Say the word “innovation,” and immediately you think about business legends like Steve Jobs and Jeff Bezos, as well as the companies they created – Apple and Amazon. Too often, however, we focus on the people who have been tabbed as innovators and the companies that develop those breakthrough products, services and solutions, such as Apple’s iPod and iTunes, or Amazon’s marketplace and unique ecosystem.
True innovation goes much deeper than a single leader’s vision. It is an all-encompassing philosophy that permeates an organization and defines its purpose for being. For me, at least, I prefer to think about innovation in its broadest terms, extending its definition to include corporate cultures and innovative management styles. Think about how Facebook and Microsoft are run, and how at both organizations employees are a key factor in the idea creation, or ideation, process.
Now, think about the breakthrough products that eventually went bust. Hopefully, you don’t have a basement full of Beanie Babies, boxes of Silly Bandz, or a home library filled with laser discs. It is more common to land on a singular breakthrough product that temporarily revolutionizes your industry rather than develop a product through a process that’s repeatable or scalable. And, just as true, no matter how innovative and creative your management team’s style may be, without the proper processes in place to push ideas through a system that takes them from mind to market, you’ll eventually have trouble keeping the lights on.
It all comes down to developing a culture imbued with innovation at its core. But this also requires having a servant culture in place where every person who works for the organization thinks about the customer first.
Consider San Francisco-based Kimpton Hotels, where employees strive to create “Kimpton Moments” by going above and beyond with guests and delivering memorable experiences.
Kimpton overcomes the inherent limitations for creating new innovative products that being a boutique hotel chain includes by approaching innovation through its employee interaction – and then rewarding employees for their creativity. For example, when team members put in the extra hours to ensure world-class service delivery, the hotel chain has sent flowers and gift baskets to their loved ones. And when they create an innovative service experience, the company rewards staff members with such things as spa days, extra paid time off and other goodies.
And then there’s the Boston Consulting Group, a management consulting firm that’s known for developing innovative business processes and systems for its high-end clientele. Part of BCG’s internal process is a focus on team members maintaining a healthy work-life balance. When individuals are caught working too many long weeks, the company’s management team issues a “red zone report” to flag the overwork.
Talk about innovation! And no product, service or solution was developed, marketed or sold.
And finally, few organizations are more innovative than DreamWorks Animation. But beyond plugging out groundbreaking animated movies, the studio’s culture embraces empowerment and innovation. Employees are given stipends to personalize their workstations so that they create whatever inspirational atmosphere they need to succeed. And, as the story goes, after completing Madagascar 3, the crew presented a Banana Splats party, where artists showed the outtakes.
Not only are these three companies known for being innovative in their respective industry spaces, they also share the honor of being members of Fortune’s 2013 “Great Places to Work” list.
So how do you take the first steps toward transformation or put those initial building blocks in place to begin the journey? There’s no magic formula, but there are some common traits – and they revolve around empowerment and establishing a culture that cares.
- Are open-minded and ask “What if?”
- Teach team members how to see what is not there and identify opportunities in the marketplace to take advantage of those gaps.
- Develop cultures where innovation thrives through open and honest communication.
- Flatten the organizational structure and recognize that innovation can come from anyone and anywhere.
- Make innovation, itself, a cyclical and continuous process.
Stop and take an internal assessment of your organization, your team and of yourself. If you can’t check a box next to each of these five traits, stop and ask yourself why. Then begin your own journey to greatness.
Nothing is more frustrating than missed opportunities — except when those missed opportunities were completely avoidable. For example, you and your organization put in the time and effort to drive prospects through the marketing funnel toward conversion. And then, when the prospect is engaged and reaches out to you, you’re not equipped to provide a timely follow-up response.
This happens entirely too often. But basic prep work on the front-end can help you avoid becoming one of those organizations whose well-planned marketing strategy is wasted.
Conversion means different things to different people. In retail, it may mean going to find a product — either online or in person. But in a different industry, it may mean that someone just wants to talk to you about helping to solve a specific problem.
Regardless of your conversion definition, the singular commonality is your ability to immediately follow up and act on the potential conversion. This is because when someone reaches out to buy a product or for help with a service, it is an emotional decision. He or she is claiming that they either need something (a product) or help with an area they do not have the expertise in.
