A VC - Latest Comments in A Time For Assessing "Strategic Opportunities"

Re: A Time For Assessing "Strategic Opportunities"

Andrew Warner — Wed, 25 Feb 2009 21:47:17 -0000

Here's the ad I see for this post (in my rss reader)

Re: A Time For Assessing "Strategic Opportunities"

fredwilson — Wed, 25 Feb 2009 16:28:23 -0000

We can debtate Jobs vs Gates at another time. I think both are quite strategic.

But your point about skin in the game is a big time winner. That's what its all about.

Re: A Time For Assessing "Strategic Opportunities"

Joe Galarneau — Wed, 25 Feb 2009 14:24:16 -0000

Fred had mentioned a few weeks ago that the commenting section of AVC is a very dynamic community on its own right. With his permission, I'd like to see if any bright lights from this community would like to speak at an upcoming panel discussion to be held in NYC (date TBD, but sometime in mid- to late April). Our organization, the Internet Strategy Forum, is looking for thought-leaders from the VC/start-up community or digital business units. The event will be a public forum with a low admission fee, so we're expecting about 100-200 people from the local digital community. Below is a description. If you're interested, want more information, or just want to chat about this, please contact me at joe@galarneau.com. Thanks!

Don't be stupid: Making the right moves to beat the recession and drive growth on the web

As decreased consumer and business spending has placed pressure on all business models, corporate America has retrenched by trimming investment, reducing its burn rate, and shuttering non-core operations. These tactics extend across the enterprise, often affecting still-burgeoning digital units at the same time as their lagging brick-and-mortar counterparts. However, when the economy rebounds -- and it will -- will these actions be viewed as the right moves to position Internet groups for the next wave of growth or will recession-inspired shortsightedness hobble them for years to come? Representing corporate Internet units, pure-plays and start-ups, our panel will explore how to balance prudence and preparation while still moving forward in tough times. These executives from across the functional spectrum will discuss their current online investing patterns, what metrics are important for opportunity identification and monitoring success, and how they’re building solid digital business cases and closing the sale to key stakeholders.

Takeaways will include actionable tactics on how to attract audiences and customers in times of austerity, build new products without breaking the bank, and craft a steady strategic plan to get through to the other side. By hearing firsthand about the details underlying successful digital initiatives, attendees will be able to transform the economic fear and uncertainty in their own organizations into a catalyst for growth and opportunity online.

Re: A Time For Assessing "Strategic Opportunities"

Donald Johnson — Wed, 25 Feb 2009 12:35:04 -0000

As we've seen in the stock market over the last 24 months and in the economy for years, people live in denial. I meet monthly with 25 very successful and seasoned executives and entrepreneurs, and the denial is beyond belief. There's a difference between being a doom and gloomer and a realist, and I'm talking about the critical importance of facing the reality of changes in technology, markets and the overall environment.

The idea that boards hold management's feet to the fire is difficult to accept, because so many board members leave their brains at the door and go along to get along. But when VC types are on a board, they have skin in the game are are more likely to be realists than some friend of the CEO.

My point is that as investors and executives, it's important to leave "hope" to the politicians and stock groupies and focus on what's going on in the world and target markets. That's why so much time must be spent on market, technology and environmental assumptions before planners start putting their dreams in their spreadsheets.

I owned and edited a newsletter on strategic planning for almost 20 years. Two things struck me over that time. First, the herd mentality rules most industries and executives. And, second, few people really think strategically.

Steve Jobs is a strategic thinker as well as an innovator. Bill Gates is not.

