It’s no surprise that a business owner’s vision is what drives a company’s growth efforts. Strategy and action are what enable this vision.  These strategic plans or actions are a portfolio of internal efforts – budgeted initiatives – that guide individual functional areas of an organization – areas such as finance, R&D, sales, marketing, product management, support, and other operational functions. These internal efforts are integrated under one overall program or corporate strategy that the business owner and/or CEO oversee in order to accomplish their vision. In short, a strategic vision and corresponding strategic plan determine what direction a company is taking, as well as actionable plans to enable the vision, assignments or responsibilities for carrying out these plans, and a crisp explanation of why the strategy will be successful.

Often owners and CEOs find it difficult to articulate and implement their vision and strategy. This in turn undermines their desire to consistently grow the business and eventually exit at desired valuations. Why? Because sometimes a complete strategic vision and the plans to make it happen tend to be either too sketchy or too overdone, making it impossible to grasp, since there are just too many components to consider. At other times efforts are not properly communicated, assigned, managed or measured, and accountability is unclear.

We find all too often that owners struggle because they don’t have a working model to capture the essence of their vision, to communicate it, and then to implement a strategy to achieve it.  One model that we’ve helped owners implement is described below.

First Step – A Growth Vision and Strategy Development Model
This model is designed to get right to the point of growing a middle-market business. The first step is to create a vision statement – tell employees where they are headed.  It is not a simple mission statement meant to show a company purpose. It is not purely a set of objectives.  However, it is not a detailed 100-page business plan either.  A vision statement is concise and defines what direction the company is going, how it will get there, who is responsible and accountable, why the company excels against competitors, and why it expects to be successful. The best vision statements are about 300-500 words in length and answer four core questions: Where is the firm going? How will the firm get there? What is the competitive advantage? Who is accountable to execute the plan?  By first setting a vision, CEOs help their teams to answer following:

• Where – Clarify market needs and targeted market opportunities;
• How -Appraise internal efforts and adjust or develop new functional strategic initiatives under one integrated strategic plan led by the business owner and the core leadership team.  Determine how a company will go to market and effectively grow sales and market share;
• What -Determine how the firm excels and what the company’s competitive advantage is;
• Who -Mobilize, communicate the vision and plan to the employee base.  Set priorities and metrics, and identify who is responsible and accountable for executing functional initiatives (and overseeing their corresponding budgets).

Second Step – Bounding and Grounding the Vision
To develop a realistic vision, CEOs need to look hard at the facts in front of them. They need to face reality and proactively deal with it. One has to judge what realities truly “bound and ground” their vision.  CEOs need to identify, document, analyze, and fully understand what limits them and what allows them to succeed in their given business environment.
These constraints and enablers can be broken down into internal as well as external limits. Internal limits are those determined by the company itself.  External limits reflect the significant forces outside the company, such as funding or financing trends, customer and market trends, regulatory trends, technology trends, competitive position, talent acquisition and retention, etc.
Whatever vision the company chooses to pursue, it needs to understand these bounding and grounding factors. Goals, such as sales targets or EBITDA goals, determine the aggressiveness of the vision.

Third Step – It’s All about Focus and Management Execution
It’s clear that owners who can create a firm that has core operating components and a team that consistently delivers revenue and margin growth creates greater shareholder value—higher exit outcomes or valuations. Strategic and financial buyers are beginning to realize that, when evaluating firms, operational capabilities and intellectual property will be more material in supporting higher valuations than will analysis based simply on financial engineering. In addition to financial value, they seek technology and operating value. They understand that in today’s environment, easily obtained gains are increasingly difficult to find, and financial re-engineering is only short-term and really requires operating abilities to sustain. Simply put, a bounded and grounded company vision and strategy, plus management execution, equal higher valuations.

Solutions solve bottom-line problems and deliver bottom-line results. Solutions have well-defined customer value propositions.   For example, whereas an IT consultant solves a resource or capability issue for a client, a SaaS or managed-service offering provides a cost-effective way to create automated, streamlined, connected processes that achieve huge
improvements in operating performance. That said, solutions have to go beyond a
simple bundling of products and services, and providers need to deliver the value that was identified and promised.  If CEOs of these IT consulting firms evaluate capabilities found inside their companies and within the industry, they can define their own specific solution set. Typical solution components are:

Product IP:  A discrete item with traceable expenses and revenue, i.e., with “physical/tangible” attributes.  Can be hardware/system or software or data

Other IP: Templates, methodologies, frameworks, pre-configured solutions

Service:  An organized activity with specific expenses and revenue, i.e., with “non-physical/tangible” characteristics.  Generally IT-enabled or related.

Professional Service:  Application of know-how to achieve a desired result. 

