Bailout or no Bailout

I try to stay out of politics on the blog as I try to discuss leadership issues. On this bailout, aka rescue plan, I have to draw a fine line.

The big talk over the last week has been about the recent bailout situation, which I find interesting. It is a little confusing as the Republican and Democratic parties seem to be split among themselves, some saying if we dont have a bailout, the end is near. While others say, no bailout is needed.

There will always be ups and downs in the economy. Those that are older, have seen several slowdowns and recessions (1981-1982 comes to mind); those younger, it might be your first one. When we are on an up, there will be a down. When we are in a down cycle, there will be an up down the line. This is what is called capitalism (i.e., Adam Smith's invisible hand). Some government intervention can minimize the downs if done correctly (although we did see during the Great Depression, government intervention caused the down to more of a downer). Is this bailout plan a good government intervention or too much intervention that will delay the inevitable? In a business that needs credit to acquire companies, I definitely see a reduction of available credit. It my view, something needs to be done, but not sure about this existing rescue plan, as I do think there are some other alternatives.

This brings me to the issue of leadership in this situation. If you have a solid service or product, you will be fine in ups and the downs. If you do not have a solid business, focus on building up your base in this situation. Remember: There are opportunities in both cycles. If you have more strategic control (a differentiator that keeps the clients to your services/products), you will be terrific shape. Be smart. Don't be too risky. Look for opportunities that leverage your strengths

Success has many "owners"

Why is it? When there is a celebration of the success of a venture or project, you have to look for a very large room to acknowledge those who contributed greatly (or to some slight degree as well as those who think or claim they did). Every one wants a piece the glory no matter how small. I know I interviewed several people from a competitor who had a successful product. It seems that each person I spoke to was the chief contributor of this successful product (how can that be?). We all want to be part of a winning team and as years go by, we tend to exaggerate our management contributions.

However, when there is failure, one needs only a very small room to invite those to commemorate the defeat or to evaluate the lessons learned because many will shun the invitation or claim that they had little or no part in the decision or action. The main reasons for failure suggested by those involved:
- poor or unclear planning
- lack of sufficient authority or staffing
- lack of thorough, accurate, and timely information
- failure to decide or act decisively

While we can learn from successes, it is more important to learn from our failures (I know I sure have) because we probably analyze them much more and learn some valuable lessons.

Bottom line: A successful project involves many people (one that seems destined to fail has people jumping ship, so if you see people conveniently leaving the project, watch out). You can take your chances and try to the hero who singlehandedly tackled the issues rather than sharing the responsibility and glory. However, the odds are rather good you may be standing in that small room by yourself!

Joke of the Weekend XXIII

Managers and Engineers


A man flying in a hot air balloon realizes he is lost. He reduces his
altitude and spots a man in a field down below. He lowers the balloon
further and shouts, "Excuse me, can you tell me where I am?"

The man below says, "Yes, you're in a hot air balloon, about 30 feet above
this field."

"You must be an engineer," says the balloonist.

"I am. How did you know?"

"Everything you told me is technically correct, but it's of no use to anyone."

The man below says, "You must be in management."

"I am. But how did you know?"

"You don't know where you are, or where you're going, but you expect me to be able to help. You're in the same position you were before we met, but now
it's my fault."

The Invisible Obvious

If you think about the most important discoveries or the best management decisions, they usually came from taking a fresh look at what people take for granted or can not see because it is too obvious. It has probably happened to you as well. When WHAM!, the solution is so obvious that is almost embarrassing why it took you too long to figure it out. The phrase "too close to the problem to resolve it" comes to mind.

You probably have heard the story of the oversized truck that had become wedged under a low bridge. Engineers were brought in to see how they could remove the truck, but had no luck. A small boy in a car stuck in traffic gave advice to authorities by the "obvious" suggestion that they could lower the truck by letting some air out of the tires.

As a leader, a fresh look at the obvious (and being open to non-traditional ways of thinking) is one of the most valuable things that you can do. This is why it is important to periodically bring "new blood" into your organization because they could provide that fresh view into the invisible obvious.

Leader versus Leadership

When we think of the leader, we imagine a commanding figure . . . whether a room-dominating figure, always sitting at the head of a conference table, or behind a large clean desk . . . bottom line: a leader who takes charge, aggressive, no-nonsense, etc.

Such images of leaders get us into trouble because it is not reality and it sets up a leader who will not be successful. The REAL strength of a leader is the ability to gain the strength of the group (not of the single individual). Relying on one person (e.g., the CEO) to provide all the leadership builds expectations that can never be met. Correspondingly, the group is denied its powers, thereby, leading to overdependence on the manager. When dependence is created, the leader's response is to micromanage, getting into areas of control and responsibilities that represent a poor use of time and may far exceed his/her capabilities. The result is the ultimate reduction of the productivity of the group.

