Thursday, 11 June 2009

Good ideas are ten-a-penny! Great Ideas are one-a-penny! Great Ideas that you can successfully implement are “Worth Their Weight in Gold!”

It is a great idea to have an egg for breakfast. They are high in protein, highly nutritious and, contrary to popular belief, are not bad for your cholesterol levels. However, without the skill and ability to implement your great idea i.e. “cook the egg” you just have a raw egg on a plate.

If in business you want to avoid getting egg on your face, then you need a certain level of expertise to execute. What I mean by “expertise” in this article is, “been there done that and have learnt from my mistakes”. Such a person has the “know-how” the expertise and, most importantly, the skill to implement. It is difficult to quantify how valuable this ability is in business, but I would guess if you had a level of expertise where you could just “plug-in” whenever you needed it, then you would be running not only a profitable business but a highly valued business as well.

Learning from others in business is probably one of the reasons why business biography books are still so popular. The majority are hardly edge of the seat “page turners” but they do pass on practical and useful lessons from people on the front line.

The analogy that comes to mind is; if you have ever put together some self assembly furniture without instructions, how much easier it is to assemble the second time. If you are like me, even if it does have instructions it makes little difference as I don’t read them anyway. I have been told it’s a male thing.

Having access to an executive with that first hand “know how” is just like assembling furniture for the second time. They know the short cuts and where to avoid the pitfalls, based upon practical first hand experience. The end result - they can get the job done, more quickly, at lower cost and with a better output.

Daniel Defoe (1660-1731) the author of “Robinson Crusoe” once wrote:

“Set sail with a mariner who has been shipwrecked many times, for he surely will know where the reefs are”

I am working from memory with the above quotation, as I could not find any reference to it on the internet. If you know the exact wording please do let me know.

I understand the sentiment of the above quotation, however, I must confess to a certain feeling of trepidation if my mariner has been shipwrecked too many times, as he may be some sort of a Jonah or just a totally incompetent sailor. Did they have kamikaze sailors?

Business is complex and it won’t be any less complex any time soon. The range of skills required to run a business successfully is many and varied. The time we have to learn new skills is constantly decreasing as the pace of business increases. The rate of consistent change is the only constant. For the small to medium sized organisation it is not always possible or viable to have that experience “in-house” on a full time basis. However, the value of being able to access specific vertical market expertise on a “plug-in” , ‘as and when’ basis could be highly valuable for the learning curve and growth of any company in our sector.

Running a business can be a daunting task. Too often, working in the business instead of working on the business means that you lose a certain level of objectivity. That is when outside help can be useful. Taking a close look at all aspects of your business with a new perspective can yield a better business. Firstly, in diagnosing areas of the business that need prioritising for special attention and secondly, in bringing in the right level of expertise to quickly help fix the problem. A “doer” not a pontificator. - If they have the right level of experience and knowledge. What you don’t want is the “expert” who borrows your watch and then tells you the time as they wave goodbye, only stopping long enough to hand you their invoice. You need first hand, front liners who have the battle scars to prove they’ve won their ‘spurs’ who are willing to roll their sleeves up and take action.

Good ideas are ten a penny. Ask any VC. I know individual VC’s that have 30 business plans land on their desk every week. Many of these hardly touch down before continuing their flight straight to the waste paper basket. Getting the execution right is where the rubber hits the road. Get that right and you can keep the egg off your face and replace it with a nutritious breakfast.

Wednesday, 3 June 2009

The Time of the Small Giants

I think the time has finally come for the (smart) small and mid-sized companies within the ECM technology sector. As I have mentioned in previous blog posts, there have been some significant changes in this industry. The number of companies that are easily seen, what I call the “tip of the iceberg” companies, have now been reduced via acquisition. This now leaves the vastly unseen smaller companies that lurk beneath the surface and for the most part do not reach the light of the media attention.

Obviously, the other significant event in the past few months has been the big “R” word - RECESSION. The only good thing about the swine flu was that it took the media attention away from the big “R”. It was probably also a good thing for face mask manufacturers, have you ever seen so many face masks. I understand that some international flights have been looking like a surgeon’s convention.

How can we not be aware of the recession when every retailer is using the recession as a theme for their marketing. It seems that we can’t buy a packet of crisps without being told that eating these crisps will be an antidote for the “recession blues”. Or recession proof your grocery bill by shopping with “X”.

The recession has however hit some companies hard and they need an antidote which is unlikely to come out of a packet of crisps. Companies such as IBM have assessed the damage that the recession has made to their balance sheet and are looking towards new growth opportunities.

Mark Loughridge, chief financial officer of IBM. "I go through a deal review every week," he recently told Reuters. The current environment provides a "fertile" hunting ground for acquisitions, he added.
Ari Balogh, Chief Technology Officer of Yahoo believes that current tech valuations are "amazing" when compared with their levels just a few months ago. “It's a good time to be buying now," Balogh told Reuters. Yahoo is in the process of acquiring some new companies. "I can guarantee you there will be some acquisitions," he said.

The second part of this year is expected to show an increase in the number of acquisitions and for the ECM sector this will undoubtedly involve the small to midsized companies in this market.
This could create many new opportunities and some of the more profitable smaller companies could gain considerable attention. However, in order to be a small giant they need to ensure that they are prepared for what the next 18 months is likely to bring.

Potential acquirers will often look at a business in a completely different way than existing management of the smaller companies in the ECM sector. By the time a company board decides that they are open to being acquired there are often many inbuilt issues with their business which stop maximum shareholder value being achieved. Some of the problems can also scare away “good fit” acquirers from a “Smart Acquisition” or merger.

Part of any good ‘due diligence’ process is looking at the weaknesses and risks associated with a business and deciding, is it an acceptable and mitigated risk?
The problem for management is that by the time, the acquisition process is commenced it is too late to fix these problems. If these can be identified early, many of the risks can be mitigated & built into a company’s business strategy. This is something that I will be banging on endlessly about over the next few weeks as Document Boss prepares to launch a new service that addresses this and many other closely related issues to the above. The factors that effect equity value are often not aspects of the business that can be changed in a matter of a few months. Historical data about the business also greatly effects value not just what is happening NOW!

Transparent attempts to increase profitability by cutting short term costs and the expense of long term success just prior to an acquisition are all to obvious. Such companies need to start thinking and behaving like a small giant well in advance of any M&A activity if they want to achieve GIANT returns. There may never be a better time for the smaller companies in our sector to shine but only if they learn to walk and talk like the big boys!