Should You Seek Input or Help From a Third Party?

People should view this post as a “food for thought” post. The idea for this post was triggered by things I have been increasingly seeing in companies as the recession bottoms out. The managerial situations are similar pre-recession, but anecdotally the occurrence seems more numerous as managers raise their heads-up to reassess their vantage point.

What if your intent as a leader within a company is to (any of the following):

  • invest in a new effort (hard to run company while changing direction or building a new capability)
  • get a new perspective
  • get perspectives on other companies and/or industry trends
  • work with (versus against in the short-run) biases that indicate greater reception to consultants versus internal ideas (e.g., see “consultation paradox” on slide 12)
  • change the DNA and culture of an organization
  • leverage resources from within the company but from another area to plug a gap
  • mediate or facilitate a program or business initiative requiring new cross-functional activities
  • signal substantive actions and investment to outside world or other areas of company
  • get functional expertise not in-house or that was lost
  • audit current project or process (see a customer point of view here)
  • complement team
  • outsource ultimate responsibility for core area (warning flag)
  • welcome new input and ideas into the company
  • fill a management gap (e.g., interim management)
  • analyze common trends across multiple industries (see here for some consulting industry history)
  • address low, organizational morale (with recession I sense a larger percentage of situations with organizations exploring business improvisation & experiential learning solutions – disclosure: client of mine here)
  • recover and retry a failed effort (flip-side warning to consultants here with bullet #3)

Should you seek input from a third party? A third-party could be another person within the firm (organizationally close or distant), an advisor, outside management consultant, services or product vendor, etc.

Feel free to share your experiences and thoughts. If you have a specific situation you’d like to talk through, please feel free to contact me directly, and I’d be happy to share perspectives. Thanks!

Review of “Open Leadership” Framework (Leadership and Social Technologies Book)

Charlene Li, founder of the Altimeter Group and co-author of the bestselling book Groundswell, was generous to include me on her distribution list for an advanced reading copy of her new book Open Leadership: How Social Technology Can Transform the Way You Lead. Open Leadership both motivates and provides an excellent framework & toolkit for changing and opening up an organization through support of social technologies. In this post I overview key elements of the book and my favorite contributions to the business & leadership book landscape.

Charlene Li describes “open leadership” as “about how leaders must let go to gain more.” Stepping aside from Open Leadership’stable of contents, I created a one-slide summary figure (sort of like a “cheatsheet”) to help describe the key concepts. While the figure doesn’t capture every element of the book, I think the figure focuses on the key areas a company must address when designing and implementing social technology-based strategy.

Open Leadership

I see her book as tying together five key areas:

  • Openness Strategy and Design – This part of the book covers an audit of where your company is at in terms of openness. This part also frames open strategy in terms of four objective areas (applicable to company/brand/product) of learn, dialog, support, and innovate and increasing levels of engagement with constituents. I like this part of the book particularly because it starts to weave together marketing, branding, social technologies, and the fringes of innovation.
  • Benefits & ROI – For those that have read Groundswell, this part is similar in that it covers some qualitative and quantitative models for using social technologies. One area where the book goes further is in its segmentation of these models by the learn, dialog, support, and innovation objectives outlined in the openness strategy section. Here I see the models as inspirational and thought-provoking as opposed to being ready off-the-shelf. Readers should draw learnings from these and figure out how to best adapt for their specific management context (as there are a mixture of top-down and bottoms-up quantitative analysis and numerical sensitivity issues). Charlene provides some additional perspectives on customer lifetime value and net promoter score, the latter which is a personal favorite for tying brand management and social technologies together in an instructional context (e.g., business school curricula).
  • Openness Covenants – This part of the book covers social media guidelines and policies. Covenants are about how an organization defines the “safe area of the sandbox to play in”. The use of checklists and case examples makes for a nice reference and workbook to drive an organization’s development process.
  • Openness Orchestration – I found this part of the book to be one of the most important areas of the book. Because the use of social technologies involves openness across the entire organization (sometimes cutting across isolated departments and functions) this book provides a nice treatment of thinking about customers and constituents, specific workflow areas (e.g., customer service, marketing), and organizational models (e.g., centralized, distributed) and tradeoffs for implementing.
  • Organizational Change – There are sections of the book dedicated to nurturing organization change, and this involves mindsets and traits, leadership assessments, and something Charlene Li calls the “failure imperative”. While organizational change is a “soft” topic in many texts, Charlene Li does a nice job reconstructing a variety of real-life case examples of how companies and individuals failed in specific situations related to social technologies. Some of the companies and individuals managed to pick themselves up, re-adapt, and succeed eventually. Similar to use of social technologies, effectively dealing with failure is something core to innovation, improvisation, and leadership. So the sections covering organizational change are a nice wrap to the book and provides concrete inspiration from which to draw.