A good "leader" provides a collective vision and acts as a servant to the people in the group to make sure the objectives are met (resources, addressing hurdles, providing guidance, being supportive). Whereas most of us have an image of the strong leader, the most successful leaders are actually servants to the group.

In Chaos Lies Opportunity

Many leaders have a quick knee-jerk reaction to a downtown economy. It's time for a reduction-in-force, or cut back all expenses, etc. Well, there may be good reasons for this, but if you are a business leader and your business has strong fundamentals, it might be a time for looking for some solid opportunities. Don't retrench, instead think about how you can grow in the downtimes.

Here is a good article written by two senior directors from Bain on just this topic.

http://online.wsj.com/article/SB122212072533364749.html


In Chaos Lies Opportunity
By DARRELL RIGBY and STEVE ELLIS

Lehman Brothers' headlong pitch into bankruptcy protection, Merrill Lynch's dramatic sale to Bank of America and the U.S. government's rescue of AIG have battered financial markets. But in the turbulence lies opportunity.

Like dangerous curves on a racetrack, economic downturns create more opportunities for companies to move from the middle of the pack into leadership positions than any other time in business.

Unlike straight-aways where leaders can thrive on raw power alone, steep curves require strategic finesse. That often results in dramatic differences in performance as leaders steer out of the curve.

With a clean balance sheet, a clear cost advantage and adroitly hedged fuel costs, the discount carrier grew at the expense of rivals. As others eliminated capacity and jobs, Southwest lowered fares to gain market share. It boosted advertising to trumpet its price advantage and built solid relations with labor by avoiding layoffs.

Southwest is not unique. About 24 percent more firms moved from the back of the pack to the front in the 2001 downturn compared with the subsequent period of economic calm, according to an eight-year study by Bain & Company that analyzed the net profit margins and sales growth of more than 2,500 companies. Meanwhile, about one-fifth of all leadership companies—those in the top quartile of financial performance in their industry—fell to the bottom quartile. By comparison only three-quarters as many companies made such dramatic gains or losses after the recession.

Recessions hit some industries harder than others, so staying alert matters. The variations get amplified in a globalizing, interdependent economy. That adds both opportunity and complexity. The opportunity is to shift focus to economically healthier regions, as Johnson & Johnson, GE and IBM did in the second quarter of 2008, reporting solid performance outside the U.S. The complexity arises from having to make long-term investments in global operations with less certainty than ever about where you will be exposed when the next downturn hits.


Many industry leaders fall from the top during recessions because they assume that a strong market position is an insurance policy against trouble. That approach breeds overconfidence. Executives postpone taking precautions or reach for the same levers they pulled in the past -- like hedging their bets by diversifying. When the downturn hits hard they usually over-react. They slash costs and staff indiscriminately, cut capital expenditures, squeeze suppliers, and avoid strategic acquisitions. Then when conditions improve, they must spend heavily to regain momentum.

The better approach: slow in, fast out—like a good driver heading into a sharp curve. Winners in recessions tend to brake quickly heading into a downturn by managing costs carefully and consistently. It's like downshifting to a lower gear to slow momentum and increase responsiveness. They focus on what the company does best, reinforcing the core business and spending to gain share. They aggressively monitor the competition to ensure they have the best possible line through the curve. That sets them up to accelerate at the apex of the curve, when the economy starts to improve. The farther you can see and the quicker you can turn, the faster you can safely corner.

In the 2001 recession, Intel Corp. timed its acceleration effectively to pull away from Advanced Micro Devices Inc., its scrappy rival in the chip business. Heading into the recession, AMD's heavy investment in product design was paying off, with AMD's revenues growing three times faster than Intel's.

Then the recession hit, catching the entire industry with too much capacity. As AMD's lack of profitability prevented it from investing in new production facilities, Intel seized the advantage. It invested in new facilities with state-of-the-art production capability and spent heavily to advertise its P4 processors. In the ensuing years, Intel's relative cost position improved dramatically and AMD had to slash 15 percent of its workforce. The momentum AMD had built quickly evaporated and a re-energized Intel remained the industry leader.

Another characteristic of companies adept in a downturn: they make bargain acquisitions to build up their core, even when it means taking calculated financial risks. As markets improve, they are well-positioned to accelerate. The latest example: Bank of America's planned acquisition of Merrill Lynch, which may turn out to be "the strategic opportunity of a lifetime," in the words of Ken Lewis, Bank of America's CEO.

