Business and Marketing

When you decided to start your business, was your first priority concerned with setting up your filing system for recording your expenses? I seriously doubt it. This simple task (yes it is simple) is usually the item that is the last thing on the new business owner’s mind. The more “important” issues of what product to sell, how am I going to advertise, how much money is it going to cost me, and how much money can I make are the first questions we consider when going into business.

The task of recordkeeping is usually procrastinated until the very last minute, when it is required. It is time to file your tax return, or time to go to the bank to get a loan for the business and the banker wants to see some financial records for the business. This can be a very daunting and cumbersome task if you have to dig through receipts and expenses for the whole year! No wonder we hate keeping records. That’s no fun!

Well, guess what? If you aren’t keeping good, timely, and up-to-date records monthly, you don’t need to be in business. That’s right. I said it. Here are the top five reasons why I truly believe this statement.

1. Lost tax deductions = Lost Money If you are throwing your receipts in a shoebox each month and not keeping an organized record of your income and expenses, I can bet you money that you are losing out on some major tax deductions. A smart businessperson keeps track of her income (cash in) and expenses (cash out) monthly, sometimes even weekly. You do not need a fancy accounting software package to do this. You don’t even need a computer! Simply keep a journal monthly and log in all of your receipts and invoices, and there you have it.

2. High CPA/Tax Preparer Fees = Lost Money I can speak from personal experience, that if you bring in that shoebox of receipts for the year and expect your tax preparer to record and properly deduct your business expenses on your tax return, you are sadly mistaken. Tax season is the busiest time of year for these professionals. If you expect them to do your bookkeeping and recordkeeping as well, expect to pay for it. They don’t have the time, or the desire to make sure that every receipt is accounted for. As a businessperson, it is your responsibility to make sure they are given the right totals and you can trace it right back to your tax return.

3. Too much time spent looking for receipts The time you spend looking for a past receipt for a particular purchase for whatever reason, you can be utilizing this time in advertising your business or producing your product. These are important money generating activities that you are sacrificing due to your lack of recordkeeping.

4. No financial statements Every business owner should review at least the profit and loss statement (income statement) for their business MONTHLY. This important piece of paper tells you if you are making money or losing money. How can you possibly run your business and make a profit if you are not analyzing your sales and expenses continuously? A good recordkeeping system will allow you to have this information at your fingertips.

5. No need for expensive accounting software If you are just starting your business, or are a small business owner, you more than likely do not need software to prepare your books. A simple journal that is kept monthly of your income and expenses is all you need. At a glance, you will know how your business performed for that particular month.

As a business owner, you need to realize the importance of a good recordkeeping system. This should also be a task that the business owner performs for at least three to six months before delegating the job to someone else. You will be able to run your business more effectively, determine possible cycles in the business year, and know where your money is going. Your business will be much more successful if you keep a simple recordkeeping system.

Strategic relationships helped establish Genentech as a leader in the biotechnology industry. Genentech had a fair amount of credibility from its very beginning because its funding came from one of the most respected venture-capital firms, Kleiner Perkins Caufield & Byers. Using that initial credibility, Genentech was able to attract the interest of Eli Lilly, the pharmaceutical giant. The two companies signed a deal under which Genentech would develop human insulin using recombinant DNA technology and Lilly would produce and market the product. This deal gave Genentech production and marketing capabilities it never could have financed on its own. Equally important, the association with Lilly gave the startup an aura of credibility and established it as the technology leader in the infant industry.

While strategic relationships seem increasingly attractive, there are problems. Nothing is an automatic success. There are many factors working against the formation of strong bonds between companies. Perhaps the biggest source of problems between partners is poor communication. Oftentimes things do not get done because each partner believes the other is responsible. When entering into a new relationship, all companies involved need to be explicit about their objectives and expectations. The companies must agree on all details: What is to be done, by whom, and when.

Management responsibilities and financial policies should be clearly stated. In some cases, companies define their markets and goals so differently they always will be in conflict. These types of philosophical differences should be aired and resolved before any agreement is reached.

Antitrust also can be a problem. In light of the economic challenge from Japan and other international competitors, the U.S. government is allowing companies a greater degree of flexibility in structuring alliances. The government has raised no objection to the Microelectronics and Computer Technology Corporation, an alliance of a dozen computer and electronics companies that was formed to share research costs. But other relationships are sure to raise objections. The intent of the partners is the critical factor. Relationships structured to restrict competition are, and should be, unacceptable.

Another problem is that small companies can become overly dependent upon their larger partners. This is similar to the problem faced by military contractors, many of which survive at the whims of the Pentagon. Companies that depend on a single relationship as a primary source of business can end up in big trouble.

MiniScribe, a tiny Colorado company that supplies disk drives to IBM, saw its stock plummet by more than one-third when IBM changed its buying patterns. The situation can be even worse when a large company decides to vertically integrate, developing its own production capabilities for parts that it once bought from outside partners. Small companies must remain aware of where they stand in their partner’s plans, and should never get in a position where their very survival depends on the continuation of the relationship.

