Building a Lead Development Program

16 October 2008

Craig Rosenberg The Funnelholic – has written two good blogs and promises a third on Lead Development.  These are good reading for anyone who is designing a sales marketing plan.  Here are the links:

 

MJM ConsultingStrategic Business Consulting – Helping Companies Grow

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Why did we just have an election?

15 October 2008

After all the posturing and complaining that the last government was dysfunctional, we have a new government that may prove to be just as dysfunctions.  Dion will probably step down after the poor showing in the results.  If not, he will surely have an internal fight on his hands.  The struggle to find a new leader will leave the party in turmoil and focused on navel gazing.  Harper, on the other hand, has now won two minority governments, and must be mad as hell.  I’m sure he will call another election in about 18 months and we’ll do this all again.  So much for the “elections every four years”.


Venture Capital is Still Out There

10 October 2008

In the last few days there have been a number of posts about a venture capital crisis yet there are still venture capitalists out there, looking for good opportunities.  Here are a few of the doom and gloom posts from Michael Arrington at TechCrunch:

On the positive

Despite the positive tone, getting financing these days is going to be tougher.  The WACC has gone up.  Plan accordingly.


The Law of Unintended Consequences

9 October 2008
CF-18 in high-g pull-up
CF-18 in high-g pull-up

Akin to Murphy’s Law, the Law of Unintended Consequences is a warning against the belief that you can control the world around you.  As well as the direct consequences, any action will also have other consequences which were unintended and which may be counter to the original intent.

As an example, in my early military career, I was an aeronautical engineer, a maintainer, working with CF-5 and CF-18 aircraft in Cold Lake.  In the early years of the CF-18 introduction, the maintenance community became concerned with the stresses imposed on the airframes by high-g loads.  Repeated stresses would shorten the life cycle of the airframe and could possibly create a flight safety issue.  To prevent these over stresses, the aircraft was modified with a g-limiter which would limit the g-loads in normal operation to about 7.5g.  The pilots could override this in emergencies and pull up to the aircraft’s limit which was above 11g.
Prior to the addition of the g-limiter, the maximum g pulled on any flight followed a statistical bell curve that averaged about 5g for all flights.  At the high end, there was a small percentage of flights with maximum g loads above 7.5 g.  After the g limiter was installed, the average g for all flights went up despite the fact that there were fewer cases of high-g maneuvers.  This higher average, the unintended consequence, represented more danger to the aircraft structural life than the small number of high-g maneuvers.
How did this happen?  The pilots, informed about the g-limiter, started to use it as a guide.  They no longer judged how much acceleration was required, they just pulled until they hit the limiter and felt safe doing so.  The statistics of the flight loads became very skewed towards 7.5g and the stress on the fleet went up not down.
What does all this have to do with business?  It is just an anecdote to highlight the need to always be measuring the results of your strategic decisions and to look for the effects of the unintended consequences.  In the story above, the maintenance community was tracking the aircraft stress loads and was intent on extending the life of the airframes.  The analysis of the data showed that the opposite effect was occurring so action was taken – not to remove the limiter, but to better inform the pilots about the original problem so that they could use their judgement as well as the limiter.
In business, many strategic decisions and tactical actions are taken but once taken, leaders and managers need measure the results and ensure the actions are having the intended results. 
MJM Consulting – helping companies grow.

Alternatives to Layoffs

8 October 2008

If you are preparing for the downturn by cutting costs, consider the advice of Mike Elgan.  In his article on “Three Ways SMBs can Survive the Economic Meltdown“, Mike highlights three alternatives to layoffs that can help reduce the overhead costs of running a business:

  1. Send people home.  Companies often consider transport and associated costs as included in employee pay.  Consider cutting a portion of this pay and let employees work from home.
  2. Use all the on-line tools to travel virtually and collaborate without actually leaving home.
  3. At the extreme, consider closing your office and becoming a Bedouin organization.

I like these ideas but I have to ask, why wait for a downturn?


Remember the Dollar?

8 October 2008

It wasn’t long ago that the strength of the Canadian dollar compared to the USD was a source of major concern for Canadian manufacturers.  With the recent turmoil in the markets, the Canadian dollar is weakening again as traders speculate that the recession will reduce demand for the commodities, oil in particular, that are the backbone of the Canadian economy.

USD/CAD currency exchange prices over the last few years.

USD/CAD currency exchange prices over the last few years.

I’m sure many in the manufacturing sector are torn between the impacts of the recession and the benefits they will get from the weakening dollar.  To survive the plunge in the US dollar from the heights of 2002 when it was trading at over $1.50 CAD to the lows in November 2007 when it hit nearly $0.90 CAD, manufacturers that sold into the US economy had to become very efficient.  It was essential to manage Canadian dollar costs to ensure profitability.  If goods were sold in US dollars, there was a double impact of falling revenue in Canadian dollars.    Many were forced to raise the prices of the goods they sold into the US.  A strengthening of the US dollar will reverse these impacts and the now efficient firms will benefit.

For most of 2008, the dollar has been trading near par but it has risen nearly 10% to $1.10 in the last three months.  [Update: As of the 10th October, the USD/CAD rate had increased to over $1.18]  That has to be a relief to manufacturers that sell into the US.  It represents free revenue in foreign exchange as well as the opportunity now to reduce US prices in the face of a recession.

The question is whether the recession will have more of an impact than the dollar.  My own guess is that the coming year will be a bad one and that the Canadian economy will again start to look good compared to the US which will reverse the trend in the dollar.  So enjoy the bump while it lasts but don’t depend on it.  More belt tightening will be required in the future.


Buffett’s Law and Cloud Computing

6 October 2008

In an interesting post on the future of Cloud Computing, Jake Smith says that one of several antecedents of wide-spread cloud computing is the impact of “Buffett’s Law”.  Basically, the law states that Warren Buffett, the billionaire investor is driving change in the business world through the principles of value investing in ways that promote conservative innovation as opposed to radical or flamboyant visionary creation.  “The value of an enterprise is a direct correlation of it’s ability to deliver consistent return on invested capital, regardless of market conditions.”  What does this mean? 

Return on Invested Capital (ROIC) is a measure of the ability of a company to generate EBIT or earnings before interest and taxes compared to the amount of investment in long term debt or equity.  To maximize the ROIC, the company must do two things:  first, maximize its operating profit which translates to maximizing sales, minimizing the cost of good sold, minimizing the overhead involved and working with a low tax rate; second, the company must minimize the debt and investment required which translates into minimizing the working capital requirements and the non-current assets.

The first part is about efficiency of operations.  The second part is about business models.  Efficiency of operations is the realm of lean manufacturing – a philosophy of organizational efficiency that can be applied to just about any process.  Business models relate to how you make money and the decisions about what you do and what you outsource.  Take the decision to outsource PCB assembly rather than purchase the equipment and build the components in house.  If the cost of goods remains the same, out-sourcing is preferred since it lowers the non-current assets which will result in a better ROIC.  To make the purchase of the PCB assembly line attractive, the cost of goods would have to drop significantly compared to what could be produced through outsourcing in order to generate the same ROIC.

How does this apply to cloud computing?  Cloud computing is essentially an outsourced IT model comparable to the outsourcing of PCB assembly.  The cloud offers lower infrastructure for similar performance which means that, even if the cloud is just as expensive as tradition IT, it will be a preferred simply because it lowers the ROIC – hence the impact of Buffett’s Law.

For more on the trends in cloud computing read Jake’s article here or my own take on the changes in IT here.

MJM Consulting – Helping companies grow.