Sagacious Think

The CEO of a company mentioned that she was frustrated with the work product she received from her contractors.  In her case, she required a “package solution” and what she received was an idea for packaging.  I asked her if it was a contractual issue and if she could go back to the company as the product was not to the standards spelled out in the contract.  She shared with me that she did not provide much detail in the scope as she did not want to be perceived as difficult to work with.  Nothing could be further from the truth; having a detailed and complete scope of work makes life easier for both sides in this contract relationship.  Besides there are so many other places in the contract to show your true character.  Especially when both parties do not have a relationship of working together establishing the initial trust through a well executed and fair document is crucial.

I will not say that a scope of work (SOW) is the easiest thing to write, its as much art as science as you want to define what the product or service is, but not to dictate how the work will be performed, and for some people this can be a fine line.  My career started in the construction industry and I learned early on that how a scope was written had an immediate and powerful impact into the quote I got from my contractors.  Given that I also had contract signing authority, as many of you starting your own company, it also made me keenly aware of the consequences of a contract gone bad, and believe me after some experience those bad contracts are easier to recognize.

Reasons for a Detailed SOW

• You are better able to compare the bids you receive, and I suspect the prices you get might be closer in range.
• You get the product you want.
• You help the other guy give you what you want.  You’re not being difficult, you’re actually helping him out by letting him know what you need.  Most companies do not exist to take your money and run.  They would much prefer to have you as a repeat client and so you’re helping him achieve his goal.
• You avoid having either an unnecessary change order or worse, having to rebid and pay twice for the work because you cannot prove based on the description in the contract that you did not get what you asked for.
• The vagueness of the language might drive up the price, as the bidder might be adding in contingency costs, in anticipation of some rework.
• A poorly written scope is one of the fastest ways to get scope creep.

It is important to remember:

In the SOW – Do Not Dictate How to Perform the Work:

If for any reason the contractor cannot perform the work as you detailed in the scope of work, you are opening yourself up for a change request.  I came from a construction background, so an example for me would be, I mandate that a conduit placed down a city block, and I want  the conduit trenched in this section of the network I am building.  After the contracts are signed and the contractor is prepared to proceed, the city dictates that all conduit must be bored in at a cost of twice the amount as trenching.  I have no doubt I would see a change order hit my desk.  A better approach might be to state in the SOW that “the conduit must be buried to a depth of 3′ and the method is up to the contractor pending approval of the city.”

You selected the contractors you have to bid on your work because of their expertise, right?  If you dictate how the work shall be performed, they will not be able to demonstrate that expertise.  They may even have a solution that would cost you less money and result in a superior product, but you just denied them the opportunity to show you what those alternatives are.

Once you have a good scope of work the rest of the contract should fall easily (or easier) into place.  If you are just starting out and your company does not have some boiler plate language, nolo.com might be a good place to start.  I’d also advise consulting your attorney.

Other Resources:

• While focused on the construction industry, this eHow article has some good tips.
• Here’s a post from Microsoft Office on Writing a Scope Statement.

Here’s some articles that I wanted to pass along:

From McKinsey:

Employees need to know that their bosses have their backs.  Good read, and speaking from experience so true.  An employee cannot grow unless she knows she has support.

Why good bosses tune in to their people

Looking to expand into the Asian Markets?  Have you considered Vietnam?  If not the article has some good reasons to do so.

Growing up fast: Vietnam discovers the consumer society

Well managed companies recognize that a solid pricing plan is critical.

Building a better pricing structure

Love this one, on the importance of Frugal Engineering via strategy + business.  Frugal engineering is a process that addresses new goods and services to “bottom of the pyramid” customers such as those in developing coutries. They may not have a lot of money to spend but they are still demanding quality.

I wrote this article on risk for Anthill Magazine, an Australian business journal:

Risk is For Wimps

Tim Berry just did a spot on post regarding best practices, and how they should be approached with caution, and I agree wholeheartedly.  The post reminded me of a phrase I heard constantly when I was consulting with the government, “situational awareness“, and I think it is very apropos here.  Situational awareness, as the name implies, is awareness of your surroundings, having a 360° view of what was going on, and being prepared to make instantaneous changes based upon the information you receive.

