DON’T Rest Easy … Change It Up Before You Hear: ‘Checkmate!’

Customer attitudes, preferences, and behaviors naturally change over time. But in the last few years - given the enormous economic and political uncertainties we now face, coupled with the ways social media and mobile technologies are upending how we interact and transact - attitudes and behaviors have been changing faster and more precipitously than ever before!

These kinds of dramatic shifts have the potential to be lethal to businesses - as they have nearly been for both Netflix and Blackberry. In each case, the miscalculations that have wreaked havoc on their stock prices and reputations were completely avoidable. The sad truth is that both companies got locked into their own perceptions of value and lost track of what it was their customers valued about their offerings.

In Netflix’s case this was truly bone-headed, because the company had been an early leader in using analytics to understand customer viewing preferences. But it didn’t bother to examine what its customers wanted or would accept when it came to pricing and packaging. In Blackberry’s case, company leaders failed to understand that past successes don’t guarantee future success.

And, dear colleague, either of these fates is certain to be yours if you don’t learn how to listen closely to the subtle and not-so-subtle changes in your customers’ preferences and behaviors.

We recently completed an engagement for a client that for the last decade or so has been a leader in its market niche. By most measures, including revenues, this company had a great year in 2011. But when we looked more closely at how the preferences and buying behaviors of its target clients have been changing over the last few years, and at what was causing these changes, we recognized that our client was in serious jeopardy.

Through diligent secondary market research and state-of-play analysis, we came to understand that the conversations players in this space were having about their needs, problems, and risks had changed dramatically in just a few short years. As a result, even though our client had a highly rated best-of-breed solution, it was now at risk of being locked out of critical conversations with customers and partners.

Fortunately, our research showed that our client did not have fundamental issues with its offerings or technologies. Our analysis proved that its problems lie in how it viewed its market, its relationships, and its perceptions of how it creates, delivers, and communicates value. We saw that our client needed to take action to change how it thought about customer problems, how it talked about the kinds of outcomes it could enable, how its team members communicated the company’s value proposition, and - most important of all - to whom they chose to tell their story.

Our two most important strategic recommendations to this client were as follows:

First, we recommended: “Stop looking at your market as if through a keyhole.” The company had always positioned itself as a provider of specialized niche solutions - a niche that it had successfully defended for many years because of the high quality of its offerings. But in a market where buyer preferences were rapidly shifting away from best-of-breed and toward enterprise solutions, our client was at risk. It needed to be able to see a bigger picture, the whole picture, and tell a more convincing enterprise-wide story.

Our researched showed that much larger competitors were rapidly encroaching on our client’s space. More troubling, competitors were also masterfully shifting the conversation - away from any focus on the kinds of problems that our client addresses and toward a focus on problems that the competitors were better positioned to solve. In the process, competitors were not just redirecting the conversation, they were also locking up spend decisions.

Second, we recommended: “Start looking at the whole chessboard, not just the niche in which you play.” Although our client recognized it was facing a new kind of competitive threat, the management and sales team didn’t know what to do about it, other than trying to compete more aggressively. But, based on experience, we knew that smarter, more strategic plays always trump plays that are simply more aggressive.

To give you a frame of reference about what we recommended, watch the following short YouTube^TM video excerpt from the TV show The West Wing^TM: “Look at the whole board“

Playing a strategy game in chess requires knowing a lot more than simply what moves you can make on any given play. It requires being able to think many moves ahead, so that you can anticipate and execute series of plays that will position you for competitive advantage. It also requires thinking about getting into the head of your opponent as you play. It’s much more difficult, but your chances of success go up exponentially when you can play this kind of game.

The chessboard analogy is particularly apt when it comes to dealing with changing buyer preferences and behaviors. One move by a key competitor or one set of moves by a group of angry customers can turn a company’s prospects of future success completely on end. But smart strategies - ones that take into consideration the whole chessboard - executed by smart leaders - people who know how to read the whole board and play strategically - make it possible for firms to anticipate, as well as plan, execute, and respond effectively when shifts occur.

This topic and more are included in the Vistage Connect^TM peer advisory sessions. Learn more.

Here’s the whole post.   If you have comments, please post them on either the Vistage site or here.  We’d appreciate hearing what you have to say!

Want Healthier Revenues?  Rethink Your Distribution Strategy

February 11, 2012 • Timothy Gendreau

Implementing a more strategic approach to distribution may be your best way to rapidly increase sales and market reach. But how to do that?

Start by looking at your current distribution strategy and then considering new options. Many companies, especially those that have traditionally always sold direct, are not very good at thinking about or executing indirect strategies. If you’re not sure how to identify and vet the options open to you, it may be time to seek out help.

In geometry, the shortest distance between two points is a straight line. But in business, the shortest distance between you and revenues may be anything but a straight line. It all depends on how your customers buy, what motivates them, and what motivates all those who influence how your customers buy. These can include distributors, wholesalers, VARs, OEMs, agents, brokers, retailers, competitors, and anyone else with whom your customers have relationships.

