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What’s Up With Your Strategy?

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“The most serious mistakes are not made as a result of wrong answers.  The truly dangerous thing is asking the wrong questions”.

–Peter Drucker

Freelancer Friend,  if you are not familiar with Peter Drucker (1909-2005),  please allow me to introduce you to but a small serving of his genius.  Peter Drucker was considered the father of modern management.  In 1971,  he launched one of the nation’s first executive MBA programs for working professionals,  located at Claremont Graduate University in Claremont, CA.  From the 1940s until about 2002,  Drucker produced groundbreaking work on business practice and strategy.  He was the Big Kahuna and he wrote several Holy Grails. 

Drucker was also known to be a serious skeptic of macroeconomic theory,  believing that economists of all stripes failed to explain significant aspects of modern economies (housing bubble, anyone?).  In other words,  if the folks at the Federal Reserve had followed Drucker’s wisdom and reined in the Wall Street masters of the universe,  the world’s economy would be in much better shape today.

Recently,  I found the above quotation plus a list of reality-checking questions that every Freelancer and business owner is advised to ponder and answer at least once a year.  The questions are quite simple and would appear to be no-brainers,  yet they are surprisingly effective at revealing the business strategies that your management team would be wise to develop and implement.

The first two questions require your team to set priorities and the last two require that you assess the organization’s ability to focus on those priorities by choosing meaningful performance measurements.

1.   Who is your primary customer?

It always comes around to identifying the customer,  does it not?  Identifying the natural customers for your products and services is the ultimate make-or-break realization for all business entities,  whether one makes a few hundred dollars during winter by shoveling snow from front stairs and driveways,  or a few million dollars from running a multinational corporation.  Only when the ideal customers have been identified is it possible to develop a marketing strategy that is a guide for resource allocation (e.g., equipment or PR campaigns),  sales distribution channels,  product positioning and branding strategies,  pricing,  creation of a sales pitch,  the networking strategy,  and so on.

2.   What business performance variables are you tracking?

Whatever yardsticks you select to measure business performance,  make sure they provide an accurate assessment of what is happening.  A sharp bookkeeper or accountant,  one with a background in financial analysis,  can tell you which numbers on your profit & loss statement and balance sheet make sense for you to watch and why that is so.  Freelancers probably want to pay attention to net revenue generated,  new business,  repeat business and the number of projects contracted.

3.   What strategic boundaries have you set?

Implementing a strategy involves risk.  Any strategy could lead the business to a place where you’d rather not go.  Know your core values,  priorities and preferences.  Think about what your customers expect and will accept from your organization.  It may be that you decide to take a pass on a golden opportunity because you just don’t want to offer that service or work that hard.  As the late,  great fashion arbiter Diana Vreeland said,  elegance is refusal.

4.   What strategic uncertainties are keeping you awake at night?

The game is all about whether your strategies work and for how many quarters will they work.  Unfortunately,  there is no silver bullet that can zero in on the weaknesses of your business strategies.  At some point,  customer needs and preferences change,  technology marches forward,  or some other event compels you and your management team to reboot dearly held business assumptions and approaches.  In order to adapt successfully,  it is necessary to constantly monitor the yardsticks established in Question 2.

Thanks for reading,

Kim

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Go to the Front of the Pack

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I’m a little bit of an egghead and every once in a while I like to read a good study,  to keep myself current,  or even ahead of the curve,  on matters of health,  business or anything else that catches my eye.  Recently,  I read an interesting study on strategic competitive positioning,  a survey study done this year at Babson College’s Babson Executive Education.

Lead author H. James Wilson competes in triathlons and he used those competitions and their participants as the study framework.  Triathletes assess competitors in a clean and simple fashion:  who is Front of the Pack,  Middle of the Pack or Back of the Pack?  The first two groups are ranked as actual competitors and the latter is seen primarily as new to the triathlon scene and nothing to worry about.  MOPs and BOPs have one goal and that is to improve their time in every event they enter and move up to the FOP.

