Wednesday, April 19, 2017

COO’s Secrets of the "Mature Startup" (and Selling to the Global Enterprise Customer)

The global supply chain for goods and services welcomes newcomers with the right idea.   But leadership vision and operational excellence for successful execution are critical to viability, growth, governance, exit strategy and legal compliance and avoidance of litigation.

Let’s consider the role of the Chief Operating Officer.   While the CEO provides inspiration and direction, the COO serves as an efficiency guru.  The COO’s mission is to avoid the perils and pitfalls of rapid growth while formalizing mature, transparent and repeatable processes and procedures.  A recent Wall Street Journal article (April 14, 2017) recounts how Instagram's COO Marne Levine successfully “sharpened” Instagram by formalizing operations, forging communications across teams and expanding partnerships with key external parties.

A great COO can make a difference at each stage of a company’s growth.
  • In startup mode, effective operational design and internal procedures and controls are essential for negotiating “alliance agreements” with mature companies or for milestone-based R&D “joint ventures.”
  • In growth mode, these same internal procedures can effectively enable sales channels for “teaming” to provide collaborative solutions by companies serving the same target customers, albeit with slightly different product or service portfolios.
    • In such cases, each of two or more “team” partners (or “bidding consortium” partners) must have mature processes to succeed in a joint go-to-market strategy. This could be an OEM supply deal. Or it could be a “teaming” agreement to plan a joint pursuit to a joint target that is introduced by one of the team members. Under a “teaming” agreement, one “partner” becomes the eventual prime contractor, while the other becomes a supplier or subcontractor.
    • The quintessential test of effective integration with an enterprise customer's needs is whether a provider can provide outsourced services that are essential functions (like back office and middle office) but do not define the brand.
  • In mature mode, internal controls provide a platform for acquisitions and rollups, or a higher price for a sale to a strategic acquirer.
From my experience, here’s a to-do list of secrets for the COO of any company seeking high growth in today's digital business environment.

1. 360° Company Vision.  Vision requires satisfying the customer’s need, both now and as they evolve,;with a logical business model for sustaining customer satisfaction over time.  A disruptive innovation won’t survive if it lacks a broad vision for both initial disruption and eventual adoption as a business standard across industries.   In the deal, the supplier’s vision must fit the customer’s own vision for its mission.  And internally, it may require trade secret protection.

2. SaaS-ability: Demonstrable Standards for Integration with the Target Customer.   If you want to have your “as a service” solution gain traction, design it to fit the target customer’s functions, business needs and regulatory standards.  Identify and adopt all regulations applicable to your customer.  Demonstrate auditable process compliance that can meet audit standards.    In the deal, demonstrating integration with the customer’s operations is defined in the product specifications, the scope of service, representations and warranties and indemnities and termination rights.

3. Marketing Effectiveness.  Marketing prepares your target customer to identify and be favorably disposed to consider buying from you.  The organization’s message may be positive, highly differentiated and compelling, but it needs to spread across the universe that includes influencers and prospects, not just repeat buyers.  In the deal, “sales fluff” marketing inducements are excluded, but core marketing message get included in vendor commitments.

4. Sales Effectiveness.  Develop capabilities for the full chain of marketing, pre-sales and sales activities for effective deal management.  Design your sales channel for effectiveness in achieving your business model: deal structure, pricing, contract development and negotiation and overall customer experience (pre-sales and after-sale).  In a channel sales deal, targets and procedures for lead generation and customer experience need to be defined so that external sales support (agents, distributors, influencers, regulators, media, trade associations) align with the internal sales team.

5. Customer Experience/ User Experience.   Customers buy to solve a problem or fill a need. How successful are you at filling that need through effective tech support and after-sales service?  Do you use a range of tools? Do you create a customer community or user group?   Do you commit to service level agreements?  Support and SLA’s require internal policies and procedures for repeatability, training and evolution.   Your business model should fit the customer’s expectation on quality of service, but you need to decide whether you are in the “commodity services” business or in a “value-add” business for which the enterprise customer will pay added value for your “design thinking.”

6. Agility and Adaptability.  A visit to the Galapagos Islands in Ecuador shows how some species evolved and survived, while others went extinct.  Do you respond to market changes and opportunities?  How dependent are you on one recent change?  Do you apply continuous process improvement as part of your “design thinking”?  In deal mode, do you use the sales process to inquire about the customer’s wants and needs and redesign your product or service offering to adapt?

7. Viability: Viability is measured by financial results, both as to profitability and re-investment in continuous improvement.

"Mature startup" strategies can be formalized through management policies, procedures and contracts.  Virtually all stakeholders are involved:  employees, contractors, supply chain partners, licensors, channel sales and distribution partners, investors, lenders and, of course, customers.  The COO can set the path.