Choosing The Right Strategy When Communicating With Investors

Earlier this year, I wrote a post about the advantages of entrepreneurs having a strong communications plan for investors. The more engaged investors are in a venture the stronger and more beneficial the relationship can become. Of course every business and each investor is different. I have found that customizing my communications strategies to the unique wants of my investors and the needs of the company has been very effective. Here are a few strategies that I have used in the past.

First, you can’t go wrong with formal communications devices like written monthly reports. Monthly reports containing P&L information are a great way to inform investors about the status of your company and where funds are being allocated. This is especially helpful in entrepreneurial endeavors because investors can recommend course corrections if they see any “red flags” in the P&L report. They also might be able to suggest connections that can help your venture. This type of insight and guidance is invaluable when starting a company. One last thing to note regarding monthly reports is that they don’t need to be but so comprehensive. As I will discuss later, monthly reports should give a detailed snapshot of your company at that time. There are more effective ways to provide a holistic view of the status of a company.

(Photo credit: Wikipedia)

A second strategy that I have used is monthly conference call updates with investors. Some of the investors that I have worked with in the past prefer having the ability to ask questions about the report. I still provide written documents containing financial information but instead of just sending documents to read at their leisure, I review the report on a conference call. This approach adds a personal touch to the process. It shows engagement and the willingness to answer any tough questions from investors.  I also have found that starting a conversation with investors can be great for brainstorming ideas. We can share ideas and advice more freely than on email. Although I have used conference call updates frequently, one tactic that helps make the calls worthwhile is to create a script before so that I hit every point that I want to touch on.

A third strategy is in-person quarterly or annual meetings. This is probably the most effective communication strategy. Investors often expect that companies provide time for them to share their knowledge and provide advice because that is one of their responsibilities as an investor. When they have the opportunity to meet with you face-to-face and to see the operational side of the company, they have a better understanding of where improvements can be made or where successes are being had. I can recall a number of great experiences during in-person, collaborative meetings with investors because we have been able to brainstorm ideas and identify growth opportunities.

These are just a few different strategies that have worked well for me. The key to any communications strategy in business is honesty. Investors are genuinely interested in the success of their ventures so being honest about the status of the company is crucial to its survival.

As I mentioned earlier, each company and each investor is different. What are some of the best communications strategies you have used?

 
 Patrick Hull 

How to choose a customer engagement strategy that works

By Andy Goodman

Pretend that you work for Pacific Gas & Electric, an energy company serving thousands of homes in northern California. The hot summer months are coming, and if your customers use their air conditioners as much as they did last year, there's a strong likelihood your power grid will fail and blackouts will roll across the state.

To prevent this, PG&E has introduced an energy conservation program called "SmartAC." If a customer enrolls, PG&E will install a switch at their residence that allows the company to remotely control their air conditioner -- and in times of peak demand, that means turning it down or off. The program is voluntary, and there's no cost to the customer for joining.

Which brings us back to your new job at PG&E: head of enrollment for residential customers. Before you start printing up fliers or knocking on doors, though, I have to warn you that the company already has marketed this program in a few areas and customer interest has been low.

Sure, PG&E has told them that it costs nothing, and the company has touted significant public benefits. Not only would there be fewer (if any) interruptions in service, PG&E also could avoid spending billions of dollars to increase generating capacity a massive investment which undoubtedly would raise rates. But so far that public good appears to be trumped by self-interest. After all, who really wants to cede control of their air conditioner on a hot day?

Fortunately, some very smart people have come to you with three strategies to boost enrollment:

Strategy #1: offer a $25 incentive for signing up. Nothing fancy here -- just a good old fashioned bribe to help customers do the right thing.

Strategy #2: post a sign-up sheet in a public space (the lobby of an apartment building) to make the enrollment process more observable. Ask customers to write their names on the list so everyone can see exactly who's in and who's not.

Strategy #3: as above, post a sign-up sheet in a public space but assign each customer a code number to write on the sheet instead of their name. In this way, you're again making the process more observable but are also protecting the privacy of those who sign up (as well as those who don't.)

If you could invest your marketing dollars in only one of these strategies, which would you choose? The correct answer -- based on an actual field study completed earlier this year -- is #2. And by a wide margin.

The field study was conducted in Santa Clara County. While the SmartAC program had been marketed in other parts of California -- with the lackluster results noted above -- it had not been introduced in this county before the field test.

Materials advertising the program were slipped under doors, left on doorsteps or sent via mail to 2,413 PG&E customers. For one group, the materials offered the $25 incentive and no public sign-up sheets were involved; a second group received no cash offer but found sign-up sheets posted in common areas where they were asked to enter their names; and a third group also received no incentive but saw sign-up sheets where they could enter code numbers and remain anonymous.