The importance of this step in the marketing funnel is critical. Like it or not, we live in a world of instant gratification — both personally and professionally — and you must tailor your marketing efforts to accommodate it. When someone winds their way through that funnel by becoming aware of your services, having interest, and then being willing to engage and dig deeper to learn who you are, nothing kills those marketing efforts faster than failure to respond to that person.
Too often, we see conversion points that consist of a basic “email us” link on a website. It sends a note to a general email address that nobody regularly checks. Or, the company lists a phone number that reaches a general voice mail account that is rarely checked. In both scenarios, all the work required to lead a prospect to conversion is rendered moot.
Take steps to ensure conversion
So what can you do to reverse the trend and build systems that allow for more immediate conversion? Among the easiest to implement are
■ A phone number that connects with somebody who is dedicated to following up.
■ Online chat capabilities in real time
■ Marketing, through a website or other sales materials, that guarantee a 15-minute response time.
■ A well-designed form on your website that asks for four components: name, email, phone number and reason for the inquiry (any more information than that may cause prospects not to convert).
Keep it simple and swift
Many organizations simply fail to take the direct route, and as a result, they swing and miss.
Initiatives such as putting a map that points to your location as your prominent website “contact us” looks great, but how many people will actually get in their vehicle and drive over to see you?
Also, don’t underestimate the importance of offering multiple ways for people to reach you for a swift response. When it comes to today’s marketing funnel, there is no effective one-size-fits-all approach.
For example, let’s say you’re looking to refinance your house or buy a new one. This is an emotional decision. You do your research and find a company that you believe will offer the best possible rates. You reach out to them. And then, you don’t hear back for days. What happens? You lose interest.
But now, consider the result when you reach out to a company and get a return response within 10 to 15 minutes.
First, you get the information you need to make a decision. More importantly, though, that company has forged an emotional connection with you because they were responsive to your needs.
It is this emotional connection that can be highly effective in closing the final piece of the marketing funnel — conversion. And, if your organization’s marketing strategy includes optimizing your marketing spend, why would you ever overtly waste money by failing to have an effective — and immediate — follow-up process in place?
David Fazekas is vice president of digital marketing for Smart Business Network. Reach him at firstname.lastname@example.org or (440) 250-7056.
Calm down … those two letters in the headline are not what you might be thinking. However, it got your attention, for this leads to an important subject.
When you, or those with whom you work, don’t follow the principles of these two letters, problems occur. Not doing what these initials represent can be the difference between success and failure, cost big money, create disappointment and actually ruin relationships.
Hopefully by now you’ve figured out that F.U. stands for Follow Up. This skill is central to achieving objectives, supporting your people or customers, and maintaining your credibility. Too many people just don’t get it and consistently fail to make F.U. a part of their business regimen.
Words are cheap, but it’s action that makes the difference. Many promises are made every day such as: “I’ll get the answer and return your call soon,” or “My person will call your person so that we can get together.” Good intentions aside, if one does not make note of it, the call just might never happen.
Fortunately, only a relatively few get hit by locomotives because trains are big and people see them coming, but many are stung by bees. That’s the same with following up. Virtually no one would forget to pick up the big order, or neglect to attend a huge meeting, but too many let the smaller, yet important, matters slip through the cracks. This not only affects the person who didn’t receive what was promised, but also could significantly impede productivity.
As an example, an associate is to provide needed information first thing in the morning. Breakfast comes and goes and as the lunch hour approaches people along the line are sitting on their hands waiting. Do the math; count up what that could cost your business day in and day out. Frantically, and with a high degree of disgust, you track down the tardy offender and are appalled by the response, “Oh, sorry, it just slipped my mind. I forgot to write it down.” Sure, this can happen once but by the second or third time it becomes a pattern and the credibility of the perpetrator can be lost.
Following up is a reflection of respect. When people don’t have the courtesy of doing what they say, you begin to wonder if they can ever do it. In my companies, all those with whom I work quickly become aware of my sacrosanct F.U. policy.
Essentially after every meeting, whether a one-on-one or with a group, I assign a date for my own purposes of when what was discussed is to take place. If it was a task of significance, the date would be agreed upon with those who had to do the work.