Wilson applied the FOP,  MOP and BOP classifications to 300+  global companies that had recently reported facing intense competition within their respective industries.  He segmented the companies as follows

  • FOP if they achieved greater than 15%  annual revenue growth in FY09  (5%,  16 companies)
  • MOP if they achieved 1-15%  annual revenue growth in FY09 (48%,  145 companies)
  • BOP if they showed flat or declining revenues in FY09 (47%,  144 companies)

The essential question of strategy is,  are you heading in the right direction?  Wilson knew that the FOPs were doing more than a few things right and to get to the heart of it,  he analyzed the FOPs and identified three ways in which they outpace the also-rans.  He then developed the following survey questions based on those strengths.

Wilson’s data indicate that if you can answer yes to each of the survey questions,  you’re on your way to the FOP.  How do you stack up?  Something to think about.

1.  Are you/is your company becoming more effective at meeting the needs of clients/customers?

Despite the economic downturn that spawned the planet-wide recession (depression?),  FOPs have maintained the trust,  confidence,  loyalty and dollars of their customers.  FOPs understand what customers want and they are better at anticipating future needs and trends.  They put resources into keeping a finger on the pulse of the customer and they know what resonates.  FOPs are proactive in market research and customer outreach.

2.  Have you/has your company recently implemented a significant innovation campaign or launched numerous small-scale innovation pilots?

Brainstorming ideas for new services,  fresh approaches,  an innovative marketing campaign or self-development plans is an important beginning.  It is always necessary to think things through,  examine the big picture and weigh the possible outcomes of your actions.  Just remember that  “implement”  and  “launch”  are the key words.  How many good plans have you left to languish on the drawing board?  FOPs understand that results come from deeds,  not words.

3.  Are you/is your company becoming more collaborative with other Freelancer colleagues/other organizations?

High levels of cross-company interactions distinguish FOPs more than any other factor studied.  FOPs are also more likely to inform those in their network about business opportunities.  As a result,  FOPs receive the benefits of reciprocity more than most,  when referrals come their way.  Think of  how you might include selected non-competing colleagues in business opportunities that would be mutually beneficial.  Perhaps this is the smartest way to scoop bigger contracts for both?  Plus,  you’ll gain exposure to another’s business methods and perspectives and that information will make you even more savvy and competitive.

Thanks for reading and Happy Thanksgiving,

Kim

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May I Have This Dance? Partnering Possibilities Part II

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How might one brainstorm and evaluate  expanded services that may or may not involve taking on a partner to a greater or lesser extent? One might start by asking the clients.  As I’ve mentioned many times before,  establishing  relationships that  make communication comfortable for both parties  is so very important.

Speaking with those who are not clients,  but who work  in or are familiar with your target industries,  can also yield some bright  ideas.  In my January CEO forum,  Carole gave me a great tip on how I can expand my strategic plan facilitating services.  Carole’s  husband works in the NFP sector and has been through more than one strategic planning process that has not delivered the desired results.

Carole clued me in on helpful extras that should increase the likelihood that decisions agreed upon in the planning process will actually be implemented.  Demonstrating to clients that I am available to offer follow-up that will keep them on track with their plan could be an excellent selling point.  I won’t need a partner,  but I will make referrals  for required services that are outside of my domain.  I will surely incorporate Carole’s suggestions  into subsequent client meetings and proposals.

Before introducing a new feature to a client,  imagine yourself working in that client’s business.  What  need does your company fulfill?   Envision the big picture and place your services within it,  to get a good idea of where your contribution fits.  Will additional services allow the client to achieve objectives in a more effective,  less expensive, timely or streamlined way?

Although decision makers are timid about spending money these days,  a decent percentage will open the checkbook if perceived value is there.  Moreover, one stop shopping is in vogue and you may be able to work that to your advantage.  Do you have the resources and expertise necessary to deliver those services on your own,  or must you link with another Freelancer or small business?