All of the strategies increased enrollment compared to other regions in northern California, but not to the same degree. The anonymous sign-up sheets increased enrollments three times more than the cash incentives. And the sign-up sheets where customers entered their names were seven times as effective as the cash incentives, making Strategy #2 the clear winner.

Why? 

First, it was superior to Strategy #1 because it took a transaction that was happening out of the public eye and made it observable -- literally could see their neighbors signing up for the SmartAC program. While Strategy #3 also made the process observable, Strategy #2 offered the additional incentive of boosting an individual's reputation for publicly signing on (and, conversely, imposed a cost for not participating). It also tapped the power of indirect reciprocity, a form of cooperation where individuals become more likely to help when they see others helping first. (In fact, the study makes it clear that for indirect reciprocity to really kick in, we need to know the names of the other helpers.)

And what does this mean for you back in your real job? Whether you're asking people to give blood or give money, drive a fuel-efficient car or drive down energy usage at home, bear this in mind: human beings are more inclined to do the right thing when they can see others doing it, and when they know others will see them doing it as well.

Five ingredients for innovation

The political, social, and economic problems of tomorrow aren’t going to be solved using the methods honed by Baby Boomers and their parents (no offense to either generation). That message took center stage at this year’s World Innovation Forum, which took place on June 12th and 13th.  But no matter how old you are, progress and prosperity are dependent on innovation. Here are five takeaways I took from more than a dozen speakers during the two-day idea-fest. The takeaways are for those of all ages:

 

Photo by Quirky

 

Innovation takes a variety of tools and skills, but Leidl offers five big ones that he gathered from this year’s

 World Innovation Forum.

Change
Rebecca Henderson, co-director of the Business and Environment Initiative at Harvard, gave a sobering perspective on a future without change.  A number of ills you’ve likely heard before — animal extinction, disrupted global weather patterns, water pollution and food shortages — are all looming.  As we seemingly creep closer to global catastrophe, Henderson encouragingly suggests that we cannot only make the changes needed to preserve our environment and planet, but can probably make a profit doing it.  With modest shifts in focus, organizations can improve the bottom line by reducing waste and emissions, and even generate revenue by solving large-scale problems.

Putting theory to practice, the young entrepreneurs at Sword & Plough, were featured  for their sustainable and innovative products.  Sword  & Plough is marketing itself as a quadruple bottom-line company that repurposes used military fabrics in the creation of fashionable handbags and accessories crafted by veterans.

Practice
The idea that innovation is best achieved through the rigor of deliberate practice was an empowering takeaway echoed throughout the event.  Innovation experts Luke Williams and John Kao often repeated this finding: innovative thinking, innovative climates, and innovative achievements are born from an explicit focus and continual effort. Specific practices include, setting aside time to think about how to be innovative in the varying contexts of your business (product, process, service, etc.), inviting different ideas and perspectives through conversation and shared spaces, accepting failure as a part of the process, and continually experimenting.

Kao described improvisation and innovation as the tension between structure and chaos; and, Williams provided valuable insight into how to embrace such tension through orderly exercises such as identifying product clichés and defining their opposites.  For example, while the cliché of socks is to sell matched pairs, LittleMissMatched is building a company around the idea of selling unmatched socks in threes. 

Collaboration
Will Pearson, co-founder of the magazine and media platform, Mental_Floss, provided key insight into the lessons he’s learned capturing the loyalty and raw power of the massively large and increasingly influential Millennial generation. Sighting Mental_Floss’s unique and exceptionally successful approach (e.g., named to Time’s 50 Best Web sites of 2013) to reaching out and engaging supporters, Pearson noted that while millennials may jump from task to task, device to device, and idea to idea, they can be swept into a frenzy through a variety of media, self expression, and idea sharing.  To prove the point, Pearson told the story of the company’s evolving t-shirt business, which consists of paying contributors a modest fee for a good design and then selling the shirts online– a seemingly win-win collaborative strategy.

Belief

With a humble and accessible delivery, Michael Martin told the inspiring story of Vibram FiveFingers.  You may have laughed at the footwear constructed to accommodate each individual toe.  In the early days, FiveFingers shoes were brutalized by consumers and industry insiders as ugly and absurd.  With little marketing budget and practical concerns that have included the mass production of a shoe that’s largely made by hand, Martin and his team at Vibram found a way to push through.  In spite of the obstacles, FiveFingers have become a symbol for the barefoot running movement, an increasingly hot trend, and was even named one of Time Magazine’s best inventions of 2007.