As a revenue strategist, I’ve worked with the senior leadership of more than 200 companies, many of which have faced significant distribution challenges. The two most common problems I’ve seen - and seen all too frequently - include: companies that rely on a direct sale model when indirect sales strategies could be far more effective and efficient, and companies that create a slew of “partnerships” and third-party relationships that fail to produce expected revenues or business results.

Here’s a partial list of techniques my firm uses, and recommendations I make when working with clients to craft new or improved distribution strategies:

1. Start with outcomes in mind, but not yours - at least not initially. Instead, begin by considering the outcomes that prospective customers or buyers need to achieve. Then think about the outcomes that major stakeholders that sit between you and your prospects need to achieve.
2. Look for trusted selling relationships - relationships that others have with customers or buyers you want to reach. By understanding those existing relationships, you can gain vital insights about possible distribution strategies.
3. Ask: Who can sell more of what they have to offer if your products are in their mix? This is perhaps the most important question you should ask when considering distribution relationships. The more valuable your offerings are to those who distribute them, the more likely it is that you’ll be able to create productive and sustainable revenue streams.
4. Look for non-obvious sources of distribution. If a particular distribution strategy is obvious to everyone, it may not be the best strategy for you. In business, companies win by being different in ways that customers value. This is true with products and with distribution strategies, as well.
5. Whenever possible, turn competitors into customers. This is a great technique for gaining insights about your possible distribution strategies. Even though this might not makes sense for some or even all of your major competitors, we recommend that you think about how this might be possible.
6. Recognize the value of research and fresh insights. Reliance on past experience alone, no matter how deep, can be fatal. That’s especially true during periods of rapid change - like the period we’re in today. Far too many business decisions about strategy are based on opinion and “gut” that isn’t backed up by sufficient and current facts and data. Therefore, do your homework. Don’t just think you know - know you know. Then leverage your fact-based insights to make the smartest possible decisions - first about the outcomes you can help your customers and partners achieve, and then about the strategies you and your team will use to make this happen.

If you have anything you’d like to add, I’d love to hear from you. Sound off in the comments to this article, or contact me at the e-mail address listed below.

Timothy Gendreau, founder and principal of The Gendreau Group (www.gendreaugroup.com), is an expert in revenue strategy development. He has a proven ability to create strategies that produce real revenues and enhance valuation by identifying high-value, non-obvious distribution strategies. Contact him at tgendreau@gendreaugroup.com.

About Vistage:  If you don’t know Vistage, you’re probably not a CEO and you likely don’t interact much with CEOs.   Here’s how the group describes itself on its About Us page:  “With more than 15,000 members worldwide, Vistage International provides unparalleled access to new business perspectives, innovative strategies and actionable ideas to chief executives and business leaders.”

To understand why we think describing SaaS as a model of deployment is so incomplete, let’s consider the differences between a company that sells cars and a company that rents cars.  The base product - cars - might be exactly the same in both cases.  But the value proposition to the customer, the nature of the relationship between the customer and the product and between the customer and the company are totally different in each case, as are the economics, financial structures, operational focus, core business competencies and the revenue strategies each requires to be successful.

Rather than thinking of SaaS as a model of software deployment, we recommend clients think of SaaS as either a business model or a service delivery model - depending on how and where in their businesses they generate revenue.

• For clients who intend to generate all or most of their revenues from their SaaS implantations, SaaS should be thought of as a business model.
• For non-profits or companies selling a wide range of products and services of which SaaS-based offerings do not represent a significant component of the revenue mix, SaaS should be viewed as a delivery model - but one that is a component of the overall business model.

However SaaS fits into a company’s revenue mix, we think it is important to emphasize that SaaS is about services, not software.  Let’s consider a few more examples to see why SaaS should be viewed as a service, not a way to deploy software.

• When a salesperson uses Salesforce.com, do they care about underlying software? No. They care about how well Salesforce.com can help them manage leads and make the sales process easier.
• When a marketing person uses Vocus.com (which owns PRWeb.com), do they care about the software? Not really. They might care about some of the feature, or how easy the service is to use, but bottom line, they are interested in the quality of the PR results they will get when they use the service.
• And when those of use at TGG use, say, Hoover’s when we are doing research, we don’t really care about Hoover’s software. We only care about how well their service will help us access and use information we need on the companies or markets we are investigating.

As we at TGG look at opportunities for SaaS-based solutions in industries such as healthcare, we find even more reasons to think about SaaS holistically as a business model or delivery model component of the total business model.

In the final analysis, companies need to keep their focus on why clients are using their products and services and the value they are receiving in the process, and they need to use this knowledge in developing their revenue strategies as well as other aspects of their business models.

Deployment conceptually is the end of the traditional process associated with delivery software solutions.   But getting a customer up and running on a SaaS-based solution is only the beginning of what should be a long a fruitful relationship between that user and the company that delivers the solution, not just the software that it runs on.

