Northern California (1069)

Saturday, 26 May 2007 20:00

Growth goldmine

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Joe Gatto says the secret to his company’s success can be boiled down to having a better mousetrap in a market with a lot of money and mediocre mousetraps.

Gatto is founder and CEO of StarMine, Inc., a 110-employee investment research firm that has grown 331 percent in the last three years. Since founding the company in 1998, he has expanded its client base to more than 400 firms.

Smart Business spoke with Gatto about why it’s important to have a low bozo ratio at your business.

Q: How would you describe your leadership style?

I lead on product vision by talking with customers and connecting the dots. Everyone can talk with customers, but not everyone comes up with the same conclusion of what to build.

Vision doesn’t come from a whiteboard. It’s not an abstraction. It comes from figuring out which of those gaps we have to fill.

That’s leadership, because left to its own devices, an organization will focus on enhancing products it already has in house. To step out to a totally new bit of functionality or a new product requires more active leadership.

You need to help people see the problem experienced by customers, and see the benefits of taking on something else when those people are trying to get their jobs done.

Q: What pitfalls should CEOs avoid?

A mistake I’ve seen others make is trying to sell technology without there being a problem that it’s solving. If we do this whiz-bang thing, you’ve got to think, ‘Who will buy this, will they pay extra, who’s affected, is it one or two users or hundreds of users, what are their current approaches?’

Not, ‘Wouldn’t it be neat to look at estimates this way?’ No, that’s not interesting. That’s not compelling enough from a business case.

Does this allow them to do some bit of work cheaper or faster or in some way a higher value? The biggest pitfall I see in business plans is people who have technology in search of a problem. They don’t have any real value proposition.

You need a group of people with a willingness to pay to step up and say, ‘Yeah, I’ll buy that.’ Now you may need to show them mock-ups, but if you get a bunch of yawns, you probably don’t have a product.

If you get, ‘I need that, that would save me time, how soon can I have it?’ then you have a compelling value proposition. So, you need to separate profitable from interesting and neat.

Q: How do you attract and retain quality employees?

It’s like one of our longest tenured software developers — now he’s our chief architect — told me several years ago. I sometimes ask people, ‘How are we different than other places you’ve worked?’

He said, ‘StarMine really manages to weed out any bozos before they bring down the average. It’s nice to work at a company with a low to miniscule bozo ratio.’

Having smart people who are performing well around you at an organization that doesn’t accept mediocrity and coasting, along with challenging work that focuses on developing or creating new stuff — people like that environment.

People like to create things and be part of that creative process, not just fighting fires. They like being acknowledged for what they do. They like the job to be a good fit for their talents. You don’t want to put square pegs in round holes.

If you get the right skill set and are surrounded by high-performing peers, it kind of raises the bar. If you were to lower the average performance of the rest of the team, everyone else would sink down to that level.

People do better when they’re not working with bozos and not working on bozo projects.

Q: How do you motivate your employees?

[Knowing the costs and benefits] helps you prioritize. If you’re a project manager, it’s a lot more motivating knowing you’re working on a project that — if delivered as anticipated — will deliver a half a million dollars to the company.

By being explicit about the benefits, it gets people motivated. Just the process itself is very motivating.

It makes sure you’re working on the important stuff, makes sure you’re not working on the less important stuff, with rigorous cost-value analysis backing it up.

Q: How do you communicate with your employees?

If people here haven’t heard it three times you haven’t heard it. It’s partly the logistics of a crowded room or conference call where someone gets distracted. You can’t say something once and expect that everybody gets it.

Repetition, repetition, repetition is key. In addition to those high-level company updates, then it’s shaped by working with the project team, making sure people are clear on what we’re going after, why and, to some degree, how.

HOW TO REACH: StarMine Corp., (415) 874-8100 or www.starmine.com

Wednesday, 25 April 2007 20:00

Brothers in arms

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In 1979, 16-year-old Andrew Ly immigrated to the United States from Vietnam with $1 in his pocket. Twenty-eight years later, he’s at the helm of a $42 million corporation.

Upon arriving in the United States, Ly learned English, put himself through college and in 1984, pooled $40,000 with his four brothers to open the first Sugar Bowl Bakery. Today, the 400-employee Ly Corp. — the parent company of Sugar Bowl Bakery — is a thriving wholesale business, with customers ranging from the Costco chain of grocery stores to the luxury hotels of the San Francisco Bay, and is averaging revenue growth of 20 percent per year.

Smart Business spoke with Ly, president and CEO of Ly Brothers Corp., about the importance of diversifying your business, building a strong reputation and creating a positive work environment.

Q: How do you create a positive environment for your employees?

I read tons of books, and every time I read a good quote, I put it on the board. I want to motivate our employees to make sure when they walk in or walk out, they see that quote from me on the board.

I also challenge them to read books. Especially the books that I read and like, like “Built to Last” or “Good to Great” [both by Jim Collins], or “Pour Your Heart into It” [by Howard Schultz]. Everyone who finishes reading the book and lets me know the key points in the book, I reward them $100 per book they read. There are an unlimited number of books they can read per year.

I have lunch with my employees all the time. I try to let them know as long as we work hard and think smartly, everything can be done. I also encourage them to go to a seminar, and if they need to, go back to school.

We are willing to contribute to learning. So then I can learn from them, too. That is how I create a positive working environment and positive thinking for our employees.

Q: How have you achieved business growth?

We do a lot of R&D; we learn from customers, study trends to see what products are demanded tremendously in the marketplace. We diversify our product line based on those studies; we create products and diversify them.

We don’t just depend on one customer. We go out there and diversify our customer base across the board, whether it’s as big as Costco, Starbucks and Safeway, or as small as a coffee shop or hotel in downtown San Francisco.

Be innovative. Try to study the trends and make great products so we don’t sacrifice too much margin. We grow, but maintain margin so we can invest into our manufacturing. That’s how we make sure we have the right products in the right place across the board.

Q: What is the most important thing a CEO has to do?

You have to be a hard worker. This is where the phrase ‘leading by example’ comes into focus. This is where the tone of the company is established. People will most likely listen to you when they know that you are a hard worker.

Also, make sure you build a good reputation. You have to have good personality and character. There is a saying that ‘Good personality opens the door. Good character keeps the door open.’ As a leader, you have to have those two. We need to say what we mean and we have to do what we say. If we establish those two things, that will work for us at no cost in the future.

Q: How do you build a strong reputation?

At the time we started out, even though we struggled to pay ourselves, we had to make sure we paid our employees. Also, you have to treat them well.

Our employees can take a vacation, but I did not take a vacation for 10 or 15 years. We have to sacrifice to make sure the company is successful, but we don’t want the people who work throughout the company to suffer.

