The realm of securities litigation and enforcement is shifting. Federal enforcement investigations are on the rise, prompting the need for more robust compliance and training programs for businesses, says John Cannon, a securities litigation and enforcement defense attorney with Stradling Yocca Carlson & Rauth.
“When I first started practicing, it was often the rule that securities litigation would be something that would occur first, and following that, maybe an enforcement action, which didn’t always have teeth,” Cannon says. “That’s changed; it’s actually flipped. The risk associated to a company’s bottom line could be much more material today with the government taking a more focused look at these issues.”
Smart Business spoke to Cannon about the changing landscape and how businesses can prepare and protect themselves.
What trends should companies pay attention to?
Nowadays, the real threat to companies — public companies, in particular — is the potential for an enforcement action by an agency or department of the government. That could range from a Foreign Corrupt Practices Act issue, an Exchange Act issue, a False Claims Act issue and an FDA issue, as well as other agencies and departments.
The government is taking a much more active role, and the risks and the penalties associated with that process are very different than in typical securities litigation.
Enforcement defense raises different issues relating to insurance coverage. Often, private securities litigation tended to be covered by a directors’ and officers’ insurance policy. But coverage for a government investigation might be much more limited — in fact, it’s nearly nonexistent under some policies.
What types of securities fraud class action filings should be of concern?
Taking the place of the classic ‘stock-drop’ lawsuit in terms of the volume of cases that a company should be worried about are cases related to the mergers. If you’re involved in a public company merger or going private transaction, the chances of being sued in your home state and Delaware are fairly high. Those cases tend to be manageable, and they tend to be dealt with in a way that preserves the transaction.
The other issue that you’re seeing is ‘circumstance cases,’ where you’ll have an event happen, like the Gulf explosion, or a matter such as options backdating, which will then trigger a whole series of cases. Or you’ll have the financial downturn, which will trigger a series of cases involving the institutions that are most affected. What you get is a kind of localized action surrounding a particular event, as opposed to an across-the-board risk.
What can businesses expect going forward in regard to enforcement?
Any enterprise that is in one way or another connected to or regulated by the federal government should be looking at itself immediately to determine whether or not it has appropriate compliance policies and procedures in place to prevent violations of law. And they should also anticipate that it’s as likely to get a knock on the door from the FBI as it is to get served with a lawsuit.
The reality is that the federal government in particular is looking toward the various statutory mechanisms it has in place on the enforcement side to mold, form and direct business as it’s done in the United States. It’s also a revenue source for the government. If you start totaling up these numbers in terms of fines and penalties that companies have to pay, they’re not small.
Who is impacted the most by the current environment?
Prime examples of entities that are particularly at risk on a regular basis:
- Small and medium-sized public companies
- State and local agencies
- Private equity/hedge funds/investors/investment advisors
- Direct and indirect payees of funds from federal programs and contracts
- Pharmaceutical and medical device companies
- Companies doing business internationally
How can businesses prepare?
Fortune 100 companies, and some Fortune 500 companies, have been somewhat proactive in establishing programs that ensure that they are in compliance. That can range from everything from an insider trading policy to a policy regarding anti-trust laws to a policy regarding the False Claims Act.
For mid-size, emerging public and private companies, I don’t think they have been as effective or have prioritized compliance as much as their larger brethren. Because larger companies have focused more on compliance, there is an expectation in the enforcement process that policies should be in place to protect against violations. Emerging companies tend to focus on revenue and the bottom line.
Quite frankly, that needs to change, because they are as susceptible to a knock on the door by the FBI today as larger companies, and the expectations about what should be in place are fairly high from a government standpoint.
John Cannon is a securities litigation and enforcement defense attorney with Stradling Yocca Carlson & Rauth. Reach him at email@example.com.
Insights Legal Affairs is brought to you by Stradling Yocca Carlson & Rauth
Patty Klein is a self-proclaimed perfectionist. It’s this attention to detail that makes A-Plus Meetings & Incentives so successful.
As president and CEO, Klein has used her background in business consulting to build a 16-person meeting planning company that can do — or figure out how to do — just about anything for its clients. The company, based in Coral Gables, Fla., serves a number of Fortune 500 companies, including Staples Inc. and Ryder System Inc.
Smart Business sat down with Klein at the 2011 Ernst & Young Strategic Growth Forum to discuss how she’s built a company that can creatively cater to a variety of client needs.
Q: How did you develop the variety of service capabilities you have?