Re: A Time For Assessing "Strategic Opportunities"

fredwilson — Wed, 25 Feb 2009 11:31:52 -0000

You are right, but it is the board's job to make management face those harsh realities

Re: A Time For Assessing "Strategic Opportunities"

fredwilson — Wed, 25 Feb 2009 11:31:48 -0000

We've all seen that movie and it ends badly

Re: A Time For Assessing "Strategic Opportunities"

fredwilson — Wed, 25 Feb 2009 11:31:35 -0000

Agreed. That's generally the best way to start this kind of process

Re: A Time For Assessing "Strategic Opportunities"

fredwilson — Wed, 25 Feb 2009 11:21:29 -0000

Excel is the standard and it works well

Google apps is starting to emerge as the most popular alternative

Re: A Time For Assessing "Strategic Opportunities"

fredwilson — Wed, 25 Feb 2009 11:20:33 -0000

Thanks for the link

I'll read your post and let you know what I think

Re: A Time For Assessing "Strategic Opportunities"

fredwilson — Wed, 25 Feb 2009 11:20:29 -0000

We need a few more good boutiques and I think we'll get them with the collapse of the big banks

Re: A Time For Assessing "Strategic Opportunities"

fredwilson — Wed, 25 Feb 2009 11:20:26 -0000

We often back small teams of developers who have built something that is gaining significant traction. That is often the best raw material for a new business. Then we have to work with them to develop the opportunity. And getting a plan in place is one of things we have to help them do. We don’t invest millions without a plan, but we'll gladly invest hundreds of thousands if we like the raw material.

Re: A Time For Assessing "Strategic Opportunities"

Ken Ripley — Wed, 25 Feb 2009 09:54:59 -0000

"The worst place to be is out of money and without a plan" . I find a primary reason for companies not changing their plan sooner is tied to their original assumptions. If there is a flaw in their original business plan as it relates to product development, consumer acceptance, or most importantly, ad marketplace realities, even the new plan is doomed. Founders are loathe to admit the plan's original assumptions/estimates were flawed so that early round investore don't raise questions about their abilty to forecast or even their acumen. And when it comes to credibilty, human nature dictates that staying the course avoids admitting your concept was off target in the first place.

The abitity to question that which has been treated as fundamental is core to finding the proper direction to come.

Re: A Time For Assessing "Strategic Opportunities"

Khan Smith — Wed, 25 Feb 2009 08:42:51 -0000

Fred, this post is spot on. I would add that it is important for a company to pick it's head up, assess the ecosystem against their business and product strategies even in environments that are more stable. It is very easy to "believe your own press" and push on blindly without assessing the marketplace.

Re: A Time For Assessing "Strategic Opportunities"

kidmercury — Wed, 25 Feb 2009 07:45:59 -0000

what you are saying is true, no doubt, though if i can help one person open their eyes and take precautions to protect themselves and their family it will all be worth it. if i can help two people i will be ecstatic.

also, in order to solve the problem, people will need to understand the causes. if hyperinflation comes, govt will just try to use it to justify more of a power grab, perhaps via the creation of a world central bank that will be even worse than the fed. if people do not understand the causes of the problem, they will continue to fall for all the fake solutions offered their way. many people in zimbabwe still dont understand their crisis, and argentina is still a mess with an unstable monetary policy. only the truth and proper education can unite the people to bring about real change that benefits everyone.

lastly the seeds of liberty must always be planted. for instance the currency act of 1764 outlawed the colonies from using their own currency and forced them to use the interest-bearing currency imposed by king george, but it wasnt until 1776 that the revolution really got underway. it is not going to take nearly that long this time, but it still illustrates that reclaiming liberty is a gradual process that requires much education. i'm happy to get the ball rolling ASAP, even if most calls for liberty fall on deaf ears -- for now.

Re: A Time For Assessing "Strategic Opportunities"

David B, — Wed, 25 Feb 2009 04:58:21 -0000

First, while I also think this is an incredibly important topic, maybe the topic of our lifetime, realistically, such a post probably goes to waste. If there's one thing we can learn from looking at the past it's that the car has to hit the deer before anything can happen. Jumping up and down about spending is just that, a lot of jumping. That said, the only time people are willing to make a huge change is during a huge crisis. This will be an incredible opportunity if we have the right ideas waiting in the wings. Should we make our rep count in Congress go from 435/100 to 43,500/10,000? They would work, not from DC, but from their district. It would end hard lobbying and give people more voice. Change the two-party system? Offer tax payers the ability to designate in which ways their tax money is spent? These are impossibilities now, but may not be at the depth of the crisis.

