No one can argue that technology has changed the way we do business. We can now accomplish more tasks, from more places, than we ever could before. Technology has not only changed the way we work, it’s also changed where we work.
A big aspect of this is the emergence of the remote work force. Although you may be wary of a remote work force, fearing that your employees’ productivity will dip, it can offer many significant rewards, including reduced expenses and decreased attrition. Not only that, a remote work force can actually improve productivity.
Besides the business benefits, a remote work force will reduce your utility costs and make your company greener. By implementing a few procedures and processes, you can quickly and easily improve both your economy and the ecology.
“Remote work forces have already become an integral part of many U.S. companies,” says Monty Ferdowsi, the president of Broadcore. “There are many benefits for allowing your staff to work virtually anywhere and anytime.”
Smart Business spoke with Ferdowsi about remote work forces and how they can save you time and money and enhance your business.
How can virtual solutions create efficiencies for telecommuters?
In the early 1990s, the concept of telecommuting surfaced, promising to virtualize the work force via the use of new telecommunications technologies by allowing employees to work from home. At the time, however, it was just a concept, as the technologies required to easily implement the solutions were not readily available or matured enough to allow for companies to easily and cost-effectively implement telecommuting.
Today, though, with the advent of many technologies, including abundant broadband connectivity services (DSL, cable and wireless), remote access to corporate networks (Citrix and MS Terminal services) and a well-matured voice over IP (VoIP), it is now possible for companies to reap the many benefits of implementing telecommuting.
Many companies have already come to realize these benefits, and in the last few years, they have implemented capabilities to allow their staffs to use telecommuting on a per-employee basis, wherever and whenever it makes sense. Of course, with any disruptive and innovative technologies, there will be some companies that hesitate to embrace them, but with a well-planned implementation strategy, most concerns can be overcome. There are many success stories and case studies that would allow companies to see how other organizations have benefited using virtual technologies for their work forces.
In this environment, what kinds of advanced virtual capabilities can benefit businesses?
Allowing employees to telecommute enables companies to tap into a much larger pool of skilled workers, well beyond the geographical boundaries of the company’s physical office(s). Organizations will also be able to retain skilled and valued employees when someone needs to move to a city or state that’s not within driving distance of the corporate office. Studies also have shown that allowing telecommuting on a full-time or part-time basis will increase employee morale, since employees see several personal benefits of telecommuting, including reduced or no travel time, reduced costs associated with transportation and flexible working hours.
How can remote work forces save businesses money?
There are several cost savings to be had when you use virtual capabilities to implement remote work forces, including a need for a smaller office space and savings in many of the general costs associated with housing staff in the corporate office (furniture, electricity, etc.). Implementing telecommuting on either a full-time or part-time basis can also mitigate the need for a growing company to move its office location, which can be a major task with many related costs.
What technologies are needed to implement a remote work force?
Today, the virtual technologies needed to create virtual work forces are readily available, however, it is imperative for companies to evaluate all the solutions available in order to receive the most optimized services. In general, there are two categories of services that need to be virtualized to extend telecommuting to employees: remote desktop connectivity to the corporate network and voice connectivity to the corporate telephone system.
There are several technologies for remotely connecting employees to the corporate network, including Citrix and Microsoft Terminal Services. These technologies have matured and are relatively simple and inexpensive to implement. Voice connectivity is, however, a bit more complicated. Establishing remote connection to a corporate telephone system is no small feat. Luckily, in the last several years, hosted telephony services (Hosted PBX) has greatly reduced both the cost and complexity of implementing a virtual telephone system, allowing a corporate telephone to be extended to a remote telecommuting work force.
Monty Ferdowsi is the president of Broadcore. Reach him at (800) 942-4700 or email@example.com. Broadcore (www.broadcore.com) has more than 20 years of telephony experience with five years of deploying advance hosted telephony for major U.S. companies.
Stockholders in public companies often hold their shares in “street name,” meaning that they hold their shares in the public company through a broker, trustee or other nominee rather than in their own name. On July 1, 2009, the Securities and Exchange Commission approved an important amendment to New York Stock Exchange Rule 452 that prohibits brokers who hold shares in “street name” for their clients from voting in uncontested director elections on behalf of their clients when they have not received voting instructions from those clients.
The amendment was “designed to enhance corporate governance and accountability by helping assure that investors with an economic interest in the company vote on the election of directors.” The amended rule applies to stockholder meetings held on or after Jan. 1, 2010, and impacts not only New York Stock Exchange listed companies but all other public companies, whether or not listed.
Smart Business learned more from Jonathan Friedman, an associate with Stubbs, Alderton & Markiles, LLP, about how the elimination of discretionary voting in uncontested election of directors impacts public companies.
What does the new rule require of brokers?
New York Stock Exchange Rules and SEC rules mandate that brokers deliver proxy materials to stockholders who hold their shares in ‘street name’ and request instructions from each such stockholder as to how to vote their shares at a stockholder meeting. Prior to the adoption of the amendment, if a broker did not receive voting instructions from stockholders who hold their shares in ‘street name’ 10 days prior to the stockholder meeting, Rule 452 permitted the broker to vote such shares in uncontested director elections on behalf of his or her clients at the discretion of the broker.
What is the overall impact of the amendment?
