fact that three quarters of their employees either won’t commit or don’t see themselves working for a tech agency in five years’ time should be of great concern to agency management and investors. Not least too the clients tearing their hair out at the revolving roster of  faces that seems to appear at every client review.  

Nevertheless, a culture that people want to work in isn’t a `nice-to-have`, it is a business fundamental that allows and firm to attract and retain the best people. After all, an agency is simply a management framework for good people to do great work. Unsurprisingly, for candidates looking to move, the survey revealed agency culture is number one on the list of things that they’re looking for in new employer.

Mind the gap

Scarcely believable in what should be a consulting business, it’s not just in creating a satisfactory working environment where agencies are falling short but in personal development of employees too.

The survey also found that 85 per cent of respondents feel it is important that they are included in formulating their agency’s business plan and strategy, yet only 67 per cent feel that this is actually happening. 96 per cent stated that it was important to them that they worked in a company where their business ideas were listened to and taken into consideration, but just 79 per cent feel this happens in practice.

89 per cent see value in a structured competency and appraisal system, but just 64 per cent state that such an approach is a reality in their agency.  This is something I find particularly amazing in this day and age having implemented such a system twenty years ago.

This wastage of potential talent is breath taking. 82 per cent of those surveyed would like to be given additional responsibilities outside of their ‘normal’ role in order to gain new skills, but one in five (18 per cent) state that this isn’t happening at their current agency

Lastly, 80 per cent feel it is important that the agency’s values and vision is incorporated into their daily work ethic, yet this is only perceived as happening in 65 per cent of cases

Wake up call

Clearly getting employee buy-in to the company strategy and direction is fundamental and yet clearly as an industry, tech PR is failing to engage staff per se, never mind in the bigger picture.

But should anyone be surprised that people want to work in an agency where they are clearly valued, a career path is mapped out for them and where they are exposed to new challenges and opportunities?   Business 101, really.
The standard agency fare of boasting about `duvet days`, having an office that looks like a teenage architect’s bedroom or throwing endless boozy socials isn’t the way to recruit the best minds in the business and keep them there.

Hopefully this study will act as a wakeup call and encourage tech PR agencies and tech divisions of generalist agencies to up their game. And as Steve Earl, managing director, Europe at Zeno Group succinctly tweeted after attending a breakfast seminar held to discuss the results `Priorities as I see them: be honest, drive change, man up.`

Wise words.  And if that's going to make the difference, then that works for me.

Wednesday, 20 August 2014

The Numbers Count – How to Spot a Great CFO

Sooner or later as the founder or leader of any entrepreneurial business you are going to need to hire a CFO.  Whether you hire full-time or part-time help, the necessary skills of a chief financial officer are not to be confused with the book keepers you have probably retained to keep tabs on the numbers early in your businesses growth or even the finance manager you may currently employ.

These are not in any way `bean counters` to be tolerated, they are strategic hires and getting the right one can be a make or break decision if you want to succeed in the long term.  So it’s worth thinking early on about the eventuality of hiring a decent CFO.  
Amazing creativity

If you are founder of a successful business you’ll have got pretty used to keeping a tight eye on the numbers from the start. But the best CFOs I’ve worked with never cease to amaze me in their creative ability to seemingly glance at set of company accounts, read them like a book, instantly spotting the key issues, in a strategic context, and describing them in plain English.
The ability to perform laser-guided reading of spreadsheets is usually a good indicator of a person you want to hire.  Particularly if they can show that they can use this information and combine it with experience to predict potential challenges in the future, advising on the potential financial approaches that will smooth the way forward for your firm.

Crystal balls
This is vitally important for entrepreneurial businesses where the rate of change is so fast and where you and other leaders are consumed by operational issues - from hitting the sales targets to getting the right people on board.  So don’t expect your CFO to have a crystal ball, but do expect them to have an uncanny ability to tell you what’s likely to happen next in your business, or at least have a reassuring grip of financial cause and effect and which fiscal levers to pull to push the company in particular direction.

In addition to making a major contribution to running the business on a day-to-day basis, having the right person in the role is also key in maximising the value of your operation. So in hiring a CFO you need to think not just in terms of their contribution in financial planning, management and governance but also about their role in looking  for the right investment, acquisitions or when, eventually, planning an exit. This means they’ll need to be able to do a pretty decent poker face as they will be key to some of your most important negotiations.
Suited and booted

Of course, the informal environment of most entrepreneurial businesses may have your CFO wedded to their jeans but they also have to be capable of facing externally towards the more conservative elements of the business community.  So they need to be someone who doesn’t baulk at getting suited and booted when it comes to meeting with auditors, banks, investors and, eventually, the City and who doesn’t look like they are being strangled by their tie.
You certainly don’t need a CFO who is a shrinking violet.  They need to be robust and not afraid to challenge any of their colleagues to a reality check. To that extent, your CFO should be the board voice of unequivocal, numbers-backed reason about what can really be achieved with what resources and in what timescale. 

Naturally, for me, one of the things that come to my mind in differentiating an excellent CFO from a merely good one is their communication skills.  It’s a sweeping but, I think, fair generalisation to say that those that are logical and good with figures are often not the most articulate in the room; just as those who are literate and can tell a good story often find it hard to add up.
Effective communication

But a CFO worth their salt needs to be able to assemble and pick out the key elements of budgets, forecasts and accounts and communicate them effectively not just to other leaders in the business but to the company as a whole.  There is nothing worse that the staff meeting where the assembled throng sit in dread of the earnest `numbers presentation` delivered in a way that leaves no one in the audience any the wiser nor clearer about what it’s supposed to mean for their role. Or that sends them to sleep.
This is important not just for tactical reasons but to ensure that the whole company thinks constantly and consistently in terms of the key numbers and their contribution to achieving them. In the same way as the best CTOs can highlight what is important and explain it in acronym-free and accessible language, CFOs have to bring spreadsheets to life.