For most industries, the optimal time to hit the brakes and downshift was months ago. The questions to be asking now are: Where is the apex of the curve, and how hard should we accelerate to take advantage of competitor mistakes? Who is in trouble and dumping valuable assets in order to survive? Can we add great people who are now available?

The companies with the right answers to those questions will have the inside track coming out of this downturn

Pressure Presentations

One of the important elements of a leader is to be able to present (whether to internal group or client/propects). Here is an article on delivering presentations under pressure.

How to Deliver a Presentation Under Pressure
After watching business pitches at recent tech conferences, communications coach Carmine Gallo prepared tips for make-or-break situations
by Carmine Gallo

http://www.businessweek.com/smallbiz/content/sep2008/sb20080919_919248.htm?campaign_id=rss_smlbz

Last week, dozens of entrepreneurs pitched their startups and technologies to influential investors and members of the tech community in hopes of raising money and attracting attention at two different important conferences—TechCrunch 50 in San Francisco and DEMO fall in San Diego. After attending the TechCrunch event in person and watching a number of the DEMO presentations online, I tried to turn what I had observed into five tips for anyone making a business presentation under pressure. While you might not have plans to pitch your company to an investor anytime soon, the odds are likely that you will have to pitch to a potential partner, customer, employee, or lender who can make a big impact on your company in the near future.

1. Keep it brief. TechCrunch limited pitches to eight minutes. DEMO gave its startup presenters even less time—six minutes. DEMO also charged an $18,500 fee to present. That's a little over $3,000 per minute. Try this exercise. If you had to pay $3,000 a minute to pitch your idea, what would you keep, and what would you cut? It might seem like a difficult task but it is an important one. You see, our brains are wired to tune out after a short amount of time. Brain researcher John Medina says the typical audience member gets bored in 10 minutes (BusinessWeek.com, 7/7/08). Venture capitalists have told me the same thing: If entrepreneurs cannot pitch their companies in 10 minutes or less, the message needs to be refined.

2. Don't override the memory buffer. Geoffrey Moore is the bestselling author of Crossing the Chasm and Dealing with Darwin and is a venture capitalist at Mohr Davidow Ventures. He has seen hundreds of presentations. He told me that entrepreneurs "try to squeeze a 2MB message into a pipe that carries 128kb per second." In other words, too many people overload their presentations. Remember, your brain can only absorb so much information at a time—keep your pitch simple and clear.

3. Set the stage for the conversation. According to Moore, most entrepreneurs fail to intrigue investors because they jump right into explaining their product without setting up the problem. "You need to create a new space in my brain to hold the information you're about to deliver," says Moore. "It turns me off when entrepreneurs offer a solution without setting up the problem. They have a pot of coffee—[their] idea—without a cup to pour it in."

I was thinking about Moore's advice when watching the DEMO pitch from Kevin Fliess, the founder of travel Web site TravelMuse. He began his presentation by setting the stage: "The largest and most mature online retail segment is travel, totaling more than $90 billion in the U.S. alone. We all know how to book a trip online. But booking is the final 5% of the process. The 95% that comes before booking—deciding where to go, building a plan—is where all the heavy lifting happens. At TravelMuse, we make planning easy by seamlessly integrating content with trip planning tools to provide a complete experience." By introducing the category before jumping into his product description, Fliess created the cup to pour the coffee into.

Once you have described the category, Moore recommends that you stake your "claim to fame" by clearly explaining why your company has the best chance to capture the opportunity you described.

4. Rehearse. Reading from notes is a sure way to lose your audience. You need to take the time to internalize your message so that it doesn't seem scripted (even though you might want to start with a script and reduce your message to bullet points for practice). Bear in mind that most presenters don't spend nearly enough time rehearsing the message (and responses to tough questions). In her new book, Slide:ology, presentation expert Nancy Duarte (BusinessWeek.com, 4/10/07) estimates the preparation time for a 30-slide presentation should be in the range of 36 to 90 hours! That's right, 36 to 90 hours! If that amount is shocking, you probably don't spend enough time researching, collecting material, understanding the audience, organizing ideas, sketching the storyline, or rehearsing.

5. Don't sweat the small stuff. During some of the presentations at TechCrunch, presenters had to wait while their Web sites loaded, because of a spotty Internet connection. Often the presenters stopped speaking while everyone waited. It seems they forgot that even in the most carefully prepared presentation, a minor glitch or two is likely. It's better to quickly acknowledge the mistake and move on. Your audience is interested in what you have to say and what you have to teach them. It's not about the slides, it's about you.

Keep these five suggestions in mind as you prepare for your next big presentation. Remember, you might not get another chance to win over your audience.