Every time a client says something like, ‘We need to do this,’ we just say, ‘We can do it.’
It's just something that we develop based on requests and pretty much a lot of times analyzing and just saying, ‘What are we doing for you? What are they using other vendors for and how do we then provide that service, as long as it's within the scope of the meeting, either pre or post?’
Q: Where do you look for creative inspiration?
We stay creative first and foremost in the agenda design. I think that's really where the rubber hits the road. You can have great décor, you can have a new innovative dinner and food and so forth, but to me, the creative part comes in, ‘How do we make this meeting more interesting and more impactful and have a higher return on investment for the attendees?’
A lot of times I'll just talk to clients and talk to them about what ideas they have, and I share among clients. Why not? None of our clients are competitors. … Once I get a partner, I feel it's really important. I know I sit in the Staples meetings; I sit in the Ryder meeting. I understand their strategies; I understand what's important to them. And I want them to win in their business.
(We need to) make sure the content is as fresh and integrated as possible with the strategy of the company. So we really spend a lot of time talking to our clients about, ‘What is the goal? What do you want to see? What are the outcomes?’ Because we need to measure that we've done that on the outcomes.
Q: What metrics do you use to gauge feedback?
We do an online survey after every program. We measure not only our service in terms of logistics — all the communication, how easy was the website, how is everything from check in and with our service on-site, which is critical … but we measure every single content of the session in terms of the effectiveness, and we measure all the outcomes. We start off with, ‘These were all the goals. How did we do against all the goals?’ We can really show the client the return.
A lot of times we brainstorm based on what happened the last time. So let's analyze everything about the meeting: what went well, what didn’t go well. And that gives us ideas to bring back the clients and say, ‘Next time, we need to do this differently because based on the survey results.’
Q: How important is word-of-mouth feedback to your business?
If I can get a potential customer to talk to talk to my clients, every single time I've won their business. It's that much of a wow. … A couple years ago, one of my clients tried another meeting planning company and I was concerned, but it was the best thing that could've happened. They did nothing of the same level of service. But that experience, that's so hard to describe, and that's where my client references really make a difference, the wow stories.
Q: How do you create that wow factor?
It's very simple — you do everything that the client wants but even more.
Because of our business consulting background, we really get involved with actually writing and viewing presentations as well as helping people do rehearsals. Things that a lot of other meeting-planning companies don’t do, we do. And we built a model where we’re sort of soup to nuts, so not only do we design the agenda content, but we actually negotiate with all of the hotels, do the flights. We have an internal air department at our company. Transfers, greeting people at the door, all the food, all the AV production … as well as all of the on-site service, and then follow ups with budget reconciliation.
Q: How to you engage your employees in that culture of superior service?
We hire for service at our company and we train for meetings. We don't really hire a lot of experienced meeting planners because they have some habits that are not within our company. They would sit on the sideline. Our company strategy is to interact and become the client’s friend, because that creates the glue and it is the service business over the long term. We go to the store and get people tampons, aspirin or whatever they need, prescriptions, because that's the difference between us and our competition.
Mistakes in our business are very costly for us. So we do have a very strong perfectionist and detail orientation, and I demand that of my people. And when a mistake happens, we discuss that and we make sure it doesn't happen again. … If it's a small mistake can we learn from it and we avoid it with processes next time, and that's probably good for us that we learned about it. … What I'm really trying to build is a culture of accountability and ownership.
How to reach: A-Plus Meetings & Incentives, (786) 888-3201 or www.aplusmeetings.com
When Mindy Grossman came in as president and CEO of HSN Inc., she was the eighth CEO in 10 years — the company had hit a rut. But she decided to break that cycle by making big changes.
“What we really had to do was redefine the brand for today, unleash the potential of the organization and then build a business strategy, a product strategy and a long-term vision that really came from the core of the brand strategy,” Grossman says of the $3 billion interactive, multichannel retailer headquartered in St Petersburg, Fla.
Smart Business sat down with Grossman at the 2011 Ernst & Young Strategic Growth Forum to discuss how she implemented change at HSN to revamp the brand in 2006 and engaged employees in the process.
Q: How did you communicate HSN’s revamped message to its employees?
People need to understand not only the functional aspect of what you’re doing but what it means to them, what it means to their ability to be successful, what it means to their job, what it means to their role as an evangelist for the company. So in addition to a two-hour presentation (on our new brand and business strategy), we then … cascaded that through the organization in a very detailed way. We integrated it into all of our performance plans so people could identify what their objectives needed to be against the business and the brand mission.