No. 2, when people are in need, like an organization like Feed the Children, or children’s hospitals, big or small, we want to donate. If we are successful, these children should not be going to bed hungry. We know how hard it is to get through those days. So we want to provide financial support or any kind of support to those people.

Those organizations are good to support and help build us a good reputation. It’s a benefit when people know we have a big heart with the community.

HOW TO REACH: Ly Brothers Corp., (415) 824-3592 or www.sugarbowlbakery.com

Monday, 26 March 2007 20:00

Clearing the<BR>paper jam

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When Guy Gecht began his job as chairman and CEO of Electronics for Imaging Inc. in 2000, the company had posted some great results and was experiencing financial growth, but about 97 percent of its revenue came from original equipment manufacturers (OEMs). 

When these companies started developing products themselves, EFI’s services weren’t needed anymore. Revenue dipped from $588.5 million in 2000 down to $350.2 million in 2002. And while EFI, a digital imaging and print management solutions company, was still profitable, Gecht knew he needed to change its game plan to increase revenue and maintain profitability.

He initially brought in outside consulting companies to help identify problems and offer solutions, but just a short time into that process, he discovered that the existing managers knew the better questions to ask.

He engaged his management team in in-depth self-review, lengthy discussions and evaluations. And they met with customers to find out where they thought the company’s strengths and weaknesses were. “The key thing is to be brutally honest with yourself and figure out where you’re strong and where you’re weak,” says Gecht.

The company also surveyed employees to get their thoughts.

“Though we encourage open dialogue always, we made the survey anonymous to ensure that we’d receive the most candid responses,” says Gecht.

At the end of these sessions, they decided to change their business strategy and then look toward acquisitions to diversify and strengthen EFI. While changing a company’s DNA doesn’t happen overnight, it does start with one step.

Avoiding the commodity trap
Gecht’s team first decided to become more of the Lexus or Mercedes of the industry.

“We didn’t try to compete too much on price,” Gecht says. “We said, ‘You know what? We’ll leave the price battle to some other people. We’re going to stay higher-end in our value and appeal to people that want better systems and are willing to pay a little bit more.” EFI was very upfront with customers about its prices, most of whom were knowledgeable professionals not needing as much prodding as the average consumer.

“Our message is, we’re not the cheapest solution out there,” Gecht says. “If you want something that costs less, you can certainly find it somewhere else. We are here to give you the best technology for your business to make you successful. If that’s what you’re looking for, we can show you why our product is better.”

Competing on quality meant Gecht had to ensure that his products were, indeed, the best. He focused the company on innovation by partially tying each vice president’s bonus plan to innovation so they would drive it down the ranks. “It’s not only just in engineering,” Gecht says. “There’s a lot of innovation happening in every single department. If you make it part of the routine and the culture and communication, it happens by itself. We call it the voice from the top.”

To measure quarterly progress, Gecht and his team tracked one metric — gross margin.

Driving innovation also involves a financial commitment, so EFI invested about 30 percent of its revenue in research and development so it could remain competitive and received heavy criticism for doing so. “We’re a technology company,” Gecht says. “We bring the best technology to the market. That’s the strategy we have. We’re always going to be the best in what we do. We need to have the brightest and best people around here.”

Gecht assured employees that as long as they performed well, they didn’t need to worry about losing their jobs.

“We didn’t want to go to the easy solution of, ‘Let’s just fire a bunch of people, and then the numbers are going to look good and we’re going to feel good in achieving numbers,’” Gecht says. “It’s not really going to help our customers or long-term viability.”

Instead, he tightened expenses in other areas and turned to employees to generate ideas. They came up with everything from eliminating aspects of paperwork to having team members check in with customers periodically. A nonexecutive team of people chose the best two ideas every quarter, and the employees who submitted them received prizes, which changed quarterly and ranged from iPods to dinner for two at a nice restaurant.

Building with acquisitions
With EFI’s business plan tweaked to emphasize quality over quantity, Gecht then started looking at acquisitions both to grow the company and to diversify it more. “Innovation is our cornerstone as a technology company,” says Gecht. “It’s our ability to out-innovate the competition that keeps EFI in the position of industry leader. That said, we are also constantly looking outside our core competencies at acquisitions that support our objective of providing best-in-breed solutions to the professional print market.”

Studying the industry and having dialogue with customers helps Gecht know what areas he needs to improve through acquisitions, but acquisitions hadn’t been part of the company’s DNA. To make up for that, he hired an acquisition specialist and a team of people in 2001 that excelled on the integration side of the equation to lead EFI’s efforts. “The price for the acquisition is a small factor in the end,” Gecht says. “There’s a lot of things you need to think about ahead of time. There is a reason why the statistics show that most acquisitions fail.”

The first aspect Gecht looks at is cultural fit to ensure that the people at the potential acquisition would mesh well as part of EFI. He then looks at leadership — both in the people and products. “We want to make sure that either we’re acquiring some technology that has leadership or people that have leadership in the industry or reputation that we can build on that will add to the leadership of the company,” Gecht says. “We don’t want to buy something that won’t be as strong as EFI, that will drag down our reputation and relationship with customers.”

While it’s important to investigate the products’ strength, it’s equally crucial to look at the people, but many leaders think of them as afterthoughts. “The people part is a very important part of the equation because when you buy a company with 100 people, essentially you’re deciding to hire 100 people to be part of your team.”

To make sure those people have that ability to innovate, he spends a lot of time asking them questions about their products and customers and about where they get ideas. He also talks to the company’s customers to see how it treats them.

Then the simple but most important question is, “Do you want to be part of us?” If the answer is, “No,” then he moves on, but if the answer is, “Yes,” then he sets to work making it happen.

Integrating acquisitions
When the deal closes, the work doesn’t end. The new piece now needs to be integrated. While smaller acquisitions typically require shorter integration periods, large ones need tending to for a while.

In early 2005, EFI made a $280 million acquisition, which management has successfully spent the past two years working to integrate instead of chasing more acquisitions. Success requires communication and sometimes difficult decisions.

Often, Gecht needs to move EFI management to the new company or vice versa. During one deal, the products overlapped, so his team decided to kill its own product and proceed full steam ahead with the acquired one. “Sit in the room and talk about the facts,” he says. “Don’t be biased. Think about it, and after awhile, you get used to doing it. You don’t think what it means to you — you think what it means to the customers. “It’s all coming down to, you just focus on looking at the company from the eyes of the customer. What do they like to see? Do they like to see Product A or Product B? Do they like to see Person A running this group or Person B? Why is it good for them? If you get yourself trained like that, it gets easier and easier.”

The next step is sitting down with management from both sides of the acquisition and collectively brainstorming where the company should be in one year and two years, and then challenging them. “If you come in and say, ‘Within 60 days, we want to A, B and C,’ you will get resistance,” Gecht says. “If you say, ‘Let’s think about where we want to be in a year and two years,’ and everybody draws nice ideas because it looks very far off, then we’ll say, ‘OK, we’ll do it faster.’ They’ll say, ‘OK, at the end of the day, if that’s where we want to be, why not do it faster?’”

