Cross-Border Integration Irritants: You Change First
August 14, 2008
Case Study Project Description
A Canadian retailer was bought by an American chain store in their first cross-border acquisition. Several years post acquisition, different policies, procedures and laws, combined with the parent company’s change in management and centralizing of operations, alienated the Canadian management team. The US company did not seem to understand that Canadian accounting was different as was the expectation of an apology when payroll didn’t take the differences in law into account. Tempers flared often and the Canadian team would give the US management lip service.
They were not working well as a team: everyone ran their own department and store and did their own thing. Conflicts also existed between team members as to how to run things, how to grow and how to work with the American parent.
Project Problem
To be seen as a division ready to take on future growth – and not be left behind – the management team needed to learn how to collaborate through change and conflict, deal with the American parent’s way of operating, and influence change with the US parent through communication rather than resistance. The Canadian company retained us to help them with making these changes, knowing that the US parent would not be participating in the process. Was it possible for one side in a conflict to do all the changing and achieve any better result?
Solution
First, the leadership team had to be willing to stop viewing the parent company and its managers as the bad guys. This perspective ensured they felt powerless to get the attention they wanted to develop their own strategies.
Next, the team had to learn how to set their own vision and then sell it up the ladder as a team, not just rely on their leader to do it for them. We facilitated several events and team coaching sessions to set this new way of working in motion so that each member of the team contributed effectively.
After a year of working on the attitudes and methods they had been using to work with the US parent, the day came when the President would be in town along with the Vice President of Development. The Canadian management team met with us concerned that they would be shut down again. We reminded them of their vision to be trusted with an expansion strategy and that they could do this. We worked through their fears and concerns and anger and finally this group of ten managers agreed on their goal in the meeting with the US parent: they would welcome them, listen to them and make their request for the expansion.
Results
The mood changed immediately. As the US leaders walked into the room, the Canadian team rose and shook their hands. Camaraderie ensued and a good feeling filled the air. The Vice President looked around the room and smiled. He started with saying how impressed he was with everyone and their Canadian operations. He noted their change in attitude and what a joy it had become to work with them He wondered allowed what they wanted to do next. “Give me a plan, guys. Let’s do something up here!” Shock ran through the room. They got their goal and they had not had to ask.
After several meetings with the parent company the team was given permission to proceed with an expansion plan. They had not seen themselves as able to get this project off the ground before. Now they are the examples to other divisions about how to expand territories effectively.
With their differences resolved, communication with the parent company became informative and resourceful rather than rebellious and adversarial. Within 18 months, the management team emerged stronger, now the star performer in the store chain and opened their new store location.
Maximizing the Value Post Acquisition
August 14, 2008
Case Study Project Description
An industrial product supplier purchased a much smaller entrepreneurial distributor of products. It seemed like a good deal at the time. Due diligence revealed they had a few cash flow problems but the buyer had the resources to remedy that. They had a fine team of fabricators and had identified a package solution the market seemed to like so they were not just selling one off products. The deal was done.
Project Problem
The smaller company had moved into a new facility before the acquisition. The buyer didn’t need that space and immediately decided to split the company in two, sending the fabricators to the central facility and sellers and managers to a satellite office. Suddenly, two people quit. The smaller company had been vertically integrated so the sales people were also the product expediters. Now with their fabricators 30 miles away, they couldn’t tell if their sales orders were being processed. Anxiety rose, sales declined and more people quit. Management had not put in a new process to help the new people adjust to the system. The manufacturing plant had not arranged for an expediter on their end to communicate with the sales people. Information fell through the cracks. To top it off, the top three sales people were all close to retirement age. Who would they pass along their knowledge to?
Solution
Management knew there were cracks in their acquisition integration system. Marketing, sales, product definition, product management and people integration were left to chance. We were invited to assist Kibo Ventures to help them come up with a better template and method of integration as well as resolve the problems of the current acquisition.
We interviewed all concerned and started to see where the road blocks were in the entire operation from sales through to installation. Communication was blocked across many departments and conversations about process improvement did not happen due to chronic interpersonal issues. The sentiment was that people should ‘just get with the program’ or ‘duke it out’ to make things work. A feeling of bleakness and resistance to change was in the mindsets of new and old employees alike.
We developed a new organizational chart and strategy for how the company could become a lot more customer focused and resolve some of the interdepartmental issues. New roles were created to take responsibility for areas that had previously fallen through the cracks including succession planning, knowledge transfer, training, sales support, product management and market development.