No question:  businesses have to be “focused.”   But senior managers and board members also have to find practical ways to mitigate the risks of finding themselves focused on the wrong things and headed in the wrong direction.  Whether investing in the stock market or investing in a business, putting all your eggs in one basket is the riskiest thing you can do, but that’s what many business people do every single day when they set their strategies and commit to their business plans.

Dealing with the Paradox of Focus

As revenue strategists we think a lot about this challenge.  As you might expect, the need to focus is most acute with start ups and companies that are developing leading-edge technologies with potential use in a wide range of markets and applications.   For larger and more mature firms, the concept and value of diversification is well understood, but significant diversification generally makes no sense for small and medium sized firms and, even for many large companies, diversification can be the kiss of death if it leads to a failure to adequately focus on one’s core business.  So the question remains:   what can be done to mitigate the risks that inherently come with putting one’s eggs into one basket?

Certainly there is no single answer to this question, but insights into possible answers lie - at least in part - in understanding the differences between diversification and options.   Diversification means that a company adds products or product lines usually intended for at least one new market or market segment.  In this sense, diversification implies commitments.  “Options”, on the other hand, are strategic choices that can be made as required.

The process of exploring “what ifs” and identifying strategic options is, we believe, one of the most important things a management team can do if it wants to develop business models and strategies that will also be both appropriately focused and also sufficiently resilient in the face of either big new opportunities or big new threats.  Having options built into your business strategy is the most important way a company can avoid the trap that is the paradox of focus.

Microsoft:  A Good Model - Even for Small and Medium Firms

In his book The Strategy Paradox:  Why Committing to Success Leads to Failure and What to Do About It, author Michael Raynor has a chapter entitled “Making Choices versus Creating Options.”  In it he compares the strategies and business results of Vivendi, BCE (Bell Canada Enterprises), and Microsoft in the late 1980’s and early 1990’s.   According to Raynor, Vivendi pursued a “commitment-based strategy” that nearly bankrupted the company when the assumptions upon which the commitments were based proved false.   On the other end of the spectrum, according to Raynor, Microsoft pursued an options-based strategy that enabled it to more successfully deal with and adapt to the strategic uncertainties it faced at the time.    In this way, he posits that Microsoft is a good model to at least understand and, where possible, to emulate.

On page 158 of his book, Raynor states, “As we all now know, Windows was the winning bet.  …but in 1988, there was no way of knowing that would be the outcome.”  Which is why, a bit earlier on this page, he points out that at that time (and arguably this is still true today) “Microsoft’s mix included its current business (DOS), the next generation of that business (Windows), and a slice of every other company’s attempt to unseat both (OS/2, Macintosh, and Unix).”

Microsoft not only clearly understood what its core business was at the time, but more importantly that it would be the market - and not Microsoft itself - that would dictate what software products and platforms would win, and therefore, how Microsoft’s strategies would need to evolve.

Now, many of us will be tempted to think that big companies like Microsoft naturally have far greater latitude and much deeper pools of resources to use in developing strategic options.   And that is of course, true.   But let’s not forget:  Microsoft was once small itself.  And when it was, it competed against establish giants like IBM, emerging giants like Oracle, and thought leaders like Apple/Macintosh.

Being Pennywise and Pound Foolish:  Not Spending on Strategy Development

We believe small and medium businesses have many more opportunities for creating strategic options for themselves than most senior managers ever take the time to explore.  The primary reason, we think, is that these managers think they can’t afford to do the work that needs to be done - either because they can’t expend the internal resources or they don’t have the money to spend on good external resources to help them.  But from our perspective, that’s pennywise and pound foolish behavior.

Let’s consider for a moment how small or midsize firms can go about developing a much richer set of options for themselves without risking losing focus and trying to do too much with scarce resources.   For the record:  we think a revenue strategy that does not provide for strategic flexibility is incomplete.  We also think that having a flexible strategy does not mean that a company has to create dozens of partnerships or alternative product/service plans.    What it does mean is that a firm has to know its markets, know its customers, and know what external factors are and will be impacting its business, markets and customers.

And there is a key word - know.   Not assume.  Know.  That requires purposeful and continuous or at least periodic review of what’s happening outside of the company, not just what’s going on inside or with existing sales and customers.

Next, we know there are a lot of great techniques around that managers can use to help interpret and understand the data and information they get about their markets - from simple SWOT analysis thoughtfully applied to more complex techniques like strategy mapping popularized by Kaplan and Norton.

But the sad fact is that too many leaders, and especially those in small and midsize companies, lead “from the gut” rather than “from the head.”   But even leading from the head fails if one’s assumptions and fundamental beliefs about the future are wrong to begin with, or if the decisions that analysis and reason produce are not implemented in ways that will help a firm recognize and deal with inevitable market uncertainties.  And heaven help us, we all know that, led by the wrong people, all analysis techniques, no matter how useful in the right hands, can lead to “analysis paralysis” and produce really bogus results when lead by the wrong people.