Upon the effectiveness of the amendment, brokers will not be permitted to vote shares on behalf of their clients in uncontested director elections unless they have received specific voting instructions from their clients. Among others, the following are potential impacts of the rule change:
- Since individual investors (generally known as retail investors) who hold their shares in ‘street name’ typically do not provide voting instructions to their brokers and brokers have traditionally exercised their voting discretion in uncontested director elections by voting in favor of management’s director slate, the new rule may make it more difficult for a company to implement its desired director slate. This is especially true for companies that have adopted ‘majority’ voting in relation to the election of directors rather than ‘plurality’ voting (plurality voting means that directors with the most votes are elected, even if they receive less than a majority of the votes cast).
Majority voting provisions come in different flavors. Companies with a ‘majority’ voting provision that requires a majority of the outstanding shares to approve the election of a director stand to be most impacted by the rule amendment. Companies that have adopted a majority voting provision that requires a majority of votes cast ‘for’ a candidate to exceed votes cast ‘against’ a candidate in order to elect such candidate may also be impacted by the rule amendment but to a lesser extent.
- The elimination of broker discretionary voting may make it difficult for companies to achieve a quorum at their annual meetings, since brokers may not be allowed to submit proxies on behalf of their clients who fail to vote or provide their broker with voting instructions. Consequently, management and financial resources may need to be utilized to achieve a quorum, for instance, through the engagement of a proxy solicitor.
- The rule change is expected to strengthen the influence of institutional investors and activist shareholders (who typically provide voting instructions to brokers) at the expense of retail investors (who typically do not provide voting instructions to their brokers) in the election of directors.
What steps should companies take now?
Companies can mitigate the impact of the rule amendment on obtaining a quorum for an annual meeting by including at least one proposal for consideration at the annual meeting that is ‘routine’ under rule 452. If a company includes at least one ‘routine’ proposal, such as the ratification of the company’s auditors, brokers may vote the shares that they hold for their clients on such proposal without instructions from their clients, and such shares will be present for purposes of establishing a quorum at an annual meeting.
Business leaders should understand the mechanics and consequences of how directors are elected at their annual meeting. Has the company adopted ‘plurality’ voting or a ‘majority’ voting provision? If a company has adopted a majority voting provision, it should understand whether directors are elected by a majority of votes cast ‘for’ a candidate exceeding votes cast ‘against’ a candidate, or whether a majority of outstanding shares are required to elect each candidate.
Companies must also assess their voting constituency. Businesses with a large retail base may want to consider improving communications with such investors, for instance, by hiring a proxy solicitation firm in connection with its annual meeting to help secure the required vote on management proposals and to assure that a quorum is present at the meeting. If management believes the engagement of a proxy solicitation firm is necessary, they should budget for additional costs for this purpose.
Jonathan Friedman is an associate with Stubbs, Alderton & Markiles, LLP. Reach him at firstname.lastname@example.org or (818) 444-4500.
Chances are you’re feeling the pinch of today’s economy in ways you never expected. With the recent banking crisis, you may be hesitant to share your worries with your bank for fear that it may see you as a risk. And your concern may be well-founded, as more than 40 percent of banks reported a reduction in credit lines to small businesses, according to a survey by the Federal Reserve.
But now, more than ever, is the best time to buddy up with your banker to develop a strong relationship that can help pull you through hard times and can ultimately save you money.
Forming a partnership with your banker makes sense, as you both share a common goal: the financial strength of your business. By talking candidly with your banker about all aspects of your business, you bring a financial expert to your inner circle of decision-making. Along with your accountant and attorney, your banker can help you streamline efficiency and keep you on the track to financial soundness.
“We act as a counselor or adviser to businesses during a very unusual time,” says Rod Banks, executive vice president commercial banking services, City National Bank. “The biggest thing we owe our clients these days is communication about what we’re seeing and how to deal with things.”
When you make time to talk with your banker regularly, you ensure that you receive the best services possible as well as the advice you need to keep your company running smoothly even when the economy is bumpy.Keep communicating
Communication is key during any climate, but keeping the lines of communication open becomes of utmost importance during downtimes.
“During times like this, you have to communicate twice as much as you normally would, on both sides of the equation,” Banks says.
Rick Davis, executive vice president, division executive for Southern California, Bank of the West, agrees.
“That openness of communication is really the cornerstone of a good banking relationship,” Davis says.
Like in any new relationship, those first discussions can feel a bit awkward. But each time you sit down with your banker whether during a quarterly meeting or through a monthly phone call it becomes more of a friendship. The most basic way to begin building the relationship is by inviting your banker to visit your business, so that he or she can visualize your passion.
“A business should be inviting their banker to their facilities,” Banks says. “If you have a banker that’s not coming out to see you, that’s probably a sign that they don’t know the business very well.”
From the onset, you must convey to your banker a sense of openness and eagerness to discuss the various aspects of your company. Additionally, there should be an understanding that both sides are in it for the long haul.
“One of the important things we do is to sit down and reassure customers that we understand what’s going on, and we see what they’re doing and how they’re coping with it,” Davis says. “That has been very beneficial to reducing the stress level out there, as they cope with a very difficult market.”
Discussing a vast amount of information will help your banker understand that you respect the partnership and are looking to the future.
“Openness, honesty, communication and candor are just critical,” Davis says. “You should not be hiding anything from your bank, the good or the bad things.”
While it’s easy to share positive news, such as unexpected revenue, some executives may find their heart racing when they think about telling their banker that a major account is hovering near bankruptcy. However, discussing matters quickly and honestly can pave the road to an amicable solution. Bankers detest surprises, so ensuring that you are their first line of communication is paramount.