Result
Included in this package of services was a pre and post integration due diligence road map. The map defined the areas where questions needed to be asked to make a good investment decision and then identify the questions and strategies needed to integrate a new acquisition in such a way as to maximize rather than erode the value. The map points to the areas where value erosion has the biggest potential and where to explore the impacts of pending decisions so that contingencies and alternatives could be developed. The company is now implementing several of the role changes and has halted acquisitions for the time being so that they will have a better foundation for the next company to be acquired.
How Do You Combine All the Products?
August 14, 2008
Case Study Project Description
A large innovator in the water business had been expanding through acquisitions on their product distribution side of the business. Now they wanted to increase their systems side with other acquisitions. But what should they buy and how should it be integrated?
Project Problem
Selling systems is a lot different than selling products. Products are short cycle items. People know what they need and they go and buy it. Systems solve bigger problems, come with a bigger price tag and have to be approved and selected by a variety of influencers. You can’t sell a system in the same way you would sell a product. Systems need a consultative selling approach that focuses on solving a problem for the customer. The problem is generally complex, involves several regulations, has installation issues, and takes time to build. The group that selects it is not necessarily the group that installs it, uses it or eventually owns it.
Solution
If you are in the market to add-on to the solutions side of the business, where do you put your focus in your acquisition selection? At the target market and only buy other system companies that sell to the same target market? At the technology and only buy complementary add-ons for that type of technology? Or perhaps at the ultimate end user of the technology? Our view is that the end user is the most important part of this equation. They have complex needs and those companies that can provide them an end to end solution that removes many of their perceived ‘hassles’ will get the contract.
Our solution was to train the management team in how to think like the customer to really understand their point of view, their pain, the hassles they experience and the work they have to do to successfully get a water system working to their satisfaction. Then we helped them survey the market place to determine: what competitors did; market trends; regulatory issues; and other uncontrollable variables that affect the sale of a water system.
Next they worked through all of this data and compared it to what they already offered and how they delivered it. They identified their internal process problems and installations to find ‘gaps’ that could cause customer frustration. Then they focused on the kind of systems that would best augment their current products to create a complete solution and identified the criterion most important in an acquisition.
How to Increase Distribution in a Fragmented Market
August 14, 2008
Case Study Project Description
A manufacturer and designer of wastewater treatment systems for small municipal sites and property developments. The company had emerged from a series of difficult situations and now wanted to expand their marketing efforts. They had one distributor left who was effective at getting this proprietary system sold and several others that had not had a sale.
Project Problem
The company had not had much of a marketing program in place. Their focus was on technical execution and project management rather than marketing and sales. In their industry, competition is ferocious and there are numerous gate keepers and influencers affecting the selection and sale of a system. Standing out from the crowd is challenging without a brand name and reference installations to demonstrate capability and effectiveness. Then the company won a coveted industry award as a result of their customers and competitors nomination. With this opportunity as a spring board, now seemed like the right time to leverage the publicity to find better reps.
Solution
It is always a difficult decision for a company in that business to decide between having their own direct sales force or using manufacturers’ representatives. Wastewater treatment systems are long sales cycle products that require consultative sales rather than order taking. There is a lot of ‘missionary work’ involved in gaining awareness amongst all the influencers. Target marketing can reduce the time to sale by focusing on developers versus municipal sales which can take a lot more effort. However, finding developers is challenging. We helped the company through this decision. In the end, the decision was fairly easy: it would take years for the networks to be built in the US market if the company hired their sales force. Reps would ostensibly have these networks already built.
We set up a recruitment program to find the right reps and develop a territory system and rep support program. We developed a criteria to identify the types of reps we wanted and then arranged to interview them at an international trade show that most attended. Understanding the system technically was the first challenge in the interview and then telling us how they would support the system came next. It became fairly obvious who could take this product on successfully.
Results
Nine new reps were selected. A public relations support program was designed and put in place. The reps received some training and technical manuals. The company won some other awards and this publicity was also leveraged. The biggest challenge the reps faced was getting the first installation in their jurisdiction to prove to authorities the system worked. This process is still under way and can take years. In the meantime, the markets where the system is already installed are continuing to enjoy reference sales.
We’re Growing Faster than Our People Are
August 14, 2008
Case Study Project Problem
A large sub contractor had the largest market share in their region. They won lots of jobs, were the first pick of many general contractors and were often voted the best place to work amongst journeymen and project managers. Yet, inside the company, the owners were tap dancing as fast as they could. With a shortage of trained people and more and more opportunities coming their way, the management team was working over time, getting increasingly frustrated at their people’s inability to take responsibility to lead and manage. Crises management created a powder keg of issues and tempers were short.