If something was outlined for a year, he’d ask them to do it 60 to 90 days. If it needed two years, he challenged them to do it in a year. Quickly integrating also helps eliminate unnecessary confusion for customers, who often get the runaround during transition times. “If you move faster on integration, it’s actually working better,” Gecht says. “In many cases, there is a temptation not to touch or not to change the name or not to integrate or not to have a unified sales force, and while it’s an easy solution and doesn’t offend anybody, after awhile. there is a ‘they’ and ‘us’ environment and inefficiencies.”

Creating buy-in
Throughout major changes, it’s important to get buy-in from people. While having both sides of management work together to create a plan helps with the executive ranks, leaders can’t overlook customers and employees. “If you’re winning the hearts of customers and you’re winning the hearts of employees, you’re going to win the acquisition,” Gecht says.

To help reassure customers, Gecht visits them and also sends communication explaining how service will either remain the same or get even better and outlining the benefits that EFI brings.

During transitions, EFI team members are at the new company weekly to answer questions and help employees adjust, but those employees also need to hear information from the top. Communicating with employees often requires a different style and needs to have genuine substance — the meat and potatoes of the meal instead of just the salad. “A lot of people, they don’t care to hear too much about big statements and mission statements and high-level strategy,” Gecht says. “They want to know what it means for the company, for them, for their perspective, for the customer’s perspective.”

He emphasizes being honest and answering all questions. Whenever he communicates with employees, he takes questions both from the floor and from prior submissions that allow people to ask questions anonymously if they feel uncomfortable asking in person. He also responds to e-mails personally, even if it’s to say, “The better person to answer this is so-and-so — talk to them.” “You’re hiring great people, and you ask them to work hard and deliver results and stay with the company,” Gecht says. “Our commitment to them is that we’ll take them seriously.”

After the transition period ends, Gecht’s team does a post-mortem to see where it moved too slowly, too fast and just right. They use their conclusions during the next one to help ensure further success.

Gecht’s strategy has paid off in recent years, as EFI posted revenue of $563.7 million in 2006, an increase of nearly 61 percent over 2002. Gecht recognizes that EFI has improved a lot, but it still has to do the small things to keep growing. “There’s no one big huge idea that changed the company,” Gecht says. “It’s all a combination of many good ideas that made us slightly better and slightly better, and we ended up becoming a lot better company with all those marginal improvements. ... As long as you make smaller progress every day, you’re going to make big progress at some point. “Even when things are going very well, never be complacent. Know that you can always do better. Keep a critical eye and constantly challenge yourself and your employees to improve your business. Stay hands-on and close to the battlefield, talking frequently with your customers, investors, engineers, salespeople and marketing.”

HOW TO REACH: Electronics for Imaging Inc., (650) 357-3500 or www.efi.com

Wednesday, 28 February 2007 19:00

King of the hill

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In 1993, Steve McDermott felt content with his company’s success, but thought maybe he should do more. He hired a PR firm to see if Hill Physicians Medical Group, an HMO with 3,000 physicians serving more than 350,000 patients, should have any marketing work done.

The firm started by surveying the physicians who comprised the group, and the results were surprising.

“They don’t feel very good about you,” the firm told him.

McDermott, CEO, wanted to find out why, and what he could do to change the situation, so he surveyed the doctors to gauge their likes and dislikes and to see exactly what he needed to do to make them happier. When he tallied up the results, he found that only about 57 percent of the doctors were satisfied.

“We had nowhere to go but up,” McDermott says.

The low rating indicated physicians were frustrated with certain procedures, and improvements needed to be made. Happy doctors mean better efficiency and more satisfied patients, so McDermott set out to change the company to increase its satisfaction rating.

“You look at the surveys, and you look at what they say, and you start to pick apart what you need to do to improve,” he says. “It’s right there in front of you, and you get to work on it.”

Building a team
McDermott saw great possibilities for the group to build on its success and help the doctors become more satisfied, but he also saw a clear barrier, one that stuck out like a blinking neon sign. “There was so much more that we needed to do, and to take it to the next level, it was too much,” he says. “It was more than I could consider pulling off. I realized I had to build a team to do it.”

The team he had at the time was too narrowly defined and too narrow in scope to succeed, so he built a new team, growing it from just him and two others to a team of eight, all of whom have their own teams, making the organization geometric in shape. He also hired people to balance out the organization and to create a different perspective for the business. And he brought in outside people to administer personality testing to make sure the company had a good mix of people and styles.

And he made the tough decision to let go of someone who wasn’t fitting in and instead brought on people who didn’t have any experience in health care. “We wanted a different orientation — outside perspective and a more strict business orientation,” McDermott says. “Our view was, health care was too narrow-minded, and one of the problems in health care and one of the reasons it’s stuck is that it’s not applying good, solid business principles.”

Once he got people with more of a business mentality, he then needed to ensure that they had a healthy, nurturing culture to operate and flourish in. “It’s creating an environment where they feel they can thrive and do their own thing and be accountable for their effort but simultaneously be a part of a team, something larger,” McDermott says. “Each of the folks feels like they’re running their own show, but they are simultaneously conscientious that they’re part of a team and part of something larger, and all the parts need to work together to make it effective.”

Part of that empowerment is encouraging creative thinking and challenging people to innovate and dream up new ideas to improve the business. “Be supportive,” McDermott says. “Encourage risk. Be open to new ideas and, conversely, don’t be dogmatic. I don’t like, ‘If it’s not broken, don’t fix it.’ I don’t believe there’s any one way to do anything. Try to steer away from those kinds of dogmas, so atmospherically, what you do is try to create a very open, stylistically, environment.”

To do so, McDermott starts with how people address him and the image he portrays to his employees to make them see him more as a normal person rather than as a CEO. “I’m Steve; I’m not mister,” he says. “I go see them. I walk the farm. I deliberately dress down and am in casual mode. It helps to drive an old car. I’m just a regular person. I allow myself to be used for comical relief, and that’s easy to do with me.”

He encourages casual dress to make people feel more at home and also celebrates holidays to add fun and excitement to the office. He wants people to enjoy the warmer weather in the summer, so he and his management team give employees an abbreviated schedule on Fridays. He also encourages a family-friendly environment, so the company offers flex time and telecommuting. On top of that, he makes chocolate chip cookies with his children to bring in to the office and share with his fellow team members. “The thing about it is, it’s one thing to do it when you start it up, but it’s to keep it and nourish that and not lose it,” McDermott says. “You have to work at it and stay with it.”