Open Leadershipserves as an excellent, end-to-end process toolkit and is well-suited for corporate executives, marketers, business information technology professionals, and management consultants looking for leadership frameworks supported by social technologies. Treatment of the subject is just above the technology-evaluation level (which would include determining whether technologies such as BuzzMetrics, Yammer, Radian6, Communispace, Umbria, Twitter, WordPress, and Facebook are appropriate).

How To Help Ensure Strategy Scorecards Don’t Fail You

For many strategy engagements, a lot of attention is paid to the detailed analysis framework. For example, should a benchmarking framework be used? Or will that framework lead us down a path of mediocrity? Or perhaps value-chain or Blue Ocean-like analysis should be used here? What method should we use for prioritizing brand associations and rectifying brand image versus identity? Regardless of strategy technique, one key output of these efforts is often a scorecard summary. A scorecard is tangible. It can be like a report card that you got from school in elementary school. While the scorecard is important, it’s important to not lose sight of how a scorecard is developed and what the scorecard could mean for your organization.

The figure below shows an illustrative scorecard for a company. The scorecard helps to identify strengths and weaknesses. In the scorecard below, I’ve also depicted areas where the company needs to make improvements (operational and tactical focus) and where the company needs to differentiate longer-term (strategic focus).

Scorecard 
Traps with scorecards can happen with the processes before, during, and after the scorecard.

Common traps that can occur before the scorecard are:

  • Failing to craft the problem statement properly
  • Pursuing too narrow activities to solve the problem statement
  • Falling short on involving a broad part of the organization in the assessment & strategy development process
  • Getting the wrong mix of structured and unstructured methods
  • Using the wrong tools for the job
  • Having an inherently biased processes or failing to frame and address biases and limitations properly

Traps during the scorecard readout process include:

  • Being too negative and demotivating an organization
  • Not stepping back from the scorecard to look at the bigger picture
  • Failing to educate new audience members about the context of the scorecard and the prior processes used to arrive at the scorecard
  • Letting an organization rest on its laurels

(Very) common traps after the scorecard readout process include:

  • Failing to develop specific action plans
  • Not having a good follow-up and cadence for making progress

The picture below shows the logical context for an example scorecard process, and it is an important aspect often lost in the mix. Note that the process context for the scorecard is as important (if not more important) than the scorecard itself.

Scorecard Process 
What are your experiences with scorecards? How can you use them more effectively?

The Power of Using “We” In Client-Consultant Communications

Recently I found myself in the doctor’s office seeking advice on a health issue I had been having with finger & joint pain. The way these conversations played out (with me in a reverse role as a client) triggered some thoughts about client-consultant communications that I thought I’d share here.

Now as context, many services relationships with medical professionals can be viewed as similar to consultant-client relationships. For example, David Maister (professional services guru, now retired) has characterized analogous medical professional types (to consultant types) as pharmacists, nurses, brain surgeons, and psychotherapists. Key distinctions between these services delivery types are on the customer contact and customization dimensions. So by way of example, nurses and psychotherapists deliver their value to customers with heavy client contact (whereas others provide work behind the scenes). On the customization dimension, psychotherapists and brain surgeons tend to be more involved in diagnosis and customized problem solving versus the other practitioners types which use more standardized procedures to serve their customers.

So using the nomenclature above, the doctor I had seen could be categorized in the psychotherapist category (high-level of customer interaction with custom problem-solving orientation, very similar to what I do when on the other side). When we talked about the issues with my hand pain, the doctor used the “we” term extensively. “We can solve this.” “Try this drug, and let’s work over the next two weeks to see what we can learn about its effectiveness.” “What do we know?” As a client, the approach put me into a collaborative frame for solving my problem. I found myself offering corners of my personal medical history, work habits, histories of my parents, etc. to try to get better (even if imperfect) information on the table.