When new employees receive a memo from me, with the unexpected “F.U.” initials in the bottom left-hand corner, many are initially stunned, thinking I’m giving them a crude ultimatum or don’t think much of their work. Fortunately, those with a modicum of common sense quickly realize that these two letters are not a pejorative as they are always followed by a numeric string that even a newbie can figure out represents a date.
I remind my team that I do not want to be their father or their baby sitter. Instead, when I ask that something be done by a certain date, and everyone involved agrees, it must happen.
Alternatively, the person assigned the task could always come back and say he or she can’t meet the deadline, don’t know how to do what was being asked, need help with the issue, or had figured out a better alternative. What could not happen is for the person assigned the task to pretend that no follow-up was required, or worse, that the covenant was never agreed upon.
Because so few follow up as promised, this presents your business with an outstanding opportunity to rise above others and create a rock-solid reputation for saying what you’ll do and then doing what you say. All it takes is a little discipline and respect for those with whom you work. It’s better to carry around a little string for your finger than run the risk of finding the proverbial rope around your neck as a result of errors of omission.
Michael Feuer co-founded OfficeMax in 1988, starting with one store and $20,000 of his own money. During a 16-year span, Feuer, as CEO, grew the company to almost 1,000 stores worldwide with annual sales of approximately $5 billion before selling this retail giant for almost $1.5 billion in December 2003. In 2010, Feuer launched another retail concept, Max-Wellness, a first of its kind chain featuring more than 7,000 products for head-to-toe care. Feuer serves on a number of corporate and philanthropic boards and is a frequent speaker on business, marketing and building entrepreneurial enterprises. “The Benevolent Dictator,” a book by Feuer that chronicles his step-by-step strategy to build business and create wealth, published by John Wiley & Sons, is now available. Reach him with comments at email@example.com.
Thinkers solve problems.
Mark Zuckerberg found a better way to connect people with friends and family through Facebook. Larry Page and Sergey Brin invented a better way to search the Internet by creating Google. Steve Jobs showed us a better way to obtain and listen to music through the invention of the iPod.
None of these examples happened by luck. Each of these great thinkers spent a lot of time working to perfect their ideas. Great thinkers are not born, they are made.
To create great products and services, you have to develop the habit of expanding your thought processes and critical thinking skills. Why? Because the human mind tends to be lazy. It tends to repeat the same thoughts unless it’s trained to explore new ideas. Great thinkers put in the effort to analyze things in new ways and not accept the norm.
We live in a negative society where bad news trumps good news and the potential downsides of an idea outshine the potential rewards. It takes a lot of effort to retrain our minds to focus on the positives and the solutions rather than the ramifications of a failed idea.
Becoming a great thinker requires an investment of time; there are no shortcuts. You have to be organized and plan for it. Take time to think about the problems unique to your business or industry. Work through the pros and cons of any idea, looking for a way to make it work. Study competing companies and leaders and gain an understanding of how they think. It’s also helpful if you always do your heavy thinking in the same location, and it doesn’t have to be anything fancy. Some people do their best thinking in the shower or over a cup of coffee at a cafe.
But there is one major pitfall to avoid: Don’t equate change with new thinking. Just because you are changing something does not mean you are being a creative thinker. There might be several “accepted” ways of doing something within your industry, and changing from one of the accepted ways to the other isn’t doing anything different. The goal is to identify new ways of thinking and as a result, find a new solution to a problem that no one has thought of before.
Finding these unique solutions won’t be easy, but success never is.
Will the strategy succeed? Is this the right move at the right time? I know we CEOs have all spent many nights pondering these questions and weighing the possible outcomes. Overall, it can
be a complex endeavor.
There are a variety of variables and unique circumstances that come into play for any business, but here’s a simple equation that can be a handy part of your decision-making process when assessing the probability of success for a strategy:
Confidence in our people x confidence in our strategy x the level of coordinated activity = our probability of success
The equation’s value rests on your ability to be honest. Your evaluations need to be fair and realistic to provide the best data. If you aren’t fully confident in an area, that’s OK. It’s about making the best decisions for your company and your people — and that requires honesty.
Let’s look at each part of the equation:
Ask: What is my level of confidence in their ability to successfully execute the strategy?