He says the key to retaining a fun work culture is to retain a sense of fun, even as the company grows and becomes busier. McDermott says his wife is a big football fan, and while they watched a game one week, he saw a story of a young quarterback who had been in the league about five years and who was coming off a rough period. When asked what caused his poor performance, the young athlete said he was working too hard at it and had lost the fun and enjoyment of the game.

“When he started paying more attention to having more fun and the pleasure he took from the game, he started being better again,” McDermott says. “I don’t know that that’s the only thing, but particularly if you’re in it for the long run, it’s really important to enjoy it. And if you enjoy it, it’s infectious.”

Open to change
It was just another day of business in 1980 for Steve McDermott when, as he prepared to chair a board meeting, he received a phone call that forever changed him. It was the woman he was in a close relationship with, calling with a quick message. “Just so you know, when you get home tonight, I’m not going to be here,” she said.

She wasn’t just going out with girlfriends for dinner and drinks — she was leaving him. Frantic, he ran in and out of his board meeting, calling her and trying to convince her not to leave, while the board wondered why he kept hopping in and out of the room. And true to her word, he was greeted with the silence of an empty home that evening. “I was, frankly, devastated. It caught me short,” McDermott says. “OK, what is life? Is life just work?”

That experience propelled McDermott to advocate for work-life balance, both in his own life and in the lives of his employees. But work-life balance extends beyond the boundaries of the group’s offices. McDermott decided to try something a bit nutty — he decided to promote work-life balance with the physicians that comprise the group to help ease the stress in their lives and improve their sentiments toward the group.

“You’re trying to create an environment where innovation and new ideas can be tried out, and sometimes it works, and sometimes it doesn’t,” he says. “This one seemed a little bit far out.”

He and his team arranged a weekend retreat for physicians and their significant others, where they learned about meditation and how to create a balanced life despite their hectic schedules. “When I saw it, I said, ‘This is New Age stuff that the docs will never go for,’” he says.

Despite his reservations, the retreat sold out, and the doctors even requested that he and the team create a similar program for their office staffs.

The doctors’ retreat was just another example of how innovative thinking can create a more positive work environment, but McDermott hasn’t stopped there. He and his team also created a data warehouse to help physicians better track patients. It allows them to see which patients are at risk, and notices are sent to doctors communicating when patients need tests done, so that doctors can contact patients and conduct preventative health care instead of treating the outcome of letting diseases go unmonitored. “We didn’t think doctors would like us looking over their shoulders like that, but with a couple exceptions, they really liked the help and asked for more of it,” McDermott says. “It helps the docs be more effective with their patients.”

He and his team also successfully instituted initiatives to reduce emergency room visits. Additionally, they’ve created groups for patients to participate in, where they work with a doctor in a group setting to discuss problems with their disease, which have allowed patients to heal more than they had been able to on their own. “They started to help and empower and enable each other,” McDermott says. “It was more the context than the content — the context, the environment was such that they could hear the content for the first time.”

That theory holds true for communicating with employees, as well. When the environment is right, people are more receptive to the message, so McDermott operates with a transparency mentality. Employees can access an an intranet site that gives them a gauge of how they are doing compared to the goals for the year. It also shows them how their annual bonuses will fare, based on the company’s progress toward reaching its goals at that given point. “It’s very hard to engage people and be committed to something if you are closed, but if you are open and you have belief in what you’re doing, then that transparency provides an opportunity for people to become committed and engaged in the same effort,” he says. “We’re not trying to hide anything here. Here’s how we’re doing, good bad and whatnot. That helps back to the innovation. It’s not just about us up here — ‘We’re going to make all the decisions, and you just do your job.’”

The sum of the efforts of McDermott and his team is a higher satisfaction score among the physicians in the group — 92 percent, up from 57 percent just over a decade ago. The company is growing each year and in 2005 posted $414 million in revenue, a 26 percent increase over 2004, and McDermott credits his team, employees and the physicians with making Hill Physicians Medical Group successful. He says that when he sees them succeed, he feels he has succeeded, as well. “We had an outside speaker, and we had a couple hundred doctors in the room, and he made an anti-managed care joke, and nobody laughed,” McDermott says. “He said, ‘Wait a second — aren’t I in a room full of physicians?’ One of them stood up and said, ‘Yeah, but we like managed care.’ Then another said, ‘I practice better medicine because of Hill Physicians.’ “Whoa, man, that made me feel good.”

HOW TO REACH: Hill Physicians Medical Group, www.hillphysicians.com or (800) 445-5747

Wednesday, 31 January 2007 19:00

The Peterschmidt file

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Born: Fort Madison, Iowa

Education: Bachelor of arts degree, University of Missouri; MBA, Chapman College, Orange, Calif.

First job: Paper route

Whom do you admire most in business?

Lou Gerstner, who formidably turned IBM around on his own terms. When Wall Street and his own internal management team were advising him that the best strategy was to sell the company off, he resisted both internal and external pressures and made his own determination as to what needed to get done.

He stayed the course with strong will and courage, and was ultimately successful in his resolve.

What has been your biggest business challenge?

I went from running Sybase, a $1 billion software company with 6,000 employees to Inktomi, a near raw start-up with only nine employees and limited cash resources. When I arrived, I was forced to evaluate what large company structure and repeatable processes were important enough to apply to the company without adding too many layers of bureaucracy.

As a result, the organization was able to act nimbly and swiftly and also grow in an organized fashion and scale gracefully.

What is the most important business lesson you’ve learned?

Your employees must buy in to your vision. Without it, you will not be able to accomplish your goals.

Describe your leadership style.

You must lead from the front and be willing to set the model for the behavior you expect to see in your people. Every day, I’m out talking to our customers, investors and partners — those touch points are key to executing on my vision and guiding Openwave’s direction.

Wednesday, 31 January 2007 19:00

The benefits of outsourcing

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As companies sink their teeth into the new year, it may be time to perform a profitability review. The competition is heating up, and many mid-size companies are consolidating costs and streamlining operations to compete with larger organizations. When was the last time you took a close look at the functions of each department in your operation?

A thorough review may identify departments that are perennial cost centers, departments that have transitioned from a profit center to a cost center, or functions like financial and SEC reporting may be perfect candidates for an outsourcing partnership. “It’s an opportunity to find a partner who has the ability to help you achieve your strategic objectives without having to worry about back-office functions,” says Cathy Thomas, a partner with Armanino McKenna LLP in San Ramon, San Francisco and San Jose. “Outsourcing allows companies to control costs and focus on their core competencies.”

Smart Business spoke with Thomas about how to identify and implement an outsourcing program that provides flexibility, expertise and cost benefits.

How can a company best determine if it would be more cost-effective to outsource?

