Morettini on Management

General Management and Marketing Advice for Software and Tech Companies

Tag: market

Creating a Distribution Channel Where One Doesn’t Exist

One of the least well understood activities in growing a hardware or software business is the building of distribution channels. This looks very easy to the uninitiated, but in reality it’s extremely difficult. There are many subtleties that are far from obvious, and some aspects that are necessary for success are downright counter-intuitive. Building a distribution channel for your company is difficult in the best of circumstances.

How hard is it when there are no current, obvious existing channel partners already selling your category of products to start with?

It’s very hard. In fact, most people in the know would likely tell you to forget about it, and not even try. That might actually be pretty good advice, because this activity could easily become a real time and money sink if you’re not careful.

But the other side of the coin is that this might be the circumstance where building a channel carries the very highest potential payoff. One of the great truths I’ve discovered in my career is that the most effective marketing and sales strategies are the ones that haven’t yet become mainstream in your marketplace. Once a strategy or tactic becomes very popular, the results become watered down until at some point it’s marginally attractive at best. In terms of strategy, this move fits in the “high risk, high reward” category. But the payback, if successful, is extremely high.

In terms of strategy, creating your own channel definitely fits in the “high risk, high reward” category. Because while it’s very difficult, if successful, you alone among all competitors in your segment will have the leverage and resulting strategic advantage that a well-executed channel strategy can provide.

So the question is how do you go about this? Where do you even start if there are no existing channel partners for your category? Let’s take a look at a few places to mine that I’ve found some success in the past:

Adjancent Markets

This is the most fertile place to begin, imo. The first step is to think strategically about what type of software application or hardware product is complementary to yours. Whose product might it make sense to integrate with your own, for example? These types of potential strategic partners might also have existing channel partners that might be interested in selling your product as a companion product. An example scenario that I recently successfully implemented for a client was an analytics software company that uses a lot of data to help forecast and mitigate decision risk. We were able to attract a number of channel partners in two adjacent categories: Business Intelligence (BI) and Project Management. Both of these categories are large, with good-sized existing channels selling their solutions. BI creates a lot of date which could be used by my client’s software for forward-looking action, and the Project Management category involves a lot of complex decision-making and risk mitigation which was a natural fit for my client’s software.

Private Label/OEM products

Potential OEMs are another great place to look for channel partners. One obvious possibility is hardware OEMs for a software company, where the software might be integrated with the hardware for a full solution. If the hardware OEM has a channel, Voilà! you have a channel. Even if the hardware company isn’t interested in an OEM relationship, you might be able to entice them into a more vanilla reseller relationship with light or no integration. Lastly, you can always approach their channel directly to sell you software as an add-on product to the hardware vendor’s.

Former Employees

The first two categories above are pretty fertile with respect to creating a channel from scratch. After mining those two approaches, we’re getting into the area where you’ll need some really creative thinking. The first idea is former employees; I’ve seen many VARs who have started their systems integration business by specializing in their old employers products after leaving the mother ship. Another similar possibility is a former employee who lives in or moves to another country; they might start an entrepreneurial “exclusive” distributorship in that country.

Former Competitors

Very similar to the “Former Employee” category above is partnering with employees of former competitors whom you may know or come across. They will likely have similar knowledge and skill sets to your former employees, so the same type of potential applies. The only caveat here is you need to be careful of any existing relationships with your competitors or special agendas that could poison a potential relationship.

Product Fans

This category of prospective partner is again very similar to the former employee and competitor categories in terms of potential. A user or former user who loves your product and who you have a good relationship with can be a good candidate for an entrepreneurial VAR/distributor startup, whether domestic or international. The area to be careful of here is they may be very skilled in your product and some internal operating specialty, but may be poorly prepared to market, sell and run an overall business. This of course is a potential risk in the former employee and competitor categories as well.

These are some ways you can take the difficult step of creating your own channel from ground zero. Has anyone else tried this–what were your results? What are your ideas on how best to go about it? Please post a comment to expand the discussion.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

1 Comment by admin on February 6, 2012
filed in Business Models, Corporate Strategy, Distribution Channels, Retail, VARs, enterprise software, hardware, sales
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The New Corporation and Chronic Unemployment

This article is written primarily for my US readers, although anyone participating in the US marketplace may also have an interest.

As I write this article, US unemployment has been stuck stubbornly at 9% or above for 2 ½ years. The after effects of what has become known as the Great Recession are lingering, and there is no sign of a fast turnaround coming down the pike. The reasons that the Great Recession occurred have been reported and debated ad nauseam for the past several years. Basically it was a severe financial bubble, and historians have told us from the beginning of this downturn that recessions born of these circumstances lead to particularly slow and painful recoveries.

A major question comes to my mind as we endure this long-term economic pain: Is the US in a long-term structural decline? Looking at the issue dispassionately, all great civilizations/powers/countries in history that have risen to great prominence had an inevitable decline. In my business career, I’ve had a tendency to consider this question every time we’ve entered an economic downturn, which has happened several times in my adult life.

At times I’ve been pessimistic about the reasons that the great days of the United States may have run its course: Depleted natural resources, ballooning debt, declining educational standing, hollowing out of the manufacturing base, high costs of doing business and a high standard of living leading to a much has “hungry and motivated” populace. All have played a role in my thinking previously. Other emerging countries without the above stated disadvantages seemed to be poised to run past the US.

Added to these older fears has been a new one, high unemployment, which appears more then ever to have a structural rather than cyclical basis. This is being caused in part by a phenomenon which from a business standpoint is considered a good thing: The previously highly inefficient large corporations in this country have finally figured out they didn’t need all of the people they used to employ (and lay off during recessions, only to rehire them at the peak of the next upturn).

I have worked in and with very large corporations as well the smallest startups. If you’ve read this column for a while, you’ll know that I’m a long-time critic of the inefficient ways of big business. But finally, large corporations seem to have figured out that you don’t need layers and layers of bureaucracy to conduct business. There are many reasons for this change, including primarily productivity increases from technology, and a trend toward flatter organizations. But the net result is that large corporations have been, in aggregate, extremely profitable during the worst economy of our lifetime. This is great for shareholders, but terribly frightening for job-seekers and economists. Because it appears this do-more-with-less attitude means that many people will be out of jobs (in their former professions) permanently, with the economy stuck in the mud due to reduced consumption growth.