The concept of using the term “we” in consulting engagements can also be very helpful for setting the tone for a collaborative consulting engagement. As an example, in some recent client meetings related to exploring business model and branding strategies, I used phrases like “we will use that information to figure out the best way to position against our competitor” or “what is our competitive advantage over competitor XYZ”. The framing of these types of statements put me in a position as if I was directly part of the client’s organization. I was fighting for my client as if I were the client. In turn, I felt that my posturing helped to energize the client, and we ultimately got more creative perspectives on the table. For me, a collaborative-type of positioning (while not appropriate for all engagements) goes beyond traditional empathy methods often advocated for consultants.

If you are a client, how do you like your consultants to communicate with you? If you are a consultant, what communication distances do you try to establish with clients?

Using The “Seeding” And “Facilitating” Approach In Management Meetings And Consulting Engagements

One technique that I tend to use a lot in management meetings and consulting engagements involves the use of two slide types. The purpose of these slides is often to help the management team get aligned and make a critical decision about some set of issues.

The first slide I call the "Seeding" slide. The second slide I call the "Facilitating" slide.

The objectives of the "Seeding" slide are to articulate the general problem statement area and enable the management team to voice issues on specific areas within that vicinity. Note that in these situations, the exact problem statement may not be known or agreed upon. As such, it is often useful to research and include some frameworks or metaphors on the seeding slide that enable the management team to "warm up" and express issues from multiple perspectives.

The objectives of the "Facilitating" slide are to help the management team move forward and begin the dialogue of exploring potential solutions to the problem at hand. Is is often helpful to do some research on answers that can help seed the solution-exploration process. Research can take the form of best practices, case studies, academic solutions, etc. The meeting lead must work hard to apply their best facilitation skills on this slide – when to use open-ended questioning, when to analyze, and when to steer to closure require good judgment calls.

The pictures below are examples what "Seeding" and "Facilitating" slides might look like. The case below involves understanding and facilitating analysis of how two product development practices (within a merged software company) might be better integrated.

Seeding

Facilitating 

What challenges do have in facilitating management meetings and decision-making? How do you address such situations?

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Consulting and Management Method: Finding And Relieving The Bottleneck

When thrust into a situation where either resources are constrained, there are competing management choices, and paths forward are unclear, I often find a consulting method of "finding and relieving the bottleneck" useful.

For example, suppose a startup is trying to figure out how to ramp up sales from its first (non-repeatable) deals. Or suppose a company cannot determine whether sales or operations processes are the primary lever for stabilizing revenues. Yet another case might be that there is an incubator unit within a larger company that is underperforming – how might you approach the problem of fixing the situation?

At its core, "finding and relieving the bottleneck" is an analytical method used in production and operations. There are a couple of predominant ways that I look at operations by default, the former being a more quantitative method involving system & process flows and things like Little's Law, and the latter (which I strongly recommend) method using visual inspection and interviews with client management. Here I'll address the latter.

So back to the case of ramping up sales for a startup, where its first deals are largely non-repeatable because they were unique and early in the learning curve. Suppose you have 1-hour with client management. How might you help to tease out how where to start looking for improvements?

In a nutshell, the bottleneck method approach might simply be organized around finding where one gets the biggest bang for the buck in terms of making a change. I might ask the client if they had another resource or an additional day in the workweek, which of the following would ultimately result in more sales:

  • Refining Strategy – this might involve breaking the customer base into segments based on type and prospect awareness profile. Where's the lowest hanging fruit? What kind of marketing and sales material is each segment getting? If you had a choice to improve the marketing collateral or sales processes for the higher priority segment, which would you choose? Are there backlogs in the system (e.g., uncalled sales lead prospects), which would indicate bottlenecks? If you made the change, would it really address the end goal, e.g., getting more sales?
  • Changing Management Approach - in many situations, entrepreneurs may make the first sales, but they often have problems transferring knowledge on how those sales are made. Alternatively, they may have problems letting go of other areas that could be delegated or outsourced (e.g., finance and accounting, inside sales, meeting scheduling, and/or field sales). Would it be helpful to have someone shadow key executives to distill the sales processes and real value propositions that various customers are buying? If we could clone key people to offload some of the burden, would there be enough prospects and deal flow to make things worthwhile?
  • Adjusting Technology or Product - if the product were made less complex or if we simplified choices, would we get better yield and flow from the awareness to interest phase of the customer purchase process? Is there a way that we could get people to sample or experience the product before purchase to skip people past bottlenecks of overanalyzing things too much up-front?
  • Obtaining Financing for Expansion– if you focus time on more sales versus financing for expansion (presuming company has sufficient sales), what would you do and why? What if choosing one path doomed the other? Would the chosen path still be worthwhile? What kind of results could we expect by financing a new online versus a physical market for services delivery?