Honestly assess: While we all would like to automatically say we have 100 percent confidence in everyone at every instance, in reality, the percentage may be lower for a number of reasons.
Perhaps the responsible leader is new and relatively inexperienced. Or maybe the team already has a full strategic workload with little excess capacity to engage in a new strategy.
Ask: What is my level of confidence in the strategy?
Honestly assess: Not all strategies are created equal. The origins and the completeness of a strategy will determine the level of confidence in the strategy itself. Consider the process and if it was created by the boss, visionaries or tacticians? Is it proactive or reactive?
Ask: What is my confidence in the level of coordinated activity associated with the strategy?
Honestly assess: All too often, great strategies and great people are handcuffed by the lack of coordinated activities. Before you can execute a strategy well, you may need to stop doing something else to create the strategic bandwidth to embrace the level of coordinated activity necessary for strategic success.
Now, let’s take a look at an example:
People: Let’s say you have a new leader and a fairly busy group. You decide your confidence in your people under these circumstances is at 90 percent.
Strategy: You have a great go-to-market strategy created by a visionary process. The only shortfall is the financials rely heavily on estimates, so your confidence is at 90 percent.
Activity: You believe the activity level is very high, but it lacks a certain level of management coordination, slowing success. It could be something as simple as an uncoordinated order entry process. Under these circumstances, let’s assess your level of confidence at 90 percent.
So here we go — what is our probability of success? At first blush, it looks like a 90 percent average. That’s an A- or a B+. Sounds good, right?
The reality is different, and here’s what you need to remember: Shortcomings, however small, tend to multiply quickly in business. This becomes clear when we work our equation: 90 percent x 90 percent x 90 percent = 72.9 percent. The probability of success is actually a very low C-.
We have to make the best decisions we can for our people, and this equation can help us evaluate our circumstances and chart our course.
Joseph James Slawek is the founder, chairman and CEO of FONA International, a full-service flavor company serving some of the largest food, beverage, nutraceutical and pharmaceutical companies in the world. For more information, visit www.fona.com.
One of my favorite business books, which also made it as a Broadway play and a big-screen movie, is “The Wonderful Wizard of Oz,” written by L. Frank Baum in 1900. My hero in this story is not the young orphaned Dorothy, nor the Cowardly Lion, the desperately in-need-of-some WD-40 Tin Man, nor even the Scarecrow in search of a brain.
Instead it is the Wizard. To understand why the dubious Wizard is my favorite character, one must get past the portrayal of him as scheming, phony and at times nasty.
To appreciate the man behind the curtain, recognize that he is a very effective presenter, though at times this ex-circus performer behaved a bit threatening. OK, he was a jerk, but the point of this column is to take you down the yellow brick road on the way to the enchanted Emerald City and corporate success.
From this tale there is a lesson that one can say all sorts of things, not be visible, and yet still have a meaningful impact.
Another takeaway is that playing this role provides plausible deniability. This absence of visual recognition is particularly beneficial in negotiating when you, as the boss, use a vicar, aka a mouthpiece, to speak on your behalf. This allows you to have things said to others that you as the head honcho could never utter without backing yourself into a corner.
Another plus is you can always throw your mouthpiece under the bus if necessary, of course, with his or her upfront understanding that sometimes there must be a sacrificial lamb. This is not only character-building for your stand-in, but also many times presents an unprecedented opportunity for him or her to learn in real time.
Perhaps the Wizard was the first behind-the-curtain decision-maker, but today this role is used frequently in business and government. In a similar vein, the “voice” of Charlie from the well-known 1970s TV series “Charlie’s Angels” was always heard, but he was never seen.
Frequently there is much to be said for using anonymity to float a trial balloon just to get a reaction. Think about a son having his mom test the waters by talking to dad before the son tells him he wants to drop out of junior high school to join the circus. Maybe that’s even how our former circus-drifter-turned-Wizard-of-Oz got his start.
In the negotiating process it is important to have a fallback when the talks hit a rough patch by instructing your vicar to backpedal, saying that he or she has just talked to the chief and the benevolent boss said, “I was overreaching with my request.”
This also serves to build a persona for the boss-behind-the-curtain as someone who is fair-minded and flexible. All the while, of course, it’s the boss who is calling the shots and maneuvering through the process without getting his or her hands dirty.