This is a pretty dire picture, and not an unrealistic one. Is this the end of the line for the US as a great economic power, with a reduced standard of living going forward for its citizens? I am optimistic that it’s not the case– and here are some of the key factors why I believe in a better future:

Entrepreneurship and Small Business Capitalism Unleashed

One of the very greatest strengths of the US economy, and indeed US culture, is the tradition of entrepreneurship. I believe it’s because we are a nation of immigrants and everyone had to create there own place in society. Relative to other countries, there are fewer people who were handed what they have. Go back no more than a generation or two in most families, and someone was pulling themselves up by the bootstraps. We have entered a phase where many people are again being forced to reinvent themselves, just like our immigrant forefathers. The way many previously earned a living is no longer possible. As stated above, those large corporations have figured out that they won’t need legions of people anymore; as many of those tasks are now being done by automation. Even those still in the biggest companies can’t expect to be there long term; lifetime employment is mostly a thing of the past. People will need to view their careers in a much more self-sufficient manner. There is much pain that has already come with this, and there will be much more yet to come. But this represents the efficient redeployment of labor that is at the core of capitalism. While painful, these labor resources will eventually find a way to make a living in a new way, ultimately expanding our economic activity and renewing growth. They will start new small businesses, invent new things or re-brand themselves as efficient “on-demand” contractors for larger companies. This will be a gradual process, but over time it will lead to a larger and more stable economy.

Innovation

We need the next big thing! The last time the economy was looking this moribund from the long view; the mainstreaming of the Internet saved the day and unleashed a torrent of innovation and economic growth. Of course, this also led to one of our more recent bubbles, but that’s a subject for another day. Over the history of the US, inventions of this type have created great economic progress: the cotton gin, the light bulb, telephony, the airplane, the mass production line, the computer, the Internet, etc. These great American inventions have played a major role in building the world’s largest economy, and indeed the world economy as a whole. Have we lost the recipe for these creations? I don’t think so. The American culture of capitalism and individualism is still the perfect crucible for great innovation. My only questions are what the next big thing will be, and when will it happen? I can’t wait!

Renewed Work Ethic

While the US has in fact become a bit fat, dumb and happy over the years as prosperity ensued, I for one don’t believe this is necessarily a permanent condition. The new economic conditions have a way of rekindling work ethic. Indeed for some the competitive instincts are flowing like never before. For many survival instincts are kicking in, and there’s nothing more powerful than that. All in all, I believe that the United States populace still possesses a very strong work ethic, and this will be one of the factors that kick-starts our economy once again.

Renewed Savings Rate

This is something that hasn’t received as much attention as some other adjustments to the economic rough times. The US has historically been a country of savers; however, in the go-go years of our latest bubble the savings rate actually went NEGATIVE. This is of course completely unsustainable by anyone’s math, and portended the economic collapse. The renewed savings rate over time will heal consumer’s balance sheets, leading to greater spending down the road, a more stable economy based on purchases aren’t made largely on credit, and greater capital formation for new enterprise. This is one of the more bullish signs I see for a renewal of economic growth, although this will have a long-term effect rather than a short term one.

Political Reconciliation

Winston Churchill famously said: “The Americans will always do the right thing… after they’ve exhausted all the alternatives.” The right thing that needs to happen today is for the political culture to come back toward the center, where historically elections were won and deals consummated during governance. The two ends of the political spectrum currently look very far apart and unable to deal with each other well enough for the government to run effectively. Indeed, the two parties are as far apart as they ever have been in my lifetime with moderates having been run out of both parties. But if you look back at the longer history of our country, this isn’t an unusual situation; the political classes have always come back to the center eventually, as the electorate inevitably gets sick of extremism and governance gridlock. The sooner this happens, the better, no doubt. But history tells us that it will occur.

So those are my crazy thoughts of optimism as we slowly crawl out of the Great Recession hole. What’s your forecast on the future growth of the US economy? Where are we headed, and does it end happily?

Post a comment with your own views on this subject. Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

8 Comments by admin on November 12, 2011
filed in Uncategorized
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Social Media Marketing for B2B Tech Companies

By now, every company has grasped the importance of having a social media presence on the web. Or have they?

In discussions with potential clients and others I am actually amazed how many folks have done little or nothing in the area of social media marketing.

Why do you think this is? Some business executives immediately associate “social media” solely with consumer-oriented activities on social medial sites such as Facebook, Twitter and MySpace. You know the stereotypes that are popularly characterized by the mainstream media: pictures of wild high school parties, viral invitations to flash mobs, and inane posts about what people are having for breakfast.

But there is serious business going on in the Social Media world. The fact is that Social Media marketing has definitely become not just a mainstream activity, but a critical one. No longer are at an advantage if you are heavily using social media in your marketing mix; you are falling behind if you aren’t!

Social Media is obviously very important in B2C software and hardware marketing. Because it is less well understood, I will be focusing on B2B marketing in this article.

Blogs

A Blog is the single most important step into Social Media for a B2B tech marketer. In addition to being a great way to bring traffic directly to your site, it provides the content to use as bait for all of your other social media activities. There are almost too many benefits to list here, but let’s try a few:

  • New and high quality website content which increases SEO (search engines LOVE fresh, high quality content. This assumes a self-hosted Blog–it’s critical for your Blog to be hosted on your domain to maximize SEO benefits)
  • Direct traffic to your website
  • Fast & Easy search engine crawling and indexing due to the large number of Blog ping services, Blog indexes and Blog search engines
  • High quality backlinks from the Blog services mentioned above, as well as from happy readers who link to your Blog
  • Content you can repurpose in a number of ways such as publishing in newsletters and posting on appropriate social media sites
  • Positions your company and key employees as “thought leaders” in your category

This is just a taste of what a Blog can do for you; the uses and benefits are limited mostly by your imagination. It’s a bit of work, no doubt, but has a high return if you dedicate reasonable resources to the effort.

Linkedin

After creating your Blog, this is the second most important social media activity for a Business-to-Business technology marketer. Key employees should create a complete profile (for professional development purposes, if no other reason) and a profile for the company should also be created. But that’s just where the fun starts. Here are some additional important activities to consider:

Join and Use Groups: Other than setting up a complete and effective profile for both you and your company, the most important thing you can do is join groups. You’re allowed up to 50, and if you choose the groups well they can be a very effective segment of your online marketing efforts. Become known and respected by participating in discussions. But most importantly, post links to your Blog content, press releases, newsletters, webinars, etc. If you’ve targeted the right groups, this will create a good deal of qualified traffic to your website and other online vehicles.