Many times I’ve seen “best practices” implemented by new managers, or managers with workplace issues looking for a quick solution to their problem.  It worked for IBM, so it should work for me.

I’m not saying its bad to adopt “best practices” but realistic expectations should exist.  Each company is unique, from industry, to people, to culture, to the issues that are faced.  So what one company achieved by implementing this practice may not be a realistic outcome for the next.

Keep In Mind

• The “best practice” may have developed to address a specific situation, which may not be the one you are facing
• Your organization is unique, know that some customization is required to implement these ideas (situational awareness)
• Don’t limit yourself to the perceived outcomes from the best practice, consider it a starting point, and develop a custom solution from there

When I first started my career, I managed large scale fiber optic network construction.  Our company was a spin off of a major construction company.  We made use of their “best practices” because they had worked for that organization, specifically in this instance as it pertained to contracting.  The problem was that construction on a fiber optic project is a significantly smaller scale in terms of cost, liability, manpower than construction of a dam in the Amazon jungle.

Contract clauses around insurance, bonds, etc.  that were deemed essential by the home office limited the contractors I could have bid on my work.  It took some negotiating and demonstrating of what were industry standards to get those changes implemented.  The resulting contract changes lowered the cost of my contracts, as the insurance requirements were not nearly and onerous, and it allowed more contractors to bid on my projects.  Had we stuck with the best practices of a similar industry we would have continued to incur a limited pool of contracts and higher prices which would make us less attractive in the market place.

Another company I was involved was big on Six Sigma, and we produced monthly dashboards to provide insight into many of the critical programs.  One “best practice” that was used was allowing the project managers to override the metric and provide their interpretation of the results.  The belief was that the project managers knew their projects best, and the automatically provided results were the result of various mathematical interpretations of the data.

We used “green” for good, “yellow” for some issues, and “red” for trouble.  Every month I saw the project managers file into the individuals office who was compiling the report, and never once did I see them change the color from a green to yellow, or yellow to red because they knew of issues that were not picked up in the reporting.  Instead, they changed the yellow to a green or a red to a yellow (we seemed to have very few reds) saying that the solution was well in hand and the metrics did not reflect that reality.   These adjustments nullified the intent of these reports, to me it was akin to taking the batteries out of the fire alarm.  The early warning signals the reports were intended to provide to senior management were short circuited as the project managers did not want to be associated with troubled projects.  In some cases, this system may work, but the culture of this company, and the perceived stigma around problems, voided any benefit from this exercise.

The term “best practices” has been overused, some say abused, as so many procedures now seem to be de facto best practices.  Some “best practices” are sound, and workable if kept at a high level such that some customization is required, such as having metrics in place to track progress, or having a business plan before jumping head first into a new endeavor.  In neither instance are the details specified; the metrics are not spelled out (how could they be, it depends on your business and what your priorities are), nor what goes into the plan, as it depends on what you seek to accomplish.

Best practices is a business buzzword that should be retired.  Before “best practices” they were simply “good ideas”, which is more appropriate.  Seek out good ideas, and determine if they apply to your business.  Recognize that modification is probably required to account for the issues facing your firm, the culture of your firm and a host of other factors that probably were not encountered by the company that had that original good idea.  Good ideas should be nothing more  than a starting point to a discussion.  The best practice should be what your company does with that good idea to generate the desired results.

Everything harkens back to communication.  So many times I’ve been presented with challenges, be it risk, strategy, human resources, or any number of other topics, and the solution frequently boiled down to communications, or more specifically, the lack thereof.  I recently found myself thinking about work, and the lessons around communication that could be applied as a result.  Specifically I thought about feedback, and not taking advantage of opportunities to gain valuable insights.  I’m as guilty as the next person in that I do not solicit it as often as I should, but I am learning.