The value of using this clean-hands technique is that it enables the real decision-maker to come in as the closer who projects the voice of reason, instead of the overeager hard charger who at times seems to have gone rogue.
It actually takes a bigger person to play a secondary role behind the curtain rather than always be in the limelight. It also takes a hands-on coach and counselor to maneuver a protégé through the minefields to achieve the objective.
However, accomplishing the difficult tasks through others is true management and the No. 1 job of a leader who must be a master teacher.
After you have guided a handful of up-and-comers a few times through thorny negotiations, you will gain much more satisfaction than if you had done it yourself, while engendering the respect and gratitude of your pupils. They in turn will have learned by doing, even though they were not really steering the ship alone.
The final step is to let the subordinate take credit for getting the big job done. This will also elevate you to rock star status, at least in his or her eyes. Soon those who you’ve taught will emerge as teachers too, and the big benefit is that you will populate your organization with a stellar team of doers, not just watchers.
So, forget about the Wicked Witch of the West and move backstage for the greater good of the organization.
A few years ago, one of my friends embarked on what he deemed an ambitious, yet simple plan: Write a New York Times Best Seller.
“Ed” had reason to be optimistic: His first two books had sold well and he had successfully leveraged them to launch a burgeoning consulting practice. Ed also had a nationally known book publisher to handle distribution for this book, and he had developed a comprehensive marketing and promotions plan for the launch.
Ed felt all the pieces were in place and was sure he would succeed. His goals were two-fold: break out from the pack and grow his business, and hit the New York Times Best Seller’s list. While his head told him the first goal was more realistic, his heart was set on the second — publicly claiming it was his only true benchmark of success.
Needless to say, Ed’s book didn’t make the list. Few books do. That doesn’t mean Ed’s book was a failure. Quite the contrary, it was a huge success.
As a result of Ed’s book, he landed numerous speaking engagements with organizations and companies around the world. He began to command four- and five-figure speaking fees from those engagements, and his book was purchased and distributed to every attendee.
Further, Ed’s speaking engagements lead to dozens of private companies hiring him to provide one- and two-day seminars, where he taught executive teams how to implement the ideas he espoused in the book. Ed was also presented with numerous business opportunities for new and existing clients to tackle initiatives beyond the book’s subject matter that he had not previously considered but were related to his expertise.
Finally, Ed did sell thousands upon thousands of copies of his book in bookstores nationwide and online through booksellers like Amazon.com and BarnesAndNoble.com. His book was in the hands of the right people — and lots of them — and he had established a national profile.
Viewed through this lens, there is little doubt that Ed’s book was wildly successful — even if it wasn’t a New York Times Best Seller and even if it didn’t stack up to his primary benchmark.
This is the reality of book publishing. Each month, I speak with dozens of entrepreneurs and CEOs about their nascent book ideas and the possibility of having Smart Business Books handle development and publication of their stories and manuscripts. I begin every conversation the exact same way: “If your goal is to have a New York Times Best Seller, we’re not the right option for you.”
That’s because you should write books for the right reasons. If your only goal is getting on a best-seller’s list, then your ambitions are off the mark. Writing and publishing a book is not like a professional sports team’s season — there isn’t one winner who takes the championship and a bunch of losers who fall short. Publishing a book is not an all-or-nothing proposition.
This isn’t to say you shouldn’t aim high with your goals, and having your book become a best-seller is certainly one way to measure success. Setting reasonable expectations, however, is essential.
So why write a book?
One of the most important questions you should be able to answer when thinking about writing a book is, “Who is going to read it and why?”
As Ed’s story demonstrates, a book is a very useful business development tool. It is an immediate conversation starter, an excellent credibility builder and one heck of a leave-behind. If you’re engaged in marketing, why not capture your expertise through a book?
Another reason is to celebrate a milestone or establish a legacy piece. It could be for a 50th or 100th anniversary, or to recognize the history of an organization upon the founder’s retirement or death.
And, if you are interested in helping others succeed, a book is a great way to share your expertise or what makes you and your organization special. For example, if you’ve built an amazing corporate culture where productivity blossoms and innovation flourishes, the “how” and “why” are good subjects for a book. And if you’ve been involved with several mergers and acquisitions, consider sharing what worked and what didn’t, and the lessons learned along the way.