Q: How did you boil down that message?
At the first level, we rolled out what our vision is going to be, which is really to create almost a distraction on the retail landscape. We changed the paradigm, our mission to bring the joy and excitement of new discoveries every day. And then we identified six pillars around that that we needed to have. … Then behind that, we said here are the three business priorities: grow our active customer base and lifetime value of every customer, expand our gross profit, and what we were calling total quality improvement — our people, our talent, our processes, our execution.
You’ve got to keep communicating that. I think one of the reasons we’ve been able to keep our momentum is they haven’t changed. I think one of the things that companies do is they zig and zag. … You have to have clarity of purpose and you have to make people get passionate behind it.
Q: How did you inspire confidence in the change?
What we needed to do is as we had successes — whether they be small, whether they be large — we communicated them and we celebrated them. So people felt the momentum was beginning, and they could get excited and they could share that excitement. And they have examples of where our changes were working. Because whenever you go into a transformation, once you’ve come out of it and you are building, you sometimes forget the ugly stuff that you had to do. You had to get out of businesses; you had to get out of brands. That first year we had to get out of $150 million worth of businesses that either didn’t fit the brand or warrant quality or weren’t relevant. You’ve got to make those changes and people need to understand why, because unless you can communicate that, they are confused. … Or they are scared; people are scared of change in many cases.
Q: Why did you celebrate success?
We knew that you couldn’t take 24 hours a day of programming, 365 days a year, and change it overnight. But what we did have to do was take some very bold steps.
For example, in beauty, 70 percent of our beauty business was in four brands that were exclusive to HSN, and we didn’t have a diversified portfolio. The company was having a difficult time attracting prestige and boutique brand. … In fashion, we had to get out of almost everything we had except for a few brands that we still have today and have grown. … So we did partnerships with (Sephora and) Scoop. … Fortunately, they worked and they served as catalysts.
So we had to celebrate that, even though in the scheme of things, they were a couple of hours of programming, right? But then you all of a sudden saw your profile go up in the marketplace, in the trade. You are then able to attract other brands and businesses. So those were the type of things that we had to do — communicate while we were doing it, and then come back to the organization and give them a little bit of a report card.
You have to do that (because) not everything is going to work. And you have to be as open and transparent to say to the organization, ‘You know, we tried this. We put a lot behind it, and you know it didn’t achieve our expectations. But here’s what we learned and here’s what we’re going to apply to the next time.’
Q: How do you build a culture that can embrace the failures?
We are a culture of change. We are a culture of strategic risk taking. I like to say, ‘We take risks; we don’t like to commit suicide.’ There’s a difference. We are at a culture of innovation, and if you are going to do that, you’re going to have to take inherently those risks. The thing that you have to do, though, is you can’t talk through two sides of your mouth. You can’t say we want to be this kind of culture and then something doesn’t work and you’re berating somebody for failure.
So we have a lot of dialogue so that when we are going into something that potentially might be defined as a risk, we talk about it. We identify why we’re doing it. We look at what the metrics and what our goal is. And sometimes the goal is less metrics and more impact. And so you go through all of that, and then at the end you do a diagnostic. And the way we approach it is not ‘This didn’t work. Why?’ It’s ‘What have we learned from this experiment, this launch, this … new direction?’ But if we didn’t do that, we wouldn’t have some of our most interesting businesses right now.
How to reach: HSN Inc., (800) 284-5757 or www.hsn.com
The office is evolving. New generations of tech-savvy, collaborative employees are knocking down cubicle walls and the corner office while shrinking real estate footprints.
By actively creating a more open environment that inspires ideas and increases productivity, employers are seeing benefits in increased morale, talent retention and lower real estate costs. This is occurring not only at the latest social media/Web startup but also at long-established corporations in a wide variety of industries across the country.
“Multiple studies, and even our own experiences, have shown that this new approach to office space is working,” says Gino J. Del Pup, senior associate of project management for Plante Moran CRESA, a real estate consulting firm based in Southfield, Mich. “This allows for a more efficient work model and a more innovative workplace, while also reducing your usable square footage significantly.”
But in order to foster such success with a new office design, there must be a clear vision and a keen understanding of who you are and where you want to go as a company.
“It’s not just a cool design, it’s a cultural change that a company has to make,” Del Pup says. “If it’s not done correctly, you’re not going to encourage innovation; you may just do the opposite.”
Smart Business spoke with Del Pup about how employers can make office design changes that get results.
