The Executive Edge Newsletter August 2008
10 Questions for Would-Be Wooers
Steering Toward Revenue Growth
Exclusive White Paper: Leveraging Economies of Scale - A Path to Growth
Small is Beautiful — and Profitable
QuickStat: SMBs Get Smart about Business Intelligence
10 Questions for Would-Be Wooers
By G. Richard Shell and Mario Moussa
Selling your idea to someone — whether it’s a potential investor in your business or your boss on a new sales technique — is an art form in itself. To prepare yourself for any idea-selling encounter, consider these the preflight checklist for launching your idea.
1. What is the Five-Minute Summary of my Idea?
Before going into a meeting or sending an important message, review exactly what your idea is about. Scan quickly through the PCAN model: What is the problem? What are the causes of that problem? How does my idea answer the problem? How is my answer new or different from the status quo or available alternatives? Recall a memorable image or metaphor that captures the idea clearly and positions it favorably against its alternatives.
2. What Role Does this Person Play in the Decision Process?
Review why you have chosen to meet with or communicate with this person at this time. How can he or she help you advance your idea?
3. What is my Goal for this Encounter?
Think specifically about your goals. Useful goals include: getting feedback on your idea, gaining access to someone else, persuading this person to take a favorable attitude toward your idea, obtaining authorization for resources, gaining endorsements, making decisions, and getting help with implementation. Write down your goal and refer to it before as well as after the encounter. Did you achieve your goal? If not, why not?
4. What is the Basis for my Credibility with this Person?
What relationships, references, credentials, past accomplishments, or competencies should you mention to establish your credibility? The importance of this step depends on the depth of your relationships. If you have a trusted relationship, this will be less of an issue. If the relationship is based on reciprocity, you may need to diplomatically remind the other person of who owes what to whom at this point in your interaction. If you are trying to develop rapport in the relationship, concrete signs of credibility may be especially important.
5. What Persuasion Channel will this Person be tuned to?
Be prepared to adjust your pitch so you are communicating on the other person’s channel. If you think the person tends to be more rational, be prepared with analysis and evidence. If the other person is more conceptual, emphasize the larger purpose or framework within which your idea fits. Have a Plan B in case you need to shift to a discussion of interests (what is in it for the other person?), politics (how will it look to a larger audience?), relationships (how does this fit into your ongoing interactions?), or authority (who is in charge and is that authority being respected and used appropriately?).
6. What Persuasion Style is Appropriate?
Be aware that your preferred persuasion style may not be the best way to appeal to this particular audience. Of course, different people have varying degrees of flexibility when it comes to personal style. If you try to adjust yourself beyond your stretch point, you will damage your credibility. So make an effort to shift your presentation style in the right direction — turn up (or down) your volume and focus more (or less) on spinning your message to appeal to the audience. But remember that it is better to be a bit awkward — and authentic — than it is to try too hard to be someone you obviously are not.
7. Will my Idea Conflict with any of this Person’s Beliefs?
Will the other party be skeptical of the idea based on its feasibility? If so, how can you address that? Might your idea conflict with a basic value or norm the other person holds? Think of ways to minimize this conflict — such as mentioning the prior endorsement of someone who holds that same belief or value.
8. Might my Idea Conflict with this Person’s Interests?
Imagine that you are sitting in this person’s chair. Think of the interests the person may have — especially those related to control, resources, career, decision-making, jurisdiction, and future opportunities — that your idea could conflict with. Then think of the interests you share that could bridge any conflicting agendas.
9. What Commitments Can I Ask For?
What specific actions do you want the other person to take to advance your idea? What audience should witness this action? If you have an endorsement goal, obtain agreement on the people you can notify about the endorsement. If you have a decision goal, request permission to notify others of the decision.
10. Can I Leave the Relationship Better Than I Found It?
Always remember that wooing begins and ends with positive, constructive relationships. Think about how you can conclude the encounter with a strong relationship intact. Be considerate of the other person’s time. Ask if there are things this person needs that you can help with. Find ways to demonstrate your good faith and reliability. There are few problems a good relationship cannot fix.
G. Richard Shell is director of the prestigious Wharton Executive Negotiation Workshop at the Wharton School of Business, where he is also Professor of Legal Studies, Business Ethics and Management. BusinessWeek has named him one of the nation’s top business school professors. His previous book is the award-winning Bargaining for Advantage, now available in over twelve languages.
Mario Moussa is a faculty member at the Wharton School and a Principal of CFAR Inc., a management consulting firm. He has published widely on organizational dynamics, power and influence. Mario has led the development of programs at Wharton for corporate security managers, energy executives, physician leaders and health care and banking executives.
Excerpted from The Art of Woo by G. Richard Shell and Mario Moussa by arrangement with Portfolio, a member of Penguin Group (USA), Inc., Copyright (c) G. Richard Shell and Mario Moussa, 2007.
Steering Toward Revenue Growth
Many companies respond to slowing sales by cutting costs, reorganizing and shifting to higher-margin products as a way to boost profitability.
While these tactics can boost the bottom line in the short term, companies looking for sustainable revenue growth must focus on creating new revenue opportunities. Unfortunately, many companies struggle with this task, and often seek quick results in risky and sometimes disappointing ventures.
If your company seeks to grow sustainable revenue, these strategies can serve as a good starting point.
Target niche markets. Expand your customer base by branching out into specialized areas that are relevant to your portfolio, but may not currently be served. Identify possible niches by breaking down your demographic audience into subcategories to highlight specific groups with related needs and interests. Once you’ve identified and qualified a particular audience (or set of audiences), canvas competitive offerings to identify gaps and opportunities for your company.