Solution:  A set of two or more products (software and/or data) and/or services that satisfy the needs of some customer value propositions, along with the information and know-how required to effectively deploy and realize the benefit of the solution.

The benefits of offering value-adding solutions to an IT consulting or service business might be:

• Obtain a larger “footprint” within the customer (more product users) or increased transaction service volume.
• Stickier or locked-in recurring revenue streams with upside growth potential
• Higher fees and margins

Successful solutions players do not view solutions as an additional offering to their target markets, but rather as a fundamental new approach that replaces mature product- or service-centric, go-to-market approaches.

To summarize, a solution is a collection of components intermingled to provide a seamless, implementable, and holistic resolution to a customer’s business issue.

Overall, the IT industry is moving toward some form of a hybrid company model where services firms begin to develop more intellectual property (IP), such as software or managed-service delivery frameworks, and IP or software vendors begin to offer expert services or Software as a Service models.  The goal is to provide a total solution. I will talk more about hybrid models in a future post.

The Firm has historically operated with limited staff supporting our Managing Directors.   However, over the past several years we have begun building our operational infrastructure / execution team to capitalize on the Firm’s growth prospects and the significant market opportunities within the sectors we serve.  Associates have the unique opportunity to interact directly with the founders of the Firm on all M&A assignments and are encouraged to take on a considerable amount of responsibility. Such exposure enables Associates at the Firm to gain first-hand M&A experience and develop meaningful relationships with clients.

The firm is seeking individuals with the following attributes:

• Highly competitive with strong work ethic
• Outstanding ability to develop thoughtful, creative, and compelling presentation materials
• Strong interpersonal skills and maturity, as the Firm expects Associates to interact extensively with clients and prospects and are required to represent the organization in the most favorable manner possible
• Strong financial/accounting/technical skills, including the ability to independently develop sophisticated financial models on behalf of clients
• Outstanding academic record
• Strong written and oral communication skills
• A minimum of 2 years prior investment banking or private equity experience is required

Responsibilities include:

1. Financial Modeling/Analysis

• Take primary responsibility for gathering and analyzing Client’s financials and developing detailed historical and pro forma models
• Develop comparative valuation analyses for Clients and/or target market sectors

1. Research

• Perform market sector research (industry, competition, and customer)
• Update market sector research as required
• Make outbound calls to potential acquisition targets of private equity clients

1. Transaction Management Process

• Assist with identification, screening, and qualification of prospects
• Make outbound calls to potential acquirers in sell-side processes
• Develop all marketing materials (pitch books, teasers, and information memorandums)
• Due diligence analyses
• Field calls and information requests from potential acquirers/suitors
• Coordinate and manage client-prospect due diligence, task lists, schedule and process
• Manage the on-line data room set up and maintenance

1. Business Development

• Assist with developing and coordinating marketing activities to promote the Firm
• Contact CEOs and business owners to generate new leads

Falcon Capital Partners is an equal opportunity employer offering competitive salary and benefits.  Please send your resume to info@falconllc.com for immediate consideration.  No phone calls please.

Please take a look at:

www.FalconLLC.com

According to a study performed by The Conference Board, the primary concern of mid-market and small business CEOs is top-line growth. And yet, only 9% of the CEOs interviewed for another study by Bain Consulting actually achieved their growth targets. Despite their best intentions, only one in ten CEOs is reaching his or her growth objective.

So what explains these disappointing results? Are their targets too lofty and unachievable? Do they give their strategy and the change required to implement it enough time? Are they organized enough to mobilize their firm? Do they communicate their plans and create urgency around growth targets? Do they have the detailed plans to operationalize their strategies – and the management teams to implement and drive them? Or do they simply fall short at leading?

In case after case, the main reasons why companies don’t grow according to plan are:

• They are unable to unlock the money within their core business because they cannot effectively execute their growth and cost control strategies.
• They are slow to refine their strategies when markets mature and look for new sources of revenues, or “adjacencies.”They change their plans too often and have no “staying power” around their market direction.
• They react impulsively to market conditions.
• Their vision or direction is flawed – based on aspirations versus real facts and hard analysis.

In our experience, companies simply get disconnected from the market and its opportunities. They lose their focus, and when they do so they tend to lose their way.

We’ve seen some executives get obsessed with developing the next new thing – pouring large sums of money into ideas that have not been meticulously researched and validated. Others reach too far beyond the capabilities of their organization – as in moving from a product to a solutions approach. They create visions and plans that are too complicated. Some get too far ahead of what buyers want. Others just don’t have the experience to take their firms to the next level of execution and performance.

It is the CEO’s challenge to help the firm identify and capitalize on market opportunities. Such leaders need to help their firms get reconnected. But how? By listening to the voices of the market. The answers to growth are out there. Companies need to hear what these voices are saying and accurately interpret their signals.