The Single Most Important Question You Need to Ask:  What Problem Do You Solve?

Years ago, I remember being stopped in my tracks by a senior manager who asked one simple question about a project we were working on:   What’s the problem were trying to solve? The question stopped me dead in my tracks because I realized we really didn’t know.  I have never forgotten the question, my feeling of “Duh!”, or the manager who asked it.

Since then, Timothy Gendreau and I have asked that question many times - of ourselves and at clients.  And it never ceases to amaze how many times that becomes very difficult for people to answer.

And while the “what problem are you solving” question is by far the most important question managers should be asking, it needs a companion question:   “And who cares?”  Or as Timothy Gendreau almost always puts it, “Who cares enough to pay you at least $1 to solve the problem?”

By expanding on this basic question, we can then create a relatively simple investigation that can produce not only answer, but answers that can be used to develop a perspective on strategic options.  These questions are:

• What problem(s) does your firm solve - and for whom?
• What will compel buyers to buy from you rather than from someone else?
• What’s the best way to get a solution - any solution, not just yours - into the hands of those who will use it?
• Who will benefit most by being able to provide the solution?
• What does your company actually contribute to the solution?

Many managers do not really have a solid understanding of the problem(s) they, their companies, and their products actually solve.   Many assume they know, and they assume their offerings have value.   It’s the smart few who either actually know or confidently admit they don’t know and will commit to working with us to find out.

Even worse than a fuzzy understanding of the problems solved, too many firms lack a clear understanding of how buyers of their offerings view the options they have available to them.  You could develop the most wonderful solution, say, for lab technicians to analyze and understand the results of their lab tests, but if those technicians don’t know how to access or buy your solution, if the administrators in their institutions won’t budget for it, or if the IT managers who control the IT and communications infrastructure in their labs won’t support or allow access to your solution, guess what?  You’re dead!

The best way to avoid getting trapped in the wrong strategy is to constantly ask tough question AND be prepared to deal with tough answers.  This means constantly testing assumptions and sacred cows, and it means never ever shooting the messengers who bring answers that are not to your liking.  Better to have an employee or a consultant tell you your company is on the wrong path, than to have a client or prospective client prove that you are by not buying from you!

More Questions:   The Kind That Will Help You Identify Your Strategic Options

Once you have solid answers to the questions above supported by adequate facts and data, you can now ask the kinds of follow-on questions that you should to identify viable strategic options.  Here are a few we think companies should be asking themselves to understand where and how they might be developing more and better strategic options:

• Are you a product or service company? If you say both, why? Which one is more important? Could you conceive of ways to off-load and not do the second?
• How many ways can you describe the problem(s) you solve? How many different types of buyers or end users do you solve problems for? How does perception of the value change with each description?
• Do you solve “the whole problem” or just a part of it? (If, for example, you say you provide “job site safety solutions,” are you satisfying all job site safety needs or not. If not, without changing your existing products or team, how could you do to provide more complete solutions?)
• Who buys your offerings today? Are you selling to the right persons and at the right level? What would need to change in your offering or your selling approach to sell to a different audience?
• Who uses your offerings? Is this group as diverse as it could or should be? If not, without changing your existing products or team, how could you attract and provide value to additional end users?
• How do you sell your offerings? If someone else could sell your same offerings, would they be better off with you in the mix? How would that change how you sell, the price you charge, and the margins you could command?
• Where do you take your margins? Are you making money where you should be making money? What does where you take your margins say about what kind of business you really are? Without changing your existing products, how could you change your value proposition in such a way that you could better align where you take your margins with the value you actually deliver to paying clients.
• Who benefits most from what you sell? Without changing your existing products, are there others - in current target markets or in other markets - that could benefit from what you make or do?

At TGG, we believe successful revenue strategies are those that include and actually create strategic options and flexibility when implemented.  In business as in life, the choices we make set our directions, but the options we create - for ourselves and for our businesses - are what give us flexibility in the face of opportunity or disaster.

By learning to look at things from multiple angles, and by learning to listen to what’s going on around us - not just our own internal drummers - we learn to develop the options we need to have in order to maximize the probability of success for any strategy we implement.

If you are interested in discussing specific challenges you may be having or hearing about specific ways we have helped past clients develop more robust and flexible revenue strategies, let us know.   We’d welcome the dialogues.

