What Sun Tzu and Eisenhower share (but we’re deaf to)

I was thinking today of the treatise The Art of War, written in the 6th Century BC by Sun Tzu and considered the most relevant tome on military strategy and tactics in history. Actually, if you look at the 13 chapters that conform it, you quickly understand how the structure and items proposed have been used more than any in military planning (in East and in West). They have also extended in recent decades to business strategy and planning. Find an ultra-short briefing of these 13 chapters here

There is a very famous quote of this book I came across the other day in Jordan Bortz’s blog which goes like this:

Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.

The reason this caught my attention was a recent debate I witnessed inside my organisation on waterfall versus agile methodologies for software development, whereby some considered waterfall (sequential software development model) as a purely strategic method whereas they claimed agile was purely tactical. I think this is a limitation and narrowing of both methodologies that’s not fair to either.

I believe you can use agile in a full fledged strategic manner as long as you manage agile actions and scrum teams in the context of a clearly visible and well communicated strategic endeavour. Probably managing this obeys a different order and formal logic than a waterfall project, but I am certain agile can be used in a mid or long term strategic context and at the same time respect it’s governing principles.

However, I still hold truth some basic notions, one of which would go something like this, as Dwight D. Eisenhower said:

In preparing for battle I have always found that plans are useless, but planning is indispensable

More also from Damon Poole, who has a bit of a fight on the topic with the above mentioned Jordan.

Nearshoring, outsourcing or else…

When considering nearshoring, outsourcing or other externalisation of processes, a number of strategic considerations have to be taken into account. I read a very synthetic (3 points) but spot on approach in Harvard Business Review recently on the subject which I would like to share:

1. List all your capabilities - including HR, finance, IT management, logistics distribution, product development, and packaging
2. Identify capabilities with high proprietary value. Your company executes these in ways that generate measurably more value than rivals could. And your company would suffer major strategic damage if rivals imitated them.
3. Identify capabilities with high commonality. Outside suppliers could achieve scale or other advantages by providing these to many others in your industry

An interesting note: only 6% of companies which outsource are satisfied with the practise (source: HBR).

Commonality identification illustration flow from esi.es

The smart approach to recession

If you are in as dreamy a situation as Apple, with wads of cash, a great looking balance sheet and no debt, you might as well follow Steve Jobs’ wise counsel. This is what Michael Roberto of Conversation Starter quoted him as telling in Fortune magazine (is this meta quoting…?):

“In fact we were going to up our R&D budget so that we would be ahead of our competitors when the downturn was over. And that’s exactly what we did. And it worked. And that’s exactly what we’ll do this time”

Jobs was referring to previous recessionist environments and of course, to the current one. As Roberto reflects in his post on the matter, in a recession there are a number of good actions to take, namely:

Invest in research and development for the next shinny times

Analyze and know your competitors’ Aquilles heels and act upon them in a clever way (think on the fringes; be a parallel thinker?)

Identify critical suppliers and distributors and identify the risk associated to them in the economic environment and how it could affect you

Think carefully about your talent needs and be very careful so you don’t send the most talented people to you competitor’s den

In workaholic mode

I really liked this tip list on how to save costs and other clever tricks to use when running a start up, provided by Jason Calacanis. Definitely enjoyed point 11 about seeking talented workaholics when managing a start up.

Verbatim:

“Fire people who are not workaholics.don’t love their work… come on folks, this is startup life, it’s not a game. don’t work at a startup if you’re not into it–go work at the post office or stabucks if you’re not into it you want balance in your life. For realz.“

Infact, I think it’s fair to say that also in large companies, in new projects, you need to abide by some similar set of rules in taking talent from outside or handpicking it from other divisions. It’s critical to ignite and steer certain projects within the corporation at large and if you don’t infuse innovative projects with individuals who also have a true entrepreneurial edge and a desire to outdo themselves, you may never lift to even the design phase.

Project management gone astray

You could be in one or various of the following situations: projects stuck in logjams nobody can fix; non-strategic projects consuming too many of your critical resources; delays you cannot set objective milestones to; well run project parts which were executed perfectly (as parts) but which don’t wield together as a whole… and so on.