Fun
The improv troupe On Your Feet creatively reminded the audience that the process of innovation can be as fun as it is rewarding.  Continuously popping up throughout the conference, On Your Feet led the audience through stream of conscious brainstorming and improv exercises that ranged from using a short list of favorite things to create an innovative product or how the unnoticed objects around us can be used to memorably name a rock band.  Slightly irreverent, the troupe used improvisational acting to explore how freeing your mind and letting go of your impulses can lead to creative and compelling solutions.

Dan Leidl is the co-author of the book, Team Turnarounds, regularly writes on topics that range from leadership and team development to innovation and motivation, and is a Managing Partner with Meno Consulting.

Three ways to make your business more attractive to investors

 

Before Wehuns Tan caught the attention of a major venture capital firm, he and his team had big plans.

As CEO of Toronto-based Wishabi, Mr. Tan saw a pent-up demand for a digital flyer experience on mobile. He wanted to give consumers a new way to shop and save, and also give retailers a different way to connect with their customers every week.

In September, 2013, Mr. Tan secured $15-million in a Series B financing from Insight Ventures, a private equity and venture capital firm who has invested in similar technology companies like Tumblr and Flipboard. The funding gave the founding team of graduates from the University of Waterloo the capital for rapid growth.

In its early stages, digitizing flyers for mobile presented a challenge to Wishabi, but with the right investment, the company rolled out Flipp, an app that brought together the richness of a digital flyer but on a mobile device, such as the iPhone and iPad. Retailers could personalize flyers for their customers, and in turn, Wishabi sends retailers data on consumer engagement and interaction on each flyer specific data on their customers’ purchasing behaviour which makes it possible to boost client interest.

“Consumers are using digital at an accelerated rate and the potential in the flyer industry is immense. We are just getting started,” said Mr. Tan in an interview. He added that their next move is further expansion in the U.S.

Although not every tech startup will be as fortunate as Wishabi, there’s good news: if an equity investor believes the management team is capable of delivering the business potential they have outlined, they will invest in the business. In tech equity, when you win, you win big. You only need one of your investments to take off to cover the investment costs sunk into the other firms.

So, what are the key ingredients to attract and secure funding from a prestigious private equity firm? Here are three main pillars that worked for Wishabi:

1. Get comfortable with growth: For those who do not own a company, it can come as a surprise that many owners are not comfortable with growth and once they hit a certain plateau, they prefer stability. There are many reasons for owner’s aversion to growth but as a company scales up, it becomes unstable and uses up more cash than previously; this increased risk brings stress.

For tech companies, founders generally anticipate the need for expansion, and recognize they will need to move from small to larger equity investors within a short time frame. Founders may not like the risk and added pressure, but they plan rapid expansion, as equity investors recognize the early winners gain the biggest market share. Wishabi knew how they would use the funding: to accelerate growth with a focus on bringing new technology to market and expansion in the U.S. Most importantly, they were ready to execute.

2. Disrupt the industry: Spell out exactly how your company will transform your industry. Wishabi took the print flyer and brought it to life. Then they established a massive distribution network through their media partners so that their content now reaches over 200 million consumers across North America. With Flipp, the weekly shopping experience was recreated on mobile – a platform most consumers already are using. Knowledge is power, said Frances Bacon, and Wishabi knew to give the gift of information to retailers, helping them understand the impact of digital flyers on their business.

3. Build team into the DNA: Private equity investors seek a competent management team as they personally do not want to do the day-to-day operations. Silicon Valley is full of start-up wannabees and investors filter for the cohesive team who will stay in together to overcome problems.

Wishabi had the advantage of growing organically. Since the founding partners of Wishabi are all graduates from the University of Waterloo, they had time to cement their roles and work together. The team believes in long-term success over short term wins. This is not a group of individual sprinters; rather they’re a team roped together in a grueling climb to the top, spurring each other on to a common destination.

Jacoline Loewen is a director at Crosbie & Company, which focuses on succession advice for family businesses and closely held small to medium-sized enterprises. Crosbie develops customized strategies, particularly in relation to M&A, financing and corporate strategy matters. Ms. Loewen is also the author of Money Magnet: How to Attract Investors to Your Business. 

Thinking Inside the Box: 5 Ways to Generate Breakthrough Ideas

 

 

The Sony Walkman? While it may seem quaint now, the Walkman was a revolutionary innovation in 1980—one with many skeptics. Even Sony’s chairman at the time, Akio Morita, was surprised by the market’s enthusiasm. With no recording function, the Walkman defied the idea of a “tape recorder.” 

The Walkman demonstrates an innovation technique called Subtraction—one of five simple techniques anyone can use to produce new ideas. These methods trump brainstorming in generating more innovations in less time.

