Finding success through your crises.

Owning a business is pretty similar to a roller coaster ride. One minute you are up and the next minute you are down. I know how true this is from both personal experience and through the experiences of my clients.

It is easy when you are up. You believe your employees think you are about the smartest dude around. Your pride glows as you read the stories about account wins and new hires. You might even start thinking about selling out to some big outfit from some far off place. Life is too good!

Then it all goes to hell. An account that makes up a third of your business unexpectedly fires you. Your right-hand lieutenant who you have underpaid for years leaves with half your accounts. Or maybe the IRS finally catches on to those outrageous deductions you have been taking all these years.

Well, achieving your vision is as much about how you manage a crisis as it is about getting the most wins. If you have a decent product or service, the wins will come. But what many business owners are terrible at is managing a sudden downturn. They react
too quickly or slowly. Get bad advice. Think their business model no longer works. And worst of all, become terribly discouraged.

I had been in business for about three years when, at the height of my firm’s success, my partner suddenly decided that she wanted to split up. I mean, we were considered about the hottest new shop in town. We had it all — awards, new clients, and were building a great staff. Then BAM! It was all over.

I had one day to figure out what to do. Exactly 24 hours. After thinking about it for the rest of the day and night, I told her I would leave but I would take all of the clients. She could have the staff and all of the new business pitches we were in. But I wanted the clients. Perhaps with a bit too much confidence, she agreed. Perhaps she thought the accounts we were pitching were far more prestigious than the ones currently on board.

There was just one thing. Those accounts paid the bills. And she didn’t win one of those new business pitches. Within three months, she was out of business. If I had proposed that we just split everything down the middle, I might have been also.

The business community mostly knows about your wins and little about your crises. But it is how you handle thoses crises that will determine whether you achieve your vision. I know because I have been there. I hope you take this advice to heart.

Will life be better in retirement?

This is a very interesting study among folks concerning their pre-retirement and post-retirement thoughts on retirement. It is very surprising!

http://retirement.digitalinfo.org/

The Creative Monopoly

Here is a piece from David Brooks of the NY Times, published 4/24/2012. Extraordinary advice for a business owner….
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As a young man, Peter Thiel competed to get into Stanford. Then he competed to get into Stanford Law School. Then he competed to become a clerk for a federal judge. Thiel won all those competitions. But then he competed to get a Supreme Court clerkship.

Thiel lost that one. So instead of being a clerk, he went out and founded PayPal. Then he became an early investor in Facebook and many other celebrated technology firms. Somebody later asked him. “So, aren’t you glad you didn’t get that Supreme Court clerkship?”

The question got Thiel thinking. His thoughts are now incorporated into a course he is teaching in the Stanford Computer Science Department. (A student named Blake Masters posted outstanding notes online, and Thiel has confirmed their accuracy.)

One of his core points is that we tend to confuse capitalism with competition. We tend to think that whoever competes best comes out ahead. In the race to be more competitive, we sometimes confuse what is hard with what is valuable. The intensity of competition becomes a proxy for value.

In fact, Thiel argues, we often shouldn’t seek to be really good competitors. We should seek to be really good monopolists. Instead of being slightly better than everybody else in a crowded and established field, it’s often more valuable to create a new market and totally dominate it. The profit margins are much bigger, and the value to society is often bigger, too.

Now to be clear: When Thiel is talking about a “monopoly,” he isn’t talking about the illegal eliminate-your-rivals kind. He’s talking about doing something so creative that you establish a distinct market, niche and identity. You’ve established a creative monopoly and everybody has to come to you if they want that service, at least for a time.

His lecture points to a provocative possibility: that the competitive spirit capitalism engenders can sometimes inhibit the creativity it requires.

Think about the traits that creative people possess. Creative people don’t follow the crowds; they seek out the blank spots on the map. Creative people wander through faraway and forgotten traditions and then integrate marginal perspectives back to the mainstream. Instead of being fastest around the tracks everybody knows, creative people move adaptively through wildernesses nobody knows.

Now think about the competitive environment that confronts the most fortunate people today and how it undermines those mind-sets.