Whatever your story, the key is having a reason to share it with others. The bottom line: It’s your story. Make it count.
Art was 58 when he realized that his company might have passed him by. He had been with the same employer for 35 years. He still loved the business, enjoyed the young up-and-comers and genuinely respected his boss. Yet, he did not feel like as valuable of a contributor to his company as he was in years past, and it bothered him.
Finally, Art’s friend Peter asked him what bothered him most. Art replied, “The thought of being viewed as obsolete. It scares me from a career standpoint and hurts me personally. I don’t know how to say this to my boss.”
Peter’s response was spot-on — “You just said it, but I’m not your boss.”
Perhaps the deepest need in corporate America that even senior executives and CEOs experience on a regular basis is a toolbox for being productively confrontational. Most employees don’t know how to manage their boss and often work from a place of fear of resentment.
Many managers will not confront administrative assistants who are short and even rude to clients. Talk about underachievement! What does this do for individual performance, organizational results and professional reputations?
The following are important steps necessary for confronting others in a manner that creates stronger relationships and increased productivity:
Change the name and your attitude
Too many people look at difficult conversations as negative and counterproductive; hence, they avoid and dance around them as often as possible.
Instead of difficult conversation, use productive confrontation. The words you choose create the path you use. Knowing that the intended result is to help, not hurt, may make it easier to find the courage to step-up and approach others. Frame it appropriately.
Put it on paper
Before the meeting, prepare a bullet-point structure (not script!) in writing. Be sure that it allows you to communicate your viewpoint in a logical order that is easy to understand and follow for the other person.
Clarifying your points with concrete examples builds momentum and makes a stronger case for being heard with respect.
Be as clinical as possible
Whether you’re intimidated, angered, hurt or resentful, try to consider the impact of how both parties will feel and focus on how everyone can benefit. This will allow you to assume a third-party, objective perspective and maturely manage the confrontation.
Agree on a resolution
At the conclusion of the meeting, discuss what the next step should be for follow-up. This agreement serves as a strategic road map for a stronger working relationship going forward.
Art did approach his boss honestly with concerns and after his boss listened attentively, Art learned that he was not only valued more than he thought, but he was in line for a promotion. Remember, even bosses can’t fix what they can’t see.
Not all corporate stories have a fairy tale ending, but think of how many people wallow in negative emotions from holding back in confronting others. The key is to prepare, be confident and behave with courage.
Joe Takash is the president of Victory Consulting, a Chicago-based sales and leadership development firm. He is a keynote speaker for executive retreats, sales conferences and management meetings and has appeared in many national media outlets. His firm, Victory Consulting, coaches executive teams and individual leaders with a client list that includes American Express, MIT, Prudential and
Turner Construction. Learn more at
How can your company improve its business results? One way is by optimizing your firm’s use of patents. The right strategies for leveraging patent properties can provide long-term advantages and a leg up on the competition.
The following strategies are useful starting points for enhancing business outcomes through patents:
Consider patents’ financial qualities
The same analytical constructs that apply to financial asset management can be applied to patent management. When managing financial assets, it is prudent to consider things like expected future cash flows, return on investment and relative risk profile. Understanding this information helps businesses with limited resources to select the most profitable investments and manage risk.
Likewise, expected cash flows from internal commercialization of a patent or out-licensing royalties can be forecast, returns on patent research and development investments measured, and relative risk profiles of patents assessed. By considering these financial characteristics associated with their patents, companies can make better decisions and optimize value.
Understanding patents’ financial qualities, for instance, can shed light on which monetization route — commercialization, licensing or sale — is most desirable for a given patent or group of patents. It can also help a company strategically leverage its operations to support patent value and vice versa.
Recognize the risk profile of patents
All assets, including patents, carry risk. Importantly, the type and level of risks in patents vary according to a patents’ economic life, the technology it discloses and the industries touched by the technology. For example, certain patents in fast-moving industries may carry the risk of rapid technological obsolescence, while other patents’ technologies may face uncertain or very slow market adoption.
Holding several patents that relate to a steadily selling product may suggest financial stability but also may imply a high level of risk concentration since several patents’ values may be impacted by a single product’s market performance.