Optimize pricing. In today’s economy, where rising energy and commodities prices are squeezing already tight margins, many companies are revisiting their pricing structure. Instead of placing an emphasis on being the lowest-priced offering in a category and surrendering profit when the cost of goods goes up, businesses are finding it is better to promote service and value regardless of how prices might change. When setting prices, consider the unique value your company provides and actively promote that value at every possible juncture.
Create a sales-oriented culture. Building a well-oiled sales machine is a surefire way to boost sales. Start by fine-tuning your business processes around sales. Create a culture where team members are encouraged to collaborate and share knowledge with other departments. Having a shared mission statement will go a long way in helping everyone agree on what constitutes a good sale, as well as providing methods for moving prospects to the right resource in your organization and then through the sales pipeline. Also, establish key performance indicators so that the sales organization knows exactly how it’s being measured.
Court existing customers. There’s no better place to fish for prospects than in your existing customer pool. Your current customer base already knows your product and trusts you. Business intelligence or customer relationship management applications can help you assess patterns in customer behavior to identify additional sales opportunities.
Branch out. When the time comes to branch out, the right partnership can help you enter new markets or new product categories. Before entering such a relationship though, be sure to define objectives and responsibilities clearly, and be specific about how to treat customers. Consider a joint referral process or co-marketing arrangement as a way to initially work together and determine whether the new opportunities that partners provide is where you want to be.
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Small is Beautiful — and Profitable
By Steve Ernst
I would never claim to be an expert on the economy, but you don’t have to be a meteorologist to know when it’s raining. With the economy slow, are we experiencing the end of a cycle? The long-wave theory posits that after long periods of growth and increasing prosperity, the economy begins to complete its orbit, slowing down and stalling. Is this a self-fulfilling prophecy, after having repeated the mantra “this can’t go on forever” so often that we cut back and the good times retract?
Whatever the explanation, it seems the whole world is feeling it. Or is it? Some segments within our economy are thriving, even expanding — for instance, small and midsize businesses. They may not be growing at the same clip as they have since 2002, but they’re still attracting and utilizing capital.
I recently had an opportunity to speak with two authors with extensive successful business backgrounds on the topic of the private companies. The world inhabited by small and midsize businesses continues to create value through innovation, leadership and sheer managerial courage.
Doug Tatum is the founding chairman emeritus of Tatum LLC and the author of the recently published No Man’s Land. The title refers to that transition growing companies make when they are too big to be considered small but still too small to be considered big. Tatum travels extensively, speaking to entrepreneurs and business leaders about how to navigate through this transition. His premise: If starting a company is difficult, leading a company once the business has caught fire is infinitely more so.
Tatum refers to small but rapidly growing companies as “gazelles,” and says that the gazelle segment of the economy is the only one, as a whole, that continues to grow during a downturn.
In fact, even as the economy slows, more than 3,500 private equity firms continue to invest in more than 50,000 small to midsize companies. Over the last 10 years, annual PE invested capital was twice the capital raised in the IPO market.
In his book, Tatum cites a statistic from David G. Thomson’s best-selling Blueprint to a Billion: 7 Essentials to Achieve Exponential Growth: only 5% of the over 7,400 companies that have gone public since 1980 have reached $1 billion in revenue. After one of his recent presentations, I had a chance to chat with Thomson.
Because there are so many books suggesting that emulating successful people will bring the same kind of success, I expected the presentation to be boring. I was wrong. Thomson’s presentation, based on the subtitle of his book, was both entertaining and counterintuitive. People talk a lot about how technology can support a small business’s growth, proving the business’ executives become more conversant about technology, and Thomson’s book underscores why.
He analyzes and distills his work with McKinsey, Nortel Networks and Hewlett-Packard into these “seven essentials.” They are common to all hyper-growth companies, no matter which industry, product, service or geographic borders they inhabit. I highly recommend - especially if you’re an owner or executive in a small or midsize growing business or a professional service provider to those growing businesses - you go to www.blueprinttoabillion.com and see if David Thomson is presenting in your area. It’s well worth your time and will give you a perspective on growth that you may not have had.
Recent research and economic reports support both Tatum’s and Thomson’s comments on the continued growth of and investment in companies by private equity firms, even during a downturn. According to Thomson Financial and the National Venture Capital Association, nationally, 57 venture capital firms raised $6.3 billion in the first quarter of 2008, compared with $6.2 billion raised by 83 firms in the same quarter of 2007.
Even as we listen to the grim news of the domestic economy, we should think of those private companies plotting their transit through “no man’s land.” They are still attracting needed capital to continue that effort. There are no guarantees in the world of small business. But for those with the ideas and the courage to pursue them, there are investors out there who, even in today’s economy, still believe in the adage “small is beautiful” — and profitable.
Steve Ernst, CPA, leads the SAP CPA Advisor and other influencer programs for SAP America, Inc. Prior to joining SAP, Steve provided consulting services to boards and executive staff on accounting, auditing, business processes and internal control systems, as well as sales, marketing and business development initiatives. He has more than 30 years of experience, including 10 years with PricewaterhouseCoopers LLP and more than 20 years in international finance and operations in the consumer product and technology markets. You can contact him at steve.ernst@sap.com.
QuickStat: SMBs Get Smart about Business Intelligence
Increasing profit margins and forecasting sales is hardly an exact science. According to a recent study by market researcher AMI Partners, more SMBs are turning to business intelligence tools to better interpret market trends. Some 9% of small businesses and 37% of medium-sized businesses in the United States are currently using packaged BI applications, while 6% are using BI tools as part of a hosted service. About 16% of small businesses and 22% of medium businesses use BI or data mining tools as part of an integrated ERP/SCM module.
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