The traditional view of creativity requires thinking “outside the box.” Starting with the problem and then brainstorming without restraint. Stretching far afield to find that breakthrough idea.

Headed by one of the most prolific researchers in marketing and my co-author, Jacob Goldenberg, our study of the most successful innovations proves just the opposite. Published in the elite journal, Creativity and Innovation Management, the study finds that, more innovation—and better and quicker innovation—comes when you: work inside your familiar world; generate solutions independent of any specific problem; and use five simple techniques to generate solutions.

These five techniques are the heart of Systematic Inventive Thinking (SIT) and are based on patterns used for centuries to create new solutions. With SIT, you can extract those patterns and reapply them to anything:

1. Subtraction: Innovative products and services often have something removed, usually something previously thought to be essential. Subtracting the recording function made the Walkman a breakthrough. 
2.  Task Unification: This technique brings tasks together, unifying them within one component of an innovation, usually a component that was previously thought to be unrelated to that task. Straps on backpacks are shaped so that they press softly into the wearer’s shoulders at strategically located “shiatsu points” to provide a soothing massage sensation.
3. Multiplication: Innovative products and services often contain a component that’s been copied but changed in a way that might seem unnecessary or redundant. In cameras, repeatedly firing the flash reduces “red-eye.”
4. Division: Some products and services emerge with a component divided out and placed in a new location or appearing at a different time. Dividing out the function of an oven and placing it elsewhere in the kitchen creates a warming drawer.
5. Attribute Dependency: Two unrelated product attributes can be correlated with each other. As one attribute changes, another changes. Transition sunglasses darken as outside light gets brighter.

Use of these patterns relies on two key ideas. First, you must re-frame how you generate ideas. People think the way to innovate is to start with a well-defined problem and then think of solutions. Our method reverses that belief. We start with a conceptual solution and then work back to the problem it solves. 

The second key idea is called “The Closed World.” We tend to be most surprised with ideas “right under our noses,” and that are deceptively simple. While people think you need to go outside your current domain to innovate, the opposite is true. The most surprising ideas (“Gee, I never would have thought of that!”) are right nearby.

We have a nickname for “The Closed World”…we call it “Inside the Box.”

About the Author

Drew Boyd is a 30-year industry veteran. He spent 17 years at Johnson & Johnson in marketing, mergers and acquisitions, and international development. Today, he trains, consults and speaks widely in the fields of innovation, persuasion and social media. He is the executive director of the Master of Science in Marketing Program and assistant professor of Marketing and Innovation at the University of Cincinnati. Drew’s work has been featured in The Wall Street Journal, Bloomberg, Industry Week, Psychology Today and Strategy+Business.

How To Build A Boundaryless Organization

Jacob Morgan, 

The first and most important truth any leader must understand is that the human beings who work inside every kind of organization possess unlimited potential. They have the ability to solve any problem and the adaptability to respond to unforeseen circumstances. It may be the most overworked truism in the business world, but employees are indeed the most valuable resource and asset that any company has. 

The problem: most organizations today are unable to tap into that limitless human potential because of a series of self-imposed boundaries. Unlocking this potential means challenging the many assumptions that we have about work today: the incontestability of hierarchy, the importance of putting in time in the office, semi-annual employee reviews, valuing the voice of the customer but not of the employee, and the restriction of vital information to preserve rank.

Organizations and their leaders must strive to break three common boundaries in order to unleash all of the talent and contribution lying in wait. The first is role-based: communication and collaboration is restricted by seniority level. How could a lowly entry-level employee possibly engage with a senior manager or worse… an executive! The second type of boundary is around departments and function. Marketing folks stick with their peers in marketing, sales with sales, product development with product development and information and potential opportunities for innovation remain stuck within silos. The third most common type of boundary is geographic—employees in one office or location simply don’t “see” their peers in another.

Escaping these persistent and pernicious boundaries to communication, contribution and collaboration requires three key shifts:

From management to leadership
Lifting boundaries isn’t a matter of executive direction. It’s about re-thinking management and shifting perspective from telling people what to do to getting them excited to want to do it. We don’t need more managers, we need more leaders. Today, any employee can become that leader. Yet the norm in most organizations is to bring in more and more managers to oversee people and then more managers to look after those managers. The goal of all of this, of course, is to get a tighter grip on the organization, to enforce control. The original goal of management was simply to make sure that employees showed up to work on time to do their tasks, to not ask questions, to not cause problems, and then to leave and do that over and over again. 

Management wasn’t focused on innovation, the voice of the employee, engagement, or creativity. That was the case 100 years ago—and it’s still the case in too many organizations today. This is why it’s so crucial to create leadership capacity in every aspect of the business.