Second, I see the stimulus not as some more spending but as defibrillation. It's not a matter of putting the "dollar at risk" but about making sure there is a dollar at all. And the stimulus is nothing compared to the rate at which we're increasing the money supply. To me, this is no longer in the realm of conventional politics of spending or not spending, but a sort of life-and-death situation.

Again, I think it's an important topic, sure. But talking about the reasons the ship is going down doesn't help anyone in the end. We're not going to have much influence. But we can have a tremendous impact on what happens afterwards.

Re: A Time For Assessing "Strategic Opportunities"

D.K. Kidd — Wed, 25 Feb 2009 03:47:41 -0000

Fred,

I made my first business budget today. It's written down (in excel), and while it isn't 18 months, it does cover through the end of 2009.

Do your companies use a spreadsheet for the financial plan? A napkin? Any special budgeting sotware?

Re: A Time For Assessing "Strategic Opportunities"

Alexander Osterwalder — Wed, 25 Feb 2009 02:20:55 -0000

In these turbulent economic times I would even go a step further: take a step back, organize at least a half day off-site and "re-assess your business model". The following questions should be answered:

1. is my initial target market still lucrative enough (and not too strongly impacted by the crisis)?
2. what customer problem am I really solving?
3. is my target market really willing to pay for that? how does he want to pay?
4. am I really using the most effective channels to reach my customers?
5. what relationships do I have to build with customers in such a severe economic environment?
6. which resources are too costly to maintain?
7. which activities are too costly to maintain?
8. which strategic partners can leverage my business model?
9. how can I lower my cost base (an obvious one...)

The best way to do this is by brainstorming with a diverse team equipped with post-its and a huge wall... The discussion, the understanding and the alignment will be even more valuable than the outcome. That is exactly what you need to come out of a crisis more strongly...

Warm regards from Switzerland! Alex

Re: A Time For Assessing "Strategic Opportunities"

ap — Tue, 24 Feb 2009 20:52:30 -0000

Fred,

Great post and even better are the comments that follow with some examples. If possible I would love to read your thoughts on what should be covered in a plan regardless of industry?

cheers
aj

Re: A Time For Assessing "Strategic Opportunities"

peter_zaballos — Tue, 24 Feb 2009 20:46:42 -0000

There's a nuance here to the task of revising the business plan, that what you're really doing is revising the set of assumptions, and the accuracy of the information in the cells of the spreadsheets are still likely wrong. What you've done is given yourself a fresh view of how you expect the landscape to unfold, with a set of assumptions that reflect the economic conditions of today (that last business plan you had was written before October 2008, so all those assumptions are invalid now.

In six to nine months, you've got to go through this again. Hopefully the economic climate may have improved, and most importantly some of the broader indicators on demand and growth will have become clearer, and you can iterate once again.

It's the slavish obsession with the process, understanding your plan is a container holding assumptions, not predictions of what revenue will be in month 9, and being able to let go of this plan and create another, once the assumptions change or need to be validated. It doesn't mean in you ever ignore your plan, or don't maniacally measure your performance to it, you're just very mindful of the interplay between its assumptions and reality.

This provides the aperture in the conversation among the execs and their board to surface where the trajectory of the business is pointing, where the business could and should be within the cash horizon, and who is in the logical acquirer landscape.

That's so much harder to do for younger companies/execs than it is for folks who have been through a down cycle before. To your point Fred, the more experienced teams don't have to be asked to do this, they naturally know it's time to reset the plan around a new set of assumptions when they read the same headlines we all do .

I took a run at explaining this process for the companies my partners and I invest in with this post: http://openambition.com/200...