How many times do you, or your company seek feedback when…

You Loose

When you loose that bid to your competition, do you chalk up your loss to price?  Or maybe you think that your competition had some inside connection, or any host of other reasons.    Do you ever go back to the potential client to find out why you did not win the bid, and query further as to why your competition did?  Maybe it was price, but what if you discovered your competition offered a superior solution adding some element, or creating a solution that you never considered.  Upon reflection you realize you could implement a similar offering with little additional cost to you but a great way to distinguish or add value on subsequent proposals.  What if your competition upped the ante, and added further follow up, which the customer took this to be superior customer service (and may have even been willing to pay a premium), or they offered training to additional management levels to ensure the adaption of that technology stuck in the organization.  What a great way to increase your company’s exposure within that client organization.  You might not find out how simple steps are allowing others to distinguish themselves, in often incremental ways if you did not seek out this information.  When was the last time that the client provided a detailed response as to why this vendor won and why that vendor came up short.

The same approach could be applied to your career.  Why was someone else selected over you for that promotion, project, team?  Criticism hurts, but how do you improve if you don’t know what your shortcomings are, perceived or otherwise?  So if the results were not what you expected, don’t assume you know the answer, get feedback, be open to hearing what others have to say and gain a new perspective.

You Win

How about when you win that contract, do you ever find out what it was about your proposal that got you the project?  What for the client synched the deal for you that he or she thought none of the others providers offered?  Maybe your clients are honing in on a benefit you offer that you had not considered significant.  What a boon to play up that feature in future proposals.  This sort of post analysis is akin to market research for your product, you’re uncovering functionality you did not initially consider and finding knew ways to market yourself or your product.

Back to the job, wouldn’t it be nice to know what management considers as valuable traits, that you already have, and you can focus on and develop, and help foster in your team.  Maybe your boss does a really good job of conveying that to you, but chances are that may not be the case, so instead of making assumptions about how you got where you are, having a foundation built on understanding that supports growth seems like a better way of increasing the odds of going forward.

Early in my career, I once asked a boss why he picked me to join his team, and his response surprised me – I thought it would be my skills or my previous experience.  He said it was because I always asked what I could do to help.  He liked the fact that I didn’t wait for someone to direct me, but sought out work to do.  (You can be sure that if he thought I was proactive before, he hadn’t seen anything yet!)

Learning About Yourself

I recently developed a brochure for Sagacious Consulting and it was an equally fascinating and frustrating exercise.  I garnered input from various sources; some who no idea what I did, others who were in positions that would hire me, and still others who were experts in marketing and PR.  The results, as you might expect were all over the board, but what was interesting is that no two people saw the information the same way, and I learned not to assume that others knew what I meant  when I said I helped clients address their operational challenges.

Their comments were enlightening, adding outside perception that I had not been privy too, mainly I found out because I had not asked.  I had considered operations a fairly straight forward area, but depending on industry found peoples perception of it to ran a broad spectrum – did I mean sales, or finance?  What does risk have to do with it?  They alerted me to functionality I offer that they do not readily see elsewhere, and were quick to point out items that they felt were commonplace and I was not distinguishing myself.  While I may not have incorporated all of their comments into my brochure, I certainly gained some insights into ways to position and distinguish myself from the competition.

So I challenge you, as I’ve challenged myself, to seek that feedback and find ways to improve your proposals and develop the skills and assets you bring with you.

I read many different journals and a great deal of valuable content exists out there.  I decided to start highlighting a few of the articles in this blog.  Here is the first few.

From MIT – Sloan Business School

Is Decision-Based Evidence Making Necessarily Bad?

Some quick takeaways:

• Management wants fact based decisions, but they may not be getting them.
• Evidence is used in a variety of ways, to make, inform or support a decision.
• Managers must be aware that evidence is shaped by subordinates to meet perceived expectations of company leaders.

From the Harvard Business Review

Making Your Strategy Work on the Frontline

How to get your front line employees to execute on strategies they never bought in on, and may not even fully understand.

and another from the Harvard Business Review

Leader’ Blind spots Undermine Their Global Language Policies

A one language policy is one of the most important policies that a multi-national corporation can institute.  However, that is the beginning and not the end of the conversation.  The company must help its employees understand how a single language policy is an opportunity for personal growth rather than professional failure.