Be careful about the sphere of influence that each partner will have,  particularly when those involved have the potential for overlap.  No one wants to confuse clients with a power struggle.   Be clear about who takes the lead and who makes the decisions in each aspect of the project.

It is also imperative to really know the business practices of a potential partner.  I recently had an unfortunate incident when I was invited to be a last minute replacement in an unpaid speaker’s program.  This was not a partnership in the classic sense,  but a collaborative venture nonetheless.

After the organizer successfully separated me from $200 to help cover program expenses for what was sold to me as a quarterly program featuring the four speakers on board,  she proceeded to recruit new speakers for the series, without consulting the original roster.  I eventually deduced that the new recruits were not required to pay $200 to join the roadshow,  as had the original crew.  If that was not enough of a slap,  the organizer decided that I would not speak at the second program!

I was not pleased with the bait & switch, to say nothing of the unilateral decision making and I requested that my investment be returned.   After some patronizing and stonewalling,  the organizer eventually mailed a check for $100.

No,  nothing was in writing.  I naively thought that a contract was unnecessary for a $200 transaction with someone I thought I knew!  Moral of story:  protect yourself and leave nothing to chance.

To sum up,  collaborations,   joint ventures and partnerships can be long term or ad hoc. Specifics of duties, authority and expectations should be in writing (an email may suffice).   If a formal partnership (or merger) is formed,  obviously the attorneys and accountants get involved.   Again, know who you are planning to dance with!

Thanks for reading,
Kim

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May I Have This Dance? Partnering Possibilities Part I

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At our January meeting,  a member of my CEO forum told the group that partnering is high on her list for 2010.  She’s decided that the right partnership vehicle will propel her to this year’s  financial goal.

Pam is a market research specialist,  with solid clients in the life sciences industry.  She’d like to have more presence in high tech,  but needs a way to get there.   Pam is acquainted with another marketing specialist who has a good roster of high tech clients.  The two are now in early stage partnership exploration talks.  Maybe they can figure out a  way to team up and increase traction in both industries?

As luck would have it,  Pam has learned of an upcoming conference that will address partnership,  joint venture and collaboration options,  strategies and methods to make the arrangement beneficial to all parties,  including clients.   She plans to attend.

Very soon,  I plan to approach Pam about the possibility of adding early stage product and market development for life sciences products to her array of services.  Could this give her yet another useful competitive advantage?  I will first visit her website and confirm that she does not already have that base covered.  Then I will ask if she feels that addressing the prospects for early stage products might be a good fit for her business and interest level.

If Pam gives the go-ahead,  I will introduce her to Regina, who guides biotech, medical device and pharmaceutical companies as they sort through which of their exciting newly patented  products has the best potential for success.

So you see,  a form of mergers (and even acquisitions) can apply to Freelancers and small business owners. This dance is not only for the Fortune 1000.  In fact,   many of us have done this for years.  General contractors often form partnerships or joint ventures with real estate developers and structural engineers when they come together to work on one building project or several.

Event planners (my first business venture, BTW) must collaborate with caterers,  florists, limo companies,  photographers, etc.  in order to pull together a project.   Over time,  one develops a list of preferred vendors for these services.   Sometimes,   the parties will join forces and form a legal partnership.  Wedding event specialists and bridal shops are known for this practice.

Teaming up with someone who has complementary business skills can open many doors and can be an excellent way to gain market share and opportunities to work within industries where one has not gone before.   It is possible to greatly enhance your company’s appeal to current and potential clients.

More on partnerships next week,
Kim

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On Surviving the Economic Crisis Part II

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Last week, I attended a roundtable discussion for business owners that was hosted by the Cambridge Chamber of Commerce.  The purpose of BIG: Best Insights Grow (Your Business) was to provide a forum wherein a dozen small business owners and consultants  could share some of our more vexing business challenges and receive some practical advice from the group about how best to resolve those issues.