Inspired” recently by a recent Nova documentary on PBS about the Bernard Madoff scandal and subsequently by discussion I heard recently about the “Tricks and Traps” revenue model used by credit card companies, I began thinking about a Revenue Strategy Hall of Shame.  Here’s my current list:

• The ‘Tricks and Traps’ Model - a favorite of some credit card companies
• Ponzi Schemes - Bernard Madoff made Ponzi look like a piker, but so did Ivar Krueger, according to author Frank Partnoy.  His book  “Match King:  The Financial Genius Behind a Century of Wallstreet Scandals”  is on my summer reading list.
• Nuclear Extortion - A favorite strategy of Kim Jung Il’s for funding his weird lifestyle and his rogue state
• Protection Schemes - a la Tony Soprano in fiction; the mob in real life
• Bank Robbery - Willie Sutton’s and Bonnie and Clyde’s favorite model
• Multi-level Marketing Models - generally designed to dupe the unsophisticated
• Health Insurance -  Yep!  Hall of Shame!  Americans pay too much and get too little when they really need help!
• The Field of Dreams Model - The “Build it and they will come” model.
• The Newspaper Business Model - a great model…50 years ago!
• The “Free, then OMG, what next?” Model - Facebook, Twitter, and a lot of other online content businesses
• The Big Box Stores Model…except Costco!  We love Costco.  Wallmart on the other hand…not so much!
• Hedge Funds - Shouldn’t those who create risk have to own and manage it?
• The IRS - Our government needs revenues, but isn’t there a better way?
• Paparazzi - Annoying others to make money off their images, missteps and worst moments.

Care to add?

I also have a list of good and reasonable revenue models that only end up in the hall of shame if they are employed in the wrong situations.  If you’d like to have a copy, send me a request at  swayo@gendreaugroup.com and I’ll send it to you!

Susan

Are you as astonished as I am at the explosion of Twitter?   Are we all just lemmings at heart?  If the service weren’t named Twitter, would it be as big a deal today as it has become?

I absolutely get Twitter if you are Ellen DeGeneres, or if you are Rick Sanchez on CNN developing a following and looking for news.

I do not get Twitter if you are a member of Congress listening to the President’s Address to the Nation!  I also think Twitter is a very dangerous way to vent if you are someone who can’t afford bad publicity - like a CEO of a company.

I actually found the following “tweat” while doing some background research on a potential client during 2008.  In answer to the basic Twitter question “What are you doing?” this CEO answered very publically:  “Just got stood up by <name>  of < lawfirm> and chairman of the <investor group>. As if I didn’t have anything better to do.”

What problems does Twitter solve and which does it create?

I’ve been trying to understand Twitter since 2007 when I found an article on Twitter and sent an email to my business partner about “A company named ‘Twitter’ that provides micromessaging for people they call ‘Twitterers’ and whose CEO is named Biz Stone.”

From a revenue strategists perspective, I have to ask the questions we always ask:  What problem does Twitter solve? For whom? and Who will pay at least $1 for solutions that Twitter creates? I also think we should be asking questions like “What problems is Twitter creating?” - like massive amounts of wasted time and attention. With Twitter, I’m finding it very difficult to answer these questions.

True, not everything needs a financial motivation, but Twitter doesn’t happen for free.  But somehow Twitter has to create value that someone turns into revenues or Twitter isn’t going to survive.    I wonder which will die first:   the Twitter fad or Twitter itself?

Lots of ‘one-way tweets’, but where are we headed?

I heard Sherri Shepard from the View on Larry King this weekend admit that Twitter is a massive time sync for anyone who wants to Twitter “seriously.”   And from the way she describes it, it sounds like for her Twitter is a one-way “tweet” rather than a way of creating dialogue.

My take: Maybe some of us will figure out ways to use Twitter wisely.   At the moment however, Twitter is just one a huge experiment, but one in which it seems everyone in America somehow feels a personal obligation to participate.   But in 12-24 months, most of us will probably figure out that Twitter is a massive distraction and huge waste of time for most of us.

Rather than idiotically short “tweets”, we should take a moment to think about what is of value and what’s really worth saying.  Rather than creating and following disjointed streams of consciousness, we should be trying to create meaningful dialogues and exchanging thoughtful observations about our world and events - not just jumping on the latest babbling bandwagon!

A possible solution for turning Twittering into revenues?

I have a colleague in Seattle with whom I’m working on a possible solution that could make a service like Twitter if not rational and sensible for those who waste valuable time Twittering, at least valuable for trend spotters, advertisers and content producers.   Technically we are confident in our approach.  We’re now looking for right home for our solution to take root.

So although I personally don’t “get” Twitter, perhaps my Seattle colleague, my TGG partners and I can at least contribute to a solution that will make services like Twitter valuable for people who do.

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For a fascinating and recent discussion about Twitter’s business model, read:  The Obsession With Twitter’s Business Model by Claire Cain Miller - New York Times blog, March 26, 2009, 11:23 am.

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UPDATE, May 16, 2009:

On this week’s Bill Moyer’s Journal, following a fascinating opening discussion about what’s happening in Pakistan,  Moyer’s interviews Daniel Goleman, author of Emotional Intelligence, Social Intelligence, and most recently Ecological Intelligence.  During the interview, Moyer’s observes that his desk is a “Twitter free zone”, but then observes that Goleman may have identified a truly practical use for Twitter. (You’ll have to listen to the show or read the transcript to find out what that might be.)