First, students have to jump through ever-more demanding, preassigned academic hoops. Instead of developing a passion for one subject, they’re rewarded for becoming professional students, getting great grades across all subjects, regardless of their intrinsic interests. Instead of wandering across strange domains, they have to prudentially apportion their time, making productive use of each hour.

Then they move into a ranking system in which the most competitive college, program and employment opportunity is deemed to be the best. There is a status funnel pointing to the most competitive colleges and banks and companies, regardless of their appropriateness.

Then they move into businesses in which the main point is to beat the competition, in which the competitive juices take control and gradually obliterate other goals. I see this in politics all the time. Candidates enter politics wanting to be authentic and change things. But once the candidates enter the campaign, they stop focusing on how to be change-agents. They and their staff spend all their time focusing on beating the other guy. They hone the skills of one-upsmanship. They get engulfed in a tit-for-tat competition to win the news cycle. Instead of being new and authentic, they become artificial mirror opposites of their opponents. Instead of providing the value voters want — change — they become canned tacticians, hoping to eke out a slight win over the other side.

Competition has trumped value-creation. In this and other ways, the competitive arena undermines innovation.

You know somebody has been sucked into the competitive myopia when they start using sports or war metaphors. Sports and war are competitive enterprises. If somebody hits three home runs against you in the top of the inning, your job is to go hit four home runs in the bottom of the inning.

But business, politics, intellectual life and most other realms are not like that. In most realms, if somebody hits three home runs against you in one inning, you have the option of picking up your equipment and inventing a different game. You don’t have to compete; you can invent.

We live in a culture that nurtures competitive skills. And they are necessary: discipline, rigor and reliability. But it’s probably a good idea to try to supplement them with the skills of the creative monopolist: alertness, independence and the ability to reclaim forgotten traditions.

Everybody worries about American competitiveness. That may be the wrong problem. The future of the country will probably be determined by how well Americans can succeed at being monopolists.

Do good bosses have to be cutthroat?

Sometimes I like to post an article from another source that I believe has some wisdom that must be shared. This is one of those articles….

March 28, 2012,
Do Good Bosses Have to Be Cutthroat?
By JAY GOLTZ, New York Times

The question came from a 20-something son sitting next to his 50-something father, who I hope was proud because the question was thoughtful and, I’m sure, on the minds of many. Also, it took some guts.

I had just given a speech to a group of family-business owners who were interested in professional development and succession planning. This was a very engaged group that was dedicated to improving their businesses and preparing them for the next generation. For me, it was the perfect audience because I was able to interact with several generations of owners with different experiences, perspectives and attitudes. I always look forward to taking questions, and this session was particularly rich.

The son was trying to reconcile some of the ideas I had been tossing around. “How do you balance a nurturing environment with being cutthroat?” he asked.

The title of my speech was “The Power of Being a Little Bit Better.” It is pretty much an outline of what the boss needs to do to grow a little faster by providing a better experience to the customer. It includes subjects including hiring the right people and setting standards. But one part of the speech always elicits the most questions, produces the most angst, and, I believe, provides the most value to the crowd. At least, that’s what people tell me.

Here’s what I say: Even after the careful hiring, the thorough training and the positive coaching (not to mention the pizza parties), some people will just not be able or willing to do the job. Some may be difficult to work with, or maybe they are nice people who work hard, are loyal and are just in the wrong job. With some of these people, all of the coaching in the world will not solve the problem. The only solution is to move the person to a more appropriate job — maybe in your company, probably somewhere else.

Yes, sometimes in the pursuit of excellence, you have to fire people. And yes, I am well aware that there are many bad bosses out there and that many people get fired through no fault of their own. I get it, I really do. But that is a whole other subject. Today’s subject is the question from the son: “How do you balance a nurturing environment with being cutthroat?”

Ahh. It was like having a slow pitch thrown right down the middle of the plate. “The answer is in your question,” I replied. “Do you really think that firing someone who can’t do the job is cutthroat? Does doing this make you a bad person? Is it mean, unethical, unfair or ruthless?

“I’ll tell you what it makes you if you don’t do it,” I continued. “It makes you a bad boss. A bad boss because you are cheating your customers of good service or a good product. And, you are probably subjecting your other employees to having to fix, cover for or put up with someone who makes their jobs harder, or even miserable.”