 

Some great authors in HBR explained that the problem is that in companies “we look at projects individually and try to push them, as such, through the pipeline with speed and cost efficiency”. But who keeps an eye on the big picture? Who decides which is the right blend of projects we should be nurturing in a period of time? Who sets the pace for strategic versus maintenance? Who provides metrics and confidence to roll out mega-projects with a calm mind?

The authors suggest a few techniques:

“Achieve the right blend of project types: including breakthrough, platform and derivative products; R&D efforts; partnerships

Eliminate strategically irrelevant initiatives

Replace project management with process management: unplug the bottlenecks; smooth the workloads; increase the time to market

Build small projects into large initiatives early: to deliver fast measurable payoffs and iron out problems before they doom the effort”

I like all the principles hereby stated. They are pragmatic and propose a good high-level framework to reduce noise and achieve speed to market in a reasonable priority setting.

More reading: Why Good Projects Fail Anyway by Nadim F. Matta and Ronald N. Ashkenas

Project plan schema visualization (Gantt chart) courtesy of Ambysoft

More value, less products: the innovation radar

The Innovation Radar, first described in 2006 by professor Mohanbir Sawhney and 2 peers, tries to identify innovation beyond product development and R&D, where it is normally silo-ed in traditional analysis. For that they have built a radar which covers 4 major dimensions or business anchors:

What: Offerings a company creates
Who: Customers it serves
How: Processes it employs
Where: Points of presence it uses to take its offerings to market

It’s a nice tool for companies concerned about their capacity and depth of innovative exercise, as it broadens the spectrum beyond product delivery and into value creation.

Spread across these, a company can innovate way beyond product or technology and can also track the status of it’s innovative capacity well beyond them. Infact, from these 4 key anchors the radar provides a vision enabling companies to innovate in these 12 areas:

Offerings, platform, solutions, customers, customer experience, value capture, processes, organization, supply chain, presence, networking, brand

More on using the innovation radar to drive organic growth. Image courtesy of Enterprise Leadership

I wanna be a management booklet (or do I?)

Today I was reading one of those visionary presentations that you always wonder if the author wrote under the effects of some opiate. But I came across a slide that addresses exactly the 3 questions I was asking myself in the morning when I woke up in the same anxious anticipation that wakes me up every morning since I moved here.

Those 3 questions where masterfully articulated by the author as follows:

Strategic decisions: what business are we in and where are new opportunities for growth?

Operational decisions: how do we structure our business units to most effectively compete for and win market share?

Tactical decisions: which customers are available to us and how can we convince them to chose us over any and all functional equivalents?

Nicely put. Now I continue to rake my mind and scrutinise my peers to answer these questions in the most value adding manner for the business ;-)

More information in AuroraWDC and also in ReconG2

Illustration courtesy of Pay Attention or Pay

The advertising dollar dance (worse than ADD)

A great guy by the name of Peter Würtenberger, who happens to be the CEO of Axel Springer’s Die Welt as well as Berliner Morgenpost (and who before managed Yahoo! Germany), presented some very interesting numbers the other day in Istanbul at the Dogan Yayin Holding Forum 2008.

As I mentioned in a previous post on online ad spend a few days ago, the loss of newspapers to Internet is the most significant and painstaking one around. I mean, really, in the period 2004 - 2007 loss is at an annual 890$ million in the US from printed newspapers to advertising dollars spent online.

My question is, is this loss to other-than-newspaper online resources or does it also include gain (that’s what I call negative gain ;-) in online newspaper bottom-lines…?

In any case, here’s a very interesting (public) presentation on how they at Mr. Würtenberger’s company go about dealing with this issue.

Source: eMarketer/Citigroup Investment Research

Marching orders for your company

The balanced scorecard is a strategic planning and management system used(*) to align business activities to the vision and strategy of the organization, improve internal and external communications and monitor organization performance against strategic goals.

The balanced scorecard suggests we view 4 critical perspectives of our business:

Learning & growth: includes training, learning, corporate culture and attitudes, self growth. Individuals are the main repository of knowledge of an organisation and the critical resource. Communication among workers is key, as is avoiding brain drain.

Business process: Metrics based on internal business processes allow management to monitor how well the business is running and wether it’s products/services are well accepted by clients.