At the conclusion if the program, Moyer’s comments on his personal history as a technological Luddite.  Then he offers the following very amusing observation about how history might have changed if some of our most famous figures had had Twitter at key moments in their lives.   From the transcript of  Bill Moyer’s Journal May 15, 2009:

For now, I am playing it safe, first considering what some of my heroes in history might communicate if Twitter had been at their thumb tips. Here goes:

George Washington: “Crossing Delaware. Way cold. Hope Brits don’t hear chattering wooden teeth.”

Alexander Hamilton: “Oh my God. Aaron Burr can’t shoot his way out of a paper bag. LOL [Laughing out loud].”

Abe Lincoln: “Where in Gettysburg? Lost address. TIA [ Thanks in advance].”

Teddy Roosevelt: “Returning to San Juan hill. Left charger.”

F.D.R.: “At inauguration. Must inspire country. How’s this, people: Only thing we have to fear is stuff that hasn’t happened yet.”

On second thought, perhaps it’s better not to tweet and be thought a fool than to tweet and remove all doubt.

This is precisely why I think members of Congress would be wise to leave their Blackberries in their pockets or purses during the next Presidential Address to the Nation!

Among the “solutions” we saw at the conference were:   video-based offerings (many), mobile medical centers, in-home devices, prosthetics, medication dispensing devices, and a display sponsored by TATRC on the “Hospital of the Future” .  But are all these “telemedicine” solutions?  

ATA states that telemedicine is not a separate medical specialty,  and defines telemedicine as “… the use of medical information exchanged from one site to another via electronic communications to improve patients’ health status… Products and services related to telemedicine are often part of a larger investment by health care institutions in either information technology or the delivery of clinical care. …Telemedicine encompasses different types of programs and services provided for the patient. Each component involves different providers and consumers.”

Translation:   Telemedicine today is a collection of puzzle pieces in search of a cohesive picture. 

When we work with clients, we have to constantly ask and remind them to think deeply about critical business questions, including:

1. What problem do you solve… and for whom?
2. What’s the solution worth to them?
3. Why should they spend money with you rather than someone else?

We find it amazing how often we talk with people who think they know the answers to these questions, and who assume it should be evident to everyone else what the answers are. But, when you dig, as we must in our practice, you often find that (a) answers do not exist, or (b) if the answers exist, they are not commonly shared, especially among those who need a common understanding of the problem, or (c) that  the economics that underlie or support the answers are often misunderstood if understood at all.

Given this, we think companies need to get very clear and very granular about the problems they solve and what part of the whole problem they address,  their contribution to the whole solution, and perhaps most important,  the value of the whole solution and the value of their contribution. 

We think companies in this space need to be able to distinguish and articulate clearly what they provide:  telemedicine OR telemedicine enablers.   Further, we would recommend that companies not talk about “solutions” unless they first make clear what problems they solve.  These are important distinctions that can have big implications on how a company operates, manages risks, and generates revenues.   As revenue strategists, this is fundamental information that we need in order to help firms develop distribution strategies and increase firm valuation in advance of exit - considerations that will become more critical as this market evolves, matures, and consolidates.

Another consideration:  ATA states “…Even in the reimbursement fee structure, there is usually no distinction made between services provided on site and those provided through telemedicine and often no separate coding required for billing of remote services. “

Does anyone else find this a troubling statement?   Not only do telemedicine providers and vendors need to be able to bill appropriately for there products or services, but they need smart, sustainable strategies to ensure they are selling to the right customers or partners.  And to do this, each provider or vendor must be able to clearly articulate a value proposition that is grounded in hard numbers, not just soft assumptions.  

At ATA 2009 we say lots of wonderful and exciting ideas and puzzle pieces. What we didn’t come away with was a clear picture of what telemedicine is and how companies are (or are not) cooperating to make telemedicine work. A lot of companies are talking about “solutions.” Few are clearly saying what problems they solve. Fewer still are able to articulate where they fit within a clearly defined picture of what telemedicine is.  And most concerning:  we are not convinced that companies are doing what they could to determine how they should get paid and by whom - today or in the future.

Our bottom line assessment: Telemedicine today consists of lots of puzzle pieces, but no clear landscape.

We think that companies that want to claim a space in telemedicine should take serious steps to make sure they (a) they have a clear definition of telemedicine that they share internally and with their customers and relevant practioners, (b) a clear picture of the landscape of players with whom they compete or want to partner, and (c) a precise assessment of how economic value is created and exchanged across this landscape. 

In our view telemedicine is about efficiencies and cost reductions.   We’d like to believe it’s about improving care and patient outcomes, but frankly, we think that will be a by-product and not really a driver for telemedicine.   Therefore, organizations that want to play in this space need to be able to recognize, articulate and substantiate their contribution to improving the economics of medicine delivered through the use of telemedicine products and services.

We would your comments!

From my personal experience, there are two kinds of organizations that can be particularly challenging when it comes to revenue strategy work. These are business startups and non-profits. Raising money and selling are generally not what the founders and leaders of these kinds of organizations want to do or worry about.