Following these voices doesn’t mean following the crowd into crowded markets. Nor does it mean following the voice of the single customer request – for new features or one-off applications. Companies hear all types of voices. Some are relevant. Some are not. Knowing how to tell one from the other though methodical analysis makes all of the difference!

It’s time to listen more intelligently to the market by systematically analyzing its signals and capitalizing on what you’ve learned.

Herein, we’ll provide a six-phase, actionable framework and set of winning practices to guide enterprising executives as they look to the market horizon. This strategy, which we call “Opportunity-to-Cash” (O2C), represents a proven method for unlocking the secrets that the market is willing to reveal. We just need to listen, learn, and take action.

Phase 1: Capture CEO and Leadership Insi ghts, Direction and Objectives

Uncover Actionable Market Insights

Every company has a vision, but is it based on fact or fantasy? Is it dated? Is it developed in a vacuum – within the four walls of the board room — or within the context and realities of the marketplace? CEOs and their teams need to regularly step back and reexamine where the company is heading so that they can recognize if they are on course or heading into heavy seas. Most companies need to check their direction quarterly or mid-year, with a major refresh every three years. Many times CEOs take pause due to major competitive events or the departure of a key executive or a revenue miss. A more regular cadence of reviewing the business environment, external and internal trends helps alert executive teams to changes and challenges in the market. It helps them respond more assertively and effectively.

CEOs need to constantly ask themselves and their teams whether the company is heading in the right direction, if the organization really knows how to get there, what results it expects to achieve and why it will be successful.

A method used to accomplish this starts with a series of interviews and/or questionnaires designed to uncover issues related to internal and external business environmental factors such as: competition, technology, regulations, funding, company capabilities, performance trends and other key parameters.

The interview information is gathered and synthesized into a set of discussion points so that the CEO and executive team can process through them in a collaborative session. At this session, the team works through the findings and tries to match them to existing company direction or vision. When things are unaligned, the team needs to determine the change required so that the company direction is realigned with the executive findings. The results are a refreshed vision and a clarification of the environmental conditions consistent with that vision. This is only the starting point. Companies next need to validate – or ground and bound – their direction with rigorous analysis (as outlined in Phase Two of the Opportunity-to-Cash framework).

By establishing a regular cadence around reexamining the facts of the market and the thoughts of key executives, companies can develop a market sensing capability that keeps them ahead of the trends and the competition.

Phase 2: Validate the Business Environment

Scan the Market for Growth Opportunities

It takes more than an offsite or series of workshops to truly validate company direction – or vision. As mentioned, the challenge of seizing market opportunities begins with a vision that is based on a clear  assessment of the existing business environment. That assessment has to be fact-based. Therefore, it’s absolutely critical to begin with research and analysis that generates a strong understanding of key happenings and to seek where unmet customer value might lie. We call this the grounding and bounding process – a process of understanding what restricts and what unleashes your vision.

The process begins with the executive team conducting a fact-based assessment of how the business makes money and where it has the best opportunities to increase its value.

Too many companies try to skip this phase. Some rely too much on their intuitions or ambitions, on an unsubstantiated company strategy or the disparate requests of customers or prospects. Others don’t dive deeply enough into external data and market analysis. Still others have made deep commitments to product development. Considering the heavy investments they’ve made, they have a stake in assuming there is a demand. To discover there is not is to confront the painful reality that a great deal of money has been misspent.

You have to engage in market validation efforts upfront – prior to committing vast sums to product development, sales training, branding, marketing campaigns, or reorganization. To compete successfully in today’s market, it’s simply vital not to fly blind.

Best practice enterprises methodically assess the marketplace in an ongoing fashion. They analyze trends and competitors. They perform value chain analysis to find opportunities for cost advantage and differentiation. They ask themselves where it is they can deliver more value. They listen to and observe prospective customers and market constituents to better understand their wants/needs and the context of use for a new product or service. They want to know the cost and scope of their problems, and their dynamics of decision-making and organizational change. They also need to incorporate inputs from end users, dealers, sales, marketing, customer service, engineers, etc. to ensure that opportunities and customer requirements have been explored from multiple angles.

To identify markets, enterprises must employ a robust approach for understanding the voice (or, more accurately, “voices”) of the market. Companies need to use tools and methods that enable them to stand in their prospective customers’ shoes and see issues from their customers’ (and other market constituents) perspectives. These types of analysis open doors to obvious and latent customer requirements. They also allow companies to make sense of what they see and hear and to understand their customers’ problems or challenges. They then use their expertise to deliver creative solutions – ones that unlock tremendous value for the customer and, in turn, profitable growth for the vendor.