Build your Network: This is the place where you want to go fast, but don’t hurry. The more people in your business segment you know, the easier it will be to market your product over a long period of time. The key is to take a long term perspective. You don’t build a network by being pushy or “all about you”. It’s like any other form of networking. Reach out not only to connect, but to actually assist those in your network. In the long run, you’ll have a stronger position and it will benefit your business.

Search for Prospects: People are listed on Linkedin that you wouldn’t find elsewhere. It’s a great place to search for both companies and high level executives that you’d like to connect with. Be very careful in your targeting efforts and try not to be too obviously sale-sy. But if you are respectful and careful, an excellent source of targeted prospects awaits you, that you can contact directly (with a premium account) or connect with through your mutual contacts.

Ask and Answer Questions: This Linkedin feature provides a great, low key way to both show off and improve your knowledge. By answering questions posted by others you can demonstrate your knowledge in a forum without having to appear to be bragging. Don’t be afraid to ask questions either; there are a great many resources out there to fill in the blanks in your current knowledge base.

Twitter

This is a great place to connect with like-minded people. As profiled time and again in the mass media, it’s also a great place to waste time. So unless you find that you can become a productive and efficient Twitter networker, make sure you don’t become addicted to tweeting. Some people love it, some hate it–what’s important is to leverage it optimally for your business. I personally don’t waste a lot of time on Twitter, but there are some folks who have dedicated a lot of time–to great effect for their business. Especially if you have more time than money for marketing, there’s a lot you can do to gain exposure and goodwill for your business here. At a minimum you should post your Blog content, press releases and other important external communications. You should also think about assigning members of key departments (PR, customer service, tech support) to Twitter, giving your users and potential customers an easy, informal way to interact with appropriate parts of your company

YouTube

Yes, Youtube! Everyone loves to go to YouTube to view that video of the 6 month old baby surfing in the bathtub while smoking a cigar (Ok, I made that up, but if you do a search you might just find it on YouTube). But it’s also a great place to post a short intro video about your product or service. You can even put up training videos to show the depth of your knowledge in a particular area, or the depth of your product or service offering. The videos are hosted on YouTube, but you link to them and feature them on your website. These videos will give you a leg up in search engine ranking as Google, et al love video content and provide it with preferential search result positions.

Facebook

Yes, use Facebook as well! Facebook is certainly not a core platform for business to business marketers. But 750 million users (and still growing like a radioactive weed) shouldn’t be ignored. So create a personal profile and company page and post your Blog content and other external communications pieces there. If nothing else, you’ll get some quality backlinks to help your SEO efforts with very little effort. Don’t waste time here, but it makes no sense to completely ignore this platform, either.

Coming Soon — Google +?

This is a real wild card that could have a big impact on the Social Media Marketing landscape. As I write this article it’s too early to tell what Google+’s ultimate impact with be on B2B social media marketing. Most people don’t yet have access. I haven’t used it yet, so I only know what I’ve read. It’s still in pre-release phase (although it seems that most things at Google are!), and the features are still being developed. But so far it appears to be off to a very promising start, with 25M users in only a few weeks of controlled beta release. Reviewers have raved about the elegance of the “Circles” feature, which allegedly makes it very easy to segregate those connected to you into logical groups, a real problem on Facebook. Of course, Google is aimed far past B2B social media with Google Plus, taking aim squarely at Facebook as a mass-market social media network. But I think this new platform also has particularly strong potential for the B2B crowd, with possible integration with tools like Google Adwords, Analytics, Apps, Docs, etc. We’ll have to wait and see where this goes, and I’ll be watching closely.

There’s certainly much more that can be written on this topic. This was just a quick look at what I think about the importance of social media marketing for B2B Software & Tech companies. For example, there are new vertical social media networks popping up every day–there may be one perfectly aligned with your market.  This is a varied and rapidly evolving topic–what are your questions or opinions? If you need help with your marketing mix or other aspects of managing your software or hardware company, please contact me at your convenience. In the meantime, post a comment to share your views on this topic and continue the discussion.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

2 Comments by admin on August 14, 2011
filed in Business Development, Marcom, Online Marketing, Product Marketing/Management, Promotion, Social media
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Will Smartphones Replace PCs?

Smartphones are taking over the world–the tech world, at least. The computing buzz these days is decidedly mobile. The question is “where does it end”? Do Smartphones continue their growth until they are the dominant or sole computing platform, or does this trend stop somewhere short of that? Let’s look as some of the factors that will drive the market:

Processors

The state of microprocessors used in Smartphones will go a long way in deciding the ultimate outcome of this discussion. We’ve seen similar scenarios to the Smartphone phenomenon before, and history tells us that microprocessors will keep progressing on all three major computing platforms. History also says that applications have always grown in size and capability to take advantage of the increased level of processing power and memory available at a given cost. In addition, desktop PCs (and laptops to a lesser degree) don’t have the extreme power constraints that a pure mobile platform like a Smartphone does. If historical trends hold true, it won’t bode well for Smartphones becoming the dominant computing platform, because PCs will continue to have an inherent advantage in software capability due to more powerful hardware. If there is a leveling off in PC processor capability, Smartphones will have more of a chance to overtake them as the primary computing platform.

Screens

Screen size and power consumption are also very important to this argument. Until holograms become standard, screen size will always be an important factor is choosing where to do your computing. This doesn’t bode well for a total Smartphone takeover of computing.

Keyboards

Keyboards are an analogous issue to screens; once voice input becomes standard in the computing world, keyboard size will seize to be an issue, tilting the field toward Smartphones. But until this happens, all but the insane will prefer typing on a PC keyboard over anything available in the Smartphone world (although there have been definite improvements in Smartphone keyboards).

Batteries

Battery life is also a major driving factor in the capability of Smartphones. While mobile processors and memory will almost certainly continue to provide greater compute capability at lower power consumption, desktops essentially have no power constraints (except for the very green-conscious). Even laptops come with an assumption of working at least part of the time where they can be plugged in. There could come a day where batteries are so powerful and hardware is so miserly in power consumption that battery life is no longer a major issue. Until that day, however, the checkmark goes to PCs.

Software

There are two aspects of software that are important to this discussion. The first is the number and breadth of applications available–the Smartphone category has already blown through this checkpoint. Hundreds of thousands of applications are already available on Smartphone platforms. Smartphones are already in the mainstream from a software assortment perspective. The second question is the sophistication/capability of the infrastructure software available, to ensure whether bleeding edge technology can be used on a platform. While Smartphone infrastructure and tools aren’t t yet as powerful and mature as what’s available on PCs, things are moving fast and I don’t see this as a major issue preventing Smartphone dominance.