“This is a time when you don’t provide surprises to your bank,” Davis says. “You let them know if you’ve lost a major account or you’re not going to make your numbers or you’ve lost a sales manager. You should sit down with your bank and talk about what you need to do to get back on track.”Maximize the relationship
With a trusted adviser on your side, you can work together to develop a plan to prosper. To make the most of the partnership, go over your business plan together and discuss how to improve efficiency. Even if your company is thriving, you can always benefit from the sound advice of a financial professional who can help you look to tomorrow.
“They should be sitting down with their bank, around their business plan, and having us validate their assumptions; taking a look at their projections and giving them any insight that we have,” Davis says.
As a CEO, it’s your job to update the bank on any changes in your industry. Your banker can then help you plan your next best step, whether it be trimming costs or planning an expansion. It’s also a good idea to ask for your banker’s opinion on how you can take advantage of the low interest rates offered today. Refinancing may lessen your payments and free up cash for other investments.
“One of the advantages, if you’re a borrower in a recession, is that rates are at an all-time low,” Davis says. “Your banker will tell you all the different products so you can lock in low rates.”
Once you have a relationship with a bank, it may be tempting to shop around for additional services. However, remaining loyal to one bank for a variety of products even when you could get a slightly cheaper price elsewhere may actually save money in the long run. When a company has a variety of services throughout different departments of the bank, that company becomes a household name inside the bank and may be considered for special offers.Find the right products
Banks today offer more services than ever before, and tackling the list on your own can be overwhelming. Once your banker understands your company, he or she can assist you in selecting products and services that can streamline your workday and improve your bottom line.
Though some services have a fee, the benefits can outweigh the costs. For example, compared to traditional check depositing, remote deposits can save time and money by eliminating the need for an employee to drive to the bank.
In today’s market, cash is king. Products are available that can maximize your cash flow. Your banker can also provide advice on the best use for additional money such as investments or paying down loans.
With the nature of banking constantly evolving, a business must trust its banker to match the business with appropriate products. A company should review its banking products annually to stay fresh on the offerings.
Mohan Maheswaran admits that he wasn’t natural management material.
The Sri Lanka native is an engineer by trade, and he preferred tinkering with technology.
But during a decade-long stint with Texas Instruments, a mentor showed him tinkering could come from the executive suite.
“One of the things that he said to me was any good business must drive its own energy,” Maheswaran says. “In other words, it has to drive the energy to move itself, and it took me a while to figure out what that meant. Well, he showed me how it works in practice, and it’s really a wonderful thing when you see it working. Essentially, what you do is you put in place the systems, the processes and the people and, as the leader, you facilitate the business. But by virtue of the systems, strategy and the execution model you put in place, the business should have the energy to drive itself. So I’ve always taken that philosophy and applied it to everything that I’ve done in business. I say, ‘Hey, I can’t spend all of my day, seven days a week, focusing on the business.’ I have to be able to see it growing and scaling, even if I wasn’t there.”
So while Maheswaran became management material along the way, taking the post of president and CEO at Semtech Corp. in April 2006, he realized that not everyone shared his vision of a high-energy culture that could carry the day. In fact, the culture at Semtech was in direct opposition to this. The supplier of analog and mixed-signal semiconductor products was still performing — it posted $252.5 million in fiscal 2007 net sales — but that number was its second straight year below its record sales in fiscal 2005, and it was rife with signs of a struggling, fear-based culture.
“A lot of employees were somewhat afraid to take risks, unwilling to make decisions, and for me, a no-decision-making culture is doomed to failure in this competitive environment,” Maheswaran says. “You have to make fast decisions. You have to make well-balanced decisions, but you have to make them quickly, and that doesn’t come from a fear-based culture.”
So Maheswaran changed that culture by putting top-flight managers on the job and instilling systems that let people build their own expectations to fit his vision.Start at the top
Maheswaran realized he alone couldn’t change the culture of a global company with nearly 1,000 employees, so he decided he wouldn’t.
“For the leader, the No. 1 task is to put into place a management team that can get the job done,” he says. “I can do all the talking and waving and define the vision all I want, but if I don’t get the management team to go execute it, it’s nothing.”
If you have a vision of a culture that can drive itself, you have to have self-starting managers. Finding those people is twofold. They have to share your vision and then you want to make sure they have the winning attitude to carry it out.
“That winning attitude can drive high motivation even in downtimes,” Maheswaran says. “So the people with the can-win and can-do attitude, despite the environment, are the ones that differentiate themselves.”
How do you find that attitude? It starts with a passionate person who matches your drive and has values.
“Give me a passionate individual, someone who really wants to work hard and wants to achieve something, (someone) not looking for money, not looking for recognition, they just really want to achieve and do something great and different,” Maheswaran says. “The second thing is somebody with values. If you have somebody with a lot of integrity who is a good team player, they look to motivate rather than demotivate people.”
Since resumes and interviews can be misleading, you have to tune your ears in for some keywords to make sure you get what you ordered. Here’s a phrase to look for: earning it.
“Some people think that rewards and bonuses and equity are entitlement,” Maheswaran says. “Well, in my world, they are not. I find it amusing when I see all the news out there on executive bonuses and I see people getting massive bonuses when the company is in dire straits. I sit back to myself and say, ‘How would I feel if I got a bonus and the company is not making any money?’ That doesn’t make any sense to me. So I want people who come on board and say, ‘Look, if we perform well and deliver results, we want to be rewarded. If we don’t, we don’t want to be rewarded.’”