Typically, a company would perform the analysis to determine if a function requires an in-house skill set to keep the operations going. An emerging example of this is the SEC reporting required for public companies under Sarbanes-Oxley. A lot of activity happens each quarter and at year-end, but many times not a lot goes on in-between. Many companies are choosing to outsource that expertise because they don’t need a full-time person. It’s more cost-effective for them to use an outside source that is trained to handle these functions every day. The cost savings and effectiveness of this partnership can be dramatic.

What other departments can benefit from an outsourcing partnership?

Payroll outsourcing has been around for a long time. It is usually one of the first areas a growing company looks to outsource. Tax and financial accounting positions and IT functions are all areas that can benefit from outsourcing.

IT outsourcing can be extremely effective. Often, a company needs a well-trained technician for a certain number of hours to deal with a specific issue but may not need a full-time employee. It can be difficult and costly for companies to keep an in-house IT programmer trained and competent at all the systems they have running, because of their specialized nature.

There is also a continuing trend toward outsourcing a piece, or even the entire function, of the HR department. For years, companies have been tapping boutique HR firms to handle certain specialties within that department with great success.

How do clients respond to outsourced departments?

It depends on the service line, but it’s like any other client service — there are always skeptics. Some people are more willing than others to work with consultants. Outsourcing within the U.S. can be successful if the executives that are fostering the change state it up-front. If the tone at the top is well conveyed to the service group that the outsource company will be assisting, there is usually a fair amount of support.

Outsourcing can also raise many political and security issues that have to be addressed.

What are the key benefits of using an outside firm?

The main benefit to the client is having somebody on call that is trained and technically competent but doesn’t have to be compensated on a full-time basis. It’s the provider’s job to be fully trained and up to speed on the necessary skill set. The client is getting the best of both worlds in terms of cost and competency.

In the end, if you add up the salaries, benefits, and the cost of training, it’s generally cheaper to use outsourcing — and usually you get a better product.

What steps should be taken to switch a service to an outside firm?

Initially, it is important for management to assess who will be impacted by an outsourcing plan. The communication and the reasons given for the outsourcing should be made in a very thoughtful manner. Employees will react differently depending on whether or not they’ll be long-term players with the firm. It really depends on how it affects their lives.

From our standpoint, we first go in to assess everything that needs to get done and put a plan in place. We then go back to management and make sure the plan is in line with their strategic objectives. We typically sit down with the client every three months, as well as annually, to get an assessment of our work, and to ensure the plan is working and meeting both partners’ objectives.

CATHY THOMAS is partner in-charge of consulting with Armanino McKenna LLP in San Ramon. Reach her at (925) 790-2656, or cathyt@amllp.com.

Sunday, 31 December 2006 19:00

Cathy Baron Tamraz

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Cathy Baron Tamraz has spent 26 years with Business Wire, and she works hard to make it a place where her employees will want to spend a long time, too. Offering perks such as a company condo in Hawaii that employees can use creates an environment that people want to be part of. Tamraz figures that if she takes care of her 500 employees, they’ll take care of the $130 million commercial news distribution company. Smart Business spoke with Tamraz, president and CEO of Business Wire, about the secret to retaining employees. Understand people.
I’m all about the people that work here and that I deal with outside, as well. It’s a relationship business — they all are. Understanding psychology, that’s always helpful because knowing what motivates people and how to get them to work for you and feel good about the company, themselves — it all flows together.

Make work a home away from home.
A lot of what we do is about longevity, so it’s an encouragement to stay with the company.

Coming to our organization, we want you to find a home here, and we try to match skill sets and promote and reward. Obviously money is important. Beyond that, it’s feeling appreciated and noticed.

We don’t have a lot of layers here — we’ve got about 500 employees, so your work is recognized and acknowledged. It’s pretty simple: You work hard, you get rewarded, and if there’s other opportunities, we’ll look from within first to promote.

Hire employees with multiple skills.
There’s not one prototype, but you want someone who wants to stick around awhile and learn and is open. Well-rounded works better than someone who has a particularly strong skill set in one area.

We’re in a really fast-paced environment, so you’ve got to be on your toes and be able to multitask. You need good computer skills, good communication skills.

Rely on your managers.
I tend to want to control everything, and not in a bad way, but just know about everything, because ultimately, if the buck’s going to stop with me, I need to know about it. I’ve gotten better in trusting people because we’ve got so many talented people to own different segments of the business and get it done.

Select some key managers that have a particular skill set that can get it done. Empower them to make decisions and go out there and do the research and then execute.

It’s about the team. Nobody does this alone. You have to have a really great team around you and work closely together, and there’s that whole trust. Sure, one of us is going to stumble once in awhile, but we pick each other up and keep going.

Prioritize employees and watch the bottom line.
We’re a no-debt company. If we don’t have the money, we don’t do it.

Our motto was proven right in the tech-wreck. Many of those companies were trying to grow by press release, and they were overex-tended. We had a lot of technology companies that use Business Wire, and we felt a trickle-down effect, but we didn’t have any layoffs — not one — during that time.

We said, ‘These people we hired to be with us and grow with us, and we’re going to find something else for them to do until we recover,’ and we did. It speaks to the fact that we weren’t overextended.

The people that work here, that’s how they stay. We have good benefits, but more than that, there is that care. You spend a lot time with everybody in your office. They become like your family. If we take care of our people, they’re going to take care of us, of our clients, which is what it’s all about.

Address problems as they arise.
Sometimes you have to course-correct. We hate to do it, but there are requirements, and we’re an aggressive company, so we might have to change the manager or salesperson.

There might be a good reason for that. An industry might be lagging, so we might have to ride that for a while, and maybe they’ll have to look at some other ways of selling. They might need to be retrained in some area.

Most of the time, you’re going to find out you’ve got the wrong person in the job. Someone might be good at one thing, but they’re not that good at something else. They’d be better off in a different position. It’s matching up skill sets. They’re not happy, either. It’s kind of refreshing when the person says, ‘I’m feeling stressed out — this is a relief to hear.’ It’s identifying it early and communicating.

Learn from mistakes.
You’re always going to keep learning. I don’t think anyone should ever get so cocky to think you’ve got it all figured it out because nobody does.

It humbles you a little bit. Always keep a little grace for other people, and hopefully you’ll get the same when you need it.

Be tough.
I have a little newspaper clipping headline on my PC, and it says, ‘Nerves of steel.’ It’s stressful. Lots of things happen, and you have to be prepared, but you can’t anticipate everything that’s going to happen on a given day.

You’ve got to be flexible, and you need to be able to take that deep breath and think about it rationally before reacting. Then you address the issue head-on, you deal with it straight up, and you move on. The one thing I do is, we have a problem, immediately communicate. That takes a lot of the sting out of the problem.

You take your lumps and you fix your problems and you just move on. That kind of attitude serves everybody well.

Have strong values.
Keep it simple. It’s like the old values are the good values, and if you live your life that way in business and [in your] personal life, you pretty much can’t go wrong. Hard work and being focused and being passionate about what you do — if you don’t have that, I don’t think anything really happens.