I just finished reading this great article in Fast Company on Team Coordination is Key in Business by Dan and Chip Heath.  Essentially the article states that while its all well and good to have super star individuals, but if they never have a chance to work together, how will the team deliver?  How good is the company if no one is really working together.  The analogy they used is a relay team of top individual runners with little opportunity to practice passing the baton among themselves, so that on race day, a critical pass is flubbed.  I’ve seen this happen a lot, a company has some high performing individuals and they are tasked with solving “X”  They go forth to deliver, yet they do not really understand how all the moving pieces in an organization fit together.  So while they may come up with a solution that improves the situation, its not as good as it could be.

Another example is the Jet Blue debacle that  stranded people in New York.  Jet Blue realized problems stemmed from the result of  their “can do” culture.  It was only by getting all the teams together and following the process through that they realized they had some hand offs that hampered the process.  They needed to make sure the entire process, including hand offs between the different teams, was strong and made sense.   [This may sound obvious, but sometimes until you break down the processes you realize there's a lot of wasted or duplication that can be weeded out.]   By working their way though a similar scenario they were able to identify problem points and address them, so that the next time a similar event occurred they were coordinating their efforts instead of trying to tackle the problems individually.

I had a team of strong individual performers, one lead the construction for a state wide fiber optic build, the other was my engineering manager.  Both determined to excel at the fine work they were doing.  However, we had some head butting when the engineering manager asked for data that only the construction manager and his team could provide.   The construction manager complained that what was requested was a waste of time and added a lot of extra hours to his days.  I could see his point, but then I knew what the engineering manager’s needs were too.  The engineering manager in an attempt to make the information he recieved as consistent as possible had developed a spreadsheet that no one on a construction site wanted to take the time to fill out.

When it became obvious that they would not solve the issue with out some assistance, I sat both sides down and started the meeting by neutrally explaining the concerns of both sides.  I then stepped back and moderated the subsequent conversation, which proved to require little effort on my part.  The construction manager upon seeing how the data could be used, and more importantly how he could use the data was converted.  He rightly stood up for his team and identified the requests that were not viable, but he also offered up some other data that the engineering manager did not think he’d be able to easily able to obtain.  It was a win-win situation.  The construction manager got some additional information which helped him, and the engineering manger came away with more data points than he was originally seeking.  For a data driven guy, can I just say he was tickled?

A recent story in the Washington Post speaks of a rise in problems with air traffic controllers.  Due to a thunderstorm, one controller directs his plane into the other controllers space, and with no verbal confirmation, believes they have a gentleman’s agreement that both understand the situation.  The article made me nervous detailing the close calls that ensued.

Let’s face it if you a company you have a team, maybe they do not all work directly for the company but to do their jobs they need touch points with other team members.  Understanding what is expected, or what happens at these touch points is critical to the success of the organization.  This sort of knowledge only comes with practice and open communication.  Something that is often lost as new employees are brought on board, or existing employees are transferred to new lines of work.

How do companies prepare for good fortune so they can grab it head on before it,  at best, slips through their fingers, or worse becomes a PR nightmare or the equivalent.

Two very similar examples of success gone wrong come to mind.

1. AT&T with the incredible popularity of Apple’s IPhone
2. Small companies seeking rapid exposure with Groupon, and then faced with demand they cannot possibly handle.

AT&T had not anticipated the strain its infrastructure would have based on the demand for the incredibly popular Apple IPhone, and well the rest is history.  Users complain about the lack of service.  AT&T has customers has far more customers on plans that sap their bandwidth, and cannot sign on the low data usage customers that would positively address their bottom line.

Small businesses have used Groupon as a way to raise awareness for their product or service.  They offer a special through Groupon that is valid if a minimum number of people sign up on a given day.  The problem is that some offers are so enticing that far more are sold than the business can address, leaving disappointed customers, bad press and the potential for some legal issues if they cannot deliver on a paid service or product.

Companies need to plan for opportunities.  I cannot imagine a more frustrating experience than working hard and dreaming of that sales opportunity that will take your company to the next level only to miss it because of lack of preparedness.