The American Institute of Architects (AIA), the Alzheimer’s Association, San Diego’s Classics for Kids, and the Cincinnati Chamber Orchestra are non-profits that I have been personally involved with in some capacity over the years either as a revenue strategist or as a board member. I think they serve as great illustrations of the range of revenue strategy challenges that exist in NPs.

In my view, the AIA is the closest of these, both in style and purpose, to for-profit businesses. As a professional membership organization, AIA has a very clearly defined target market: architects. Although members might view their membership fees as “contributions,” the AIA’s members are really fee-paying “customers” who clearly expect to receive measurable economic value from their association with the AIA.

While membership fees are an important revenue source, the AIA actually generates most of its revenues from the sale of contract templates, and from its industry conferences. These sources of revenues are offerings that must be planned, package, priced, promoted, and produced with the same kind of business management skills and rigor required by for-profits. The only real difference I see between the a for-profit and AIA (or any other professional organization of its kind) is that AIA shifts the focus on profit. Instead of having to worry about its own profits, AIA’s mission is to worry about the ability of its members to generate their own profits.

Most non-profits need a mix of revenues or incomes from a wide range of sources that can include contributions, memberships, grants or subsidies, the sale of goods or services including such things as tickets to performances and events, as well as income from endowments or investments. With for-profits, the only revenues we are really interested in are those that come from the sale of goods and services to the businesses or consumers who want to own or use them.

The Alzheimer’s Association, with its focus on helping us all understand, battle, and deal with the realities and ravages of Alzheimer’s and other cognitive degeneration disorders, needs a very different revenue strategy than the AIA. Here a much more challenging mix of funding strategies is required, one that may or may not include the actual sale of product to either those afflicted with disease or to caregivers or their families. However, the bulk of funding must come from sources other than the direct sale of goods or services.

Many if not most fine arts organizations, including Classics for Kids or the Cincinnati Chamber Orchestra, must be organized as non-profits in order to survive. If we think of a continuum of non-profits with those that rely totally on revenues from sales on one end, and those that rely totally on contributions, donations or grants on the other, non-profit fine arts groups probably sit somewhere between AIA on one side, and humanitarian and charity organizations like Alzheimer’s on the other. (Blog note: If anyone has already mapped this continuum and would be willing to share it, please do!)

The primary customer of a fine arts non-profit – e.g., its audience – must usually pay something in the form of ticket prices or memberships in order to be able to experience the fine arts in question. These organizations have a huge challenge: audience affordability. In order to be able to sell tickets at prices that the target audiences can afford, to be able to pay orchestra members and other artists reasonable wages and benefits, or to be able to maintain and preserve expensive buildings and works of arts, arts organizations almost always have to turn to other revenue sources as well.

Additionally, motivating people to donate or support an organization or a cause is very different than motivating people to buy, own or consume. This has a tremendous impact on how organizations operate, market, and “sell.” In my experience, the more an organization’s board and management has to focus on attracting and keeping donors and supporters, the more the tone of their efforts shifts to tapping into relationships and social networks rather than producing product that someone really wants to spend money to have access to. For those who run non-profits, who you know can often be far more important than what you know. (Certainly this can be true in business as well, especially for firms who use lobbyists, but seems especially true for many NPs.)

Another challenge that affects NPs and their revenue generating strategies is their organizational structure. Many NPs are organized around national, regional, and local chapters. NP success, it seems to me, often depends on the balance of power between the national or central organization and the chapters, where there can be tremendous disconnects between where value is created by the organization (e.g., at the grassroots level or at the top level, say through advocacy) and where revenues are generated. For these reasons, the organization’s sources, uses, and the quality of revenues produced can vary tremendously, which also makes it very challenging to define and then implement new revenue strategies or change existing ones.

In general, I think working for non-profits can be far more challenging that working in for-profits because decisions about strategy and measurements of success are often based on things that are usually softer, more subjective, far less measurable in terms of revenues and bottom line results. And then there is the challenge of employees versus volunteers. If you’ve ever run a volunteer organization, you know that people often have the best of intentions and then just don’t follow through, usually because they don’t feel they really have enough at stake if they don’t. Getting the right kinds of volunteers involved, motivated, and reliably committed is often far more challenging than with employees whom you can both select and incent to get what you need – especially when it comes to revenue generation!

But the really big problem non-profits face, just like for many start-ups, is that founders and leaders often get so wrapped up in their mission and what they themselves want to accomplish that they fail to ask and answer fundamental business questions, such as:

• What problem do we solve?
• For whom?
• What will cause someone spend a dollar with us rather than with someone else?

It does not matter what kind of organization you are – for profit or non-profit. If you want someone to give you a dollar, you have to convince them why they should give it or spend it with you, rather than someone else.

And whether you are courting donors or buyers, employees or volunteers, investors or endowment contributors, answering “What’s in it for me?” (WIIFM) from the viewpoint of each of those individuals is critical.