HOW TO REACH: Business Wire, www.businesswire.com

Sunday, 31 December 2006 19:00

Sourcing, manufacturing, selling

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China is the fastest-growing importer and exporter for the United States. Chinese citizens are experiencing greater earning power, which in turn has led to huge demand for consumer products and services. The economic strength and population provide opportunities for American companies interested in doing business in China.

“There are three ways for American manufacturers to do business and make money in China: sourcing, manufacturing and selling,” explains Helen Huang, vice president and chief representative of the Comerica Bank Shanghai Representative Office, which opens this summer. “Most American companies understand the advantage of reducing costs via a China strategy, and more are realizing the opportunity to sell in China to its 1.3 billion people who now have more spending power.”

Smart Business spoke with Huang about the reasons behind China’s economic emergence, how a company should proceed if it is interested in doing business in China and what types of opportunities she foresees in the future.

What are some of the driving factors behind the tremendous economic growth that China has enjoyed?
The low labor costs and availability of skilled workers combined with favorable government policies have enabled China to become the No. 1 destination for foreign investment. In addition to exports, another important factor behind the tremendous growth is the need for massive infrastructure within China itself.

Also, China’s stable political environment has played a role. Since the 1970s, China’s government has changed its focus from political movements to economic growth. The central government has implemented policies encouraging trade, foreign investment and economic growth while maintaining stability.

In what ways does the Chinese business environment differ from the United States?
Historically, the Chinese economy was totally state controlled. Today, government at different levels can still have a big impact on businesses. The Chinese legal system is still evolving. The rights of each party in the economy are not clearly defined, and it is not easy to enforce one’s rights. Signing a contract doesn’t necessarily mean you are protected by the laws. If you don’t understand the culture, there will be misunderstandings. A typical Chinese is not as direct as a typical American. It may mean ‘no’ even when you don’t hear that word.

What advice would you give to a company that is interested in doing business in China?
In general, U.S. businesses should understand that China is a very different culture — including the way in which business is conducted. You need patience, an open mind and a long-term view. It is probable that you need a local partner or consultant who understands Chinese culture and its business practices.

In addition, the regulatory environment is very different in China. Understanding government policies relevant to your industry and the type of business that you want to set up should be a very important part of research and planning of your strategy.

How can a company find suitable business service providers in China?
You can ask for referrals from your bank, CPA, attorney, and others who have had experience doing business in China. A credit reference system is not necessarily available. You will probably find that good business service providers come from introductions from a trusted source who knows the providers.

How should a company evaluate locations to set up an office or manufacturing facility?
Currently, most foreign investment takes place in three regions: Yangtze River Delta, Pearl River Delta and Bohai Rim. These three regions are the most developed areas in China with the best infrastructure, the most sophisticated business environment and the best trained professionals. Obviously, these regions are significantly more expensive than inland areas.

When evaluating locations, there are many factors that a company should take into consideration. Labor cost is one of them, but not the only one. Other important factors include close proximity to highways, ports and airports; close proximity to customers and suppliers; and local government incentives to foreign direct investment.

Over the next several years, what types of opportunities do you anticipate for American manufacturers in China?
China will remain an attractive location for manufacturing due to its low labor costs and improving infrastructures. The cost has been going up in coastal areas and Chinese currency is expected to continue to appreciate against the U.S. dollar, but manufacturing costs will still be much lower than in the U.S. The provincial and local governments are eager to attract foreign investments and therefore have very favorable incentives.

HELEN HUANG is vice president and chief representative of the Comerica Bank Shanghai Representative Office. Reach her at helen_huang@comerica.com or contact Glenn Colville in Comerica International Trade Services at (925) 941-1931 or glenn_l_colville@comerica.com.

Tuesday, 11 January 2011 19:00

Changing technology

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If someone told you that you could drop your operating costs by 40 percent, would you listen? If that same person said you could save between $70 and $150 per user per year in energy savings alone if you tried something new, would you try it?

A lot of companies are listening, and those same businesses are trying something new — cloud computing and software as a service (SaaS) — and reaping the many benefits, which start with the aforementioned cost savings.

“It’s about saving money, and there’s a tremendous amount of money to be saved, because if you look at IT budgets, nearly 80 percent of that budget, in many cases, is spent just to keep the lights on, which means the other 20 percent is the only money that’s actually able to be used to implement new technologies into the model,” says Jeff McNaught, chief marketing officer at Wyse Technology Inc.

McNaught’s company builds a device that replaces the PC, uses one-tenth the energy of a PC and connects you to the cloud. The device doesn’t make a lot of noise, but more important, it doesn’t cost a lot of money.

“When you look at cloud computing, operating expenses can drop by about 40 percent a year, and that’s real money,” he says. “These devices use one-tenth of the energy of the PCs. Now you’re really talking about saving real money.”

How cloud works

So the idea of saving that much money has caught your attention, and now you may be asking, “What exactly is this whole cloud computing thing anyway?”

Dave Hitz is the co-founder and executive vice president of NetApp, a company that sells enormous amounts of storage to people who need it. For example, Yahoo stores all of its e-mail accounts on his equipment, and the special effects for “Avatar” were stored on his equipment, as well.

“If you look at storage systems, they’re a lot like toilets — for two reasons,” he says. “No. 1, it’s where you put your shit. But No. 2, as long as they’re working, nobody cares. But when they stop working, they become the most important piece of equipment in the house or the data center. We don’t offer cloud services — we’re not a cloud service provider company, but if you look at the equipment that we sell, many cloud infrastructure environments are built on top of our storage as a foundation.”

From his perspective, Hitz sees two different definitions of cloud computing.

“Definition No. 1 of cloud computing is you no longer buy a computer,” Hitz says. “You access computing service over the Internet to somebody else’s data centers, and they spend the capital and they hire the people to build them and they do everything, and all you do is pay a monthly bill and access the service over the Internet. Style No. 2 of cloud computing is a completely technical definition, which has to do with if you’re going to build a data center, what does the architecture look like? And if the architecture has a lot of shared infrastructure, then people tend to call that kind of environment a cloud-computing environment.”

Using his first definition, cloud eliminates many IT headaches because how often do you have an overly positive IT experience?

“I imagine people would say their experience with IT has been less than optimum,” says John Dillon, CEO of Engine Yard Inc., a company that delivers an environment for software developers to write programs that run inside the cloud. “The reason is you spend so much money building all this infrastructure, that going the last mile, which is where you write the application that interfaces with the human, the user, doesn’t get the attention, doesn’t get the money and doesn’t get the investment.”

The idea of the cloud is essentially that you plug into the wall, and you get a whole data center.