New Hybrid Smartphone/Laptops

This embryonic platform holds the promise of being a game-changer in the market, tilting the advantage towards Smartphones as your primary (and possibly only) computer. What I’m referring to is a normal Smartphone “docked” into a laptop accessory shell, providing a larger screen, keyboard and maybe even bigger battery while using the same interface and software available on your Smartphone. This allows all of your files and computing occur on a single device, which would represent a major breakthrough for users. It’s the holy grail of computing. You may have seen ads for one of the early models, the Motorola Atrix “Lapdock”; or heard about the recently announced ASUS Padfone hybrid Smartphone/Tablet. It’s still very early in this segment and definitely uncertain how it will turn out. As in any early market, prices are still high, and the early devices don’t quite work as well as you’d like. But the paradigm is a powerful one. If the companies bringing out these devices stick with it, continue to innovate and introduce next generation devices that meet market expectations, this is a product that could truly be a PC killer. Only time will tell if this category will become the next generation of computing, or peter out like so many other great ideas that weren’t carried out to the required maturity.

I realize that tablets are becoming an important part of the computing ecosystem, but for simplicity I’ve considered them a next generation laptop in the context of this discussion.

I can’t say I know how this eventually works out. If I had that type of view into the future, I’d be in Vegas placing bets rather than writing this article. But using history as a guide, I think all three major platforms–desktops, laptops and Smartphones–will be with us for a long while.

I do think there will be a re-alignment in computing market share among the main platforms. I see desktops continuing a slow decline in share and eventually becoming specialist computers, used only where the ultimate in computing power is required. Smartphones have already staked their claim as the new growth platform. How far this growth goes is the only question. The wildcard is the new hybrid category. I believe that these devices could become the dominant primary computing platform if the hybrid Smartphone/laptop category takes off–which is far from a certainty at this time. If hybrids don’t take off, I believe screen, keyboard and processor limitations will prevent Smartphones from becoming the dominant computing platform anytime soon.

That’s my forecast–what’s your opinion on the direction computing will take? Do desktops eventually go away completely? Are they replaced by a Smartphone/laptop hybrid device? Do two of these three platforms survive, or will all three co-exist in the future as they do now?  I’d be interested in your own forecast–leave a comment to further this discussion.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

1 Comment by admin on June 12, 2011
filed in Business Models, Corporate Strategy, Software/Product Development, hardware, market research
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Is Outbound Marketing Dead?

The craze in the marketing world these days is “Inbound Marketing”–otherwise know as “content marketing”, “permission marketing”, “new marketing” “modern marketing” and a few other buzz-terms. The definitions may vary slightly, but they’re essentially variations on the same theme:

Potential customers find you, rather than you (the marketer) approaching them.

The current commentary on marketing methods goes like this:

People are insanely busy these days, and constantly inundated with marketing offers of all kinds, causing them to tune them out. Traditional outbound methods such as direct mail/email, advertising, etc. no longer work as a result. The answer is to use inbound marketing methods, defined as to driving traffic to your website via search engines, content (such as blogs and videos) and social media. Since these users have found you, they are by definition more attentive and better qualified targets.

Of course, although this discussion is very hot in the marketing world today, it isn’t really a new topic. It’s an argument about Push vs. Pull marketing, concepts which have been around nearly since the beginning of marketing as a science. At any rate, the preceding paragraph makes a lot of sense, does it not? No denying that getting boatloads of prospects finding you is a good thing.

The problem I see is that like most “trends”, the inbound marketing case is being grossly overstated. There is no doubt that the Internet has enabled pull/inbound methods grow to a degree not previously possible. If you’re a software or tech company marketer, in almost every market/product situation you should be leveraging online inbound methods to the max. But is that all you should be doing?

Of course not. Some companies may be able to fill their pipelines using only inbound methods. But this shouldn’t be an either/or discussion. In almost every situation, both inbound (pull) and outbound (push) should be used. They are not competitive methods; they each serve a different purpose, and are actually very complementary. Let’s take a look why:

Different psychographic profile of prospects

Prospects are not a homogeneous group in any market. They come in all shapes and sizes–early adopters, mainstream buyers, late adopters, etc. As a result, they respond to different stimuli, and have different buying styles. Many want to be totally in control and never have any “invasive” marketing targeted at them. But for every person that is offended by any offer directed at them, there are others who are happy to receive a timely, targeted offer which saves them money–as well as time– in searching out a software or hardware product they need. This is especially true for some very busy folks, and others that absolutely hate the shopping process. Outbound marketing can be a real advantage with these prospect profiles.

Different stage in the buying process

This is a key point which someone relatively new to marketing may not understand. If you have a prospect in the active buying stage, inbound marketing works great. Since they are out searching for your product or service, if you’ve done a good job on inbound marketing activities, there is a good chance they will “find” you. But what about those target prospects that aren’t yet in active buying mode? Should you just be ignoring them? I think not. First of all, you absolutely want to get a leg up on your competition and get your message to them as early as possible. By doing this, you’ll be on their short list of vendors to check out when they are ready to buy. But the right offer can also turn that future prospect into an active buyer–without so much as a look at the competition. What happens to your odds if yours is the only marketing message they see? Outbound marketing is much more effective than inbound in this scenario.

Timing vs. budget

From a marketer’s perspective, outbound and inbound marketing may fulfill different needs. Inbound marketing may provide a solid, day-in-and-day-out flow of leads and revenue. Outbound marketing can provide a more instantaneous bump to your numbers. Think PPC advertising vs. SEO. An inbound marketing technique like SEO is probably the more powerful activity in the long run, but and outbound method like PPC advertising can start creating business almost instantly. This outbound marketing bump can be very useful during slow periods where you’d like to “smooth out” your numbers, when you’re just getting started, during a busy (but competitive) holiday buying season or to give extra emphasis to a new product introduction.

Targeted Offers

Since you have greater control with respect to when a prospect will be exposed to an offer, it’s much easier to provide urgency and that critical timeliness component via outbound marketing. In addition, targeting can also be easier with outbound methods.  Direct outbound marketing, in particular, can be highly targeted if good lists are available.