For the record, these people don’t come in any one shape or size. Maheswaran’s executive team is from all over the world and is composed of people he’s worked with before, executives already in place at Semtech and new hires. But he says you personally need to spend time doing interviews to ensure that each one meets this leadership litmus test.
Maheswaran also refused to take second best, getting permission from his board to do broad searches, extensive interviews and give the incentive-based compensation models that would befit the person he wanted.
“It’s the only way,” he says. “If you settle for anything less than that, you are really saying to yourself I’m going to have to not be as aggressive in pursuing the vision.”
Once he brings these people in, though, he doesn’t just trust that they’ll be 100 percent there on day one. He has them work directly with him during their training to share the culture of empowerment at Semtech.
“If I made the decision to bring in an executive, it’s my job as their manager and their leader to give them the tools and show them the way,” he says. “What I find is that when people have spent some time with me, they develop that passion and that culture because I have it and people who work with me develop it.”Build accountable systems
Maheswaran doesn’t use euphemisms when discussing the biggest challenge he had in reworking the culture at Semtech.
“The execution of the company was just not where it needed to be,” he says. “At all levels and all areas of the company, I found the execution to be poor at best.”
So before he could completely empower people to make their own path, he had to make sure they understood the new direction.
“That was a big challenge because this is not only a cultural shift, but it’s also behavioral and a people shift,” he says.
Semtech didn’t have any systems in place that pushed for higher efficiency or risk-taking. The result left processes feeling stagnant. When you’re dealing with that type of cultural idle, you can’t just give people marching orders and expect them to change course.
“The main thing is really enabling the people to shape the vision to help them see that in their own roles how they can help create a great company, so not only communicating the vision but communicating the shared common purpose,” Maheswaran says.
In order to involve them in that process, you simplify it and let the energy build by explaining what individual results mean.
“Break it down for the people,” he says. “When you’re trying to bring out the best in people, you really have to simplify things to show them how to get from A to B.
What you do is you set the vision and break the vision down and say, ‘If we can achieve at the end of this year this milestone, and the end of next year this milestone, we’re on our way.’ It’s the road map of how to get from A to B. There are always choices and there are different paths you can take, but which is the right path for the company? That’s really where the leader and the management team play a very important role in defining that road map.”
So you create an overarching vision and then ask people how they’ll step up and perform to it over whatever realistic time frame you set for significant change. Then, you measure that.
“The first thing you do is you start to measure things and you start to set milestones and you put metrics in place and you start to measure people and hold them accountable,” he says. “So I asked people, ‘What are you going to deliver next quarter?’ You tell me I’m going to deliver A. Well, if next quarter you deliver B, I want to know why, what’s the difference?”
Many employees will be enthused to set their own targets and take on new challenges. But when people don’t perform right out of the gate, give them time. Remember that people will still be a little shell-shocked by the adjustment from a stale culture.
“The trick is to watch out for the people that are actually very good and can execute well but they’ve been demotivated for so long that they don’t actually get there,” Maheswaran says. “So you don’t want to throw the baby out with the bathwater, right?”
So when they don’t perform you ask them what left them out in the cold and help them adjust so they know something like coming up short of stretch goals isn’t the problem. If they come up short again, you repeat the conversation but not ad nauseam.
“One quarter, two quarters, three quarters, you give people opportunity to take charge and you try to help them,” he says. “But, in the end, if it’s a continuous story, you end up saying to yourself, ‘Well, maybe the issue is not the company anymore; maybe the issue is you.’ I haven’t tried to build a culture of if people don’t execute one time that they’re out. It’s more of a, ‘Hey, look, this is not working. Here’s how we’re going to improve it; if that doesn’t work, let’s try something else,’ approach to get better execution. But, in the end, if you’re not delivering on a consistent basis, then something has to be done.”
During this time, you’ll have some changeout of staff right away because, frankly, accountability isn’t for everybody. But this is a double gift: You’ll lose underperformers and new people will help cement your systems.
“When you bring in somebody new with the right excitement level and the right passion, that is somebody who doesn’t know the old systems, the old culture, the old people, they don’t know the old constraints,” he says. “So, essentially, bringing in new blood is its own catalyst for change.”
Once you mix new blood and start seeing some refreshed experienced employees, you’ll get a second batch of people that self-select career relocation when the systems stick.
“Eventually what happens is the people who can’t (meet expectations) start to realize, ‘This is too tough for me’ or ‘This is too stressful for me,’ or ‘I’m obviously the weak link here,’ and they leave,” Maheswaran says.
With managers cascading a winning culture and employees owning their own goals, things have come a long way at Semtech, as a downturn hasn’t stopped a culture where people set their own internal stretch goals.
“The company has started to become more of an empowered culture where employees know they will be held accountable for poor performance and poor results, but they also recognize that they are part of a team that’s working toward a common purpose and that the rewards come from taking some risks and trying to do that something extra,” Maheswaran says.
The financials bear that out. The company posted a then-record $284.8 million in net sales in fiscal 2008, and then pushed through to post a new record of $294.8 million in fiscal 2009.
“There are still areas where we can do better,” he says, “but I feel good about it, and the proof is in the pudding. ... Last year was a record year for us, the year before that was a record year for us, in terms of revenue, and so by delivering results on a continuous basis, you start to get a feel for are we really executing the way we want to execute, and that, to me, is the right sign.”