“It’s IT as a service, just as you get electricity or water,” Dillon says. “In business, you, in most cases, don’t have your own power plant, you didn’t dig your own well, you didn’t build your own building, you don’t have your own fire department or police department. So why on Earth do we basically give power to a group to build something that has been built before in-house, and then hope it works?”

Dillon also points out that in the United States, capital expenditures are a huge expense. In fact, about 50 percent of capital expenditures in America are information technology.

“Unbelievable,” Dillon says. “How many people are getting the ROI on this? What’s happening with the cloud is some big companies are saying, ‘Look, I’ll build the data center.’ It’s changing who buys, why it’s bought, and it changes the capacity and the economic decision-making process around IT.”

When you look at how much money most organizations spend on their IT systems, these cost savings are a big driver and will, ultimately, be a game changer for business.

“Amazon, who is a leader in cloud technology, told me that they think it’s a $1 trillion a year potential business,” Dillon says. “So if there’s a trillion dollars at stake, that means every company within 50 miles of here is going to make a really big bet, and it’s so disruptive, because the buyers are going to change, and the sellers are going to change.”

The other benefit, aside from cost, is that you now have everything that is on your PC in one location that can be accessed from anywhere — not just from the PC itself.

“When you take your software and your applications and your data and you move it to the cloud, something’s happened,” McNaught says. “First off, the cloud is the data center of your company and you can always get to it. You’re connected to the Internet, so you can get there from home, from the conference center, from the airport. And guess what? Because it’s not on a PC with a hard drive failing and memory getting filled up, it’s protected. It’s backed up. It’s secure. So the cloud provides this real opportunity to take the things that make up our work life and, within five years, our home life as well, and move them to this one place where we can always find our stuff.”

The evolution of cloud

Dillon is amazed by cloud computing, and if you look at how it’s evolved and how it’s changing business, it’s hard to disagree with him.

“This cloud thing is the biggest thing that’s happened in technology since the IBM computer, and that’s pretty big, and at least as big as the Internet in terms of economic disruption, because it changes how and where we do our computing,” Dillon says.

He says to go back a few years and remember how every small and midsized business had a room with computers in it and maybe a server or two.

“As businesspeople, you probably didn’t understand what they were for, but you knew they were important and you wrote checks,” he says. “It was hard to be good at that, because you had a business to run, and presumably you were an expert at that business, and you used technology to be good at that business or best at that business, so it was a necessary evil.”

Over the last 10 to 15 years, a variety of things happened that became game changers. First, we got the Internet.

“Everybody is connected — not just a few people are connected — and we’re connected not just inside our companies but outside our companies,” Dillon says.

Second, access became ubiquitous with the advent of cell phones, BlackBerrys, iPhones and laptops.

Then access got cheap — almost free. It doesn’t cost you anything to go to Google and look up any information that you want.

“You think about that perfect storm that happened — we’re having an explosion,” Dillon says. “The applications that are being built today are no longer these little things you do inside the building. You don’t write a general ledger for 12 people — you’re doing something that interacts with employees, vendors, suppliers, and what you’re trying to do is provide those people with a wonderful experience.”

McNaught would add another element to that perfect storm — the PC itself. He asks if you really love your PC.

“I don’t mean what you do on your PC, but how many of you love the physical hardware incarnation?” he says. “The keys, the noise, the weight, the dragging it around, and, oh, by the way, if you drop it, it’s probably not useful the next day. It’s part of the business — people don’t want to buy these anymore. The cloud is really the place where you take the things that were on the PC, and you go put it there.”

McNaught says the data indicates that PC market share, which is about 94 percent now, will drop over the next decade to about 10 percent.

“It’s not because less PCs will be sold — maybe a few less, but it will lose its role as the core device we use to access our stuff,” he says. “You’ll see this huge proliferation has already started with tablets and mobile devices and mobile phones and the mobile Internet exploding now. The question becomes, how do I access my stuff? How do I access it securely? And how do I access it at the lowest cost?”

These are questions that most people would agree are incredibly important. In fact, these questions are reasons why cloud hasn’t been successful in the past.

“This had been tried before and it’s failed, because there were two things we couldn’t get right as an industry,” McNaught says. “Early on, we couldn’t make all the software that was important to your business work reliably. We walked into the hospital and the hospital says, ‘We have 400 applications, we can only make 350 work on the cloud. Where are the other 50 we need to execute?’”

The other factor was user experience.

“If you get, from the cloud, an experience that is the slightest bit less robust than the experience you get at home or the office today, what are you going to do?” McNaught says. “You’re going to go beat the living daylights out of the IT guy who suggested the cloud.”

But now, the technologies have changed, and these two pieces have largely been addressed. On top of that, security is stronger than with a PC, and that’s why companies large and small are now using the cloud.

“There’s an adage in the IT industry that when you introduce a technology that reduces costs, you’re giving up benefits, and if you introduce a technology that gives you big benefits, it costs you a fortune,” McNaught says. “The thing about cloud computing is that it fires on both cylinders — it reduces costs dramatically and delivers incremental benefits that you don’t get with the current model.”

With kinks being worked out to create a compelling and viable technology option, how companies do IT is starting to change.

“One of the big drivers of why this is happening and why all these benefits occur is because cloud computing is a lower-cost architecture,” says Brian Jacobs, founder and general partner of Emergence Capital Partners. “You can deliver more computing power to more users for less cost, and that is a compelling driver.”

How cloud can affect you

You may think this sounds great and believe that cloud computing is important to the future of business, but if you are skeptical, Hitz has a warning.

“I’ve had the opportunity to ask a lot of CIOs, ‘How is cloud computing affecting your business? How much cloud computing are you using?’” he says. “The most common answer I get is, ‘It doesn’t affect our business at all yet, and we’re not using it at all yet.’ I will tell you that almost all those CIOs are wrong. They’re already using it but not thinking right.”

He say that CIOs need to think differently and compares it to the early days of the transition from the mainframe to the PC. In those days, if you asked CIOs if they had a PC strategy, many said, “Oh no, that’s not part of what we’re doing,” but half the employees had PCs.

“When data started leaking out the door because somebody lost their PC, who do you think the CEO went to beat up?” Hitz says. “The CIO, and the CIO said, ‘Well, PCs aren’t really IT.’ Those are the CIOs that are gone. I predict the exact same thing is going to happen to the CIOs who think that cloud computing isn’t happening in their business. … There’s an enormous amount of work that CIOs need to start thinking about — how do I get my arms around all the cloud contracts that are being found in little places scattered around?

“It’s affecting a lot more than people are realizing, because they’re not defining it broadly enough. If they look at that broader definition, the stuff they’re already sort of doing or in denial about, that stuff is a pretty good road map to where the future is headed, just more.”

Not only is it affecting how your business will run, but it’s also going to change how new companies enter the market, meaning fewer barriers to entry for future competitors.