Push and pull on the same prospect

Lastly and very importantly, this really isn’t an either/or argument–as I stated earlier. When discussing inbound and outbound marketing, we’re really still just talking about push and pull by other names. As any good marketer knows, push and pull work together. The number of total marketing impressions matters–more impressions increase your odds. This is fundamental brand-building. As an example, it’s well documented that PPC ads and organic results on the SERP converts better than either alone. So don’t choose between inbound and outbound marketing–use best practices in both methodologies to optimize your marketing results.

So what do you think? Will all your investments going forward be toward inbound Marketing activities, or is there still room in your budget for outbound methods? I’d love to hear your plans and opinions–post a comment to weigh in on this discussion.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

4 Comments by admin on May 16, 2011
filed in Online Marketing, Product Marketing/Management, Promotion, Social media
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International Expansion: Partner or Invest?

This is an age-old question facing software and hardware companies. In this article we’ll examine the pros and cons, as well as the specific conditions that should drive your decision process.

Two basic options confront a tech company considering a foray outside of their home market:

  1. Set up your own subsidiary hiring your own employees to “put on the ground”
  2. Partner with established traditional distributors or strategic partners in the target foreign market

Let’s look at some of the key factors to consider when designing an international business development strategy:

Available Capital

How much money does your company have available for international expansion? If the answer is “not much”, this alone can be the deciding factor in your decision. If capital is very scarce, you’re almost forced to start out using distribution partners. This isn’t all bad, in my opinion. Using partners initially when you are an international newbie is a much lower risk way to start, and allows you to learn this part of the business without “losing your shirt”. I’ve seen a number of control-oriented management teams invest large amounts of money by putting people on the ground in subsidiaries, only to waste it in spectacular failure. Often this failure is due to inexperience.

Product Price and Complexity

If you have a high priced, technically-complex product with a long sales cycle, you will tend to benefit more than others by having people on the ground in the foreign market. These are the types of products which are most often sold directly, even in home markets. In this scenario, even if capital is tight and you can’t afford to put down a fully-loaded subsidiary with a dedicated direct sales force in every foreign market, it still may make sense to put some folks on the ground. As an example, you might be able to afford a channel sales rep and a couple of field engineers to support a large network of sophisticated local country distributors and VARs, across an entire continent like Europe or Asia.

Management Skills

What is the skill set of your corporate management team? If no one on the team has any experience with indirect distribution, for example, it’s going to be pretty tough to successfully build a working distribution channel in FOREIGN MARKETS which are far from home, in more ways than one. In this case, the most cost effective thing to do is to add someone to the top management team with the requisite skills and experience, or at least retain a long term consultant. Going without this hire often seems the cheaper route initially, but in most cases this end up being “penny-wise but pound-foolish” in hindsight.

Local Market Cost Structure

Each foreign market should be evaluated individually before deciding an approach for that market. For example, in large emerging markets with low costs (such as China, India, Brazil for many verticals) it may make sense to put your own people on the ground, regardless of the distribution strategy. When costs are low and the market is strategically important in the long run, the relative benefits of having your own subsidiary are high. In a high cost market with lower sales potential (Switzerland and Norway may be good examples for some businesses,) relying exclusively on a dedicated local partner may be a better way to go.

Availability of Partners

In some cases what may be the best strategy for your company and market in theory is overridden by facts on the ground. Many vertical software and hardware markets have a well established set of distributors and resellers dedicated to their marketplace. In these cases it’s relatively easy to find an appropriate distribution partner. But what if you’re in a business in which this ISN’T the case, which is not all that unusual? Or maybe there is an established channel, but you’re late to the game and all the obvious “good” partners are tied up with your competitors. Sometimes you may choose to not enter that market immediately. But if the geographic market is considered strategic, then you will need to choose a course that looks sub-optimal in theory. That might mean biting the bullet and outlaying the investment to start your own subsidiary. Or, you might find a local entrepreneur with the skill set to set up a new distributorship. If it’s a geographic market that you just HAVE to participate in, then you will find a way!

There are obviously a wide range of combinations and intermediate options, but “partner or invest” represent the extreme ends of potential strategies. In many cases (particularly large, established markets) the optimal distribution strategy will be a combination of these two main approaches: pairing a wholly-owned subsidiary with local distribution partners. In smaller markets, partnering with an established distributor or strategic partner may be the only viable strategy. In other cases, the optimal strategy may be dependent on the specific factors of a particular marketplace (local costs, available partners, etc).

What’s most important is to closely analyze your specific company’s situation and vertical market, as well as the “facts on the ground” in each individual geographic market. Resist the temptation to simply copy your competitor’s strategy or fall back on approaches that you are comfortable with from other vertical and geographic markets. That is how you make mistakes.

What’s your approach to international expansion? Post a comment and share your own personal experience.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

No Comments by admin on March 13, 2011
filed in Business Development, Business Models, Corporate Strategy, Distribution Channels, VARs, enterprise software, hardware
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How Soon Should Your Software or Hardware Company Go International?

This is a question that frankly doesn’t come up often enough at early stage tech companies. There is usually an assumption that you first conquer your home market, and then sometime way down the road, when you are already flush and successful, it will be time to expand internationally. US-based tech companies are most guilty of this often questionable thinking.

What’s wrong with this approach, especially for US-based companies? After all, the US is the largest market in the world, and it’s far easier to sell to customers close by, then it is halfway around the world. With this the case, why should you use your scarce early-stage capital in a risky international expansion? This is how the thinking goes.

The problem is that you may be leaving significant low-hanging fruit on the table, at the very time that you need those customers the most. Let’s look at 4 important reasons to go international as soon as possible:

Reasons for Early International Business Development

Early adopters needed

As an early stage software or hardware company, you need to find early adopters of your product. These folks fit a certain psychographic profile, and they are rarer than the average customer. You sometimes need to cover the earth to find them. Limiting your geographic net unnecessarily only makes the job harder.

Distribution partnerships can provide tremendous leverage for a young company

This is one of the big reasons to go international that newbies don’t understand. They think that with all the money they are spending to penetrate the home market, selling internationally will be much more expensive yet. Not necessarily. In many markets, you can find distributors who will take on much or most of the marketing and sales load, reducing your investment tremendously and allowing you to leverage their existing relationships–rather than “starting from scratch”.

Many markets are less competitive than your home market, especially if it’s the US

Unless your home market is a tiny one, there are most likely many underserved markets available to you that have a lot of low hanging fruit. Why? Every startup software or tech company thinks the same and focuses initially on their home market. Since the bulk of the tech business is located in the US, it’s by far the most brutally competitive of all.