AT&T provides equity, access to operating systems technology, low cost manufacturing capabilities, and credibility. Kyocera, a Japanese manufacturer of ceramic packaging for the semiconductor industry and other high technology products, also provides equity as well as access to the Asian market, sophisticated packaging technology and manufacturing capability. And British & Commonwealth, a London-based shipping conglomerate, provides equity and access to the European markets. The chairman of Kyocera and the president of AT&T Information Systems are active participants on Counterpoint’s board of directors. According to Pauline, “These relationships are just the beginning.”

Of course, simply establishing the new relationships is not enough. Companies also must know how to capitalize on the links after they are formed. ZyMos is one company that has failed to do that. As a small company manufacturing custommade semiconductor chips, ZyMos needs to convince customers of its reliability. The marketplace is fearful of a small company in today’s environment. All companies are growing so quickly that they need a reliable supplier.

They can’t afford to have their lines shut down.

Strategic relationships are an ideal way to ease these customer fears, and ZyMos has an impressive list of partners. It has technological agreements with many top-notch companies, including Intel and Apple. But ZyMos is still going out and presenting its product on the basis of technical data. ZyMos’s managers came to us and talked for an hour about line widths. That makes no sense. Pitching technology doesn’t work in this environment. ZyMos should be stressing its relationships with Intel and Apple. They have the right relationships, but they’re not using them.

The idea of strategic relationships is not limited to the electronics and computer businesses. It applies to all fast-changing industries. Strategic alliances can be critical in the biotechnology industry. As in the electronics industry, most of the innovation in the biotechnology industry comes from small firms. But bringing products to market is particularly difficult for small companies in biotechnology. Many biotechnology products must gain government regulatory approval. That is a long and expensive process. Few small companies have the resources to wait out the entire process. Teaming up with large companies solves this problem, while also giving the startups much-needed marketing muscle and credibility.

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* See the first posting about this at:
The important of Strategic Relationships

First and second article in:
Forming Strategic Relationships -1
Forming Strategic Relationships -2

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Indeed, acquisition strategies in technology-based industries have a pretty dismal record. Schlumberger, for example, tried to acquire its way into high technology. The company, a leader in the oil-services business, wanted to gain a foothold in new technologies, so it acquired Fairchild Semiconductor, the pioneer of Silicon Valley’s semiconductor industry. But the strategy backfired. Key employees left the company and Schlumberger’s corporate culture did not translate well to Silicon Valley. Schlumberger’s desired foothold has turned into nothing more than a toehold, if that.

Exxon Corporation’s effort to enter the office-automation market through acquisition of small high-technology companies turned into a disaster.

Western Electric acquired robot maker Unimation in 1982, then saw Unimation’s sales drop sharply. And AM International’s high-technology acquisitions drove it into bankruptcy in 1982.

Clearly, acquisitions are filled with pitfalls. In many cases, large companies would be wiser to buy minority interests in small companies, or sign development contracts with them. These approaches allow the small companies to maintain their culture and entrepreneurial zeal. To better understand the growing need for strategic relationships, it is important to understand the product-development cycle in technology-based businesses. There are many steps between the scientist’s workbench and the assembly line, and no company can handle all steps.

Strategic relationships are needed to bridge the gaps.

*the end.

See previous article in: Forming Strategic Relationships -1

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Many strategic relationships link a small company with a large company. These relationships are not a zero-sum game: Both companies can benefit. Small, growing companies acquire an important aura of credibility by linking up with large, respected companies. The large company acts as a credible reference that tells the market the small company is a winner. Customers are more willing to take a chance with a small company if the small company has IBM or Digital Equipment standing behind it.

At the same time, large companies can gain a window on new technology. Typically, small companies develop new technologies faster than large bureaucratic companies. So by forming links with small companies, large companies can bring more innovative products to the market, and get them there

quicker.
A good example of this type of strategic relationship is the alliance between IBM and Microsoft. IBM agreed to use Microsoft’s MS-DOS software as the primary operating system on its personal computer. The operating system, essentially the traffic cop controlling activity inside the computer, is a critical element in a computer system. Designers of the operating system and the computer itself must work closely together. For that reason, IBM had always
developed its own operating systems for its computers. But the deal with Microsoft made sense for both companies.

For Microsoft, the IBM deal meant instant credibility. Microsoft was an obscure company in Washington state, run by a kid in his 20s. Suddenly, Microsoft was seen as a significant company in the personal computer industry. Its revenues have soared ever since. For IBM, the Microsoft deal meant the giant company could get its personal computer to the marketplace much faster than it could have otherwise. IBM was already somewhat late getting to the market. If it had to develop its own operating system, it might have arrived too late to become a leader.

IBM has forged other alliances as well. To help in the development of floppy disk drives, it struck a deal with Tandon. In microprocessors, it decided to standardize on Intel’s family of 16-bit processors. It also invested in Intel, buying 12 percent of Intel’s stock, and later increasing its stake to 20 percent. In each case, IBM gained quick access to new technology, while its smaller partner gained an important shot of capital and credibility. IBM’s stamp of approval delivered a clear message: This company is a winner.