Customer: Indicators on customer satisfaction and tools to improve and monitor customer relations are critical

Financial: Timely and accurate financial data is still a key to manage the business. Data should be centralised and of fast and easy access, but financial data should not be the only indicator, thus the original intention of the word “balanced”.

It was ideated and first detailed by Robert Kaplan and David Norton. Image courtesy of Metrus
(*) Used in business and industry, government, and non-profits worldwide

Fostering Creative Thought Inc.

I recently read an interesting post about where innovation occurs in organisations. I have to say the post by Bo Harald is fascinating in that it addresses the critical issue of the formal lines of authority versus the informal communication lines.

I have nothing against formal communication and organisational charts, but I also believe there proliferation of distributed tools and myriad operation models should prompt large organisations even more to revise traditional communication lines.

Harald mentions in his post the discovery by social cartography pioneer Valdis Krebs that innovation happens in intersections of the organisation. The kind where ideas meet that are not visible in the formal organisation charts. This means people there are excellent individuals (the best positioned) to revise how things are done or could be done and drive innovation.

Interestingly enough, he supports that the messiness of the social interaction patterns of an organisation is often correlated to the innovation capacity it exercises.

Just to ratify the probability of the assertion, I read a very interesting study about using social graphs to uncloak terrorist networks by Krebs which also raised my interest on the issue. In any case, it’s application to the social graph of my current organisation is, for the moment, what most interests me. Now trying to think how to apply, adapt, learn… ;-)

In the image the social graph of the 2001 September 11th folks from Valdis Krebs study

Market share is… never enough?

 

I was just looking over our competitive monthly report in a number of markets and giving faces and situations to diverse points in the monthly outlook of 2007. After a lot of musing about what really matters in business development you always somehow reach the conclusion that what matters is market share. We spend so much time speaking of it, looking for it, defining metrics to measure it, increase it, benchmark it… But let’s see what it really is.

It’s the percentage of the total sales of given type of product or service attributable to a given company, they say.

This means that your market share = Your company sales of Product X / Total market sales of Product X

Clear. Now, what cool stuff can make us move towards more market share? And I do not mean just predatory pricing, for those incumbents reading (if any)!

As far as I know market share is associated with profitability and normally we seek to increase it to achieve economies of scale and bargaining power, sales growth (especially in stagnant industries), to improve reputation…

Tools to increase it? I have recently seen a checklist where they mention the following as key actions:

1. Share of preference: product pricing, promotions
2. Share of voice: advertising and promotional share
3. Share of distribution: improved and increased channels

But I am missing something here… In a market of web applications, where does product quality stand in terms of driving organic share growth?

In the image a graph of free versus paid newspaper market-shares in Europe from Newspaperinnovation.com. Look at Iceland!!! Looks like the age of copy sales has passed already…

Inside the dotted line

The other day I attended a presentation where a P&G Marketing & Sales veteran explained what she considers to be matrix management. She informed us of the following

Matrix management is a type of organizational management in which people with similar skills are pooled for work assignments. It is a style of management where an individual has two reporting superiors - one functional and one operational.

I like this definition, although of course I find it a hard execution challenge, but could be a good one if it works.

 

Among the virtues of this model, she described the following:

1. Better solutions to consumer/client needs
2. Better reconciliation of technology requirements
3. Brings together diverse mix of talent and skills
4. Better integration of functional groups
5. More effective functional communication
6. More efficient use of corporate resources
7. Better strategy deployment across the whole company
8. Allows economies of scale within functional departments
9. Enables in-depth knowledge and skill development
10. Enables the organization to accomplish functional and strategic goals

It seems to address many of the issues that are keeping me awake. It’s also specially challenging in our environment, meaning:

We deal in emerging markets of sometimes irregular legal, structural and business frameworks

We work with networked people collaborating in a second (sometimes not optimal) language. Culture matters and has an impact, it requires another individual learning step in the fluency of the matrix collaboration

Not all markets and countries operate at the same level of maturity, skill, transparency. You need to understand each one very distinctly or best practise sharing could become a worse practise in itself ;-)

Quantum vindaloo swaps

Quantum entanglement proposes that particles which are arbitrarily far apart are influencing each other. This contradicts the general notion held in relativity theory about cause and effect, because infact it states that phenomena which should cause an event from one point of view, is infact happening after the event from another point of view. Apparently this is an issue of open and heated debate. Quantum entanglement is already a super complex subject of quantum mechanics, but it gets even more interesting when you cross the issue of entanglement swapping.