Beat your competition to the punch

Getting to a market early can often mean the difference between success and failure. If you’re the first one in a country or region, the early adopters and other low-hanging fruit are there for you alone. You will get your pick of the best distribution partners, and your product category will be “fresh” news for the media. Once established, it will be hard for later arriving competitors to push you down the market share ladder, even if they are larger than you overall.

So when should a company go International? The short answer is as soon as you can possibly do it. But what’s most important is to fully evaluate when “as soon as you can” actually is.

What to Evaluate Prior to Deciding to Go International

Your product must be stable

This should go without saying, but the only thing that causes a greater catastrophe than an unstable product is an unstable product distributed worldwide! Don’t do this–make sure things are solid before venturing away from where it’s easiest to “babysit” early problems.

Your product must be “market-tested” in your home market

While I’m a proponent of aggressive international business development at an early stage, there is such a thing as “too early”. Make sure that you know your product has a market before going far away from home. It’s a pointless exercise to be recruiting distributors and customers in foreign markets with a product that doesn’t really hit the mark, and one which doesn’t even had a reference customer list. If you can’t gain 10 or 20 or 30 customers close to home, heading far away likely won’t help.

Inventory or License only

Businesses that involve large amounts of inventory are one of my exceptions to aggressive early international development. That means hardware companies generally need to be more careful that software companies. Companies that distribute through retail channels involve more inventory than those who sell via VARs or direct, so they also need to be more cautious. The issues that come with inventory such as repairs and returns are exacerbated by borders and distance. So if you’re inventory intensive, maybe start with one smaller market rather than a large regional rollout, to test that everything goes smoothly before placing a big bet.

Direct or Channel distribution

If you have to establish your own local foreign operation, hire a bunch of people, rent office space, etc–you generally need to wait. Most startups can’t afford this type of risk and investment. However, although some feel this route is their preference due to control, it’s generally not mine. It’s quite risky and slows your international progress rate down significantly. Most companies can start out by using partners, and usually this is a good long run strategy as well. If you’re wildly successful and really feel the need for total control, you can always buy out distributors later on.

English or Local Language

English is the universal language of technology. In some vertical markets (such as IT software) English language-only products are fine. These are markets where you can make the fastest penetration after proving your product in your home market. If you do need local translations, they really aren’t that expensive in most cases and can be done quickly, and distribution partners can often help. But make sure that you don’t skimp on a good translation; nothing will hurt your local credibility more than language that isn’t proper, or at worst, makes no sense.

Safety, Legal or Electrical Specifications

This is also an area that can slow down the potential for fast international market development. Many countries or regions have safety or electrical standards that will require product modification or testing (and thereby investment). There are also legal aspects that need to be considered (European privacy laws when selling security or marketing software, as an example.) Don’t let these stop you from doing an evaluation of your international prospects, but these factors can change the calculus of your decision making.

SaaS

If you’re a software company using the SaaS model there may be very little downside to early international business development. If latency isn’t an issue for your product, you may need no international investment at all. Or maybe you need your servers hosted in other parts of the world to reduce latency issues, but this shouldn’t be a huge investment. You still need marketing in the local markets, either by your own direct (albeit remote) methods or through partners. But given the potential rewards, these investments should be a small price to pay.

Process or Cultural Differences

When you first go into a foreign market, it’s important to understand that you can’t fully comprehend the local culture, as well as how commerce functions. Listen more than you talk at first. Hire a consultant if you can afford to. Partners can also help greatly here. But if you are a savvy international business person it certainly raises your odds when attacking foreign markets early on.

Existing Demand

Are there customers “chomping at the bit” for the benefits your product offers? Or will there be a bit of an education process and a long sales cycle? Obvious existing demand is a key indicator for aggressive international business development.

The bottom line is that going international quickly can be a big boost to early growth for a tech company. Be careful, but not overly cautious. Evaluate your specific situation, and take the plunge if the odds are with you. What’s your take on the proper pace for international business development? Post a comment or send us your story.

Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

No Comments by admin on October 12, 2010
filed in Business Development, Corporate Strategy, Distribution Channels, Retail, SaaS, Startup/Early Stage, VARs, hardware, sales
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Is HP acquiring Palm a good idea?

To answer the question posed in the title, it definitely is if you’re Palm!

A long time player and sometime innovator in the mobile device marketplace, Palm was rapidly losing steam, market share and relevancy in the hyper-competitive Smartphone market. The company had staked its future on its new WebOS software platform and the recently release Pre SmartPhone.

 After a long period of decline due to an aging product line built on an obsolete software platform, the Palm Pre and its WebOS software was introduced to critical acclaim by industry reviewers and pundits. Had these introductions come a few years ago, they might have indeed turned around Palm’s fortunes.

 But competition in the SmartPhone marketplace has heated up to a white-hot level. After a promising early start, sales momentum of the new Pre products stalled, and this “last-stand” product introduction proved to be too little, too late. At nearly the first sign of Pre sales weakness top Palm executives began bailing out, while Telco partners quit promoting the product heavily, and it was also being dropped from the assortment of major retailers such as Radio Shack. The end was clearing in sight for this handheld industry pioneer.

In swoops HP to save what little shareholder equity was left. HP is on a roll, and in conjunction with their upward momentum they seem to be intent on acquiring everything available for sale, as well as competing in nearly every category of the technology business. This particular acquisition appears to me to be particularly high risk/high reward. It raises several key questions:

 Did HP pay too much?

Probably. The price HP is paying for Palm is about $1.2M, while most knowledgeable industry observers had placed the value below $500M. This is hard to understand for the casual observer, but you must remember that a company is worth what the highest bidder is willing to pay. Except for those on the inside of the deal-making, no one knows what the sizes of the competitive bids were. So it’s a bit pointless to speculate whether they paid more than they needed to. The better question is what is the intrinsic VALUE of Palm to a company like HP?

 A case can be made in this situation for bidding at a price that will prevent the transaction from dragging out. Software loses value quickly–especially in a fast-moving market like SmartPhones, and this is largely a software acquisition. Another big key to the valuation question is whether or not HP is able to hold together and retain the Palm team, especially the key developers. In most cases, buying a software business (which is the key asset of Palm) without the team is nearly worthless.

 Can HP compete in the SmartPhone business, and should they?