Listening to the voices means scanning the market environment on multiple dimensions:

• Industry Scan. This analysis identifies external opportunities and threats, evaluates an industry’s overall attractiveness, and identifies factors contributing to, or taking away from, potential industry growth. It should answer the question: Does this industry have room to grow?
• Market Scan. Analysis and characterization of the overall market and its key segments. An important outcome is to accurately size the market and its various segments. Segmenting a market identifies the subset of prospects that are “most likely” to purchase your offering. It should answer the question: What are the key growth segments in this marketplace?
• Customer Scan. Interviews and analysis of both existing and prospective customers, identifying their buying preferences, product or service usage, key pain points, the financial, organizational and personal consequences of their problems, and exploring the outlines of a potential solution. It should answer the questions: What is missing for our prospective customers? What would they value?
• Competitor, Technology and Regulatory Scan. Analysis of the trajectories of both emerging technologies – and the paths pursued by our competitors (and future competitors). It should answer the questions: What enabling technologies and trends will create new opportunities? Where are our competitors headed? What new competitors might we be seeing in the future?
• Business and Operating Scan. Analysis of our current business and organizational capabilities – providing a baseline of current strengths, weaknesses and core competencies. It should answer the questions: What are the core strengths we can leverage to provide new forms of value? What new strengths should we build? How do we become more effective in core processes?
• Financial Scan. Analysis of our internal costs, finances and metric. Identify and prioritize possible sources of funds. It should answer the questions: How do we fund this endeavor? Can we fund it out of operations or do we need external funding? How do we measure this effort and each resulting initiative?
• Channels and Partner Scan. Analysis of key partners and the extended capabilities that they provide (and might provide) to enhance customer value. It should answer the questions: What opportunities are our partners seeing that we have not yet seized? What are the strengths that are partners bring to bear? What new strengths must be built? What new types of partners must be identified?

In sum, we strengthen and validate our assumptions by scanning the environment on multiple dimensions.
This phase of an O2C project delivers a detailed external analysis that helps define the market opportunity. This opportunity analysis should identify how value is migrating in the industry. Where do the new sources of value lie? Current and future market opportunity space analysis provides the basis for developing compelling growth strategies.

The O2C framework helps re-confirm or re-align a company’s direction and effort based on an understanding of the current market opportunity space.

In 1998, I took over the management of Integration Software Consultants (ISC), an SAP services company. ISC was struggling to break beyond $10 million in revenue. It had talented professionals and smart, hardworking founders, but we found ourselves in a noisy and crowded SAP staffing market that competed solely on resumes and rates. Margins were trending downward and revenues were flat. We just had to find a way to get back on track. Climbing up our customer’s value chain was key.

We began to listen more closely to the market and examine our internal capabilities. We came to the realization that there was an unmet need in the market and we could add more value. We discovered that firms wanted: a) better understanding of the potential value of ERP software and, b) faster time-to-value from their ERP investment and c) less reliance on large and expensive integrators. Knowing this, we organized the business around these and other market needs. We had to transition from a staffing to project based business — a solutions oriented provider of implementation services. We set five key initiatives around solution strategy, sales strategy, delivery strategy, an internal administrative strategy and human capital management. The solution initiative led to the designing of an assessment and delivery framework called E3.

The result was the doubling of revenue over a nine-month launch period. Margins climbed 11 points. Eventually we sold the business at one of the highest valuations of any SAP implementation firm 12 months after the launch of E3.

Phase 3: Value Realization: Building Competitive Advantage

Develop a Clear Statement of Differentiation and Solution Value Propositions

In this phase of the Opportunity-to-Cash framework,companies identify compelling sources of customer value that can generate long-term growth and profit. The external analysis of Phase Two provides the basis for understanding the market: customer voices, partner voices, competitors’ strategies and positioning, winning business models, and other items that provide the basis for developing the manner in which the company will distinguish itself from the competition over time in order to create a sustained competitive advantage.

In Phase Three, we develop our own unique basis of competition – consistently differentiating our enterprise in the mind of the customer. We create successful value propositions for our offerings! Ones that are relevant to the customer, easily communicated to the market, and that create a compelling reason to buy. As part of the above efforts, we will find ways to enhance the customer’s buying experience and reduce the barriers to buying.

Lou Gerstner was an executive that was very focused on customer value development. In his parting letter to shareholders, Louis Gerstner, who as CEO led IBM to a glorious comeback in the 1990s, spoke of a “massive shift” occurring in the technology industry. Technology companies, he explained, must become increasingly “customer-driven” and “services-led” if they are to address the emerging demands of the market.

