Building Business Value | Corporate Management Strategies

It's What You Don't Know That Can Kill Your Valuation - Be Creative

Experience is a business essential but if used as an excuse to kill innovation, it will end up killing the company.  Here is how the board room conversation in a midmarket company typically flows.  The CEO want to drive revenue in the next two quarters in order to meet the company’s annual revenue targets.  The head of marketing presents a warmed over version of the last years outbound marketing plan.  The head of sales presents a channel program that last year never really got off the ground and said it just needed a bit more energy to succeed.  Product development talks about add-ons and professional services presents their new finder-minder-grinder model.

None of these by themselves are terrible ideas, although they are perilously close.  But they represent a way of thinking that causes a company to get stuck in a pattern of focusing entirely on operational efficiency.  Operational efficiency is important, but not sufficient.

Creativity and innovation rarely show up on valuation reports, but they are key ingredients to building long term business value.  Every company needs to stretch and that does not mean stretch sales goals.  It means innovation and creative thinking.

Unfortunately, not all of us are very good at this.  John Clease, the famous British comedian suggests we create a time space oasis to begin the creative process.  Lock yourself away for a period of time (CrackBerry addicts should start slowly).  Do your best to avoid the trivial, mundane, yet seemingly urgent items on your todo list.  Pick one challenge and simply think about it.  Then, and this is critical, throw away your first idea and keep thinking.  Clease guarantees us we'll come up with more creative solutions after we've trashed the first.

When I have the discipline to follow Clease's advice, I'm at my best.

So sometime during the next week, take 20 minutes of quiet time and follow the links of some very creative people.

I guarantee you’ll begin to look at your business challenges in a different light.

Check out Steve Shapiro's Innovation Poker.
Read Guy Kawasaki's blog and think about how you can change your corner of the world.
Subscribe to the ChangeThis Manifesto and be amazed by the innovative writing.
Wonder around Alltop (Innovation) and find inspiration.
Buy any Seth Godin book for your vacation reading.
Put David Meerman Scott in your corner and change your approach to marketing on the web.

Remember, its what you don’t know that can kill your business.

Using Advisory Boards for Free Advice

In the April, 2009 issue of Fortune Smalll Business, Justin Martin wrote a great article on how advisory boards can give you firm a leg up.  The really good midmarket companies leverage their resources, including their boards of directors and boards of advisors. They use these business-savvy individuals as sources of wisdom and as sources of new business.

John McBeth, a serial entrepreneur and CEO of Next Century, has a passion for what he calls a “worthy purpose.” He keeps himself accountable by leaning on a top-notch board of advisors who aren’t afraid to set him straight. In contrast to this, too many small and midmarket companies tend toward boards of directors that consist of friends and family. Perhaps Uncle Joe loaned the company $100,000 ten years ago, so he still wants to run the show. But friends and family who may have been able to pony up necessary start-up funds back in the day are not capable of  providing the outside accountability that experienced business leaders offer. Many middle-market companies struggle with governance.  Entrepreneurs and C-level executives need someone to challenge them and offer the guidance and direction necessary for growth.  Uncle Joe may have great fishing stories to share at the board meetings, but he cannot mentor the leadership team when tough, challenging business decisions must be made.

There are other ways to fail to take maximum advantage of your board of directors. A company might have board members with personal agendas that lack transparency. Or a board member might try to buy the company outside the stated strategy of the executive team and the other members of the board. Leaders might isolate and disregard board members whose points of view differ from their own. That’s why board diversity is extremely useful. Boards not only provide insight, advice, and support to the CEO, their members should have strong industry and financial backgrounds to add real value to CEO decisions. Board members not aligned with the direction of the company are harmful; those with axes to grind or agendas to meet must be culled. Outside directors give business leaders the opportunity to close the books every quarter, position their companies for the future, talk about plans and leadership development, and generally guide the company with the help of other experienced leaders.