This is a huge question in my mind. Hewlett Packard is definitely becoming the 10,000 lb gorilla in the tech business. But even the biggest giants reach a limitation on resources, most importantly senior management bandwidth and market segment knowledge. IBM at one time looked much like HP today, competing actively in nearly every important technology market. Eventually IBM lost traction and did a painful restructuring focusing on services. Microsoft is huge and still dominant in software, but they’ve been far from successful everywhere they’ve invested. There are many examples in the tech business of competing in too many competitive markets at once. The often-used analogy (which still rings true) is to Hitler opening up a two front war by invading Russia. The old joke goes that had he been more focused, we might all be speaking German today. I am very skeptical of Hewlett Packard being able to win in all of the major markets they appear to be serious about at the moment.

 Can putting two losers together ever create a winner?

Not usually. I can’t think of a single high profile successful instance of this, although I’m sure it’s happened before. It usually doesn’t work in such a highly competitive market as SmartPhones, however. Palm was around 5% market share and fading fast.  HP is very successful overall, but its iPaq SmartPhone has less than .1% market share–I’ll bet most of you are shocked to hear that HP was even in the SmartPhone market prior to this deal! When there is a reason that both companies are unsuccessful, it’s very difficult to change the equation simply by combining. Mergers often create more problems then they solve, regardless of how good they look on paper.

 Having said all this, there is some synergy here. There is a belief is that one reason the Pre wasn’t gaining much traction was Palm’s precarious financial position. No one wants to carry around a phone that could soon become an orphan. The HP acquisition should help immensely on that front. Hewlett Packard certainly has the financial might, industry muscle and influence to improve the position of a well regarded platform like the Palm Pre and WebOS platform.

 Will HP be patient and persistent enough to win in SmartPhones?

To me this is the biggest question. If you asked me 10 years ago I would have said no. As a former HP employee, at one time this wouldn’t have been the type of market that I would expect Hewlett Packard to have success. But since them I’ve seen the company persevere for decades as an also ran in the low margin, down and dirty PC business, and finally push Dell out of the top spot. There was a time when Dell (and a few others) used to laugh at HP in the PC market–but that ended a while ago.

 I’m convinced that this ever more powerful version of HP can succeed in SmartPhones if they so choose. But as discussed above, even in a giant company like this, can they win so many tough fights across so many difficult market segments? That is a different question entirely–and something may have to give. They might not be able to win on all fronts.

 Bottom line

The bottom line for me is that HP can probably muscle their way into the SmartPhone market if they want to bad enough. But can they do it while they also compete with Cisco in networking, IBM in services, and Dell in PCs–just to name a few? Even for a successful industry giant like Hewlett Packard is today, I believe in the concept of “biting off more than you can chew”. That is the real risk. One thing I think for sure is that this won’t play out quickly. Only time will tell whether HP ultimately has the market knowledge, patience, tenacity and will to win in this hit-driven and brutally competitive market. What’s your take on this high profile acquisition? Post a comment to rev up a discussion.

 Follow Phil Morettini and Morettini on Management via Twitter, Facebook, LinkedIn, RSS, or the PJM Consulting Quarterly Newsletter. Contact Phil directly at info@pjmconsult.com

3 Comments by admin on May 14, 2010
filed in Business Models, Corporate Strategy, Mergers & Acquisitions, Retail, hardware
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Google Chrome–a Strategic Platform or just another Browser?

Google’s new Chrome Browser came out a few weeks ago to quite a bit of attention. It’s big news 1) because it’s from Google and 2) it brings back memories of the “browser wars”, and seems like it could potentially signal the next big battleground in the intense rivalry between Google and Microsoft.

I’ve downloaded Chrome and played with it a bit, but this isn’t intended to be a technical review of Chrome’s merits. It seems reasonably snappy, and has Google’s typical minimalist design philosophy, including a single box for multiple functions (search, address bar, etc.). Your personal preferences will decide whether you like that or not. It has some nice features such as tabbed browsing, which theoretically should prevent one bad browser window from crashing all open browser windows–much like when Windows became multi-threaded. Nice stuff, but doesn’t really fundamentally change the browser game. But technically it’s still a beta anyway (of course just about everything is with Google), and it will evolve over time–so it’s not really time to judge it from a technical perspective anyway.

What I want to do is to examine Chrome as a strategic move by Google with respect to the software and online worlds–what does it really mean, where will it take the market, and what are its chances for success?

Let’s take a look at some of the potential ways that Chrome could affect the marketplace:

A Better Browser
Of course, PR propaganda always will say that this is the “real” reason for bringing out a new product such as this. When I was at HP we used to call this “making a contribution to the market”. Google in particular often gets sanctimonious about this type of thing, with all their “do no evil” and saving the world stuff. Does the world really need another, better browser? Not sure. Firefox and Safari, to name two, are already probably technically superior to IE, and while they’ve made some inroads in the marketplace, they still trail Microsoft by a wide margin. But history tells us that competition is a good thing, and a step forward on major platform like a browser can certainly be thought of as a gateway to allow software innovation to develop faster. Having a company like Google enter the fray should increase rate of innovation that’s possible in the online market.

An Application Development Platform
This is the position that many pundits suspect may be the major impact of Google’s move. In their introduction, Google talked quite a bit about “remaking” the browser for Web 3.0, if you will. And a fresh approach does make sense, given that Internet Explorer was conceived long before serious online applications were envisioned for the Web. With SaaS and Web 2-3-4.0 currently all the rage, having a browser platform designed from the bottom up to accommodate online software applications should be a good thing. If it’s all it’s cracked up to be, this could conceivably be a game-changer and a real threat to Microsoft. The key here is how much of the talk about re-architecting the Browser is real, and how much is hype. This will become more apparent over time as Chrome is further developed, and application developers take a look to see if there truly are features they can take advantage of to build better online apps for users.

An Additional Way To Track User Behavior
This is one of the more cynical viewpoints as to the major motivation behind Google’s introduction of Chrome. The thinking is that this is one more insidious move by Google to “big brother” your online activity. It’s no secret that Google uses web activity data they collect by various means (such as Google Analytics) to fine-tune their advertising business. Certainly owning browser could be seen as the “holy grail” towards creating a complete characterization of online activity. What else might they use this data for, in addition to fine tuning their advertising platform? That’s the question and concern.

A Way To Drive More Search Traffic And Adwords Revenue
Along the same lines as the bullet point directly above, owning the browser could be seen as the ultimate in terms of driving web traffic toward Google’s Adwords online advertising. The first thing you see upon downloading Chrome is the opportunity to switch to Google as your default search engine. How much will they do in this regard, either subtly or in a straightforward manner? As stated above, at a minimum, it gives them the opportunity to make Google the default search engine, which is critical to their base business. Only time will tell how much of a factor this is in Google’s Chrome strategy.