How to reach: Semtech Corp., (805) 498-2111 or www.semtech.com
Azusa Pacific University901 East Alosta Ave. Azusa, CA 91702 (626) 969-3434 www.apu.edu Jon R. Wallace President and CEO About Azusa Pacific University is a religious university focusing on the development of academic programs with an interest on scholarship, faith integration, diversity and internationalization. Azusa offers more than 80 bachelor’s, master’s and doctoral programs on campus and online. Founded: 1899 Key areas of study Adult and professional studies, behavioral and applied sciences, education, nursing, theology
California State Polytechnic University, Pomona3801 W. Temple Ave. Pomona, CA 91768 (909) 869-7659 www.csupomona.edu J. Michael Ortiz President About California State Polytechnic University Pomona is a hands-on college with a broad-based educational experience. Graduates are distinguished by their understanding of theory and ability to think critically. The college has seven undergraduate colleges and also offers graduate programs. Key areas of study Accounting, food science and technology, human nutrition, computer information, engineering
California State University, Long Beach1250 Bellflower Blvd. Long Beach, CA 90840 (562) 985-4111 www.csulb.edu F. King Alexander President About The University of Long Beach is a diverse, student-centered, globally engaged university providing undergraduate and graduate programs of study through teaching, research, creative activity and service for the people of California and the world. Students explore a broad array of disciplines, develop an appreciation of diverse ideas, artistic modes of expression and global perspectives, and they examine key discoveries in science, technology and health-related studies. Key areas of study Business administration, education, arts, engineering, human services
California State University, Los Angeles5151 State University Drive Los Angeles, CA 90032 (323) 343-3000 www.calstatela.edu James Rosser President About California State University offers student-focused higher education. CSU Los Angeles is part of the largest, most diverse and one of the most affordable university systems in the country. The Los Angeles campus offers many opportunities to help students achieve goals and prepares graduates to make a difference in the work force. The college engages in research and creative activities leading to scientific, technical, artistic and social advances. Key areas of study Marketing, management, education, ecology, nursing, philosophy
California State University, Northridge18111 Nordhoff St. Northridge, CA 91330 (818) 677-1200 www.csun.edu Jolene Koester President About California State University, Northridge is a diverse university community of nearly 36,000 students and more than 4,000 faculty and staff. The college is located on a 356-acre campus in Los Angeles’ San Fernando Valley. Cal State Northridge focuses on educational and professional goals of students and on service to the community. Key areas of study Management, nursing, education, business, philosophy
Mt. San Antonio College1100 N. Grand Ave. Walnut, CA 91789 (909) 594-5611 www.mtsac.edu John S. Nixon President and CEO About Mt. San Antonio College is among the largest of California’s community colleges. It serves nearly 20 communities and a million residents in San Gabriel Valley. Mt. SAC has provided affordable educational opportunities to more than a million students of all ages. The college offers more than 200 degree and certificate programs and has earned statewide and national distinction in a number of disciplines. Founded: 1946 Key areas of study Arts, business, continuing education, natural sciences, technology and health
University of California,
Los Angeles405 Hilgard Ave. Los Angeles, CA 90095 (310) 825-4321 www.ucla.edu Gene Block Chancellor About UCLA is a public research university and a member of the Association of American Universities. The college has 4,016 teaching faculty and 26,928 enrolled students. In 2008, the college opened the Ronald Reagan UCLA Medical Center. Founded: 1884 Key areas of study Pre-law, health science, medical sciences, business, education
University of Southern CaliforniaUniversity Park Los Angeles, CA 90089 (213) 740-2311 www.usc.edu Steven B. Sample President About The University of Southern California is located in Los Angeles, a global center for arts, technology and international trade. The school is one of the world’s leading private research universities and enrolls more international students than any other U.S. university. The college has a strong tradition of integrating liberal and professional education and fosters a culture of public service. Founded: 1880 Key areas of study Business, education, arts, architecture, dentistry
As the economy turns the corner to recovery, many opportunities will arise to expand your online business. Seeking co-marketing relationships is one opportunity you cannot afford to miss. Co-marketing costs less than many forms of advertising and can get you the desired traffic or distribution you need to grow your Web site or software.
Smart Business learned more from Greg Akselrud, who chairs the Interactive Media and Videogames Practice Group at Stubbs Alderton & Markiles, LLP, about why online businesses need to pursue co-marketing strategies and the key business and legal issues to consider in any co-marketing deal.
What is co-marketing?
In today’s online world, co-marketing takes on a variety of forms, including true ‘co-marketing’ (where two parties agree to market each other’s Web site or software), ‘co-branding’ (where two parties make available a Web site or software displaying both of their brands or logos), or in the pure software case, ‘bundling’ (where one or both parties ‘bundles’ one piece of software with another, giving users the opportunity to download a second piece of software when they decide to download the first). For example, the only way to log in to Foxsports.com is through an MSN account and, conversely, the sports pages on MSN take you to Foxsports.com. Also, you may have noticed that you get an offer to download the Google Toolbar when you download other software. Both of these cases are classic co-marketing relationships. The possibilities for co-marketing are endless, and are not limited to online products. Often, there are tie-ins with the brick-and-mortar world. Thus you see Oprah quite visibly using Skype as her video conferencing tool.
What are the main objectives for co-marketing, and who is an ideal partner?