 

“In entanglement swapping, one particle of an entangled pair becomes entangled with a third particle, which itself becomes entangled with the other particle in the first pair, even though the two never interact”. The super cool thing about this is that scientists are developing systems where entangled photons, which instantaneously correlate with one another, travel over distance to transport information. This is called quantum teleportation. But in this is only working over a few hundred miles until there is signal loss :( And this is where entanglement swapping hits the scene: repeaters are placed along the quantum channel and there photons which come from different pairs swap information to transmit it along much longer distances.

This is amazing in itself, but gets even more amazing when you realise that they are swapping information to create a communication path but they are photons which never actually interact with each other.

The reason this is interesting to me is not because I suddenly developed an understanding of science (I am still the same old vindalooic dilettante), but because physicists seem to be discovering ways in which, without direct interaction, photons are creating efficient and resilient transmission channels.

I wonder how this could be replicated in organisational structures to facilitate process and collaboration agility. If anyone has read or seen anything in management literature to this effect, I would be glad to hear about it.

Photo: entangled photons

Morphology of leadership

One thing is clear: leadership may come in various external shapes and forms, but it must by all means share a number of internal elements. People who have the capacity to influence others use it in many different outward manifestations. Some infra and other supra utilize them – for good or for bad – but there is a certain action for sure exercised.

Probably everyone, including the village fool, has some influential capacity. But often, as I see, the difference between those who lead versus the rest is in their desire to have a direct or indirect impact not just on the outcome, but on the plan itself and how to realize it. The desire to lead, I think, has a lot to do with the belief that we could have a valuable impact on some critical items:

The final result
The project or process to lead to it
The people we will use and involve in getting there
The methodologies and formats we will use to realize the expected timing

In a simple manner this covers a number of issues which I believe drive the leadership mentality to “project the next sequence” of, if ever there are, predictable or plan-susceptible events.

To buy or to ally? A growth dilema

To acquire, to ally…? Questions we ask ourselves in the context of the growth strategy of our business. I read some good news today about our Company’s growth, lead in over 25% year on year organically but assisted in another over 10% by acquisitions. Sounds very nice, especially in a publishing market where decline is pervasive worldwide and Internet revenues are not bridging the gap.

However, research provides disconcerting statistics on the outcome of most strategic alliances (and most acquisitions at that). After a company purchases another it’s share value goes down between 0,34 and 1%, whereas the acquired goes up 30% on average. So it’s their shareholders that hit jackpot, not the purchasers’. Today, to make my evening bleaker, I read that acquiring firms experience a wealth loss of about 10% in the 5 years following most acquisitions, according to research by Journal of Finance.

To make things worse, statistics reveal that 48% of alliances incur financial loss and fail within 24 months.

An interesting Harvard Business Review article (you’ll have to pay) provides a framework on the issue to assist companies avoid the myopic decisions than are often guided by hindsight.

Before doing this, it provides a couple of simple truisms and a couple of typical misconceptions:

Acquisition deals are competitive, based on market prices, and risky

Companies habitually deploy acquisitions to increase scale or cut costs and use partnerships to enter new markets, customer segments, and regions. Sometimes previous experiences become blinders: if success was attained in collaborative experiences, often companies rebuff acquisitions when, infact, they could be needed.

Alliances are cooperative, negotiated, and not so risky

Organizational barriers often stand in the way. In many companies M&A handles acquisitions and does not collaborate with Business Development, which looks after alliances. The two teams do not collaborate and, ultimately, do not let companies adequately compare the pros and cons of either strategy

Scrum-o-matic and the time box

“Scrum is an agile software development method for project management. It enables the creation of self-organizing teams by encouraging co-location of all team members, and verbal communication across all team members and disciplines that are involved in the project”

A key principle of Scrum is its recognition that fundamentally empirical challenges cannot be addressed successfully in a traditional predictive manner. As such, it adopts an empirical approach – accepting that the problem cannot be fully understood or defined, focusing instead on maximizing the team’s ability to deliver quickly and respond to emerging requirements

The Dad of Scrum (Scrum Daddy…?) reminded me the other day that “everything is happening in a time box”. He has a point. I agree, if you’re working on a product and some part is missing, then… it’s not finished, right?