The good news was that revenue growth was through the roof. But were the owners getting any more out of the bottom line besides mental, physical and emotional stress? Was it worth it?
Solution
The first step that we took is to analyze their financial situation. They were unable to get the kind of reports from their financial software that would reveal where they were losing money so we pieced together a trail of documentation to be able to track the variances from year to year. What we discovered was that the gross margin variance was getting larger each year: what they estimated they would earn on each job differed from the actual accounting at the close of the job.
This financial fact pointed to a problem in the systems and processes that their people followed. We found that each person had a somewhat different understanding of reporting and some used software and some didn’t. The fact that the systems were not followed magnified problems and people often blamed one another for not following or using different systems. This created a culture where people would not be motivated to take responsibility for their actions.
By identifying the root of the problem on both the operational and cultural fronts, we worked with the owners and managers on both issues, instituting key performance indicators, performance bonuses tied to producing the indicator information and focused on helping get all systems onto a single software platform. Senior managers and owners all were coached on running effective meetings, their attitudes, methods of dealing with problems, managing clients, holding others accountable, delegation, leadership, decision making, having productive discussions and working with each other’s strengths rather than pointing out their weaknesses.
Result
With a variance reduction goal motivating the owners and the opportunity to clear up many of the systemic problems that have frustrated everyone, the future seems brighter. The company is able to hold more productive meetings resolving issues face to face that would in the past, have resulted in project problems that cause the variances.
Is there a Growth Path for a 20 Year Old Product?
August 14, 2008
Case Study Project Description
HR Payroll software programs abound. After industry consolidation, most of the small companies had either been bought by the larger firms or gone out of business. This software company had one great product, service and maintenance revenue and a crack software development and technical support team. But their focus had been on research and development for years, and servicing existing clients, not sales. With a new web interface completed and a ground breaking but difficult to understand second product, was there still a future for the HR Payroll system? There were a lot of pluses and a lot of challenges. Was it time for this company to fold? Was there an opportunity to be acquired? Or could growth still be an option?
Project Problem
ERP solutions for human resources, payroll and performance are dominated by the large ERP vendors. In this business, the old adage that ‘those that choose to buy IBM don’t go wrong’ seemed to dominate the purchasing decisions. How could this stable and proven software company get into new markets without being PeopleSoft or IBM? Further, the company had pursued many unrelated markets so reference clients were dotted across the spectrum of industries and geographies. There seemed to be no natural fit into any one target market despite the superb reputation they enjoyed for service amongst their great reference clients. The CEO and the COO were concerned about focusing on only one or two markets unsure as to whether they would yield any results.
Solution
The solution to this problem was to teach them about marketing, market research and market development so that they would understand how to build their own plan. We worked together on the process of uncovering what this product did that other products couldn’t do. It can be hard to look at your own product and spot what others see as the ‘thing that solves the real problem’. By interviewing existing clients, looking at competitors, understanding challenges in various industries, we finally found three distinct claims that everyone ignored that actually had the greatest value for a certain group of prospects.
Additionally after 20 years in business, the product had some very robust functionality and it did not price out after implementation nearly as high as its brand name competitors. When this research was done, then we had to find those organizations that had these problems where the company actually had reference clients and build out a database.
When a company doesn’t have a well known brand name and there is a lot of competition which results in noise in the distribution channel, advertising is a waste of time. Public relations is the best tool. An integrated marketing strategy using PR, Web 2.0, direct email and immediate ‘taste tests’ direct experience is vital. Together we shaped a marketing message, case studies, press releases, a web 2.0 strategy, measurement, KPIs and a lead generation system that tied together to become their call to action. We then coached the senior team in how to work with and use the message, how to build capacity to manage the growth and how to constantly evolve and improve the messaging system so that it would attract motivated buyers within two different and fragmented target markets.
Result
The time-intensive research and market focused discipline combined with a dedication to web 2.0 and public relations approach rather than expensive advertising started to pay dividends. In the first year, they achieved 400% growth in their sales calls and started winning business from much larger competitors. Because of this company’s dedication to service and responsiveness over the years, their few reference clients were willing to become champions for the company. One even voted the software client the most valued vendor amongst numerous other government vendors. Most importantly, we proved that there is a future and that revenue and gross margin growth are possible, even when it looks impossible.
Greening a New Product in an Old Line Business
August 14, 2008
Case Study Project Description
Port Townsend is a smaller paper mill that was in the process of converting to completely recycled feedstock (in order to remain competitive), to make Kraft Paper and other value added products in. Their goal was to find higher value applications for the paper they made to get out of the commodity business and to become much more environmentally responsible. They were looking for ways to find new product opportunities that would position them as the first mill to use 100% recycled content material for paper.