How can supporting different work styles help your plan succeed?
People tend to work in a variety of ways, but four distinct styles are common: focus work (‘heads down’ work); collaboration (working with more than one person); learning work (learning by listening to others); and socializing (working in an informal setting with others). By understanding how people work, you can begin to design a space that embraces these styles to ensure a successful outcome.
Do you need to embrace employees across generations?
Definitely. We’re seeing a generational shift in who’s coming into the work force. The traditional office model that everybody is used to — private offices and rows of workstations — is inefficient and doesn’t speak to Generation Y and the Millennials. These groups generally respond better to flexible work environments that allow them to work out of the office, multitask, socialize and work in teams. At the same time, you cannot ignore the more seasoned individuals who are used to, and perhaps prefer, the more traditional work setting.
In many organizations, professionals in their late 40s and early 50s will likely continue to work differently than 20-somethings. To account for this, private offices are still important, but they are becoming smaller and not taking up the corner window anymore. The most successful companies respect and accommodate a variety of working styles, rather than forcing one style onto the entire office.
Why is it important to provide a home base for employees?
Even though people are working more and more away from the office, everybody still likes that sense of being, or that sense of home. We are social by nature, so we need that interaction with others. The office provides that home base to socialize, connect and collaborate with coworkers.
Current design trends confirm this, as companies are designing lounges, workout facilities and game rooms into their floor plans to improve morale, but more important, to give people a reason to come back to the office. The byproduct of this design rationale is employee retention.
How can technology help foster innovation?
Technology is a key component in creating a successful, innovative, collaborative environment. Previously, we simply did not have the technology that encourages a non-traditional work environment. We were tied to our desks. Wireless access was nonexistent; there was no VPN and no mobility. And cubicles hardly promoted innovation. In 2012, employees can work from any location. Advances in technology have created a new work environment; you can be at a workstation, in a meeting room, or 1,000 miles from the office and still have technology work for you.
What specific examples you are seeing?
It’s extreme, but an office where nobody has an assigned seat — much like a hotel, you reserve your ‘space’ online the night before, or as you walk into work. Employees utilize lockers to store their personal belongings each day and secure file cabinets for their work product. Private offices are located away from windows and are often shared. Meeting rooms are in abundance, as are private ‘call booths.’ I’m also seeing an increase in ‘benching’ in offices, where individuals work along each side of a long table. It seems counterproductive, but it forces people to interact and problem solve firsthand — it’s quite unique and something we will see a lot more of in the future.
How can changing your model save on costs?
Real estate has become very expensive, and a byproduct of this design philosophy is that you can ultimately reduce the square footage of your real estate. We’re finding that upward of a third of your real estate can be reduced by going to this model.
How can a company’s brand be important in workplace innovation?
It’s a key component to a company’s culture; it’s who you are to the outside world. Whether it’s the style of workstation, the color of the walls, environmental graphics, or architectural elements, these features can help reinforce your message to employees. People want to work for a brand they admire. When your brand can speak to innovation, collaboration, employee retention and intelligent use of space, you’ll have the edge.
Gino J. Del Pup is senior associate of project management for Plante Moran CRESA. Reach him at firstname.lastname@example.org or (248) 603-5097.
As leader of the Americas Strategic Growth Markets for Ernst & Young LLP, Herb Engert works with entrepreneurs on a daily basis.
His practice guides leading high-growth companies, and takes a leading role in putting on the Ernst & Young Strategic Growth Forum.
Smart Business sat down with Engert at the 2011 SGF — which brought together more than 2,300 of the world’s top CEOs and business leaders in Palm Springs, Calif. — to discuss his firsthand insight into what makes a successful entrepreneur.
Q: What traits define the successful entrepreneurs you see at the SGF?
The No. 1 characteristic of a leader is actually having vision. … They do see things that perhaps we don't see. But they actually look for opportunities — unmet opportunities.
They are bold; they are not afraid to take risks. They actually really are just unafraid. They’re out there, they're on a mission, they’re growing their businesses, and they’re not worrying.
Q: How can successful entrepreneurs retain that vision?
You’ve got to work on the business, not in the business. I think great CEOs can actually see the fact that they need to bring in and surround themselves with great talent, because they need to take that step back. They need to continue to let the creative juices flow and to not get so in the business that they don't see some of the things that maybe they saw when they first started the business.