The best non-profits do this and do it well. What they often don’t do so well, is develop revenue strategies and distribution models that would help them do what for-profits have to do well – productively generate revenues – while continuing to promote and provide the social, cultural and humanitarian benefits their missions require.

Certainly, we won’t know for some time yet if bumping up over 8000 on the stockmarket today is just symptomatic of typical market over-reactions, or truly an early sign of recovery. And then there are the jobs numbers that came out today that were less than what the government had hoped for. But employment tends to be a lagging indicator, so let’s hope that is indeed the case here.

But whether the worst is behind us or not, one fact is true:  We are closer to recover today than we were yesterday.  And recovery will come. So, we keep asking clients and prospects: What are you preparing for?

Some companies will be looking for the next wave of growth. Some companies will drive that wave. And still others will actually get washed away after recovery begins. Just because a company survives the recession, there is absolutely no guarantee they will survive during recovery and beyond.

The business landscape we will face when things pick up again is going to be considerably different than what we faced even a year ago.  Companies that aren’t prepared to deal with different buying attitudes, different mixes of competitors, changes in our laws, and very different market economics are going to have problems.

We’ve been saying this for sometime, and apparently McKinsey agrees.  Today I received an email to a brief McKinsey Quarterly Article called “Strategic planning: Three tips for 2009: Even in these tumultuous times, strategic planning doesn’t have to be an exercise in anxiety—or futility” by Renée Dye, Olivier Sibony, and S. Patrick Viguerie.

In it the authors recommend three things to do right now as part of strategic planning:

• Intensify monitoring
• Look beyond the crisis
• Be realistic about scenario planning

We couldn’t agree more! But many companies are NOT monitoring. Many are NOT looking beyond the crisis - at least yet.  And for those who aren’t, there will be NO WAY to be realistic about scenario planning - if they do it at all!

If you aren’t investing in monitoring and the kind of analysis that will help you first sense and then really see what’s coming, you are putting your company at serious risk.

And doing this kind of work is remarkably inexpensive today given the kinds of online resources we all have access to. The challenge is always (a) investing to have SOMEONE do this work, and (b) using the RIGHT people to do the work. Not everyone wants to do this kind of work, and too few know how to sift through the noise and babble to quickly find what is relevant and useful.

We invite anyone who may read this blog to contact us with your thoughts, opinions or concerns about researching and developing the kinds of revenue strategies needed not just for recovery, but also for the next wave of growth that, sooner or later, will come.

We’d love to hear from you.

Susan Wayo

Principal, TGG

From the breakdown of our financial system, to the collapse of the US auto and newspaper industries, to the explosion of new forms of communications like Twitter and Facebook, it’s evident we are in a period not only of uncertainty but also of massive change. As a result, the business climate in which we operate and the business landscape the lies in front of us looks so dramatically different than that which we faced prior to 2008, it’s almost hard to reconcile.

In our practice, we have been feeling the gut wrenching changes just like everyone else. Many execs we talk to these days have been retrenching and simply trying to stay afloat. It’s the rare firm that is thinking seriously about future opportunities, innovation and growth strategies. These companies do exist, gratefully, but we’re finding that many firms that are growing today are more focused on cutting costs and preserving value, rather than innovating or creating new products and services.

But sooner or later, this will change. Unfortunately, many of us just don’t know yet how our customers, competitors and partners are changing or where new opportunities (or threats) will be emerging. It’s like flying an airplane into storm clouds. If you don’t have the capabilities to see beyond the clouds, you are very possibly in trouble. And that’s where a lot of firms find themselves right now: in the midst of a storm without a picture of what their markets will look like in recovery and beyond.

In business we all face a similar challenge. Unless we proactively look for opportunities, we may never see the ones that exist or the new ones that appear. Did you ever have the experience where someone mentions a particular make or model of car, and then very shortly thereafter you start seeing is type of car everywhere you look. This is a great illustration of how our minds work. We see what we are primed to see; we filter out and ignore most everything else. As revenue strategists it’s our job to help senior managers get a better view of what’s coming and figure out new strategies for recognizing and pursuing new opportunities.

Therefore, one of the things we are most interested in is helping clients identify more ways to create value and get paid for it. So deciding to start a blog was not something we took lightly. But given the state of the economy and the impact of actions taken by those who have been more interested in extracting rather than creating value, the time seems right to start writing about revenue strategies that will drive recovery.

We hope that by blogging our thoughts about revenue strategies as these relate to recovery, we can stimulate a dialogue with potential clients and partners. There is no question in our minds that recovery will come. Our hope is that, when it does, it will be driven by a new mentality and energy that is driven less by greed and far more by sincere desires to create measurable and sustainable value, not just profits and short term gains.

And now, we’d like to hear from you:

• What impact is the recession having on the real and perceived value of what you sell?
• What evidence will you be looking for to know that a recovery is underway?
• How is the recession changing the mix of customers, competitors and partners that characterized your business
• What kinds of revenue strategy services would have the most value in today’s market – to you or to others?