It is amazing how different brands can combine their appeal to bring compelling offers to customers. The latest example I have seen is Lego Batman game on the iPhone http://feedproxy.google.com/~r/Venturebeat/~3/swne3jAFI2g/.
Lego, Batman and iPhone - now there is a combination of admired, attractive brands. But it does make me wonder which customer segment is going to be served by the game they are all involved in. Lego and Batman will appeal primarily to young children up to, maybe 14 years old. But how many of these will also own or have access to an iPhone?
Can combining brands help each of them extend the reach of their core market? Maybe, though in this case, I have my doubts
Wednesday, December 17, 2008
Tuesday, December 02, 2008
The End of Exit
I have worked with private equity, venture capital and angels for the last 8 yrs and also helped and advised firms negotiating for investment from them. During this time, one of the most important questions (if not the most important one) from investors has been “What is the exit strategy”.
This forced companies requiring investment to identify major players in their industry who might want to buy them up in a few years if they grew as projected. Since far too often companies do not look at how their industry is structured, to understand who holds the power and what they might do to hinder or help start ups, this analysis was worthwhile in itself. Whether or not it then led to sensible forecasts of who might buy whom in three to five years ahead was another matter.
But the exit question also often led to wild guesses about the possibilities of floats as well as takeovers, given that the companies had no real understanding of the ups and downs of the stock market and of the likelihood that the appetite for mergers or flotations would be strong a few years in the future. Of course, in times of boom and bubble, the forecast was for a dramatic sale or entry on the stock market after only a short time, when conditions were assumed to be the same.
Now that recession is biting and stock markets have plunged, predicting exits looks even more difficult and hard to justify. (Though, ironically, it is probably now that we should be confident that in a few years time, the market will be recovering and exits will be possible. So should we look to change the exit question?
Why not justify an investment based on the profits made and the free cash flow generated? If investors take the risk of investing, for example, £1M for 30% of a company that will grow to £20M sales and £2M profits in 3-5 years with reasonable growth thereafter, they could justify their investment by 15%-20% return on capital plus the ability to sell a profitable company to free up their money but only when the market is favourable again.
The sticking point will be with investors losing their focus on getting back their capital with a good return after only a few years. Venture capitalists depend on a reasonably quick turnaround to be able to return money to their own investors.
But maybe this is the time to focus on longer term investments in the whole market. After all, investing in a company that makes good profits and pays good dividends is investing in a company that can be sold at a good valuation at some stage – it is just a question of avoiding the fixation with when the return will be.
Moreover, the very fact of paying less attention to when the return will come and more to growing profitable businesses actually makes it more likely that an exit opportunity will crop up sooner.
This forced companies requiring investment to identify major players in their industry who might want to buy them up in a few years if they grew as projected. Since far too often companies do not look at how their industry is structured, to understand who holds the power and what they might do to hinder or help start ups, this analysis was worthwhile in itself. Whether or not it then led to sensible forecasts of who might buy whom in three to five years ahead was another matter.
But the exit question also often led to wild guesses about the possibilities of floats as well as takeovers, given that the companies had no real understanding of the ups and downs of the stock market and of the likelihood that the appetite for mergers or flotations would be strong a few years in the future. Of course, in times of boom and bubble, the forecast was for a dramatic sale or entry on the stock market after only a short time, when conditions were assumed to be the same.
Now that recession is biting and stock markets have plunged, predicting exits looks even more difficult and hard to justify. (Though, ironically, it is probably now that we should be confident that in a few years time, the market will be recovering and exits will be possible. So should we look to change the exit question?
Why not justify an investment based on the profits made and the free cash flow generated? If investors take the risk of investing, for example, £1M for 30% of a company that will grow to £20M sales and £2M profits in 3-5 years with reasonable growth thereafter, they could justify their investment by 15%-20% return on capital plus the ability to sell a profitable company to free up their money but only when the market is favourable again.
The sticking point will be with investors losing their focus on getting back their capital with a good return after only a few years. Venture capitalists depend on a reasonably quick turnaround to be able to return money to their own investors.
But maybe this is the time to focus on longer term investments in the whole market. After all, investing in a company that makes good profits and pays good dividends is investing in a company that can be sold at a good valuation at some stage – it is just a question of avoiding the fixation with when the return will be.
Moreover, the very fact of paying less attention to when the return will come and more to growing profitable businesses actually makes it more likely that an exit opportunity will crop up sooner.
Wednesday, October 22, 2008
Making Effective Company Ambassadors
Everyone who works for a company is an ambassador for that company. But whether they are a good or bad ambassador depends on them and how you treat them. Treatment of employees is a huge area that I am not going to cover (and, although I have strong views, there are many more qualified people if you are looking for sound advice).
But there is one thing you can do make yourself and others into better ambassadors, and that is to ensure that you have clear and consistent messages about what the company does. You may say "Well, that is obvious. Everyone knows we are estate agents ... or website designers ... or garden ornament producers". But a simple label is just the starting point. What can you say that makes you stand out from the competition and be memorable?
You should be able to describe your company in two or three sentences in a way that is free of jargon (the person you are talking to may know nothing of your industry), clear and simple to remember and describes how you help your customers ("we have thirty years experience of specialising in ... ", "we are the only local firm to offer worldwide distribution...", "our products are so reliable they have lifetime guarantees..."). Find something that makes your firm stand out.
If the person or people you are talking to are interested in what you say, make sure you have a story or example to back it up. Stories are memorable.
Now are you confident that everyone who works in the company has this same message? Well, test it out by asking them. They do not need to use exactly the same words, but the key points must be the same.