At this point, I figured I might as well drive the point home, or maybe I was just out of control on my soapbox. “And if some of you think that you won’t or can’t be as mean as I am?” I said, “don’t flatter yourselves. My turnover is less than 10 percent, and my average employee has been with me more than nine years. Not firing people does not make you nicer than I am. It just makes you irresponsible, and your customers and your other employees pay the price.”

Done. I looked around the room. It didn’t appear that anyone was preparing to throw anything at me. I was going to get out alive, again. This is my tough love speech. I love happy customers, I love happy work environments, and I love successful companies that can be taken over by the next generation and continue to provide jobs. But I also realize that firing is tough on everyone involved.

Then someone else offered a perspective that I have heard many times. He cited an example of a former employee he had had to fire who is now doing very well in a new job. The fact is, this happens all of the time. Sometimes the situation is different, the dynamics are different, the management is better, or perhaps the person benefits from a lesson learned or just from starting over with a clean slate.

Focus or be average.

Yes, if you don’t start to focus your agency’s capabilities on your unique knowledge of (fill in the blank), you will be forever average.

I just read an article in the New York Times about an agency start-up at one of the large holding companies. This shop will focus on emerging cultural trends. To quote: “Anytime people are talking about cultural trends, my antenna goes up,” said Thomas L. Harrison, chairman of the Diversified Agency Services division of Omnicom in New York. He was intrigued by Mr. Young’s proposal for “a cultural identification company” with “a methodology to identify the seeds of emerging trends.”

Even if you think Harrison is a bit difficult to understand because of his use of “corporate speak,” the point here isn’t the “what” but the fact that someone actually made a choice! It doesn’t matter whether the choice is based on a function, industry, demographic group, or cultural region. Just so it is based on SOMETHING.

By carefully choosing what your unique capability is, you have a far stronger marketing story, a more compelling reason to get hired, and can ultimately charge premium prices.

You have a choice. Get focused or remain average. I know which one I would take.

What are you really selling?

Sorry, but you aren’t selling neat creative. Or process. Or good looks.

You are simply selling knowledge. The ability to move the client or prospect’s company forward based on what you know. The sum of your experience and the experience of your staff. And if you are talking to a prospect where the firm or staff has no industry experience, the reality is you don’t have much to offer.

But what about creative? What if you think you have the best creative in the freakin universe? Sorry, but that is a hit or miss game because creative is purely subjective in the eyes of the beholder. Maybe you might win a few with the mix of your great stuff and your charming personality. But it is a pretty high-risk game. And if you are running your business on high risk pitches, I suggest you go to Vegas. Its way more fun.

Please don’t show off your work to me like you are showing it to your mother, hoping she will rain praise on you. Tell me what you know that can move my business forward. Get my damn boss off my back. Allow me to be a hero (and maybe get a raise).

Well, maybe you should show your work to your mother too. At least she will finally know that you actually work for a living.

The perfect client.

The perfect client. Some of us spend our entire career looking for him. One that will let us do our very best work while making a substantial profit. One that considers us a true partner. And one that truly has the authority to drive our ideas through the typical management structure.

I am not sure that perfect client exist anymore. Not when the idea of a long-term strategy in some organizations last until the next monthly management meeting. Afterall, our clients are real people who have the same concerns we all have. Like keeping their jobs.

So what to do? First, make sure YOU are the perfect resource for the client. If they want it fast and you like to take your time, pass. If they want it cheap and you are expensive, pass. If their needs are beyond your core capabilities, pass.

So instead of focusing on finding the perfect client, focus on where you best fit. If you have a particular expertise, find clients that want that expertise. If you have a special skill, find those that need that skill.

Just don’t whine away with “If only I could find the perfect client.” You just be the perfect agency.

The positioning choice: thrive or just survive — Tim Williams

Great thoughts from ad agency consultant Tim Williams…..

“Lack of focus in professional service firms like advertising agency is unfortunately the norm instead of the exception. Diversification is a natural human response to help mitigate uncertainty. The problem is that diversification is not really a business strategy, but rather the avoidance of a business strategy.