I offer you a few strategies and action items that surfaced in our forum. You may want to integrate some of this into your practice, so you can grease the cash flow wheels as we enter the traditionally slow summer months.  Most of these things you already know–none of it is rocket science.  Nevertheless, selectively employing a few of these methods is bound to have a positive effect on your billable hours, in the short and long term.

  • Stealth Prospecting

Obviously, we must always keep eyes and ears open for new clients and new ways to engage our current clients.  One way to do that is to network: get out there and attend events, talk to people and let them tell you which products and services they like, why they like them and how they like them offered.  Also, remember to make sure friends and colleagues know what you do and who they can refer to you, so they can be your surrogate sales force.

Another way to set the stage for networking and prospecting is to put yourself on the panel guest and speaker’s circuit.  Meaning, position yourself as an expert.  Pay attention to the program schedules of a few business and professional organizations.  What kind of topics do they offer? What kind of audience do they attract? Can you offer up some of your expertise and give a presentation or join a panel discussion? Are you a member of any such organization?

Build relationships with the event coordinators for these groups and find out the protocol and requirements for their speaker’s bureau.  Have a clear understanding of topics that are deemed appropriate, so you can offer the right talk titles.  Local colleges may also accept proposals for workshops.  Check out noncredit continuing education offerings in a few schools and see who might give you an opportunity to teach. You might even receive a (modest) honorarium!

When you are showcased as an expert in your field, you will be approached by peers and prospects who seek your advice, want to do business with you or want to refer you to someone who does want to work with you.  Now that takes the cold calling out of prospecting, am I right?

  • Strategic Referrals

What better way to get yourself into the good graces of someone who you suspect could be a good referral source for your gorgeous self than to get the process started by referring a client to your object of desire? The chances of receiving some reciprocal billable hours are going to be good, I’ll say.  I think this is the beginning of a beautiful friendship…

  • Smart Pricing

Pricing is a tricky thing. It is both a science and an art. When it comes to services, honestly, who knows what anything is worth? The service is worth what the client thinks it’s worth.  Even in flush times, you’ve gotta know when to hold and know when to fold. You must become a very good negotiator.  No one wants to gouge and no one wants to be undervalued.  These days times are tough, clients know it and everybody wants a “deal”.

Freelancer, you need a good pricing strategy if you want to keep a roof over your head and food on the table!  You need a useful bag of tricks that will keep the billable hours coming in at rates that will keep you solvent.  Here are a few strategies that can help:

When you know or suspect that a client is going to knock down your price, try adding 10-20% to your proposed fee.  Some people love to bargain, love to think they got something at a lower price.  So give that client the satisfaction of “saving” a few dollars. When they press you for a price cut, slowly and reluctantly cave in– then smile like Mona Lisa as you collect your usual fee (or close to it).

Another win-win pricing strategy is to hold your price but add in a few extras or upgrades. Maybe you can even do some small something pro bono.  Many clients will be happy to receive more for their money.  They want to stoke that value proposition.

But alas, sometimes the clients have us over a barrel and we are forced to take a job at a lower fee because we either flat out need the cash or we crave a certain plum assignment. How to take the sting out of this one?

Start by trying to get more hours out of the project. Your hourly fee won’t be great, but the check at the end will be less paltry. You can also ask for future assignments, thus getting them on the hook for more work that you can count on.  Better still, giving a referral discount to this client may be the way to go: each successful referral the client makes means their next job will be priced at a 10- 20% discount.  Pricing is most definitely about negotiation.

This is also the time to offer your clients some flexible payment options.  Consider offering a discount on invoices that are paid in full within 15 days.  Invoicing like a general contractor might also be helpful: ask for a third of the project fee up front, the next third at the project midpoint and the final third within 30 days of the project’s completion. Setting yourself up to accept credit card payments may also prove to be useful.  The downside is the processing fee, but you will make it easier for cash strapped businesses to pay you on time.  As we all know, getting paid is the name of the game.

Good luck this summer and let me know how you make out!