Being able to admit that you don't know something and either go find somebody that does or get somebody to help you, it's key. Most of the great leaders, most of the great CEOs out there, clearly are humble enough to basically know that they don't know something, and actually will go seek help, bring in a great team.
Q: How are these entrepreneurs groomed for success?
There are a lot of CEOs that actually do come out of corporate America, so there are a lot of seasoned entrepreneurs that actually are very successful and they actually have grown up in large organizations. They come to their entrepreneurial roots, ultimately, coming out of larger organizations where maybe they were in an ‘intrapreneurial’ role. … That training ground, that proving ground, has actually been most helpful to them.
Q: Why is intrapreneurship important for large companies to foster?
What I really think is the missing opportunity is that concept of ‘intrapreneurship,’ because if most organizations were smart, they wouldn't let some of those people leave. They really would foster that spirit of entrepreneurship and promote those ideas and incubate them inside their organizations.
As much as corporate America is incubating those ideas, I think we have to do more of that because there are some large organizations that really do make a world of difference. They've got the resources and they can really commit. And if they really empowered the spirit of ‘intrapreneurship’ and empowered entrepreneurs within an organization, just think of what they could create and what they could develop and where they could take themselves.
How to contact: Ernst & Young LLP, www.ey.com
The financial industry is experiencing a crisis of confidence.
So says Ronald Kruszewski, chairman and CEO of Stifel Financial Corp., a 5,000-employee securities-related financial services company headquartered in St. Louis, Mo.
“It’s the (lack of) confidence in our political process and in the fact that we can remove uncertainty from the business environment,” Kruszewski says.
Smart Business sat down with Kruszewski at the 2011 Ernst & Young Strategic Growth Forum to discuss how Stifel Financial Corp. inspires confidence in its clients through a decentralized model that empowers the individual employee.
As a service-oriented organization, how do you approach process improvements?
It’s an education process. We deal in a human capital business, so we can’t do a lot of things with technology. We can do a lot of things within streamlining processes, we can do things in terms of how we buy things cheaper, none of which adds to the quality of the product that we deliver, which is financial advisers working with their clients to meet their individual objectives. So what we do is educate our people and make sure that they understand what’s going on in the marketplace.
We embrace the entrepreneur. The entrepreneur in our place is the individual financial adviser who deals in their clients’ interests versus an overall company viewpoint.
How do you embrace that individual financial adviser versus an overall company viewpoint?
Financial advisers attract clients that share their views. One financial adviser’s views can be diametrically opposed to another financial adviser’s views. From my perspective, that’s a good thing. As long as they’re dealing with their clients and dealing in their clients’ best interests, it doesn’t matter to me if one client thinks the market’s going up and another thinks it’s going down.
If you think about it, for any organization to think that every client is homogeneous is a ridiculous assumption, to think that everyone thinks the same way or that my viewpoint on the market should be all of our clients’ viewpoint on the market. That is a unique way that we run the business, and very different from those very large firms that believe that they have an asset allocation and a strategy that everyone should follow.
I don’t have an executive committee, where people believe that everything has to be run through an execute committee. We have built the company by embracing change.
How have you embraced change?
We’ve made nine acquisitions. This company today is the melding of nine different cultures versus us saying “Well, you know, we’re going to do it our way.” My viewpoint is that “You did it right. We can do it together.” And when you build that culture where people know that we will do what’s best, not what was made here, that culture’s pervasive and it breeds doers. I like doers. If you want to work in our organization, you’re a doer, not a listen-to-orders type person.
My personal management style is very hands up. I don’t believe in committees at all — I believe in doing. I believe in my people asking for forgiveness, not permission, and that my management style is dependent on talented entrepreneurial people having the freedom to do what they think is right.
HOW TO REACH: Stifel Financial Corp., 800-679-5446 or www.stifel.com
Jim Keane says the nature of work is changing.
As president of the Steelcase Group brand of Steelcase Inc., a global leader in the office furniture industry based in Grand Rapids, Mich., he is at the forefront of adapting its product line to accommodate this change.
“There’s a major shift from individual work to collaborative work,” he says. “And to the extent you do individual work, because you have new technologies that allow for mobility — things like wireless laptops, smart phones — people can do their individual work from anywhere.”
Smart Business sat down with Keane at the 2011 Ernst & Young Strategic Growth Forum to discuss how the 10,000-employee company generates, tests and implements new ideas for its product line to meet the changing needs of today’s workforce.
Where do you get inspiration for products?