“Silicon Valley is very much a startup culture — there’s always something starting up here, and it’s important to note that cloud computing also changes the economics of a startup,” Jacobs says. “A startup today doesn’t need as much capital to get going because of cloud computing. A developer, who could be an independent contractor, an engineer who’s working at a day job and at night has a new product he wants to develop — he can log in to a platform as a service like Engine Yard, and they can start developing their product without a single dollar of investment. They can work for free developing the product until they’re at the point they can introduce it to the market.”

As a result, the venture capital industry is much different than it was 20 years ago. In fact, Jacobs’ company started in 2003 with the idea that more and more technology would be delivered as a service as opposed to being built by companies.

“Cloud computing and software service has really hit technology like a giant wave, and all of these business models are service providers — companies that are building technologies and not selling to their customers but operating it on behalf of their customers and charging their customers a monthly fee in exchange for that service,” he says. “That’s a different kind of venture capital and that’s the focus of Emergence Capital.”

Aside from all the ways that cloud computing will change business, it’s also changing how employees approach their jobs. While people can work from home in their pajamas, it’s often difficult, and in many cases, employees don’t have access to everything that they could if they were on their PC in the office.

“Cloud computing lets you access your work environment, and you’re on your couch — maybe in your pajamas — and you’re doing real e-mail and doing real work, and yeah, maybe your boss is getting a little more work out of you, but you’re doing it, quite honestly, voluntarily because you get to work in your environment, you’re not in the office, you’re not sitting in front of the computer in the office and you probably have better TV shows on,” McNaught says. “The technology that cloud computing provides is about saving cost and delivering additional benefits.”

To give you a real example, Hilton Hotels decided to close its physical reservation centers and send all of its reservationists home with devices that connected them securely to the Hilton system.

“What Hilton found was they could close all those buildings and save those costs of real estate, and they saved all the energy costs of running the PCs in the buildings, and they found the employees were happier, because they were working from home — maybe in their pajamas, but nobody could tell. They were working over secure devices, so Hilton didn’t lose any data, and they were working over a device that didn’t have the complexity of the PC, so they weren’t calling the IT staff out to their homes to fix this,” McNaught says. “Cloud computing allowed Hilton to save money in so many ways that satisfaction increased, and they found that people working at home would take a lower pay. They saved on all sorts of fronts. Cloud computing has a transformative effect on all kinds of business.”

Cloud computing is changing the way businesses start and operate, and if you recognize and embrace that, it can make all the difference in how successful your organization can be.

“The reality is, as companies try to find ways to grow and compete in an ever more challenging economy, you have to do something different to be different than your competitor,” McNaught says. “If everyone is using the same old client server architecture — the PC connecting to the server — you really don’t have many opportunities to compete.” <<

How to reach: NetApp, www.netapp.com; Engine Yard Inc., www.engineyard.com; Wyse Technology Inc., www.wyse.com; Emergence Capital Partners, www.emergencecap.com

Sunday, 26 December 2010 19:00

Uncover opportunities

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Mark Woodward is trading in-your-face sales pitches for a few extra finger exercises. That’s why, when you visit the website of E2open Inc., you’ll go three clicks in before you even see a product name.

Right away, though, you’ll learn about the broader problems that E2open aims to solve with its cloud-based supply chain management solutions that enable visibility, collaboration and control across large trading partner networks.

“Where many companies fall down is … [they] get really hung up with the details of their products and get enamored with the widget they’ve created,” says Woodward, president and CEO. “They go out and they try to sell the widget, as opposed to the business benefits of what that widget does for you. Where companies go from being marginally successful to really successful is when they change the focus from the product they’re selling to the problems that they’re solving.”

By getting his 300 employees into that mindset, Woodward led E2open to record revenue in fiscal 2010, up 20 percent from fiscal 2009.

Smart Business spoke with Woodward about understanding your market.

Keys to growing a company. One is just focus. You need to understand what it is you’re going to do and also be pretty focused on what you’re not going to do.

Something that we’ve done at E2open really well is understanding what the value proposition is for the customer, making sure that they understand the benefit. Before we go launching a lot of time and effort and resources behind pursuing an opportunity, we really put a lot of time and effort into qualifying that opportunity and making sure there is a business case. Make sure that you’re focusing your limited resources on the opportunities that are the highest probability to close.

A lot of people get really hung up on putting a little too much emphasis behind having a really fancy growth strategy. But if you’re really focused on growth, it’s really understanding the market you’re in, who you’re selling to, what your value proposition is and then just putting all your resources behind making that happen.

Gain an understanding of the marketplace. It’s through analysts, basic research and then talking to your customers.

Sometimes companies get caught up in thinking they know better and they know the problems that need to be solved without really doing very good market research or without talking to their customers enough. It’s really important to understand not what you think your customers want but really knowing that by having those conversations with your customers.

We’ll just start off with very open-ended questions like, ‘What are your problems?’ Not even asking about our particular area but just very high-level, top-of-mind: ‘What are you thinking about? What keeps you up at night? What are your greatest challenges?’

And then, based on that, start to bore in and even ask, ‘What vendors do you look to for solving those kinds of problems?’ As you get answers, get a little more specific. Customers are usually very open to telling you about other vendors they’re working with or problems that no one has solved for them yet. That can actually help in your product strategy, as well. I’ve learned about a number of really interesting new areas, things that we didn’t even get from analysts, just purely off of customers telling us about shortcomings they had with other vendors. So the customers give you a more real-world perspective, not just the marketing spin that the analysts are hearing.

Position yourself to meet those needs. You have to be careful so it’s not looked at as the sales guy looking for a sale. It’s multiple meetings with different people. That highest level meeting might be with myself or a chief technology officer or possibly head of marketing; basically, you’re just in there information gathering.

Then if you think there’s specific opportunity for the company, you’ll follow up — maybe myself but probably with the head of worldwide sales — where we start to bring in people that are more on the solution side of the business.

Customers don’t mind you selling to them if you have a solution. But there does need to be a separation between the process of information gathering for purposes that are not specifically related to a sales process, and then the sales process itself.

Decide which needs you’re capable of meeting. I would bring it back to [the executive staff] and say, ‘Here’s what we have found,’ and just open discussion up to the whole group, which will typically then lead to some assignments of tasks. We’re going to say, ‘OK, we need to now go prove out these two things. So you, vice president of marketing, go talk to XYZ analysts and ask their opinion on this. And you, head of my deployment services, go talk to three other customers and tell them what our point of view is on this and get their feedback on that.’

Then, based on that, we may make the determination, ‘OK, we now need to make a change in our product strategy,’ or, ‘In the upcoming releases of our products, we need to start moving in this kind of a direction,’ or, ‘We should go look at an acquisition in this particular area because it would take us way too long to develop ourselves into that space.’

How to reach: E2open Inc., (650) 645-6500 or www.e2open.com