I like this heavy handed approach to challenging a product and development team: So… only 95% of specifications are done…? It’s incomplete! So… almost all code is written but X or Y function is not tested…? Go back and test! So… you did not reach pass rate in acceptance testing…? WTF are you thinking! (You could go on like this for quite a few iterations and variations therein…).

And he’s right. If it’s not working, documented, tested, reliable, working (again, again, again…), usable (as in: has functions for end users) is understandable… then… It’s just maybe not there yet.

Go back and make it something that can be called a product!

So, with this, Scrum Daddy was hammering some software engineering teams at Google in an on-plex conference. I liked a lot the concept of deliver-ability associated to the whole Scrum thing: in the time box, which is finite, there is a clear deliverable: It’s something that is ready to go and make your company some $$$.

This immediately eliminates incremental crap: you cannot really sell crap (or let’s say dis-functional functional objects ;-) in a sustainable manner. But you can make cross functional teams of real veterans and thinkers in your company, to ensure that at the end of each sprint you have, infact, moved forward.

 

Some clear and resounding comments from Scrum Daddy remained:

1. Velocity under pressure = drop in quality (for the most part)
2. 12-14h days statistically = +60% defects (which, BTW, will double-to-triple the cost of defect management and almost certainly kill the ROI of the product)
3. Over 65% of functionalities delivered and maintained are rarely used (”if at all” amount to 15% of those)

So, now that I got it out of my system, let me just give you the briefing on what Scrum actually is (besides a way to re-start a game of rugby).

Here comes the official list of characteristics of Scrum:

A product backlog of prioritized work to be done

Completion of a fixed set of backlog items in a series of short iterations or sprints

A brief daily meeting or scrum, at which progress is explained, upcoming work is described and impediments are raised

A brief sprint planning session in which the backlog items for the sprint will be defined

A brief sprint retrospective, at which all team members reflect about the past sprint

Great! But who actually does all this? Scrum teams are divided into roles. There are a number of them, but basically 2 groups: Pigs and Chickens

Pigs are committed (as in: pigs are “ham”) to building software regularly and frequently, while everyone else are chickens (as in: chickens lay “eggs”) that are interested in the project but are really irrelevant because if it fails they’re not a pig, that is they weren’t the ones that committed to doing it, their legs will not be roasted! The needs, desires, ideas and influences of the chicken roles are taken into account, but not in any way letting it affect or distort or get in the way of the actual Scrum project.

If you need more detail on the roles which are encompassed by pigs or chickens in Scrum, get the overview to start thinking hyper-productively

Some stuff on M&A

I read an interesting paper the other day by M&A veterans Terry Gambill and Bill Hodge. It’s quite cool because they address many of the issues related to M&A risk and how when they fail, THEY FAIL, in a simple and pragmatic manner. Here are some of the things I liked most about their paper Legitimate reasons for a business merger include:

Expanding your markets
Acquiring people, systems or processes
Acquiring new products, services or customers and creating opportunities for cross-selling
Achieving economies of scale
Reducing expenses
Acquiring new distribution systems
Eliminating competition (Gosh, I love this one ;-)

Ultimately, however, all legitimate reasons for contemplating an acquisition or merger fall under one all-encompassing: the desire or need for quick and substantial growth.

I am guessing by this they mean that if you’re looking for long-term incremental growth, maybe this is not the right approach….? Any comments?

They then suggest that to tell if an acquisition makes sense for your business, you should ask three simple questions:

What are the different ways I could grow my business?
Could an acquisition help me achieve that growth?
What larger, strategic goals will that growth help me accomplish?

Our experts also recommend a series of questions before any merger and acquisition deal:

1. Will this acquisition increase our profits?
2. Will it improve the balance sheet?
3. Is the risk acceptable?

If you can’t answer “yes” to each question, they suggest, don’t do the deal.