As he elaborated in his book Who Says Elephants Can’t Dance?, the tech industry maintains a  “remarkable detachment” from its customers. It tends “to ignore human behavior, human preferences, human biases, and personal and institutional demands that emanate from the non-technical parts of people’s and companies’ lives.” Gerstner added that if today’s technologists were to truly stand in their
customers’ shoes they would find “the promises overblown and the returns more difficult than promised.”

As the passage suggests, Gerstner and his team realized that they could build a powerful set of value propositions by empathizing with the existing or prospective customer – learning what needs to happen to make a company, group, or individual successful in a clear and definable way.

Indeed, it’s critical to understand the customer’s strategic objectives and how they provide value. The key to successful competitive differentiation is to:

• Build a unique statement of advantage based on one’s contribution to the customer’s value chain and customer experience. It’s critical to understand the customer’s strategic objectives and it provide value to its own customers.
• Ground and bound the statement of advantage in a clear understanding of one’s industry, competitive environment and the customer’s confidence in your ability to provide value and/or extend one’s offerings.
• Understand the position of one’s product or solution relative to competing internal initiatives seeking budget dollars within the customer’s environment. It is important to demonstrate value within a formal business case that shows a return on investment, payback period and how it impacts the key performance metrics that the customer measures itself on.

Building our statement of advantage or differentiation and associated solution value propositions are critical to overall success in the Opportunity-to-Cash cycle. They answer the customer’s key questions: Where’s the value? What’s in it for me? What’s different about your solution? Why should I buy from your firm and why right now?

Consider the case of SAP. After five years in development, the company’s new R/3 product had been launched with the expectation that it would complement R/2′s multinational-oriented focus by extending SAP’s reach into the mid-sized business software market, where mainframes were less dominant.

However, SAP America’s executive team, led by my former boss Klaus Besier, quickly discovered through customer interactions, that the real market was in positioning R/3 with Fortune 500 companies. Many other competitors saw the need to provide integrated client server software to the world’s largest firms, but they couldn’t make the software scale and they couldn’t manage multiple entities, locations, plants, etc. from one version of the software.

As it turned out, the scalability of SAP’s integrated software was a unique competitive advantage. The payoffs were huge and the market “got it”. In the space of one year (1992-93), the percentage of SAP America’s total revenue generated by R/3 catapulted from five to 80 percent, and R/2′s status as SAP’s flagship product dwindled from 95 percent of revenues to only 20 percent. R/3 was hot, and virtually overnight SAP had translated its reputation as Germany’s wunderfirma to the global stage, led by Besier and his solutions oriented and well focused US sales force.

Phase 4: Synthesize Data and Define Go-to-Market Strategies

At this point, we are prepared to organize for seizing the market spaces that represent the greatest opportunity. Relying on the go-to-market vision, the environmental analysis and value propositions presented above, we can now begin to identify, evaluate and conceptualize go-to-market initiatives or strategies.

Go-to-market initiatives are the chief priorities that one’s company must act on in order to realize its go-to-market vision. These initiatives detail the strategies that drive change in a firm’s operations.

In this phase, we identify key actions that must be taken:

• Strategic Initiative Identification. Conceptualize and frame the go-to-market initiatives the firm must develop and execute in order to reconnect with the market and capture its opportunities. They impact Sales, Marketing, Channel, Alliances, Engineering, Support, HR, Solution/Product and other strategies…Each initiative needs to have the following components:
  • Goal Statements and Charters
  • Measures/Targets for Each Goal – 5-year and annual targets
  • Detailed Project Plan to Accomplish Goals
  • Human Resource Plan
  • Resource Plan: Space, Equipment, Capital and Non-Capital Items, Infrastructure, Other
  • Financial Projections and Investment Plan – 1-3 Years
• Capability Gap Assessment. Perform an assessment to identify gaps in current capabilities. This includes the identification and development of operational capabilities necessary to execute the strategies identified.
• Key Performance Metrics. Establish key performance metrics and design an operational scorecard that can be understood throughout the company.

Clearly, a program office or war room needs to be established in order to govern these initiatives. This office, administered by the CEO and senior executives, hears status reports, reviews issues, synchronizes initiatives and intervenes quickly when targets are missed.

Phase 5: Execute Go-to-Market Strategies

In this phase, company executives define the plans, work streams, budgets and resources required to make go-to-market strategies actionable and measurable. Once again we draw from Mr. Gerstner who said to an audience at Stanford University, “Visions are easy. The hard work is to change to succeed.”

Strategic initiatives are assigned to senior management sponsors who oversee the development of plans and their alignment to the vision. Phase Five is about building a well structured, cross-functional effort.