A “Real” Competitor Aimed At Microsoft IE To Make Them Defend Their Turf
Of all the bullet points I’m raising, this is the one I’m most sure of. Google and Microsoft are locked in one of those classic death matches for online software supremacy, and don’t miss an opportunity to tweak their arch-rival and make them sweat a bit. Going back to the application development argument above, there is a feeling that Chrome could serve as the basis for a suite of online Google apps to threaten obsolescence for Microsoft’s desktop software business. I don’t doubt that Google may try to do this. But even if from a technical and marketing perspective Chrome is only a modest success, it almost certainly will get Microsoft’s attention and cause them to expend resources and management attention on browser technology, to an extent they may not have preferred.

SUMMARY
Chrome is intriguing, but it’s too early to tell for sure what the major reason is for this Google initiative. They may not even know for sure themselves at this point. But the product, and more importantly the move itself, will likely make Microsoft react. The ensuing competition should be all good for the user and developer communities, as long as it doesn’t take us toward another tiresome and market-paralyzing “platform API” war. I’ll be following the future development of Chrome closely to see where it takes us–how about you?

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

No Comments by admin on October 9, 2008
filed in Corporate Strategy, Product Marketing/Management, SaaS, Software/Product Development
tagged , , , , , , , , , , , , , , ,

Strategies for a Technology Market Slowdown

Is the world economy slowing down? What are the implications for technology companies?

Recently, technology stocks (along with the stock market in general) have tanked. There is a credit crunch that shows no signs of abating, and inflation is rearing its ugly head in some markets, and political gridlock seems to be the order of the day.  Is the economy headed for a “double dip” recession–taking technology businesses down the drain with it?

I don’t think so, but I’m not in the business of forecasting such things. Tech stocks are often affected more severely than average in an economic downturn, which affects technology industry investment and ultimately tech growth rates.

So what should you do if you’re the CEO of a software or hardware tech business?

Be Prudent, But Don’t Panic
Now’s certainly not the time to stick you head in the sand, and hope the economy doesn’t get any worse. It almost certainly will; but more importantly, how will it affect your company? That’s what you need to ponder. Is your product a “must have” or a “very nice to have”? Obviously the “nice-to-haves” will have a tougher time in a declining economy, and should plan accordingly. So take the time to analyze you situation, and make a forecast for your own business, based up the unique circumstances of your market and company. Remember, hope is not a strategy.

Look For Opportunities to Outflank Weaker Competitors
For strong players, declining economies can be a great time to pick up market share from weaker competitors. If you have the resources and can do it safely, now might be the time to run a promotion, or selectively increase your marketing. It’s counter-intuitive to most managers’ instincts. But weakening the competition during a downturn can lead to stronger growth when things turn back upward.

Slow Near-Term Expense Growth, But Don’t Compromise Long-Term Initiatives
In most cases, companies will want to carefully monitor, and possibly cut back on their spending. You want to make sure that you don’t put your company in jeopardy, by have expenses out of sync with flat or declining revenues. But try your best to keep intact the initiatives that are critical to long-term growth. You must continue to think long-term as well as short term, assuming you don’t get in a situation where your survival is at stake. Cut back on advertising and office space if you’re seeing a slowdown–but make sure you don’t cut the product development project which will lead to growth 18 months hence. These can be tough decisions, but they really separate the long-term successful CEOs from the flash-in-the-pans. Almost anyone can manage when times are good.

Limit The Growth Of Your Staff
While prudent spending can be wise during a downturn, aggressively increasing the size of you staff usually isn’t. There are always exceptions, of course, but adding too much staff can really bloat your fixed cost structure, in a manner that limits your management flexibility. Unfortunately, many companies are often most aggressively adding staff at the end of a growth cycle–just in time for the downturn. If this leads to layoffs, it can have a devastating effect on your company’s morale.

Although layoffs are sometimes necessary, they are always painful and hurtful to the company culture–unless the company culture is already of the “Attila the Hun”, cutthroat variety. The founders of one of my former employers, Bill Hewlett and David Packard, ran HP for many years with a rule of thumb that limited staff increases to 25% of revenue growth. This helped them avoid the natural inclination to hire someone new every time a new task was identified. I believe was an important factor in many years of smooth growth–without layoffs. This particular metric might not be right for your company, but something similar could prove to be a useful damper on excessive hiring.

Make Sure That You Have Money For A Rainy Day
While it’s no time to panic, it IS time to make sure that you have the financial resources necessary to comfortably cruise through a downturn.  Availability of funds and terms will only get worse if the  stock market heads down further and the credit crunch continues. Also, make sure that you have available the largest line of credit possible with your bank. It may cost you an extra few thousand dollars a year, but its excellent insurance, if you are surprised on the downside. If you’re in startup mode and financing yourself on credit cards and home equity lines–maximize your future access to these as well! Whatever your sources of funds, make sure now that you’re financially well prepared for whatever the future holds.

Be Poised For The Next Upturn, Whenever It Happens
I mentioned earlier that you should try your best to keep long-term initiatives alive. In that same vein, your thought processes should CONSTANTLY be focused on the next upturn, in all of your decision-making. Again, this assumes that your survival isn’t in question. For example, while massive hiring isn’t usually wise during a downturn, you want to always be open to unique opportunities that may not come along often. Say there is a talented executive available, only because of the downturn. If you can safely afford him or her, snap them up now, before a competitor grabs them. Or retain a talented consultant to position yourself with a new technology direction or market segment when growth inevitably climbs. Downturns often present opportunities to improve your business when the next growth cycle occurs. But you need to be “looking ahead” and making good decisions now, to take full advantage of the upturn when it finally does.

Summary
Once again, now is not the time to panic. But it is an important time to plan. Anyone that can predict what will happen with an economy should go to the nearest casino–no need to waste your time with a software or technology company! So I suggest that it might be wise to do a “best-most likely–worst” 2 year forecast now, and try to plan as best you can for the two extreme cases. Post a comment and let me know your thoughts on how the economy and the tech industry will fare in the coming months.

Phil Morettini
PJM Consulting
www.pjmconsult.com

1 Comment by admin on January 14, 2008
filed in Business Development, Corporate Strategy, Financing, General Management, Mergers & Acquisitions, Software/Product Development, Startup/Early Stage
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