We believe in user-centered innovation. … What happens when someone actually sits in our product, uses our product or goes to the conference room and tries to make a video conference call? How can we make life easier for them? How can we get at the root of what they’re really trying to get done? And we find that surveys aren’t very useful for that because people just don’t think about these things. So the most powerful tool we have seen is observation, literally just standing there and watching.
Every time we work with a client, we go back and we observe what things that worked the way we expected and we look at things that were different than we expected. Sometimes those differences give us ideas. We also are very careful about studying people at work. We have people inside Steelcase that are sociologists, anthropologists, people who are trained in design thinking. … They kind of tease out behaviors that they’re seeing (in the workplace).
Studying things that have nothing to do with furniture is actually very helpful. So I attend conferences that have nothing to do with business and nothing to do with furniture, and I learn about biology and new things that are happening with that field. I learn about architecture and design, which have a tangential relationship to us. … Almost always within six months or a year after the conference, I find myself thinking back on one of those presentations and remembering something somebody said and beginning to think about how it could actually be relevant to what we’re going to face in the future.
How do you turn an idea into a tangible product?
We very quickly in our innovation process move from ideas to prototypes. … We experiment on ourselves, and our employees love being part of experiments we run inside the company. We’ll also do this sometimes with clients. We’ll have clients who will ask to be part of pilot product testing.
We’ll study something, we’ll come up with our own range of ideas and we’ll very quickly build rough prototypes. These might be built out of foam board, they might be built out of cardboard, so we’re not intending to sit in it or work at it. But we just want to feel what that’s like, and then we tear it up. We learn from it, we tear it up and we start over with something that might be built out of wood. And then we’ll tear that up and we’ll keep iterating — maybe five, 10, 15 iterations on an idea — before we finally decide that it might be something we want to launch as a product. So we fail over and over throughout that process. Fail early, fail often, but keep iterating.
How do you take lessons from that process and apply it to future ideas?
We try to capture the lessons that we’ve learned. We may capture it through video; we may capture it through still images. We love, for example, giving users disposable digital cameras where they can take pictures of whatever they want to take a picture of to relay to us their experience in using the product they’re testing. So we end up with rooms that are wallpapered with these photographs. We might capture thousands of photographs from stage to stage, and then on that wall there might be little Post-it® notes or things that are the synthesis of the lessons that we’ve learned. So as our team continues to work, they never leave that space. They continue to work in that space and they see the progression of their idea from the early stage ideas all the way through to the end.
How do you get your clients’ constituents on board with changes to their work environment?
We have consultant services we offer, and our dealers also offer services, to help manage that change process. Some of it is actually engaging the employees of the company in the design. … A lot of times the employees have strong views about the way their workplace should be. And by working with them, we’re able to help them play a role in the design process, and that creates true buy in.
We also work during the move-in process to help people make the adjustment from the kinds of spaces they had before to new kinds of spaces — help them get their chairs adjusted, help them figure out how they’re going to use the new kinds of storage. And if you do all those things right, if you pick the solution that’s right for your company, if you engage your employees in the design and if you play close attention to individuals as they make their way through the process, it can be very successful.
HOW TO REACH: Steelcase Inc., 616-247-2710 or www.steelcase.com
Scott Case says the growth of startup companies is what drives all job creation in America, and is the key to revitalizing our economy.
Case is CEO and board member of Start-Up America Partnership, a public-private partnership with the Whitehouse focused on helping young companies grow.
Smart Business sat down with Case at the 2011 Ernst & Young Strategic Growth Forum to discuss how individuals and organizations can engage with startups to help them succeed.
What challenges do startups face in the early stages?
There’s a huge difference between young, ambitious startups and small companies. And the institutions and the members of the broad startup ecosystem that engage with startups — whether they’re active or passive participants — need to recognize this category of company.
Now the challenges that (start up founders) face are the same challenges that every entrepreneur has ever faced. … They fall into basically five core categories: they need expertise, they need to develop a network of mentors and advisors and people who can help challenge their assumptions and to help them to make better decisions; they need to have support services, that’s the lawyers and the accountants and the back office people that when they get it right it’s invisible and when they get it wrong it can be disastrous; talent, they need to select just the right people, so those early first employees are critical to their long-term success; they need to really focus on who their customer is and understand their relationships with customers and develop those customers; and finally, they need to understand capital.
I always put capital last because first-time entrepreneurs often put it first, and it’s almost always the case that those other four things aren’t developed well enough yet before they’re going to be able to get that capital investment.
How can entrepreneurs engage with startups?