Evaluating risks associated with patents can lay the foundation for comparative risk analysis and superior strategy planning. By understanding the relative risk levels of patents in a given portfolio and how those risks align or differ from broader business risks, companies can efficiently diversify.
Effective diversification of a patent portfolio can be achieved by holding the right mix of patents and by utilizing the proper combination of monetization techniques for those patents. Notably, effective patent risk management can be done without straying from a firm’s core competencies since even patents with similar technological profiles may have substantially dissimilar risk profiles.
Execute strategic patent
transactions with care
Due diligence in executing patent deals should be analytics-based, and care should be given to the broader business implications of any transaction. In this regard, appropriate qualitative and quantitative analysis should be deployed. Proper evaluation can help parties maximize value obtained through a transaction and ensure any deal comports with prevailing strategic initiatives, financial goals and desired competitive positioning.
Factors that should be considered in executing any patent deal include the following:
■ Values paid or received by others for comparable technologies.
■ Alternatives to reaching an agreement, including design-around cost/benefit analysis and assessment of the risk-adjusted outcomes of not executing a transaction.
■ Immediate and subsequent financial benefits, such as cash flow, “option” value and defensive patent aggregation security.
■ Possibilities for using the patent deal to foster broader strategic relationships or forestall undesirable competitor activity.
■ Value and risk implications of the contemplated deal on other patents in a portfolio.
When managed carefully and used cleverly, patents can be especially powerful tools for a business to enhance its bottom line. The right patent strategy can offer an excellent path to improved business results.
Michelle Rakiec and Stevan Porter are managing directors at AdValum Consulting, a premier provider of expert economic consulting services located in Chicago. They specialize in strategy, valuation and damages analysis in intellectual property matters. Rakiec and Porter can be contacted at
However, companies taking a “wait-and-see” approach to deal-making as economic uncertainty persists, may be missing out on growth and value opportunities.
Many companies have looked to divestments to offset cash and credit challenges and to free up capital to drive growth. But this short-term thinking is shifting as companies plan for the long term and take a more strategic approach to divesting.
In a recent EY divestment study that surveyed almost 600 executives, 77 percent said they planned to accelerate divestments within the next two years, and 46 percent are planning to divest in the same time frame. As companies signal an increased appetite for divestitures, it’s important they understand and implement the appropriate steps to achieve greater value for shareholders.
Evidence from our study, combined with our work with clients, has shown that there are five leading practices that companies should follow in order to execute a successful divestment:
Conduct rigorous and regular portfolio management
Review your portfolio regularly. Companies can assess whether assets are contributing to strategic goals or if capital can be better used for other purposes.
Companies that use divestments as a strategic tool to enhance shareholder value or focus on core business strategies, rather than considering them as a reactive move to free up cash or pay down debt, tend to improve their divestment results.
Consider the full range of potential buyers
There is an intense amount of competition from buyers today for good, high-quality assets and they’re ready to transact. Appealing to a broad group of buyers can garner a price that exceeds expectations.
Companies should think about the buyer universe for a potential asset sale differently than they might have in the past, considering potential foreign buyers, buyers within different sectors and private equity firms. Each buyer may have different information needs that require a different planning process.
Articulate a compelling value and growth story
Sellers should provide tailored information about how an asset fits with the buyer’s business to help achieve strategic objectives. Develop an M&A plan for the asset or provide a view of synergy opportunities to buyers.
Effective ongoing preparation can instill buyer confidence. As a result, companies can better control the process and realize greater speed and value. Half of the executives surveyed admit that certain changes to the preparation process could have made a significant difference during divestment.
Understand the importance of separation planning
Probably the most crucial aspect of a divestment is separation planning, yet 56 percent of respondents identified a clear separation road map as the most complex part of the divestment.
Other separation challenges include decisions regarding the completion mechanism, tax planning, estimating stand-alone costs and negotiating transition services agreements.
Every day a company waits to evaluate its capital strategy, someone else is making a change and gaining an advantage.
In heeding these five key practices, companies can take a more strategic and ultimately successful approach to divestments to ensure they get the most value possible and grow the bottom line.
Paul Hammes is the Divestiture Advisory Services Leader for Transaction Advisory Services at EY. Reach him at www.ey.com.