The main objectives in any co-marketing deal are to build awareness of your brand, drive traffic to your Web site, increase the distribution of your software, generate additional direct or incremental revenue, and/or complement your product or service with your partner’s offering.
The best co-marketing partner is one that satisfies your co-marketing objectives and, as a result of natural synergies, operates a Web site, service or software that is complemented by the product or service you provide.
What are the key business issues in a co-marketing deal?
If your business already has traffic, downloads and revenue, then an attractive co-marketing partner would offer additional products or services that complement your own successful business. On the other hand, if you are trying to gain traffic, increase distribution or grow revenue, then you would seek a partner with established traffic and/or distribution that might see synergy in your product offering. In either case, the following are some of the key business issues (and some suggested approaches).
? Branding: You want the co-marketing relationship to present a product or service that is co-branded with both parties’ brands, particularly where you are looking for enhanced value from the partner’s brand.
? Promotion: Avoid passive obligations to promote your brand (Web site and download links on a partner page), and insist on active obligations (to appear ‘above the fold’ on the home page for specified periods of time, measurable distribution obligations in connection with software updates, or joint press releases or other PR obligations).
? Revenue sharing: If there is revenue to share, understand who collects and what are their reporting and payment obligations.
? Other terms: Define clearly if this is a long-term relationship or one designed to ‘test the waters,’ specify limited territories or worldwide, and determine whether one or both parties are to be the exclusive partner for the given product or service offered and/or whether one party should be prevented from doing business with competitors of the other.
Should I worry about the legal ‘boilerplate’?
The legal ‘boilerplate’ provisions are just as critical to the business relationship as the business terms. They help the parties determine their level of business risk and aggregate liability, and accordingly shape how each party works with the other. The following are some of the key legal provisions.
? Representations and warranties: These provide information that may be important to understanding your proposed co-marketing partner and its products/services (i.e., does their Web site/software infringe a third party’s IP).
? Limitations of liability: Just like they sound, these provisions limit your liability and likely that of your co-marketing partner, so analyzing what should be limited depends on the individual business deal.
? Indemnification: These require you to repay or defend lawsuits against the other party in certain events, and shape your total liability (including for third-party claims).
As is the case in any legal transaction, be sure to seek the advice of experienced lawyers to make sure your co-marketing deal achieves your desired objectives.
A large number of biopharmaceutical companies will see the patents for their products expire over the next five years, which is creating a regulatory path for “biosimilar” products and rapid growth of the generic drug market.
Smart Business learned from Christian J. Scognamillo, a senior counsel at Stubbs Alderton & Markiles, LLP with nearly 10 years of experience working with life science companies, what biotechnology companies are doing to pave the way for development of generic versions, or biosimilars, of expensive biopharmaceuticals used in the treatment of complex life-threatening diseases.
What is a biosimilar product?
Biosimilars, also referred to as ‘follow-on proteins,’ are to biopharmaceuticals what generics are to chemical drugs. Biosimilars are new versions of existing biopharmaceuticals whose patents have expired. A biopharmaceutical is created by manipulating living cells into ‘mini-factories’ to manufacture the desired molecules for the drugs. Any deviation from the manufacturing process can change the entire function of the product, and it is impossible to manufacture biologically identical products, which is why generic versions are referred to as ‘biosimilars.’
What is the market potential for biosimilar products?
Many believe that the future of the pharmaceutical industry rests with biotechnology. According to some studies, patented biopharmaceuticals account for 10 to 15 percent of the current pharmaceutical market and biopharmaceuticals are currently outperforming the pharmaceutical market as a whole in terms of growth. A settled market for biosimilar products is essential to exploit the growing number of biopharmaceuticals, which will lose patent protection in the next five years.
Most biopharmaceuticals are high-cost specialty drugs, used to treat relatively few conditions with a currently unmet clinical need, such as certain forms of cancer. Thus, another compelling need for biosimilars is to treat the same conditions at a potentially lower cost to the manufacturer. Biosimilars also present the potential for biotech companies to gain a larger market share in a time when the rising research and development expenses for such companies are getting harder to finance.
What is the current regulatory framework for biosimilar products?
Currently, there is no formal procedure in the U.S. for the testing and approval of biosimilar products. European regulatory agencies, however, have set forth a regulatory path, outlined by the European Medicines Agency (EMEA), which is not easy. The process is based on a thorough demonstration of ‘comparability’ of the biosimilar drug to the existing biopharmaceutical drug. Where generics can be brought to market quickly and cheaply by merely demonstrating that the generic is chemically identical to the brand-name drug, the EMEA guidelines require a minimum of two clinical trials and extensive testing for toxic side effects. This makes the approval process in Europe for biosimilar drugs nearly as rigorous and expensive as the approval process for new biopharmaceuticals.
How is Congress addressing the growing demand for development of biosimilar drugs?
Escalating health-care expenditures are forcing the U.S. Congress to consider legislation that would create an abbreviated review process by which the FDA could approve biosimilars. Last year, two bills addressing such an approval process were introduced in the House and are still pending.
The key provisions of the first bill are:
? the granting to FDA authority to approve biosimilars;
? the approval process will require showing that there are no clinically meaningful differences between the two products;
? the first biosimilar able to establish that it is ‘interchangeable’ with the original product will receive six months of exclusive marketing; and
? an original product with a novel molecular structure is entitled to five years of exclusivity and can be extended by up to one year if it can be established that the product can be used for a new disease or that it conducts pediatric studies.