The CEO needs to ensure that a clear operational project plan is built to set down what gets done, in what order and by whom. This needs to go beyond creating a list of tasks or strategic planning binders.
Instead, the team maps the go-to-market initiatives, and fine-tunes project plans to establish time lines with milestones and the resources needed to meet them. The plan needs to be explicit about team and individual employee assignments and accountabilities including their specific objectives and rewards. One tool that we highly recommend is to implement a program office or war room to drive the execution of go-to-market initiatives. For best results, management should openly display its objectives, plans, tasks, timelines, roles, responsibilities and accountabilities. This format keeps the team informed and helps ensure short term decisions are fully compatible with the longer term O2C strategies. It addresses issues and concerns. It enables the monitoring of budgets and resources. And it helps management drive execution of the O2C program. Through the O2C program, companies stand to achieve improved revenue and margin growth, increased market share, operational efficiencies and an overall competitive advantage. They will experience:

• Strengthened company focus, processes, and market targeting
• Aligned marketing and sales efforts
• Enhanced customer experience
• Refined packaging of solutions and related offers
• Clarified business value through the demonstration of ROI, Payback and TCO.

Let me share with you a company initiative at a building supply firm that was able to turn a raw material commodity into a highly valued solution. This company’s customers were only concerned with getting the right amount of material, at the right time, at the right location, for the right price.

Faced with downward pressure on prices and increasing cost of service, this client initiated market research that characterized and segmented the market. It then conducted a voice of the customer project, interviewing multiple decision influencers within each segment. This effort uncovered sets of “currencies” that estimated the value for the company’s products for each market segment. The client in turn was able to create specific value propositions for each segment based upon these currencies.

Sales approaches were developed that tested the value propositions during the sales process – enabling specific offers to be crafted and presented. These offers empowered the sales teams to move beyond purchasing – and the conventional product/price discussion. It enabled them to target business buyers, giving them a better chance of clarifying the value they brought to the table. This effort allowed the company to progressively increase its share of its customer’s wallet, increase price and improve operating margins. Needless to say, management of this program and its field execution were critical. Having well defined roles, accountabilities, metrics and rewards were key to driving this effort.

Phase 6: Governance

Now, we’ve put the initiatives in place and launched the relevant and engaging efforts to stimulate growth. Our O2C framework for making growth happen requires a formal cross-functional governance structure, clearly defined responsibilities and accountability, and performance metrics with appropriate rewards. Most important, senior executives need to use a variety of approaches to communicate and teach new behaviors and procedures.

Many firms fail to adequately hold team members accountable to their responsibilities. They also fail to provide incentives for a job well done. One mid-market client we recently engaged had established crossfunctional teams and senior level governance. However, a proliferation of teams, projects and governance bodies resulted in the confusion of roles, accountabilities and authority while detrimentally impacting operational efficiency / effectiveness. Rarely did project teams meet their budgetary, time-line or revenue forecast and this was obviously impeding the firm’s ability to compete.

In order to effectively govern an O2C program you must:

• Define a cross functional team structure;
• Define governance bodies that will ensure team activities, goals and objectives are in alignment with O2C goals and objectives and serve as the aggregation point of all the strategic initiatives and go-to-market-plans;
• Develop team charters that clearly define the scope of work for each team and governance body within the new structure in order to set expectations and targets within and across teams;
• Establish unambiguous roles, responsibilities and targets while holding teams and their members accountable to task and performance commitments;
• Ensure the right resources and skills are involved in enabling plans and achieving targets;
• Created a sense of urgency and communicate. Employees need to know what to focus on and CEOs need to use every vehicle and opportunity available to communicate company direction, the initiatives that will take them there and the behaviors expected of the organization. Don’t forget to communicate.

Senior executives must regularly show the organization that the new approaches offered in Opportunity-to-Cash will help improve performance. Making links between good behavior, process discipline and performance is critical. Through key performance metrics and incentives, you can ensure that the organization is meeting its commitments, generating compelling results and continually improving.

With these governance foundations in place, the firm can confidently move to a market sensing and solutions-oriented position that delivers real value to customers and hefty profits to the company.

Conclusion: Achieving Growth Targets Through Better Analysis and Execution

Opportunity-to-Cash represents a smart, rigorous and disciplined way to seize new market opportunities and drive new levels of profitable growth.

Too many technology companies today act in an analytical vacuum and pursue strategies that are reactive, and not supported by the facts of the day or the capabilities of the firm. Many spend vast amounts of money simply trying to introduce the next new thing. Many don’t clearly understand the marketplace. Many don’t appropriately test or validate their ideas. Many don’t govern initiatives in a way that ensures accountability and progress. Not surprisingly, many fall far short of their business objectives.