What makes for a good acquisition?

According to Gambill: “Having a solid foundation in place, meaning your people, systems and resources are sufficient to handle integrating another company”. Frankly, after being in operations during a number of acquisitions in my lifetime, I have to say I agree with this statement. If you can’t swallow it, don’t eat it. And add to this the regulars in methodology and planning:

A well-planned merger or acquisition strategy, realistic plans in terms of expectations and time schedules, appropriate price and terms & realistic debt load, clear and well-executed people/transition plans, reasonable additional capital investment requirements, clarity around your expectations for the deal

Formulating a business merger or acquisition strategy requires 4 basic steps:

1. Identify your goals
2. Consider other alternatives
3. Establish key parameters for the deal
4. Create an acquisition criteria sheet

Have inside your company the following pieces “ready” to integrate the merged company:

Adequate computer and information management systems, management teams, financial planning and reporting and human resources

Ask yourself critical questions

Does the company to be acquired clearly fit into my growth strategy? Will the acquisition increase my competitive position or my profits, either through growth in revenues, efficiency gains, breakthroughs in technology or some other quantifiable measure? Will the transition work smoothly? Will the two companies integrate well, physically and culturally? Am I paying the right price? Do I have the right deal structure? Does the present value of the cash I expect to receive from the deal exceed what I will pay for the business? What synergies - either in terms of revenue enhancements or cost reductions - do we intend to achieve? How and when will we achieve them?

And remember that…

The method used by a buyer to value a seller candidate is unique to acquisitions; valuation is seller candidate-specific; price and value are not the same thing

Finally, the experts propose 10 actions that must be followed to smooth the process:

1. Set crystal-clear performance expectations and communicate them to all levels of both organizations
2. Lay out what the transition will look like for everyone
3. Address the WIIFM (what’s in it for me?) factor
4. Create the transition plan before you sign the deal
5. Get involved and be visible
6. Hit the ground running and make quick decisions
7. Don’t confuse cultural differences with politics
8. Avoid unplanned turnover
9. Keep the best of the best
10. Don’t put new people in new jobs

What are the main ingredients of a failed analysis of the deal’s synergies?

Among the most frequent issues our experts suggest elements such as bad chemistry and cultural conflicts, unrealistic expectations and failure to see the potential impact on core business. They include lack of or a poorly implemented transition plan and due diligences that ignore red flags. Surprisingly, they also mention emotional buying and, of course, an unrealistic debt load and the failure to spend money on professionals ;-)

Next time, I will blog more on risk control, negotiation, transition and integration.

Origami in Business & Research

The other day a friend from San Francisco was telling me about his fascination with origami as applied to business. The comment was related rather to the leaness of foldings and to the economy of energy to accomplish a task: something like, you can accomplish a three-dimensional shape by folding a two-dimensional one using the minimum amount of energy (folds). At this time I had not hear of Robert Lang.

Robert Lang works as free-lance paper artist and scientist, implementing what he has learned from his folding experiments in concrete technical applications. Concurrently with the Japanese biochemist Toshiyuki Meguro, Lang discovered in the early 1990’s that each component of an origami figure can be reduced to a basic circular shape.

Origami principles are also used by innovative technology companies to develop new products. The German company Easi Engineering, which works together with almost all of the large European car manufacturers, to pack airbags, folded with the help of origami software, in the steering wheels. Robert Lang was hired as a consultant for the development of solar sails for satellites and fold-able optical lenses for space telescopes.

I find extremely interesting to think of the applications of the origami principles to business management. It could be translated in a desire to simplify and distill management practises to a lean organisational structure. Providing innovation or flexibility and modulation with the least energy and with a goal of optimisation and improvement: to fit in the most efficient form a volume into a limited space; to make it a “killer application” (like in the case of the airbag, a life saver)

Classifieds’ Lost Ink

The publisher’s dilemma is still whether to split their on and offline business. As publishers we always supposed that we could leverage our last mile infrastructure, use our direct sales, start bundling off and online products to avoid cannibalization (whatever that means)…

Maybe we need to disassociate our print and online activities and treat them as separate platforms and channels. The multimedia approach is just not always doing the growth for a lot of publishers and in the end we neither have good online products nor a pricing strategy that could allow us to let go of print offer and make aggressive pure online products to bridge the revenue gap.