Re: A Time For Assessing "Strategic Opportunities"

kidmercury — Tue, 24 Feb 2009 20:17:22 -0000

IMO in trying to understand and plan for the current crisis it may be worthwhile to look for historical precedents. IMO argentina in 01/02 and iceland in 08 are the closest examples to historical precedents to this current crisis. the link below offers a comparison to argentina (contains some small inaccuracies IMO but by and large correct):

http://www.nowandfutures.co...

in both argentina and iceland once currency started collapsing the govt put in capital controls making it hard to get your money out of banks and into other currencies. basically they tried to stop a run on the currency. this means you cant get your money out of the bank while prices are soaring and imports are declining (thus creating shortages which further fuels higher prices for consumer goods). naturally this is what pushes people to finally get politically active, i.e. protests in the streets and that kind of stuff.

a couple observations:

1. getting politically active BEFORE the crisis is the best way to stop it. realistically speaking this is not going to happen in america as most people dont know what is going on (we are just sort of hoping this is a temporary thing and we'll naturally bounce back) and dont care to learn, after all who has time, american idol is on

2. getting out of the dollar is worth considering, as foreigners running on the currency is what causes massive currency devaluation, so basically you can either start the run or be left holding the bag. typically when foreigners stop buying govt debt the govt begins to print money and the foreigners run. the saving grace of the US may be that the dollar is the world reserve currency so foreigners may be more reluctant to run. judging by gold prices and central banks increasing their gold holdings i think foreigners could run from the dollar to gold, or to a basket of currencies, so i think a run on the dollar, or a partial run on the dollar, is still quite possible, even more so if govt refuses to curtail spending (as was the case in argentina). and a global crisis makes it harder for foreigners to continue subsidizing americans (this is the decoupling theory)

while i am a full-blown kook this concern is not just for kooks, brighter and more experienced minds than mine are very concerned about it. itulip.com and shadowstats.com to mention two, and of course peter schiff (europac.net) who has become famous for giving kookonomics a charismatic and easy to understand voice

the conventional way to hedge is through accumulation of precious metals, as if capital controls are put in place than electronic commerce will come to a standstill (credit and debit cards wont work) and we'll have to return to barter until govt turns the banking system back on. alternatively i think there could be an oppty in creating virtual currencies as our own monetary system. this would require cooperation from people which of course is still extremely unlikely, remember not only is there american idol but after that we have to watch mtv and other quality programming (emphasis on the word programming). this would also essentially be a non-violent revolution, the thought of which scares most people, regardless of necessary and morally correct it may be. so i wouldnt count on it, least not until people are educated enough and psychologically willing to face the scenario.

in the final analysis govt spending is critical here, the more we enter a loop of diminishing tax base followed by "stimulus" packages (gotta love the orwellian newspeak....what destroys is called stimulus) the more currency risk we create. ending the american empire is no longer just a moral imperative, it is increasingly an economic one as well.

conventional logic is that it's bad for business to talk about politics. of course, everything that has a beginning has an end, and IMO now is the time to end this sort of logic. the safest route is for everyone to get politically active and start demanding a decrease in the size, scope, and spending power of govt. demilitarization is the most obvious area where govt spending should be cut drastically, doubly so when one remembers that 9/11 was an inside job. but at the very least the "stimulus" packages need to be stopped, if govt wants to stimulate the economy they should do so with the massive amount of money they already have, not by printing more. otherwise we are putting the dollar at risk while also distorting the free market and making it harder for trained investors to rationally analyze and cultivate opportunities.

but like i said dont take my word as brighter and more experienced minds than mine are concerned about insolvency of the US govt and the currency crisis that could emerge as a result. at the very least it is something that entrepreneurs and investors should be aware of and discussing when making plans, and evaluating for themselves whether or not it is a legitimate concern. i am simply mentioning it because i think it is the biggest concern that we should all be talking about. i hope i am wrong though i've yet to find a very convincing rebuttal for how we are not on an extremely dangerous path, which is why i mention it (not trying to fearmonger or say sensational things to get attention)

Re: A Time For Assessing "Strategic Opportunities"

scottfromshanghai — Tue, 24 Feb 2009 20:06:27 -0000

Here in China we always have a 5 year plan! You don't have to stick to it religously, obviously things change but its a great annual exercise to step back and renew it.