Powerful and inspiring
So, as well as being in charge of the numbers, CFOs need to be business leaders in their own right and be part of a powerful and inspiring team. They will need to be able drive the finance team, but they also need to approachable and be capable of explaining that numbers exist in context. So a CFO must be able to visibly connect the work of finance to all aspects of day-to-day operations and demonstrate business smarts in doing so.  And that means being engaged in the whole of the business and its people. Being comfortable with managing by walking about is a skill all CFOs should master.

Problem solvers not problem creators
In this respect I’ve found it useful to rotate internal services teams, particularly finance and HR, around the business. If they sit with other operational groups for extended periods they build relationships outside of their immediate team and become intimate with all aspects of the business, being seen as problem solvers not problem creators.

Over the years I’ve worked with some CFOs who have been genuinely fascinated by all aspects of the business and its people.  This, in itself, is delightful but it was also vital to them not being seen as the head of the numbers ghetto as much as it was valuable in gaining an all-important real-time perspective on what made the company tick. And it’s that passion to understand everything about the business that ultimately marks out the leading CFOs from the also-rans.

Monday, 11 August 2014

One, Two - That’s Creativity for You

One of things I like about the precious two weeks most of us reserve for our summer holiday it that it gives me some time to be alone.

Being no diva-esque Greta Garbo in my search for solitude, I do this best by climbing up and down Greek mountains on a bicycle or by being out in the Mediterranean hanging off a catamaran.  Occasionally, it’s just lying about catching up on a few books for which my normally frenetic schedule and atomised time doesn’t allow.
The myth of the lone genius

In between the sweaty and scary moments that some of these pastimes provide, solitude, whether physical or mental, gives me time to think.  It helps develop some perspective, and come up with new approaches to problems and ways to develop businesses or people.

The reality, though, is that many of the better ideas I’ve been associated with and, certainly their implementation, have ultimately been group efforts. But the best have been a result of a series of partnership with people with complementary skills and personalities I’ve enjoyed over the decades.
This may be one reason why I don’t hold with the cultural concept of the` lone genius` whether they be Edison, Einstein and Faraday or Jobs, Zuckerberg and Welch.  Many are extremely driven and have ruthlessly planned self-deification convinced of their own uniqueness, others had it thrust upon them by outside interests.

Attractive though the idea of the entrepreneurial hero may be, I’ve long held the view that alongside the most effective CEOs is a great COO; that the most successful start-ups combine at least a sales and technical skills leader from the outset whilst great communications campaigns come out of pairings of the visually and verbally literate. The need to sustain and evolve creativity is why even the most successful artists have muses.
Creativity is a social process

To be clear, I’m certain, then, that creativity of all sorts is the key to consistently generating innovation and is the social process which underpins successful entrepreneurial leadership.  This issue lies at the heart of Joshua Wolf Shenk's new book, ` Powers of Two: Finding the Essence of Innovation in Creative Pairs`.  In this tome, which draws on sources including academic research and historical evidence, he explores what makes creative partnerships work, those where people can be `as alike as identical twins and as unalike as complete strangers. `
Shenk believes that in successful pairs lies a special combination of similarity and mutual interests alongside differences.  Creativity, he argues, is driven by `encountering difference`. But this seems to work best when only two players are involved.  Crucially, it's a social unit but it's also very flexible. Two people can take and switch roles, forming a balance that is also part of optimising the creative process.  

Effective partnerships are rarely symmetrical, with both people in the same role, even if, like Google’s Larry Page and Sergey Brin they have the same title. For instance, it can commonly be the role of one partner to be the public face of the company, whilst the other maintains a lower profile.
This can be for more than pragmatic reasons of skill or time availability.  It may be that the `face` gets their ego gratified by public attention, and that need  not be destructive so long as they respect the other person’s contribution.  It may also be that the more recessive personality has to realise their interests too are being met by the more extroverted skills of their partner.

But such issues may be difficult to navigate and any student of business history knows that entrepreneurship is full of tales of co-founders fighting, especially if their enterprise proves successful. This can start as soon as a third person enters joins the firm. The culture then starts typically to become less dynamic and more structured at the expense of rapid, informal and often intuitive communication.

Also, as anyone that’s been in a start-up will attest, when you're struggling to break through, you're all in it together and it's fun. There is a common enemy - failure.  In the presence of a common enemy focuses the mind and the surrendering of individual ownership, either metaphorically or literally is easier because there is not so much at stake.
Of course, creative pairs exist in a context, and when you look at those that survive and continue to be creative together, what surrounds them becomes a really critical part of the story. Shenk points out that, often, creative partnerships have a stable team of co-workers who've been with them for decades. Each in the pair has the freedom to play to their strengths because they're being supported consistently by a group that understand how it benefits them and have evolved mechanisms that make the most of any situation.

Trust, faith and belief
But ultimately great creative partnerships are built on trust.  You have to be confident that your partner is going to do what they say they're going to do, and that's something that’s developed over time.  Eventually trust evolves into faith, where you really believe in someone. 

But as I like to think my holiday schedule demonstrates, creative partnerships are not at odds with solitude.  A lot of people need to have time alone to give their best to another.  And that’s something  every partnership needs to work out.