The key provisions of the second bill are:
? establishes safety standards for establishing interchangeability;
? establishes exclusivity for the first product found to be ‘interchangeable’ for a period of 24 months;
? the original product with a novel molecular structure is entitled to 12 years of exclusivity and 14 years in the event that a new indication is found for the product in the first 8 years after licensure; and
? an additional exclusivity period for pediatric studies and use of product.
The main sticking point between the two bills is the length of the company’s ‘data exclusivity.’ Data exclusivity refers to the period after the FDA approves a new drug product for the market during which an imitation, or generic, can’t rely on the name-brand drug’s clinical data with respect to safety and efficacy. Data exclusivity can extend during and longer than the brand-name drug’s patent protection. Consumer groups are lobbying for five years of data exclusivity for biosimilars, which is the same length as a chemical drug’s data exclusivity (i.e., brand name and generics). The biotech industry supports the 14-year period to allow biotech companies to recoup their investment in their ‘brand-name’ biopharmaceutical products and conduct further clinical trials to improve them.
With the length of time it takes for new biopharmaceuticals to be developed, reach the market and become profitable, the ability for biotech companies to extend the data exclusivity period for brand-name biopharmaceuticals they have already developed and pave the way for the manufacturing of biosimilars will be an important factor in their future success and profitability.
Christian J. Scognamillo is a senior counsel at Stubbs Alderton & Markiles, LLP. Reach him at (818) 444-4512 or email@example.com.
The transportation industry has taken a hit in the past couple of years first pummeled by fuel costs, now endangered because of lack of product demand. Even though the economic forecast may be grim, this is a prime time to evaluate your current network to find wasted money and inefficiencies that may be hurting your customer service.
Delivery delays and poor packing and routing methods can all cost your company money.
The good news is that there are software solutions out there that can help you fix your problems with a minimal investment and lower your logistics and transportation costs by 8 to 15 percent.
“Transportation logistics accounts for about 20 percent of the product (cost),” says Min Shi, assistant professor in the department of management at California State University, Los Angeles. “Any savings will directly transfer to profits for the company. Technology is important when used correctly. Software helps eliminate errors by giving you a direct link between all businesses involved in the supply chain and your inventory. Monitoring inventory through your programs will significantly reduce the amount of stock you keep on hand and reduce the chance of business interruption.”
Software programs are available to assist companies from the time an order is placed through the successful delivery of the order. Many executives view their transportation department as a cost center, but through successful management, it can be another way to earn money.
Why logistics software is important
The addition of software to your logistics department will optimize daily and long-term transportation plans and scheduling, carrier selection, route planning, inventory management, and small parcel shipping, which can reduce costs.
While a software investment may cost at least $10,000, improving your shipping processes will allow you to serve more customers and increase profits in the long run.
“Developing a correct and effective logistics strategy means knowing your customers and the company mission,” Shi says. “Connecting this through software will be your best bet to make sure you’re meeting their needs and keeping track of your goods and minimizing your costs. Much of this software used for logistics is Web-based. This means there’s nothing physical to purchase, you simply gain access to the information cataloged and updated digitally. Software also allows you to have a backup plan if plan A doesn’t work out. Relying on one carrier will become your problem if something happens with their fleet or business.”
A common transportation management issue has businesses keeping more inventory on hand than necessary. This typically happens when stock is manually cataloged instead of tracked with software. This means more of your money is sitting in warehouses instead of in your pocket.
“This economy has been like getting bariatric surgery,” says James Moore, vice president of sales for Ryder System Inc. “If you lose 100 pounds all at once, your clothing isn’t going to fit anymore, and that’s what’s happened with many companies’ networks. They are now way larger than what they need to be and their one-time assets are now financially draining them. If efficiency is a problem with your transportation process, software will help eliminate errors and make the most of all efforts.”
Human error is a big part of what can go wrong in logistics. Depending on the volume of orders you are receiving, this can add up. The use of software can eliminate these errors and make your inventory and tracking easier to manage. Software can also determine the best carrier for a particular type of shipment and contractual agreements.
“The implementation of systems and software rapidly changed customer demand,” says George Hynes, president of Logistic Edge LLC. “Companies are seeing smaller orders and more dot.com orders of one or two items at a time instead of mass orders through business-to-business retailers. This changes the way shipping is conducted and there is a software application that can help companies adapt to these alterations and remain flexible.”
What you need to know
Before making a software purchase, you need to assess what areas of your process are in greatest need of assistance. While some companies package their software options, others individualize the programs for specific areas of interest, such as shipping and loading.
To figure out where you need help, you will need to perform an audit that tracks products from production to delivery.
Start by making a checklist. Are your shipments on time? Are your trucks traveling with full loads? What are your current fuel expenditures? Are you utilizing the best routes? What rates are you paying carriers? Are you paying your employees overtime? Are your orders accurate? If you don’t know how to obtain this information or you’re finding inconsistencies, software can probably help you reduce errors and delays.
“Investigate if you are effectively controlling your costs,” Hynes says. “If shipping isn’t part of your business’s core competency and you don’t plan on making it one, then you could benefit from a third-party logistics firm. A third-party logistics firm can replace or complement your internal logistics operations. The supply chain can be made or broken with the use of software. This is really a necessity in today’s industry.”