I have seen some dignified attempts at hybrid products in the classified industry, but for the most part I have seen publishers that were brave in online and separated pure products, which soared. Some of them are doing 80% online EBITDA in countries where Internet penetration is on the 50-65% range. But the issue with doing hybrid products is making them sexy, sexy, sexy… And not only that: in less Internet advanced markets print products derived from vertical online can really add revenue and brand awareness.

Reverse printing

I now have to admit my love for web-to-print projects, especially in markets, where circulation still grows (India, Turkey, Russia…) and there is (not always) a huge gap for vertical, glossy, photo publications… Some markets are ready to truly absorb the multi-media package. But that’s not all, the truly cool thing is they are ready for web-to-print products…

It’s a matter of time - but it could be the case we will see the uprise of print vertical products as a sideline to online business in many emerging markets…

Some questions, though, still remain…

Aggressive online pricing once leadership is attained or not…?

How to make products that bridge the gap of print revenue loss…?

How to manage the print to online pricing conundrum…?

Manage Your Working Capital Wisely

We are all so romantic about business, ideas, creativity, products… But how often do we think about cash management? Here are some tips I have learned (the hard way) to manage working capital.

It’s a challenge for even the biggest firms: sustain working capital and manage the flow of cash through the business. But there are ways to ensure that the operation makes the best use of its cash-on-hand. These combine cash flow budgeting and/or the use of financial resources outside the company.

 

Managing your working capital

Your level of working capital is intimately related to the flow of cash into and out of your business. Simply stated, you need enough working capital to setup the business, pay operating costs, and continue to operate until payment arrives 30, 60 or maybe even 90 days later. But if you’ve used a lot of that working capital to pay for fixed assets, you may find you cannot pay suppliers, buy materials or even pay your salary ;-) It’s wise to maintain a level of working capital that allows you to make it through all these and operate the business.Short-term financing can be used to make emergency purchases or to bridge the gap between month’s-end payables and receivables. It can be negotiated with your financial institution, but should be done before the need arises.

Make a cash flow budget. Your bookkeeper, accountant, accounting software and even spreadsheets downloadable from the Internet can help you anticipate inflows and outflows of money over a period of time. Budgeting allows you to see when a cash crash is likely to occur.

Manage the business risks

You need to consider a number of scenarios such as “What if that big order comes in?”, “What if that big order is cancelled?” or “What if that important client goes under owing me money?” This kind of risk analysis can become part of your cash-flow budgeting process. For instance, if you’re using a spreadsheet to enter cash inflows, reflect that situation by adding or deleting. The repercussions in the weeks and months to come should be immediately visible.

The benefits of new clients

You can reduce the risk of a cash crash due to client over-dependence by planning ahead and having a more diversified client base. If you’re not dependent on one large order or client, your livelihood doesn’t hinge on the health of someone else’s business. Finding new clients will increase revenue, improve your cash flow situation and make you less susceptible to marketplace adversity.

Collect quickly!

To guard against late payments, bill as early as possible and make those invoices as clear and as detailed as possible. It may also be worth changing other billing practices such as invoice frequency: instead of waiting until the end of the month, generate an invoice as soon as the goods or services are delivered.

For big orders, consider progressive invoicing while you deliver the service. For example you can ask for a deposit with the order and then a percentage of the payment at various milestones.

Keep track of your receivables

It’s easy to lose track and then neglect to follow up on an overdue account. Experience shows that the longer you remain out of contact with a customer, the less likely you are to recover the full amount owed.

Monitor costs and inventory

Make sure you’re getting the best possible deal from your suppliers. You can do this by shopping around and getting quotes from other suppliers. They may not be able to give a better price, but may be able to offer better payment terms making it easier on your cash flow situation.

Analyze inventory turnover to determine which items are selling and which are soaking up working capital. Try to keep inventory levels lean so that your working capital isn’t tied-up unproductively.

There we go, some simple actions that could make a world of difference!