Bulletins on Business and Economics
BLOG.REDHAWKASSOCIATES.COM
"Local software makers continue to add jobs"
An article in 2/20/2012 *Crains Cleveland* reports that the number of
workers in local software companies has increased by 16% in the past year.
The title of the article was misleading, most of these firms are not
makers but consultants. However, the larger point is that this market is
growing well. I see consolidation increasing amongst software consultants
and marketing companies driven by the demands of large customers who want a
broad and deep array of services. Those customers do not want to have many
vendors but fewer vendors so that they can have simpler, more efficient
relationships and also have more leverage over a community of fewer
vendors.
My suggestion to many small firms is to prepare your company for sale, get
your capital structure in order, produce sound financial statements, have a
professional sales, marketing and senior management team and process. The
result will be maximum value for your business.
workers in local software companies has increased by 16% in the past year.
The title of the article was misleading, most of these firms are not
makers but consultants. However, the larger point is that this market is
growing well. I see consolidation increasing amongst software consultants
and marketing companies driven by the demands of large customers who want a
broad and deep array of services. Those customers do not want to have many
vendors but fewer vendors so that they can have simpler, more efficient
relationships and also have more leverage over a community of fewer
vendors.
My suggestion to many small firms is to prepare your company for sale, get
your capital structure in order, produce sound financial statements, have a
professional sales, marketing and senior management team and process. The
result will be maximum value for your business.
What rate do the Top 400 Earners Pay?
Interesting data from the IRS. Comments later but: the problem I see is
that income from work is taxed at a much higher rate than that from
investments. There are many studies showing that the diminishing returns
from effort (work) quell effort, few (that I know of) showing that higher
marginal rates diminish investing.
that income from work is taxed at a much higher rate than that from
investments. There are many studies showing that the diminishing returns
from effort (work) quell effort, few (that I know of) showing that higher
marginal rates diminish investing.
Corporate Innovation: I favor Google's Approach Now
The Yin and Yang of Corporate Innovation by Steve Lohr in The New York Times, (1/29/12) lays out the different innovation approaches used by Apple and Google. Partly because Apple sells hardware primarily, its approach is more top-down, measured and less customer-centric. The cost of failure to them of a new hardware product is significant. Steve Jobs was famously quoted as saying that "it's not the consumers' job to know what they want".
Google products are almost entirely software. Lohr says that it "speaks to the power of data driven decision making, on line experimentation and of networked communication". As a Google customer, I notice that there are always many "labs" developing products and beta versions of apps to try. Customers can decide to try or not with no promise by Google of successful implementation.
I think Google's model is more useful for corporate leaders to consider now since it is very different than most companies' approach which is still top-down. Be willing to throw a lot of stuff against the wall and be willing to test and change strategy frequently. The annual strategic plan is a joke now. Those plans are usually obsolete the day they are printed.
I'm reading now
*King Lear* for book club.
*Agents of Innocence* by David Ignatius
*Agents of Innocence* by David Ignatius
Hooray!
For the Crimson Tide winning the BCS. Great for Tuscaloosa.
Continuing the sports theme, too bad for the tough loss for the Hoyas of Georgetown on the court.
I'm Reading...
Tom Peters (the coauthor of In Search of Excellence, etc.), my imaginary guru, says that you have to outread your competitors. As a coauthor myself of a business book, I am very aware that most business people don't read business books unless made to or out of desperation. Anyway, I am trying to read more and as much as I can (but always distracted by the latest game on TV). I figure if I note what I'm reading here it will spur me to read more and maybe interest readers of this blog. Here's what I'm reading now:
- Shucked by Erin Byers Murray, about an oyster farm in Duxbury, MA (my hometown)
- The Mind of the Strategist by Kenichi Ohmae, the art of Japanese business
- SEO for Dummies, self explanatory
Too Esoteric? The Debt Settlement Process Summary
I know this one pager on debt restructuring for businesses has a small target audience but a few people may benefit from it.
Turnaround and Restructuring Advice for Leaders and Advisors
This article is my most detailed and gives you all the techniques and strategy needed to lead or advise on a business turnaround. A few years old, but still very good (I think).
Improving Productivity and Value Through Better Sourcing
Here are some ideas for business owners and managers here based on my firm’s unique (I believe) approach to sourcing:
- Don’t start with the realities of a current manufacturing or service base (plants, vendors, equipment), instead start with what current and prospective customers want, and what your competitors are doing and drive your plan from there (separate short term need from long term goal)
- For example, if a major customer is going to China and wants you as a vendor there, be careful and understand whether that customer can generate the type of return on investment you need to get to justify the investment
- Determine what core strength you need to be able to beat your competition. For manyanufacturers in Ohio, that strength is not in manufacturing locally but is in service, design and management
- Answer these questions like these about offshoring:
- Are you lean at home (reduced direct labor)?
- What’s the value of manufacturing near your customers?
- There are many countries from which to source product. If you choose China, be sure to use an expert who can sort through with you which region to choose, which factories are good and ones to avoid and can scout, lead and spearhead this time consuming and expensive effort
More thoughts on productivity
A couple of years ago, I was part of an integrated team of outside consultants and internal leaders of a F20 financial services company tasked with reducing expenses, including payroll and support services, in their large call centers.
According to my notes: "Our small team, with the addition of two key people from our
client, conducted dozens of interviews, visited every processing site and
analyzed thousands of telephone calls from customers. As a result, we determined that the cost of
poor quality in our client’s credit card customer service operations was 52% of
the annual operating budget. The main
symptom of poor quality was the inability to resolve customer issues at the
point of first contact. For example,
whenever our client’s marketing department would send a new promotion to card
holders, the call centers would be flooded with calls from customers asking to
have the offer better explained. A
simple solution that would pay off in millions of dollars of savings was to be
sure that the outbound communication was complete and understandable and that
the call center operators, if called, were trained well enough to answer the
questions posed."
The main result of the study was a renewed focus, using training and technology, on resolving customer issues the first time.
Bio Link
David Brown is a consultant, investment banker, speaker and author. His consulting firm, Red Hawk Associates, has helped dozens of businesses raise capital or develop and execute strategies to increase value.