Rather than perpetually trying to introduce the next large innovation, it’s time to recognize that there are vast opportunities to be seized by expanding markets for existing offerings or by expanding one’s solution with value added services to meet more customer requirements. This is the well researched recommendation of intelligently expanding from your core.

But we won’t seize these unmet opportunities unless we develop market sensing skills by regularly testing our direction, scanning the market, listening to its various voices, diligently assessing our findings, understanding the value customers seek – and taking decisive action in the marketplace.

Seizing uncontested markets isn’t necessarily tied to new product innovation. Rather, we can also be innovative in terms of market targeting, solution packaging, sales engagement, and delivery of our offerings. We can further capitalize on our existing customer and partner assets by building deeper, more expansive relationships. We then expand from our core and build competitive advantage through our expertise at doing so.

Repeatable success will require us to reconnect to our markets, realign our organizations and re-position ourselves for newly identified opportunities. These are the imperatives of today’s hyper-competitive markets. These are the steps we must take to truly differentiate ourselves and deliver enduring growth.

In a sea of innovation and technology proliferation, monetizing a software vendor’s intellectual property can be a challenge for small and mid-size software companies. Investments in sales and marketing can be substantial – not to mention, the continued need to raise capital to meet growth targets and investor needs.

“Technology transfer” is a proven growth strategy that has been used by software companies for many years to rapidly monetize their IP by leveraging the channels, brand and market position of larger firms. The potential? A considerable increase in sales, profits and share of market. Here’s what software companies need to know about tech transfer in order to do it successfully.

The Challenge of Innovation Proliferation

Innovation in the software industry continues at a healthy pace as hundreds of new offerings are launched into the market daily. In fact, during second quarter (2007) alone, $1.5 billion in venture capital flowed into software startups – more deals than any quarter since 2001.

However, innovators need to compete in a maturing, crowded, highly-competitive, and noisy marketplace. They need to respond to the ongoing structural change of the industry – with globalization, consolidation, new workforce strategies and increasing margin erosion all playing a role.

To address changing market conditions, grow their business, and take advantage of opportunities, vendors are not only introducing new products but also new business models and go-to-market approaches. The goal is to rapidly commercialize one’s intellectual property.

This is especially true for small software vendors. As the market consolidates and CIOs continue to standardize and shrink their portfolio of technology, the efforts of small and mid-sized firms to sell products becomes increasingly difficult.

These marketing challenges are one of the reasons that consolidation is rampant in the software industry today. Rather than go it alone, smaller vendors choose to sell themselves to larger companies to broaden their product’s opportunities and to raise cash to repay investors.

The Potential of “Tech Transfer”

Successful commercialization of innovative technologies is a complex, many-sided effort, but there are tools that exist to successfully encourage this activity. One approach to promote winning innovation– one that is gaining support from CEOs and boards — is technology transfer.

Long an accepted practice of capitalizing on research and development done at universities and scientific laboratories, technology transfer is now increasingly common between businesses. It helps connect businesses that own and develop technology, with other businesses that are in a better position to build out and/or market technology.

The licensing of intellectual property is the most enforceable type of technology transfer. It is also a proven way to rapidly monetize a firm’s intellectual property.

Licensing is not something new. It’s a practice that has been best used by larger players. Larger firms such as IBM, HP, SAP and Oracle routinely license their technology to form complementary business relationships.

For example, in 1998 software giant Oracle and Network Computer, Inc (NCI) came together via a licensing agreement where NCI granted Oracle a license of the NCI technology so that Oracle could promote, market and distribute sublicenses of the NCI technology through its global distribution channels. Oracle filled a void in their product footprint. NCI established a global sales channel to grow its business.

Deciding What to “Transfer”

For software vendors wishing to grow revenue and/or remain independent, it is possible to carve out a software asset or segments of code for potential license to other companies. Many firms have an inventory of non-core or non-strategic software assets. Software that may be of minor importance to one software vendor, could be complimentary and of great value to another vendors’ product suits.

Geographical and cultural issues may blind the efforts of some small and mid-sized vendors. Many software firms that are strong in a specific geography or industry have products that can be taken to other markets through licensing. Consider the highly regarded products from Planon B.V. or SAPERION AG. These firms have a strong European client base. Their North American presence is evolving as they adapt to U.S. business culture and approaches. Launching into North America could be augmented with a strong local licensor.

Some vendors use the re-licensing of technology to seed the market. It makes perfect sense for certain niche applications to be embedded into broader ERP or BI suites – for example tax software, IP management apps, formula management and environmental compliance. These small and mid-sized vendors can relicense a core app to an ERP or BI vendor, who in-turn sells the niche app as part of their suite. As their client base grows due to the partnership with the larger vendor, the niche player can up-sell or cross-sell into the newly created install base.