Why is all this important? Because any planned or even chance meeting that you or any of your colleagues have, may turn out to be with someone who might be a customer, or a supplier or someone with the skills you need in your business - or just someone who may remember what you said and pass it on to someone else.
Making everyone into ambassadors is one of the cheapest forms of marketing. You may think it will reach too few people to be important, but think of all the interactions that you and others have each day. Think too of the customers, prospects, suppliers and others who talk to different people in your company and of ensuring that they get the right impression from everyone.
"Viral marketing" is a modern buzzphrase more associated with use of web marketing techniques. But consistent, enthusiastic mentions of your company by word of mouth can themselves be "viral".
But there is one thing you can do make yourself and others into better ambassadors, and that is to ensure that you have clear and consistent messages about what the company does. You may say "Well, that is obvious. Everyone knows we are estate agents ... or website designers ... or garden ornament producers". But a simple label is just the starting point. What can you say that makes you stand out from the competition and be memorable?
You should be able to describe your company in two or three sentences in a way that is free of jargon (the person you are talking to may know nothing of your industry), clear and simple to remember and describes how you help your customers ("we have thirty years experience of specialising in ... ", "we are the only local firm to offer worldwide distribution...", "our products are so reliable they have lifetime guarantees..."). Find something that makes your firm stand out.
If the person or people you are talking to are interested in what you say, make sure you have a story or example to back it up. Stories are memorable.
Now are you confident that everyone who works in the company has this same message? Well, test it out by asking them. They do not need to use exactly the same words, but the key points must be the same.
Why is all this important? Because any planned or even chance meeting that you or any of your colleagues have, may turn out to be with someone who might be a customer, or a supplier or someone with the skills you need in your business - or just someone who may remember what you said and pass it on to someone else.
Making everyone into ambassadors is one of the cheapest forms of marketing. You may think it will reach too few people to be important, but think of all the interactions that you and others have each day. Think too of the customers, prospects, suppliers and others who talk to different people in your company and of ensuring that they get the right impression from everyone.
"Viral marketing" is a modern buzzphrase more associated with use of web marketing techniques. But consistent, enthusiastic mentions of your company by word of mouth can themselves be "viral".
Thursday, September 18, 2008
First mover advantage
First mover advantage is exactly that -an advantage that needs to be exploited, not a right to succeed. It may well not be enough to repeat the same tactics that gave you the advantage, since the competition may be anticipating that or the market may now take that for granted and look for something else. You have to keep on innovating.
In a game of tennis, if you reach advantage, the game is yours to win. But if you play the next point in a predictable way, your opponent may well anticipate you and find the shots to claw back your advantage.
Companies that are first to market can go on to dominate - look at eBay in online auctions - but they have to continue to innovate and anticipate the next trends or they risk disappearing (remember the spreadsheet programs of Visicalc, then Supercalc then Lotus).
Of course, there may be disadvantages in being first mover as well - the latest technology may have unforseen problems or it make take longer than expected to sell a new solution to a sceptical market. But the first mover is best placed to understand and react to these issues - as long as they are constantly examining their operations in order to improve them and using feedback from the market to adapt.
In a game of tennis, if you reach advantage, the game is yours to win. But if you play the next point in a predictable way, your opponent may well anticipate you and find the shots to claw back your advantage.
Companies that are first to market can go on to dominate - look at eBay in online auctions - but they have to continue to innovate and anticipate the next trends or they risk disappearing (remember the spreadsheet programs of Visicalc, then Supercalc then Lotus).
Of course, there may be disadvantages in being first mover as well - the latest technology may have unforseen problems or it make take longer than expected to sell a new solution to a sceptical market. But the first mover is best placed to understand and react to these issues - as long as they are constantly examining their operations in order to improve them and using feedback from the market to adapt.
Friday, September 05, 2008
Something for nothing
Internet users expect more and more services for free : apart from basic free access to information, we already have free music downloads (initially illegal but more and more sites are offering legal versions), free software (especially cloud computing services), free video, free telephony via IP and so on.
There are free ISPs so users do not have to pay for connection, free wifi access in many places (though you may need to buy a cappuccino which may be quite expensive) and there have even been free PC offers in the past, though they were not successful.
While some of these free services are provided by people who are keen to share their great programming skills and gain some kudos (freeware software for example), the majority is paid for by advertising.
But how long can advertising continue to pay for the increasing range of free services for an increasing number of users?
Online global advertising spend is currently $40 billion annually. This sum provides $40 annually to pay for the free online services of 1 billion Internet users.
It is not much to pay for our consumption of more and more music, video, software, storage and other services.
Maybe the rise of the phone will change the model. People are used to paying for phone services. But on the other hand, the emergence of flat rate data tariffs and competition between mobile operators is likely to limit this source of finance.
What will happen if we wake up one day and find that there is no longer the money to pay for the free services we have grown so used to?
There are free ISPs so users do not have to pay for connection, free wifi access in many places (though you may need to buy a cappuccino which may be quite expensive) and there have even been free PC offers in the past, though they were not successful.
While some of these free services are provided by people who are keen to share their great programming skills and gain some kudos (freeware software for example), the majority is paid for by advertising.
But how long can advertising continue to pay for the increasing range of free services for an increasing number of users?
Online global advertising spend is currently $40 billion annually. This sum provides $40 annually to pay for the free online services of 1 billion Internet users.
It is not much to pay for our consumption of more and more music, video, software, storage and other services.
Maybe the rise of the phone will change the model. People are used to paying for phone services. But on the other hand, the emergence of flat rate data tariffs and competition between mobile operators is likely to limit this source of finance.
What will happen if we wake up one day and find that there is no longer the money to pay for the free services we have grown so used to?
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