We need you in these start-up ecosystems, in these communities. Engage in your local start up businesses. That might mean looking up what the local lean start movement meet up is, the tech meet up that’s happening, a local conference that’s focused on companies and startups – engage and participate. Just showing up, especially if you’re successful and you’re recognized in your local communities as a successful entrepreneur, just being there is an inspiration to these folks. And you’ll be inspired yourself because these young entrepreneurs, these young companies — first time founders, second time founders who are creating these great companies — they’re energizing.
The easiest thing to do is look for startups in your local geography and take one of them to lunch and offer to help. Give them your sage advice, help them make new mistakes and avoid the ones you’ve already made. It’s a great opportunity for you to participate.
How does your organization help companies find expertise?
One example of a partner is an organization called Start-Up Hire. … You can join Start-Up America and get access to Start-Up Hire, which allows you to post jobs. But it’s totally focused on people who are looking to join startups – which again, is a very different class of people. The person that puts their resume up on Monster.com is not necessarily thinking about joining a startup. They’re a different breed of people we call starters who join founding teams, because founding teams are generally populated by total maniacs who are attacking some market that didn’t exist until they came up with it.
Another example is we created something called a Start-Up Corporate Connection. Corporations in America have entire engines for recruiting the best talent. If you’re a fourth runner up to three positions at a company like General Electric, you’re probably highly qualified. You might not consider a start up or you might not even be aware that there’s start ups around you.
And then finally, … we’re basically partnering with serial entrepreneurs in places … to create these vibrant startup communities that not only bring the startups together, but then attract and create mechanisms for talent. And one of the greatest forms of talent in those regions are universities. It’s an absolute tragedy that young people come and they fly all the to go to school … to spend four years and then they leave. What a great missed opportunity to connect them with the startup communities there.
How can you tell which entrepreneurs have the perseverance to succeed?
You generally have a track record. It’s pretty measurable. Did you have a company that succeeded or didn’t you? And that doesn’t mean that it’s a success or failure model, because mistakes and failures are made.
You may have stumbled along the way, a competitor might have eaten your lunch, you may not have been able to raise capital – but you learned something from that.
HOW TO REACH: Start-Up America Partnership, www.startupamericapartnership.org
The corporate lanscape is ever-changing, presenting new challenges for entreprenuers.
These challenges are a key focus area for the Ewing Marion Kauffman Foundation, a nonprofit based in Kansas City, Mo. The foundation conducts research and offers programs to advance entrepreneurship.
Smart Business had the chance to sit down with Lesa Mitchell, vice president of advancing innovation for the foundation, at the 2011 Strategic Growth Forum to discuss current entrepreneurial trends and challenges.
What are trends you’re seeing in entrepreneurship?
Global is the biggest trend — global companies are popping up everywhere that you can imagine in the world. Companies are starting global instead of kind of the old school way of starting local, then starting in your region, then going to your country.
The other absolute biggest trend — but frankly this one is predominantly in the United States — is women. If you’ve looked at the numbers, it’s no longer a gender issue; it’s an economic issue. The availability of women that could be high-growth entrepreneurs is frankly in some sectors way higher than men. And so the fact that we’re not engaging them as entrepreneurs is kind of a problem.
What new challenges do companies that start out global face?
In the old days when you created a company, you’re thinking about “Who’s my customer?” And what was easiest to think about was the customer that you knew. Well, in the new world of social media — whether it be Twitter or Facebook or Google or whatever — you’re not going to know your customer. … Platforms are everywhere and they’re unbelievably hard to do.
A lot of these new firms make serious mistakes in the first one or two years that they don’t know are mistakes until they’ve hit real growth, and you kind of can’t get out of it.
What would be an example of one of those mistakes?
Number one example is founder issues: your deal structure with your co-founders. … Frankly, 50 percent of companies melt down because of founders’ issues. It’s such a huge number and it all happens in that zero to five (year) space.
If you’re already starting global and then you’re scaling and then you have these issues, we are really worried about what that’s going to mean. Because literally companies … totally and completely blow up and go away because usually they won’t agree on their deal structures and it becomes personal. They’ll never agree, they won’t give the other person the company and you literally have to shut it down.
We really have to make sure that we’re surrounding entrepreneurs at an early stage, surrounding them with the right advisors that are global. But they have to be global.
I’ve had multiple of the “winning women” tell me that they’re in these kind of niche places, and they end up trying to work with advisors that are around them but have experience growing a company 20 years ago and literally don’t get kind of how to grow a company in the new world, so they end up having to reach out way beyond their community to find somebody big enough to do that. And so there’s a huge shortage of global experience for some of these early entrepreneurs.
