Strategies in Uncertain Times:
High-Tech Entrepreneurs Speak Out
(As seen in New Jersey Business Magazine, May 2003)
By Bruce Freeman
Everyone knows that high technology companies have had it rough over the last few years. The bloodbath that started with the “dot coms” has even spread to companies once thought to be virtually recession proof. Yet, many high-tech companies are surviving, even thriving, in the leanest of markets seen in the last 20 years. How are these companies managing to stay afloat, and even grow, when others have lost the battle and closed their doors? Are there magic marketing or management strategies that keep these companies going, or is it a matter of personality? Out of curiosity, I started doing a little unofficial survey amongst high tech presidents and chief executive officers across the country and found that there are three strategic commonalities as well as individual tactics depending on market that shape success in a tough market. First, the business you already have must be protected. Second, it must be closely managed, and finally, you must take or make opportunities to increase sales.
Protecting the Business
The strategies I heard most often had to do with protecting businesses that have taken years to build. Constant communication was sited as the most important strategy for continued success. Megan Cunningham, principal of New York City based, Magnet Media, a company that produces interactive training products for film, video, graphic and web design professionals, uses every available method to stay in contact with what her customers and business partners need. “We work closely with our customers at every stage of the sales process from product development, to online surveys, to actually asking customers what they would need to purchase a subscription from us. We also work closely with our strategic business partners who support us with promotions, events and online marketing campaigns.” Gary Murphy, president of the Birmingham, Alabama based, Imaging Business Machines Limited (IBML), a business document imaging company, echoes Ms. Cunningham’s sentiments. “You must stay focused on your company vision, build a quality product and always support your current customers until they are 100% satisfied. Never spend money on a potential customer if you have a current customer with a problem.” Bob Upham, president of Chatham Systems, a professional services, systems integration and consulting company based in Madison, New Jersey, puts it simply, “Treat your current customers like gold because you may need them down the road.”
Keeping in touch with customers’ needs wasn’t the only strategy considered paramount by the successful high tech executives. Constant communication with and respect for employees is also key. Jonathan Kahn, president and chief executive officer of Aladdin Systems, a Watsonville, CA based publisher of award-winning business and consumer software products, notes, “Everyone in the company has to understand where the ship is heading and what each person has to do to help get it there. Our people understand what is at stake and that they have to buckle down and make their numbers if we’re going to succeed.” Bob Upham concurs, “At one point, we had a temporary situation, so we asked for volunteers to make a sacrifice - every single employee volunteered. Loyalty comes with honesty and respect for your people.” Gary Murphy notes that he gives department managers a tremendous amount of freedom to make decisions, never shows anger and keeps remarks positive rather than negative.
The third strategy regarded as a requirement for protecting your business regards product or service quality. Dan Janal, president of Show Stoppers Media Receptions, a Cleveland, Ohio based marketing company that connects high tech companies with the press at industry trade shows knows that his success is based on customers’ expectations of high quality. “Despite economic pressure to maximize profitability, we never sacrifice quality at our events because that is what keeps people coming back. We know we are building long-term equity with our customer base by keeping our standards high.”
Managing the Business
A second strategic theme emerged as I talked to each of these successful executives. Almost everyone mentioned managing cash flow and keeping a tight rein on expenses. Frank van Gilluwe, president of San Jose, CA based, V Communications, a leading developer and publisher of advanced software utilities, commented, “We look at every expense to make sure people are making the right expenditures, and we restrict new expenses when times are tough. We make our forecasts on the pessimistic side and then are pleasantly surprised rather than caught unaware.” Jonathan Kahn agrees, “You have to follow the money. We never spend more than our revenue in hard times and we manage our cash to get the most we can out of it. We try to make revenue every dollar worth $1.30 on the expense side.”
Payment plans, flexible deals, bartering and other creative strategies were mentioned as well. “The art of a deal still works. Companies want to leverage what they have to offer off of what others have to offer; reach expansion deals are the easiest to broker - the exchange of a one-time use of your mailing list may buy $10,000 worth of advertising,” noted Megan Cunningham. Bob Upham commented, “Payment plans for customers who are having trouble and pre-billing strong accounts helps to even things out and keep everyone receiving goods and services. Our businesses are inter-related and we all know how important it is for each company in the chain to succeed.”
Several people mentioned working smarter, as well as harder, at managing their businesses. “We found that offloading non-essential work to a 3rd party vendor allowed us to make sure our time was better spent doing what we do best,” noted Dan Janal. Jonathan Kahn’s, Aladdin Systems takes a slightly different approach to working smarter, “We are always looking to barter and negotiate for everything we purchase. By knowing, and only paying, exactly what something is worth to us, rather than the price set by the vendor, we are able to free-up cash for other things.”
Of course, everyone knows that increasing sales is essential in a weak economy, but how to accomplish that depends on your market, your company’s position in that market and your ability to manage risk. For some companies, increasing sales comes via growth through acquisition. At V Communications, Frank van Gilluwe believes that growth through acquisition is a sound strategy when done correctly, “You have to look for well-engineered products that fit within your company’s mission, add benefit to your current customer base, and have done well in their markets. Then, you can make flexible deals; cash is king, but negotiation is queen.” Jonathan Kahn notes, “Tough times bring about consolidation of markets – retailers and OEM’s want to deal with one vendor who can provide multiple products, so providing a variety of related products can strengthen your sales position.”
Others believe that the key is continuing to cold call and knock on doors, as difficult as that may be. For Dan Janal of Show Stoppers, it meant taking on a commission-based sales force to increase sales. “When times are hard, there are a lot of good people looking for work, so it’s possible to get people to work on a commission-only basis. This works for us as well as for them because they are out there promoting us as well as themselves and they only get paid if we do.”
Finally, many executives mentioned increasing sales and spreading risk through opening new markets and increasing the breadth of channel distribution. The potential for international sales was noted repeatedly. V Communications looks for people to do translations, promotion and support. They may make less per unit, but the risk is less as well and it helps to even out income when sales are soft in U.S. markets. Others use cost, cash, revenue and broad distribution methods to hedge against any one channel’s weakness. Retail markets can be hedged by taking advantage of the internet, electronic and physical direct mail. OEM’s promotional deals help identify potential customers, forming new relationships that lower costs and raise profit margins.
In conclusion, there were two things in common
that I noticed in speaking with these successful high-tech executives. Each
was very respectful and grateful for the dedication of their employees. Without
realizing it, their comments and actions spoke volumes. Also, each was very
realistic, yet in the most positive way. No one was in denial about their company’s
true status or running from the reality of their individual market. Each of
these executives is facing the cold, hard, truth every single day and they are
purposefully and proactively running their companies; taking advantage of every
opportunity instead of letting the vagaries of their markets control the destinies
of their individual concerns.