What does the company need to do to be prepared for the opportunity?  Is it training?  Is it inventory?  Is it international expansion?  Whatever is needed, work back from the goal and determine what steps must be in place to maximize the potential for success.  Also included in the review should be an analysis of what are the outcomes if things do not go as planned.  What steps will the company have to take to mitigate the situation?

Question: How do you get the attention of an investor?

Answer: Show progress.

I recently attended a talk where the speaker, a former VC himself, put progress in terms of physics – distance over time – an equation which equals velocity.  It was a great analogy – showing progress from meeting to meeting with your targeted investor.

Assuming your goal is to raise equity funding, one great point he raised, is to meet with the investors when you are not looking for funds; pre funds but actively working on targets that will make you more attractive upon their completion.  Counter their surprised response, by saying your not ready and want to meet certain milestones before you approach anyone for funds.  I thought it a bit like dating, you’re playing a bit coy here to garner their interest.  Its the hard-to-get ones that are so attractive.  I would not suggest setting up meetings with them to tell them you do not need them, but in Silicon Valley, at least, there are many events where you can be guaranteed that you’ll bump into investors.  Its at these sorts of events if you strike up a conversation, that if done well should be memorable for the investor.

The goal of this first meeting is to set up a certain point in that investors mind in terms of where you are at, so that the next time you meet you can say that you are well beyond that point and working towards the next set of goals.  The investors want to measure velocity or speed, and by having that first meeting, you’ve provided them two data points for an analysis.  If they are only meeting you for the first time when you are looking for money, they only have one datapoint.  The other key note is that its not just any investor.  These conversations have to be with the investors that would invest in your company and would be the decision makers, otherwise it’s a wasted effort.

Finally, this idea is equally applicable to other critical stakeholders in your endeavor; your management team, the media, other parties with an interest in seeing you succeed.  The only thing better than showing velocity is showing acceleration, that you are able to make those goals happen faster.

Best of luck!

SWOT is a tool familiar to a lot of people, but another tool, equally valuable is the STEEPLE Analysis.  They both become more powerful if used in together.

As an entrepreneur have you ever considered what you look like from an investor’s perspective?   Investors are constantly seeking to minimize their risk and increase their returns, they’re investing equity capital, AKA risk capital, and from their perch, they see four types of risk in companies they potentially invest in:

1. market
2. people
3. technology
4. finance

It’s safe to assume that no investor wants exposure to all four risks, and of the risks she or he is willing to assume, they seek to minimize exposure to the remaining risk they assume.   Additionally, some investor’s make strategic decisions to only accept certain risk and remove others from their portfolios, so if you have a risk they are not taking on, you are wasting your time approaching them for funding.  Knowing your risk and their tolerances will help you to find a good fit.   The only way to help the investor understand your company’s risk is by addressing it yourself.  Identify:

• what is the risk
• how risk impacts your company
• when risk will impact company – risks levels are generally not consistent
• how risks will be handled

I guarantee you that your competition is probably not doing this sort of preparatory work, and having this evaluation in place will set you apart.  You’re looking to have a long term relationship with your investor and getting their perspective going in to the relationship will lead to smoother exchanges down the road.

With this exercise, don’t forget about “happy” risks – opportunities that exist and how your company might position itself to benefit from them.  One caveat I’d add about those opportunities is that they can turn into risks themselves if not properly handed, and these risks should also be considered, e.g.  a company gets great publicity via the web and is swamped with orders that it cannot meet.  The resulting failure to deliver leads to damaged credibility (reputational risk) among its customers.

Benefits of performing a risk analysis

• Increase understanding of risk from an investors perspective and can mitigate or eliminate risk and increase your company’s appeal before you approach them for investment.  Performing this analysis prior to due diligence reduces those gotchas, potential investors will not “ding” you about surprise risks, as you will have already identified and addressed it.
• Select investors who’s risk tolerance aligns with the risks associated with your company
• Develop a strategic advantage in knowing your risks and distinguishing your company from the competition
• Improve customer satisfaction by reducing possibility for problems and minimizing their impacts.

I would not necessarily recommend listing out all your risks in an investment pitch but weaving your risk strategy into your story helps a company’s leadership team gain credibility as prudent managers.  Even better, if you can identify areas where you are reducing risk and your competition is not.