The leader challenges common assumptions around management and mentors employees to help them become successful. The leader has followers not because he commands them, but because he has earned them.

From “need-to-know” to collaborative technologies
The range of collaborative technologies emerging today allows employees to connect with each other and information, any time, anywhere, and on any device. While many leaders look at the onslaught of devices and apps and new technologies as a problem to be solved, the most effective leaders today aggressively support any tools that enable employees to connect, contribute, choose, and create. It needs to be easy for an employee in California to find a co-worker in Beijing. It needs to be easy for an entry-level employee to start a dialogue with an executive, even though they may have never met face to face.

Collaborative technologies are also crucial in developing leaders. In the new world of work, leaders create themselves. They share their ideas, content, and feedback in a public way, which attracts followers within the organization. Anyone can become a thought leader or subject matter expert.

From controlling management to boundary-breaking work
At every turn, leaders must ask themselves, “How does this support our vision of breaking down boundaries?” How can employee onboarding be changed? What about talent management?

Perhaps when employees are brought on board they are taken through a collaboration scavenger hunt where they must find and connect with colleagues around the world; something telecommunications company TELUS does for new recruits. What if instead of semi-annual reviews, you go with a system of real-time feedback on a collaborative platform? Why not create a company leaderboard around health and wellness so that different geographic regions can see how they compare to one another. What if employees “narrated” their work in a public way so that everyone and anyone can see what they are working on? Every built-in management process is an opportunity for unleashing more human potential. The job of leaders and managers is to fundamentally rethink and re-design that core.

Unlocking human potential is the new competitive advantage. But it’s not as simple as expressing good intentions at the top. And it’s not enough to proclaim, “our people are our most important assets.” Every leader must do the hard work of breaking down boundaries and rethinking the most deeply held assumptions about work. It’s the difference between winning and losing in the future.

What are you or your organization doing to break down the boundaries that constrain human potential?

Tools for Entrepreneurs to Retain Clients

Patrick Hull, 

 

I want to take some time to drill down a bit further on the topic of retaining clients and why it’s so important for startups, small businesses, and even larger companies.

 

According to the book Marketing Metrics, businesses have a 60 to 70 percent chance of selling to an existing customer while the probability of selling to a new prospect is only 5 to 20 percent. I’ve seen this firsthand throughout my career and am a believer in the mantra that it’s easier to retain customers than get new ones. When it comes to your time and the company’s time, I think it’s better to engage existing customers first.

So if we accept the premise that it’s more effective to market your services to existing customers, it helps to have a strategy to ensure you’re keeping them happy.relationships

1) Stay Hungry: As a service provider, I think it’s important to show your client you are as interested in meeting their needs today as the day you first pitched them. Imagine that you won over a potential love interest with flowers, good restaurants and fun dates. Then, once you were in a committed relationship, you just stopped trying to please them. That’s a relationship heading in the wrong direction.

The same is true for your clients. I’ve found that the moment you start taking a relationship for granted is the moment you start to lose the client. Whether you are a lawyer, marketing professional, consultant, printer or retailer, it’s key to keep engaging your customers. No matter the company I started, I kept a record of my clients and the last time I checked in with them. If it’s been a while, I’ll reach out to them to see how they are doing and if they’re happy. This is one way entrepreneurs can show that you want their business just as much today as you did from the start.

2) Systemize: I’m often working on many projects at once and the only way I can hold down all of those responsibilities, while still making sure my companies are providing excellent customer experiences, is by putting systems in place for my employees to follow. Each customer may have unique needs but it’s important to me that my employees know exactly what is expected of them in the area of customer service.

One solution I’ve had success with is providing employees with a checklist. Questions on this list include: When is the last time we checked in, have our products and services been consistently delivered on time, are we hitting our agreed-upon goals for the client, and have the products and services we provided been effective. If you answer all the questions on that list, you will go a long way towards keeping a customer happy.

3) Engage: As I mentioned last week, soliciting feedback is one important way to ensure that your customer is happy. I’ve found that most customers are unlikely to speak up if they have a problem with a service or product they have purchased. They are far more likely just to walk away and never come back. That’s why making sure that you are meeting their needs as a vendor is vital to long-term success.

One company that has this figured out is the technology services firm Cisco. For example, the communications division at Cisco participates in surveys with its vendors on an annual basis. The survey has the client (Cisco) and the vendors rate one another on a variety of categories. Both groups then meet to discuss the results. I think that’s an excellent approach and really highlights the importance of engagement because client relationships are a two-way street.

Those are a few suggestions. What are some ways that your company monitors its customer service?