A wide body of business literature documents time and again that the most successful companies are those who are willing to make what business strategist Michael Raynor calls “strategic commitments.” In his compelling book “The Strategy Paradox,” Raynor observes:

“Firms that avoid strategic risk survive
but do not prosper.”

This is a powerful way to think about the question of positioning. It essentially invites you to ponder the question “Do you want to just survive, or do you want to truly maximize your success?” Survival, while certainly desirable in these tough economic times, is hardly the reason talented professionals come to work every morning.

The nature – and power – of trade offs

To define and implement a strategy is to decide which trade-offs your company will make. You can’t offer every type of service or serve every type of client, so strategy is about deciding in which areas you intend to be excellent.

“Faced with this painful trade-off between the returns to the bold commitment and the risk of making the wrong commitment,” says Raynor, “most organizations forgo the possibility of glory for an existence bereft of greatness.” If your goal is greatness, the price is strategic commitment.

A risk?

“The best laid plans of mice and men go oft awry,” wrote the poet Robert Burns, in a nod to modern strategy making. A positioning strategy is indeed a risk, but so is not having a strategy. In fact, the greater risk – at least financially speaking – appears to be in not taking a stand and not making strategic commitments.

The diversification discount

Economists have actually identified what they call a “diversification discount,” which is a measurement of the inefficiencies that arise by channeling money and energy into too many different activities, divisions and product lines. This is chronicled in studies like The Cost of Diversity: The Diversification Discount and Inefficient Investment and Diversification’s Effect on Firm Value.

In effect, you erode both the short- and long-term value of your firm by spreading your time and resources into too many areas.

Don’t ever forget that as a professional service firm, what you essentially sell is expertise, and expertise is gained and maintained by focusing on the areas in which you and your firm can truly be best in class.”

Five critical items for business success.

Start your business for the RIGHT reasons.
-You have a passion and love what you’ll be doing. You strongly believe that your product or service will fulfill a real need.
-You never give up. You have drive and determination.
-You thrive on independence and can tackle problems head on.
-You learn from your mistakes. You will make plenty of them.

You are a good manager.
-You pay attention to details. You never drop the ball.
-You understand how to organize work flow so that the right things get done on time everytime.
-You know where you are financially at all times. You plan accordingly.
-You know how to get the best from your staff. You enable them to love their job as much as you do.

You have six months of operating expenses in the bank.
-Before you buy that new BMW, you make sure you have adequate cash flow to weather any downturns.
-You don’t distribute profits until you have adequate capital.
-You quickly cut expenses if you see a downturn in the near future.

You know who your potential customers are.
-You understand what makes your business attractive to your target customers.
-You build brand preference constantly by using marketing tactics that are right for you.
-You add value to your offering through free or enhanced services and discounts for repeat customers.

You take it slowly.
-You don’t expand until you know there will be continued demand for your services.
-You remember that “tall trees don’t grow to the sky.” Knowing when to exit a business is more important than knowing when to expand.
-You know that patient money always wins over fast money.

When to add a partner.

Partnerships truly do come and go. Things change and people change. But having one or several partners can have a very positive impact on your business. The key is picking the right partner.

Generally, partners either start a business together or are added at specific points in the business’s evolution. However, both situations require the same thought process for the owner. The following are some key things to consider when thinking about having a partner.

1. Having a partner means sharing in less of the profits. Will the potential partner not only make up for this reduction but help create far greater profits?
2. While you might have a majority share, partners must treat each other as equals in the daily operation of the business. Can you do this?
3. Partners must always be transparent with each other. Are you sure you want your partner to know about everything you do concerning the business?
4. Partners must complement each other. They must bring different skills to the table. If you are poor at sales, they need to be great at sales. If you have lousy financial skills, you might want them to take this responsibility from you. If you both have the same skills, you don’t need them as a partner. You just need to hire them.
5. While it isn’t important for your partner to be your best friend, it helps for you to be compatible. Obviously you will be
spending a great deal of time together.
6. You will want to have a partnership agreement drawn up by an attorney. It should specify what happens if a partner leaves the company. Are you ready to lock yourself into a formal agreement?
7. Constant communication holds the relationship together. Can you maintain this level of communication?
8. Lastly, can you give up total control. If not, a partnership will almost always end badly.