Editor’s note: This is first of two articles. Bill Warner is Managing Partner of Paladin and Associates.Last week we are focused on the issue of picking the right executive team for companies. If there is one issue our firm deals with every month is engaging with companies that have poorly constituted executive teams and are suffering from the lack of business and operational know-how as a result.
The primary way this issue reveals itself is lack of sales; resulting in tremendous cash flow pressure. We recently worked with an emerging commercial hardware tool company that is being run by its founder. The product is unique and patented, and is ready for the market. It has been ready for two years, while the founder tried to sell the product through direct channels to large manufacturing companies.
The company has burned over $1 million in marketing programs and sales personnel. The problem has been that the founder has no sales experience, has taken the product through the wrong sales channel, and has hired sales people how do not have the knowledge or experience to sell to distributors. If the founder and the company’s board would have insured that the right marketing and sales executives were brought into the company at the time the product was ready, they would be in a very positive position today.
Price of failure
In addition, a new CEO with successful business operations experience should have been brought into the company. Unfortunately, the company is nearly out of money, and may fail
Without effective marketing programs, there won’t be enough leads to generate the correct number of sales. One of our clients has a very effective software product for managing high inventory turnover situations and reporting quantifiable results. It is sold through direct channels by knowledgeable manufacturing process sales people. The product has been on the market for eighteen months, but only four sales have been made. We discovered that the founder doesn’t really believe in marketing, and has been cold-calling prospects and getting very poor results. Going deeper, we found that the marketing message he was delivering was not effective in convincing a buyer who is solely interested in return on investment. If the founder had brought in a seasoned marketing executive who knows how to put a comprehensive sales lead generation program, there would have been the necessary number of qualified leads to generate sales.
It is terribly important that the executive team of any company work well together and is on the same business agenda. We recently worked with a financial services firm whose partners were tied in knots by their lack of mutual commitment to the company’s business objectives and private personal goals. Their lack of business maturity and experience to take the company beyond where they were was causing significant sales failures and personnel disruption, as their lack of cohesiveness showed through to the entire firm.
Quite frankly, nobody was in charge, and their strong personalities continue to clash and undermine their decisions making. The firm is frozen in place, and won’t progress until the partnership organization is reconstituted.
When a company is launching a new product and is meeting new customer prospects, potential investors, industry analysts and representatives from the media, it is very important that their story is told concisely, completely and with humble excitement. If the company’s leadership cannot do this, accomplishing their goals will be almost impossible. Recent experience with a company, that supplies software to associations to manage donations, brings this issue home. The CEO and founder had a major case of arrogance and selective listening. She angered investors, talked down to analysts, overstated to the media, and bored everyone with unnecessary technical detail, never getting their value proposition across to anyone. If the board of directors had hired an experience CEO, they would have had a chance of survival. Now, the bridges are burned.
Making well thought out commitments is necessary to maintain credibility with investors and customers. It takes experience to recognize when a commitment is needed, properly establish and manage expectations, and rationally make the commitment. We discussed this with a potential client last month.
The software company had a very complex product, with several enhancements to make based on customer needs. The customer demanded rapid delivery. They committed a very aggressive delivery date, and missed it by a month. This was the straw that broke their back. This was the ninth commitment made and missed over the last year, so the customer discontinued the relationship. The development leader and CEO were very junior people, and were working with a Fortune 500 company. If this company had seasoned executives who knew how to handle these tough situations, they would still have the customer.
Having seasoned executives leading your company, who have the wisdom and experience that is needed to accomplish your objectives, will maximize your chances for success.
Bill Warner is managing partner of Paladin and Associates. You can reach him via e-mail (email@example.com) or phone (919 570-1023).