What are the challenges unique to women entrepreneurs?
Women don’t think big.
There’s a young woman here that’s an entrepreneur “winning woman.” … I sat down with her this morning … and asked her about her goals and her targets, and I was very unhappy with her response. It was in the multimillion. I said, “I don’t understand. You have a rock star technology company. You could be a billion-dollar company. Why is nobody saying that you could be a billion-dollar company to you?” And she kind of looked at me with this shocked look on her face, and she said “Nobody’s ever said that to me before.”
I think women have the skills, they have the capability to start these companies, but women don’t necessarily … talk about how great they are. … Men will come right in and meet you the very first time; “I’m growing my company to a billion.”
In many cases, (women) don’t ask for help, they kind of feel like they have to go at it alone. Zero percent of the entrepreneurial “winning women” have advisory boards. Zero.
Even very successful women don’t get asked to sit on boards. That’s why we have very few companies with women entrepreneur board members. So it’s kind of this “don’t ask for it, isn’t offered.”
HOW TO REACH: Ewing Marion Kauffman Foundation, 816-932-1000 or www.kauffman.org
As a working mother of two, Jo Kirchner identified with the growth goals of the founders of Primrose Schools — shifting their half-day preschools to full-day child care facilities that offered high-quality preschool.
“They were really seeing a shift with professional working women who needed to go back to work and were looking for quality care,” Kirchner says.
She joined the organization in 1988 as a consultant to assist with the shift. Now, serving as president and CEO, she continues to modify the school’s model to grow the Acworth, Ga.-based company, which now encompasses 235 schools in 17 markets.
Smart Business sat down with Kirchner at the 2011 Ernst & Young Strategic Growth Forum to discuss how Primrose Schools continues to innovate its model using feedback for curriculum improvements.
Q: How do you engage your constituents to identify their needs?
In the beginning, it was a lot of consumer research — research studies that we were doing or outsourced research companies that would do surveys for us. But today, social media has enabled us to engage with them directly. Not necessarily the children, but with the staffs, with the parents, with the franchise owners and the people in the communities that we serve. We’re able, through social media, to connect to them beautifully. They’ll tell us exactly what they want.
Q: How do you gather and filter feedback to find the best ideas?
Our franchise owners are very savvy with social media. They have a tendency to funnel those innovative ideas up that they’re getting in their local markets, because the franchise owners (and) the parents have relationships. … So either via social media or via direct, the parents are giving them ideas and best practices or recommendations.
An innovative idea that comes from the field, we’ll test it in our school and we’ll test it in the field. Then we roll it out. … The best way to make an idea really stick and be imbedded in the organization is to engage the franchise owners in developing it, and then launch it in a consistent way where you’ve worked out all the bugs.
For example: music. We knew there was a weakness in the music program that we had because we were getting feedback from parents via social media and because when we were assessing the skill sets of the children they were weak in the music area. So we went back and found a partner out in the marketplace that had a fabulous music program … and embedded it into our curriculum.
Q: How do you assess students to evaluate the curriculum?
We pre-assess and post-assess the children in the four- and five-year-old programs so we can see through this assessment research how well the children are progressing. And if there’s an area that they’re not getting what they need, we’re then that next year working on embedding it in the curriculum and rolling it out.
We are the only for profit education company in America that’s delivering exactly the same curriculum in every school, every week, every day, every year. And so if we know it’s not a teacher, it’s not the room and it’s not the child, then it’s the curriculum (that’s the problem) if we see something consistently across the country.
Q: What role does technology play in innovating curriculum?
For instance, we’re Skyping in the four-year-old classrooms with children in China. We’re bringing iPads into our after-school program to begin to work with children with the iPads, really using technology as much as we can.
Q: Where do you see the future of Primrose Schools?
I had an opportunity to visit Dubai to accredit the American International School. And while our plan is to double the size of the company here in the United States in the next five to six years, it became really apparent to me at the American International School that I visited that there was a great opportunity for preschools in other countries.
We’re getting people contacting us because obviously education is a driving force for the future work force, and all the research says that brain development in the first five years has a significant impact on a child’s learning and life skills. So early childhood education is really becoming well-recognized as a very vital component, yet most countries don’t have a proven model for that. So what’s next for us is to start researching international and beginning to look at how we’ll deliver in an international market.