Again, the practices above aren’t new. But we believe the technology transfer approach can be better exploited today – especially by mid-sized and small software businesses.

How Tech Transfer Works

In a typical tech transfer situation between two software companies, a license is a written grant of rights from one entity to another for specific purposes. One firm (licensor) owning the intellectual property grants another company (licensee) the right to develop and/or commercialize the intellectual property.

In order to commercialize a technology, the licensee will develop, market, sell and support the software asset. In effect, the licensor is transferring the technology – or rights to the software technology – to the licensee in return for financial reward, which is usually a royalty payment based on net sales.

A license can be exclusive, meaning the licensor may not grant to another party the same access to the intellectual property, or non-exclusive, meaning the licensor may grant rights to other licensees. The scope of the license can be wide enough to include all applications and industries, or narrowed to specific applications, market segments, as well as geographic regions.

Beyond licensing, some firms actually sell their IP or source code in order to immediately monetize it – for an upfront lump sum. In this situation the seller of source code may also negotiate an operating arrangement with the buyer to further develop and support the source code for a certain period of time.

This type of technology transfer can also be exclusive or non-exclusive. We seen have several IT services companies transfer applications that they developed for a small set of clients, by selling source code to firms that have more substantial capabilities and client-base to better market and distribute the application.

Implementing a Tech Transfer Strategy

The process of tech transfer is daunting for some companies – but it shouldn’t be. Our experience has identified 10 main practices that experienced vendors follow.

• Document the intellectual property in sufficient detail – Develop and package a complete set of computer programs, procedures, and associated documentation and data/content designated for delivery to a customer or end user.
• Have a qualified attorney protect the IP – Intellectual property rights can be protected through patents, copyrights, and trade secrets. If a company has something of value, it must have an experienced attorney go through the process of protecting the IP.
• Perform a search and comparison of similar IP- A vendor needs to make certain that it has free and clear ownership of the software. As part of protecting your IP, an attorney should also perform this service.
• Characterize the market opportunity – This document should enable any potential partner to understand the context of the market opportunity, the rationale for pursing the opportunity and how the opportunity aligns with their overall business focus and strategy. Key tasks include:
  • Identify how IP can be applied or used
  • Document the value the IP can deliver to users
  • Size the market and determine targets by segments, geographies, industries
  • Identify competitors and like products
  • Determine a reasonable sales forecast
  • Determine what exclusions are required
• Build a “sell-document” – The objective of a sell document is to take the above analysis and create a confidential and concise overview of the software asset and indicate the value of this asset to potential licensors. The sheet should describe the asset, its value proposition, client base, and so on.
• Conduct confidential mail and call campaign – This is a confidential and welltargeted campaign directed at CEOs of the agreed upon universe of potential licensors.
• Build a pipeline of interested parties; pursue and qualify each – The mail/call campaign is the vendor’s opportunity to connect with and qualify the other party’s interest and decide if a face-to-face visitation is appropriate. If the party does qualify as a potential licensor, a mutual non-disclosure agreement is signed and appropriate next steps are scheduled.
• Select final licensee – With a final licensee identified, a letter of intent can be negotiated and due diligence activity can begin.
• Obtain an actionable launch plan from final licensee – Make the new relationship actionable by detailing how the product is marketed and sold into the intended market and what roles and responsibilities each party has to make the launch a successful one.
• Close deal and structure a solid agreement.

The most important of all the steps? The market launch plan. It is critical that the licensee detail how the IP will be promoted, who is responsible for what, and how it will achieve its forecasted number of units sold. The process takes anywhere from 4-12 months with an average of 9 months to successfully complete.

The Tech Transfer Opportunity

Of course, there are some drawbacks to licensing. The licensor loses control of the commercialization effort and gives up a major portion of the profits – or worse, the licensee may not perform as anticipated.

However, the benefits of tech transfer can far outweigh the drawbacks. Tech transfer helps firms avoid the risk and the costs required to develop, promote, sell, and support software. In certain situations, we’ve seen technology transfer partnership discussions evolve into a more serious and strategic discussion of merger and acquisition. The most dramatic benefit? A firm can greatly shorten it’s time to cash.

There are various forms of licensing and compensation. Selecting the best match for a particular company calls for not only the services of an experienced attorney; it requires assistance from experienced go-to-market practioners. The ten steps mentioned above require a deep level of industry experience, a rich rolodex to swiftly find potential licensees, and the business savvy to position the asset, and negotiate the best price with the right terms and conditions.

The innovation that is pervasive in the software industry is a valuable asset – and one that is too often underutilized by vendors. Technology transfer can significantly help augment the selling and marketing efforts of mid-market and small software companies, enabling CEOs and their management teams to achieve their growth targets.