Optimal diagnosis clearly involves a mixture of tools and approaches, but the bottleneck method is an important method to learn in consulting because it can be increasingly used in facilitative situations where a client has substantial implicit knowledge (and such knowledge must be better formulated explicitly and transferred for company operations to scale).

I've also used this method in management situations (as opposed to in consulting situations only). The method can be particularly good when troubleshooting a problem that cuts across functional areas.

What are your thoughts? Have you ever used this type of approach? If so, how effective was it for you?

Related Posts: A Perspective On Client Facilitation Skills and Crash Course Consulting Reading List

Update (9/19/09): Readers may also be interested in post by Seth Godin on the priority list.

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Leadership Is Innate (Part 2?)

Three years ago I wrote a post entitled "Leadership Is An Innate Skill?". In that post, I essentially avoided the core topic (because I didn't have an opinion), but I made some anecdotal points about  how one could foster one's leadership style (which I thought was a more important point). My views on leadership haven't changed fundamentally since my original post in that I believe that some leadership skills can be learned, there are many different leadership styles, and contextual and organizational items play a role (e.g., can influence one to diverge from one's own leadership style or enhance it).

That said, reader Tom Hartly has brought to my attention a new book entitled, "Leadership Is Innate". I've not read the book, but one can peruse a bit online and figure out which side of the coin is being argued. The description reads:

Top CEOs will tell you that leadership traits come as "part of the package" and "can't really be taught". Scientists have recently begun to discover how genetic differences contribute to key leadership skills.

Services Offered

Freelance consultant. Provide both interim management and business strategy, marketing, and operations consulting services to clients. Specialty sectors include high-tech, software, services, and communications/telecom. Sample services include:

  • Outsourced management for growth-phase companies (business development & general management)
  • New business initiatives and product introduction
  • Operational diagnostics and change management
  • US market entry for international ventures
  • Business and marketing plan development

Post updated (March 2009).

Watching Nickels And Dimes On Legal Costs In Start-Ups And Ventures

Venture capitalist Ed Sim had a good post recently that touched on a number of things ranging from principle-centered negotiation to matching the core DNA and chemistry of a team in a venture. He entitled his post, "Nickels and Dimes Don’t Add Up" to reflect his late-in-the-negotiation realization that perhaps the DNA of a prospective executive hire didn’t match up because some of the aspects of the negotiation got extended too long for little reason. Because negotiations for executive employment arrangements can be complicated and involve more layers of legal mechanics stretching into the Board-level, his post triggered some tangential thoughts I had on the costs of legal and bootstrapping these costs from garage-level operations through seed and some cases of Series A financing. I suppose I could have called this post, "Bootstrapping Legal So That Nickels and Dimes Don’t Add Up Too Much".

A core problem with bootstrapping legal costs (and following a variation of a "cash is king" strategy) is that a company may pay for things later by bootstrapping these things now. For example, if a company needs to perfect its intellectual property rights because of poor professional services agreements, this can be a sore spot to have to go back to every customer one has dealt with to perfect the agreements.

But lawyers can cost from $200/hr to $500/hr. To create additional pressure on ventures, post-bubble many legal firms
(not to mention employees and other partners) pushed down their
willingness to take stock options in lieu of portions of cash compensation. Some are willing to push off costs for a few months, but you need an in then.

Let’s face reality then. Not everyone can afford to have lawyers draft every legal document change, even if one tries to make sure that drafting is the last step after negotiating or planning business terms.