These strategic relationships allow each company to maintain its independence and unique corporate character. These alliances should not be confused with traditional acquisition and diversification moves. Acquisition strategies often suppress innovation rather than foster it. The larger company often forces the acquired company into its corporate mold, thereby killing the innovative character of the small company that made it attractive in the first place.

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To be continue at:
Forming Strategic Relationships -3

Companies in fast-changing industries need to form all types of relationships. As I have already discussed, they need relationships with venture capitalists, with dealers, with industry luminaries. But just as important, if not more so, are relationships with other companies in the same industry.

In fast-changing industries, these relationships are becoming more important than ever before. As technologies advance and become intertwined with one another, no single company has the full range of skills and expertise needed to bring products to market in a timely and cost-effective way. To produce a personal computer, for instance, a company needs expertise in semiconductor technology, display technology, disk-drive technology, networking technology, keyboard technology, and several others. No company can keep pace in all of these areas by itself.

As a result, collaborative efforts are proliferating. Fast-growing companies, once fiercely independent, are now forming all sorts of alliances, even with former competitors. Every small company, it seems, is looking for “sponsors,” while large companies are trying to link up with as many innovative startups as they can. As Business Week magazine wrote in a 1984 special report on the computer industry: “For companies large and small, collaboration is the key to survival.” These collaborations can take many forms: joint ventures, technology exchanges, manufacturing agreements, and equity positions, among others. Although some of the agreements seem aimed at R & D or fi¬nance, these relationships can play a critical role in a company’s marketing strategy.

Companies in fast-changing industries need to form strategic relationships for a variety of reasons:
-    To compete in today’s markets, companies need a diverse set of technologies. Fields like computers and communications are merging, and customers want complete solutions. No company can develop all of the necessary technologies by itself.
-   The costs of developing new technologies are rising rapidly. Companies must share the costs if they are to survive.
-    U.S. companies are facing increasing competition from Japan. The Japanese government has led and helped finance cooperative development efforts in fields such as integrated circuits and robotics. U.S. companies must team up to keep pace.
-    Technologies are changing more quickly than ever before. At one time, a company could stay at the forefront of many different technologies. Now it is much more difficult.
-    Small companies need to gain management expertise, distribution muscle, and capital in order to compete. Strategic relationships can provide these.
-    Less tangible, but just as important, strategic relationships can bring added credibility to the companies involved. By choosing the right strategic partner, a company can gain credibility by association.

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Next posting for Forming Strategic Relationships in:
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The use of small wins and breakthrough projects is especially important when organizations are going through difficult times and teams feel overwhelmed by the changes. Through this tactic teams learn to redirect their energy toward factors that are directly within their scope of control and are better able to buffer themselves against stress.

When selecting a small-scale improvement project for your team, begin by identifying one major performance area that, if improved, would contribute substantially to your organization’s success and at the same time make your group feel like a winning team. To ensure success, select a goal that:
1. Is urgent and compelling-a real attention-getter.
2. Is a first-step goal achievable in a short period of time-in weeks rather than months.
3. Is a bottom-line result, discrete and measurable.
4. Is one the responsible participants feel ready, willing, and able to accomplish.
5. Can be achieved with available resources and authority.

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Celebrate each success. It’s important to provide ample opportunities to celebrate team successes. Teams suffering from a deficit of positive feedback can quickly become demoralized. Take, for example, the manager of an international sales force whose team was responsible for selling sophisticated computer networks in the European and Middle East markets. Often the proposal development and review time for these projects stretched out over eighteen months or more. In consulting with the team on steps they could take to improve their performance, I discovered that over time members had been putting less energy into their proposals.

According to members, one problem they faced was their manager’s insistence that proposal milestone were not causes for celebration. Whenever a milestone was successfully crossed, the manager would quickly remind his team, “This doesn’t mean anything until we’ve won the proposal. It’s still early in the bidding process. A lot can happen.” What an inspiring speech! It’s sort of like standing at the twelve-mile marker of a marathon race and telling a runner, “Don’t start feeling optimistic yet. You’re only halfway there. You have more than twelve grueling miles to run under the hot sun.” Many marathon runners would soon drop out after such a pep talk.

Strategy Management: Overcome Inertia
Create a sense of urgency. The first tactic for helping your team overcome inertia is to convince members that their survival and success depend on their ability to act now to make dramatic improvements in their performance. The importance of creating a sense of urgency can’t be overestimated. It’s a key tactic applied by some of the world’s best organizational change strategists.

The difficult question is how to generate a sense of urgency within a team that has become complacent. I don’t think that this can be done by passing along the latest executive memo on the state of the organization or by the use of thinly veiled threats and intimidation. Threats and grandiose statements about the need for greater productivity are not effective motivators. Instead, try the following tactics:

• Give team members the opportunity to discover for themselves how important it is to meet the organization’s rapidly changing perfor¬mance expectations.
• Make use of the close-call phenomenon. Perhaps you know of another group or division that has already experienced considerable difficulties (staff or budget reductions, loss of management positions) as the result of performance problems like those just beginning to plague your team. If so, put your team in touch with these groups to discuss their lessons learned. Afterward, pull your team together and discuss how to avoid these problems.