After you’ve determined the area you need the most help with, choose a software company you feel comfortable working with. Find a company that will be accessible when you need them. If you decide handling everything in-house is too expensive, find a third-party logistics firm that handles the details while you focus on your core competencies.
“Do a cost-benefit analysis to see if a third-party logistics provider will benefit your operation,” Shi says. “After you configure what areas you currently do not have software but need it, price that and compare it to a third-party firm. Make the decision if you want to invest in the man-hours it will take for employees to learn the programs and the costs involved.”
Today’s economic climate may be tough, but by looking for savings in every area of your business including transportation you can find money that can be better used elsewhere in your organization.
“Monitoring every aspect of business is key,” Shi says. “When you can’t monitor what is happening, you can’t measure the effects, delays, inaccuracies and other issues like fuel use have on your bottom line. Software has assisted businesses in every aspect, yet it isn’t used as much as it could be in transportation logistics. I think it will one day be a given to have software, but for now, the top companies are using it and the rest will likely follow.”
Born: San Pedro, Calif.
Education: California State University, Long Beach, undergraduate and graduate degrees in criminology
First job: I actually was a tour guide down at the Ports O’Call Village down in San Pedro, and I used to have to wear a nasty little uniform with white go-go boots and a miniskirt.
Whom do you admire most and why?
The person I admire most is Hillary Clinton because I just like her drive, her passion, her compassion. She’s just very focused on what she believes in, and she goes and gets it. She’s just a kind, gentle person who is smart as can be. I admired how she handled her campaign, and I hate it that she lost, but I think she’s one of the brightest people around.
If you could be one superhero, who would you be and why?
Hillary is my superhero. I can’t think of the abstract ones. I see things too black and white, and she’s my superhero.
Ticker: Molina Healthcare Inc. is listed on the New York Stock Exchange under the letters MOH.
Innovations in the banking sector have transformed the way that business is conducted. In order to fully take advantage of such technological advancements, it is imperative to partner with a bank that communicates how new products and services on the market can improve your company’s efficiencies.
“If it’s been over a year since you’ve had a conversation with your bank about new innovations and the banking services you should have at your disposal, then you are probably being underserved,” says Syd Saperstein, senior vice president, division manager of Comerica’s Special Corporate Financial Services Division.
Smart Business spoke with Saperstein about what products and services should be expected from one’s financial institution.
How would you define the term ‘underserved’ as it relates to banking?
The banking industry has grown, as all industries do, and has come up with innovations, new cost-effective services and labor-saving solutions to handle problems that businesses face in the electronic age of the 2000s. We have consolidated and developed a lot of services that used to be spread around many different banks or many departments within a bank — now they are often seamlessly available in one place. Most customers, however, have not been given a road map on how to interface with their financial institution. And most financial institutions have done a relatively poor job of educating their customers about what improvements have been made. Consequently, customers are not getting the full benefit of the banking relationship that they could.
How can a business determine if it is being underserved by its bank?
Start by asking some questions: When was the last time my bank spent the time to educate me on the improvements in their world? When was the last time they pointed out improvements to the interface between businesses and banks? How can changes in treasury management services and the work that banks do internally translate into cost savings for me by taking over some of my work?
If you haven’t had a conservation like that, then chances are — just by the sheer increase in new products and services that banks develop and the passage of time — you are probably being underserved.
What advancements in the industry have occurred in the past decade or so?
Complicated multilevel transactions are now handled electronically, and there are advanced methods for batch file handling and consolidation. Internal accounting and subaccounting systems have developed within the most progressive banks. These sophisticated systems enable a bank to slice and dice their customers’ business and deposit relationships into regions, territories and sales offices, for example. In the past, a company’s employees used to have to keep track of all this information. Now, it can be handled within the bank, which saves the customer on personnel expenses.
What specific industries are most commonly underserved?
The ones we find most underserved are either the newest industries or the oldest industries. A company that starts today may ‘think small,’ go to a local branch and find the expertise that exists on the street level within a banking structure is not sophisticated enough to handle its needs.
On the other end of the spectrum are old companies with a lot of mature management, such as law firms or insurance companies. Law firms are often run by a management committee composed of the most senior partners. While their skill sets were probably well suited to manage a banking relationship 25 years ago, they may be very different from the skill sets that are being taught and used most effectively today. In order to keep their company as progressive as possible, they could very well benefit from partnering with a bank that is able to give them some up-to-date advice about what should be improved.
What products and services should be expected from one’s bank?
First, businesses need to take a look at the nature of the relationship. If they’re not having a conversation with their bank about innovations at least once every six months then something is wrong. Innovations within the banking world happen that frequently.
Second, you should investigate how the bank can take over labor-intensive transactional activities that are currently being handled internally. A specific example is processing 1099 Interest Income statements. Law firms frequently have to dedicate lots of staff time or even add staff in January and February so they can handle the processing of 1099 forms for the individual taxpayers whose funds are sitting in trust accounts with them. In today’s world, the 1099 work can be done by the bank for each component of a trust account. What’s worse is that, based on our experience and what we have learned by survey, the error rate on 1099 work done by nonfinancial institutions is around 20 percent, which can be very costly. Our error rate, for example, is far less than one-tenth of 1 percent. This is an area where businesses could avail themselves of using a bank’s services at low or no cost and replace a cost that is very high to them.
SYD SAPERSTEIN is senior vice president, division manager of Comerica’s Special Corporate Financial Services Division. Reach him at (415) 477-3246 or firstname.lastname@example.org.