If find it useful early on to know what type of company is in the making. This way you can think about how complex the company may be in the reasonable future (e.g., 12 to 18 months). As examples of types of companies and some of the pertinent legal aspects:

  1. Services-only company – may need very basic things like NDAs, professional services agreements, and subcontracting agreements
  2. Software-only company – may need more advanced things like NDAs, MNDAs, licensing,
    maintenance, OEM inbound and/or outbound, distribution and partnership
    agreements
  3. Software and services company – may need all of the above, plus additional
    considerations for when they interrelate surrounding intellectual
    property rights and/or interstate tax, say

I’ve seen the stuff above range from $1,000 to $25,000ish. When one
talks about adding core infrastructure paperwork (e.g., equity, stock
option plan, executive employment docs) costing anywhere from $5,000 to
$25,000ish, and then adding stock purchase or recap docs (post Seed round)
costing anywhere from $25,000 to over $100,000, things add up over time. One really needs to breakdown the timing of company needs (and scope of work) to get narrower ranges on these costs (and thus to bootstrap the org along).

To weigh through some of this entrepreneurial & legal jungle, I find it useful to examine some pertinent operational considerations:

  1. Whether there will be a future for the venture  – Entrepreneurs are pioneering, experimenting, and there is high risk early on. Don’t expend too much on legal until you’ve figured out what you are doing and what works. Somewhat related to this, don’t make core foundation documents or organizational structures too complex and customized unless you really need to.
  2. How far out the next phase of the future is – Try to storyboard out the future of the firm in a rational way. Consider only structuring legal stuff to keep you rolling for 12 to 18 months. Things like getting perfect distribution, licensing, and maintenance agreements may not make sense until you’ve got more traction selling direct. Why? People may not be able to sell accounts for you until you’ve a critical or workable mass of reference accounts. Although one may pay $5K more or even $15K to fix the job in the future on a $10K job, weigh the costs systematically.
  3. What that future could look like – Will there be things like capital raises? On core infrastructure documents (primarily corporate finance documents), I would not mess around here too much. In my opinion, these problems are the most expensive to fix, and it is in part because the problems are more diffused through the legal documents. The key factor that one can control, however, is that looking for iron-clad documentation and customization can cause much $$ pain early on. Maybe some of this can be fixed if the venture makes it to the next round.

Yet another strategy is to look at each of these types of documents above and figure out where they are most likely to break. If you need lawyers to focus on just getting that piece of the document iron-clad, this is another strategy to minimize costs in a somewhat "layered way".

I also find it useful to note, at least based on my experiences, that so long as one is reasonably careful, there’s little that lawyers can’t fix. Delaying costs is a key principle to look at.

Aside from actively managing legal costs and mechanics, I have another good option. Consider having a lawyer in as one of your business partners. They can save you a ton and help put your mind at ease.

Note these are insights on legal topics within start-ups from a
non-lawyer but from a person that has worked with a number of lawyers
in corporate finance and infrastructure, intellectual property, and
employment and human resources within start-ups and growth firms. I have been spanked (lightly) by lawyers for drafting stuff.

Steve Shu

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Outsourcing Innovation – The Final Frontier or The Last Stand?

I imagine this could be a bit of a controversial article (Business Week). The article covers the outsourcing of innovation. We said we’d never do it, but here we are. Key snips from the article for me (bullet format is mine):

  • … Underlying this trend is a growing consensus that more innovation is
    vital — but that current R&D spending isn’t yielding enough bang
    for the buck …
  • … "It is a slippery
    slope," says Boston Consulting Group Senior Vice-President Jim Andrew.
    "If the innovation starts residing in the suppliers, you could
    incrementalize yourself to the point where there isn’t much left." …
  • … Still, most companies insist they will continue to do most of the
    critical design work — and have no plans to take a meat ax to R&D …
  • … Who will ultimately
    profit most from the outsourcing of innovation isn’t clear. The early
    evidence suggests that today’s Western titans can remain leaders by
    orchestrating global innovation networks. Yet if they lose their
    technology edge and their touch with customers, they could be
    tomorrow’s great shrinking conglomerates …

I suppose that at the heart of the question is what part of the R&D chain can be outsourced without threatening a company’s ability to appropriate profits (and under what conditions). The Business Week article hints at looking at R&D more comprehensively and that the last line of defense may be having a competence in orchestrating innovation supply chains.

Steve Shu
Managing Director, S4 Management Group