Slightly off-topic but did you see the rather public way Pillsbury mishandled their layoffs?
http://abovethelaw.com/2009...

Re: A Time For Assessing "Strategic Opportunities"

Shane — Tue, 24 Feb 2009 19:20:20 -0000

I agree. I think that sometimes there are companies in the technology space that may have such a great tool, widget, what-have-you, that they forget they have to make money with it. It is certainly understandable that there are some companies who cannot see the forest from the trees, especially in this economic climate. I mean, it is a lot easier to gravitate to what you are comfortable with (coding, in this case), than grind out what you are uncomfortable with (sales). In my opinion, the sales process and strategic plan is the most critical aspect of any business because it guides all other decisions within the company.

Re: A Time For Assessing "Strategic Opportunities"

johndodds — Tue, 24 Feb 2009 18:27:23 -0000

I'm a little surprised (actually more than a little) to infer that you don't insist on your companies having at least an outline strategic vision from day one. As the first two commenters rightly assert it instils a direction/purpose and, I would add, it makes it more likely that the product and engineering focus is a focus on end users rather than technical possibilities. It doesn't have to be set in stone and I don't believe its existence need limit innovation and flights of fancy, but the fact that it's there does at least have a subconscious impact.

Re: A Time For Assessing "Strategic Opportunities"

JLM — Tue, 24 Feb 2009 18:08:15 -0000

Megan ---

I could not agree with you more! You are absolutely correct. Ocam's Razor level of brilliance.

The other thing is to drag out the PLAN a couple of times per year and thoughtfully reflect on what has changed since the PLAN was written. It is particularly important for CEOs to get "buy in" or at least "brief back" from the top guys. There is a something to be learned when you ask folks --- what do you understand is the PLAN? Sound simple, but it is always illuminating. Make them commit or make them come up w/ a good alternative. Get everybody's fingerprints on the murder weapon.

I think that we all do very little real thinking that is truly STRATEGIC. Sure we make "plans" and my "to do" list would choke a giraffe (because it's..........long..........like a giraffe's neck) but most of the time we engage in very tactical thinking.

When you are standing at the pay window cashing in your chips you will realize that very, very few real singularly important decisions were truly "strategic" because an awful lot of success is just based upon getting to work early, staying late and checking stuff off the list.

I think that a great strategic plan has to be no more than 2 pages long to truly be strategic. Now the tactical or implementation plan can be much, much longer but the strategic concepts are very short.

The top dog, the CEO, has got to blend imagination with strategic planning and thinking. Don't ever make small plans because GREAT BIG plans cost the same amount of money. CEOs have to be ready to accept that they are different: If you are not comfortable feeling foolish when presenting the plan, then you are not being aggressive enough. The higher you get on the totem pole, the more of your ass the world can see.

"I can no longer obey; I have tasted command, and I cannot give it up." who said this?

Hint: it was a very short guy from France who almost conquered the whole damn world but for the savagery of Mother Russia's cruel winter.

I urge CEOs to join organizations like YPO and TAB and other organizations which provide a good peer to peer contact and to go in with no preconceived notions and to use it as a learning exercise. In these settings, CEOs can state the obvious --- I have some good instincts and I am in charge but I really don't know what to do. You will be amazed at what great advice you can get.

Re: A Time For Assessing "Strategic Opportunities"

Vaibhav Domkundwar — Tue, 24 Feb 2009 15:49:58 -0000

Fred, this is a great topic. One question I have however is what can bootstrapped companies do in this regard when they don't have any investors. How do they go about the sales process or exploring the opportunity for a sale. It seems like funded companies with connected investors are able to make strategic connections more easily than a bootstrapped company which may have a better product/traction etc. What is your advice to such companies and are there any boutique firms out there who are focused on helping bootstrapped companies explore exit opportunities? I am pretty sure there is a big need for this.