Project Problem
The biggest challenge was to find product applications that had secure market niches, little competition and large volume potential since paper mills make product by the ton. We suggested going to technology sources like Battelle National Labs and developing some industry discussions with potential strategic partners who could participate with Port Townsend in developing new products.
Solution
Battelle Labs has a mandate from the US Department of Energy to focus on what the pulp and paper industry should become in the future. They take two approaches to help companies like Port Townsend Paper:
Discover what products are possible given the state of certain technology and processes that they have identified in their research
Present market-driven ideas for products that they have determined will solve a problem or be in demand in the future.
In return, they want to be able to share the market information that we and Port Townsend Paper brought to the process with other clients and other Battelle research areas. Their goal was to create new products that solve current problems affecting many environmental, economic and social issues.
Battelle arranged a meeting with nine different scientists at the lab. We generated nine different product opportunities, all of which would require research funding from Port Townsend for work to be done. Many of the options were for agricultural markets. Port Townsend decided to do some research on potential market opportunities for such products before they funded any technical research
We put Port Townsend Paper in touch with another client, Global Warming Research & Development Corp. (GWR&D) to see if Kraft Paper could be used as a soil builder and moisture retention system for planting trees in the desert. Another meeting with Battelle was scheduled which included GWR&D to discuss the theory and get more information on desertification problems. The results of the meeting proved that the paper would be a good application for this use.
Results
We explored the competitive market for molded pulp packaging. We found the non-toxic adhesive products they can license for developing a new paper masking product for selling through Home Depot. Port Townsend signed an agreement with GWR&D to supply paper for their test trials of their watering technology for use in solving desertification problems. We helped them do trials on gift wrapping and molded pulp packaging. Eventually they were able to produce packaging, high end shopping bags and recycled-kraft paper and today are an environmentally sophisticated paper producer reclaiming millions of tons of paper from the waste stream.
Can Commodity Product Producer Differentiate for Better Profitability?
August 14, 2008
Case Study Project Description
This California based company made doors. Doors are a dime a dozen. They are made from wood or metal or composite woods. There is not a lot of ability to price a door any differently than competitors. The manufacturer of doors also has to produce a high volume to make enough profit to make it worthwhile. Can a small manufacturer do anything to make their product stand out in the marketplace?
Project Problem
The door manufacturer made doors from recycled construction materials. He had developed a special method of process the waste material and purchased unique manufacturing equipment from Europe to press the material into doors. But would the market care? How was he going to get into Home Depot and Lowe’s to sell the doors? How could he get distribution into the market place? Could he get a regular source of material to make the doors?
Solution
The stark reality of the situation was that this manufacturer of a single product would not have much success trying to sell a door with unique properties into the consumer distribution system. While the owner was convinced that his recycling activity would help the environment and employees all thought they were contributing to something worthwhile, there was nothing about this fact that would cause buyers to spend more to buy his door over a competitors door. Was their another way to look at the market place.
Rather than attempt to find traditional distribution methods, we looked at who had waste streams similar to the door manufacturer’s raw materials, cared about the environment and already had a distribution channel that these unique doors could be easily sold through but they did not have a door in their product line. We found three potential partners through this method of looking at the marketplace.
Each of these partners had the potential to sell high volumes of the product. It would mean that the manufacturer would only be making the product, not selling it any longer.
Result
We brought the owner to three meetings with these potential partners. Unfortunately, the owner chose not to enter into a distribution arrangement where he would make the doors for them as he found their first price unacceptable and was unable to keep the relationship going well enough to establish a basis to do business. It takes a re-orienting of expectations and an ability to have difficult to discussions to manage joint venture relationships. Ultimately, if the company is unwilling to change how they do business to meet the needs of partners or customers, potentially lucrative target markets become unavailable to the company.
A 90 Year Old Manufacturer is Purchased and Downsized – Is There a Future ?
August 14, 2008
Case Study Project Description
The company had built its reputation on appliances, cookware and consumer durable goods. When a conglomerate bought them out, the senior leadership team left. The remaining managers were expected to determine how to pare down the product line and increase profits.
Project Problem
The remaining managers had never had to work through a downsizing exercise. They had been selected from middle management and put in a difficult situation to turnaround the company. Distributors relied on the huge variety in the product line to differentiate themselves in the market. When they heard their favorite products were going to be eliminated, they were told to step up sales or lose the line. The team needed help and guidance in how to execute this strategy without alienating their distributors and each other.
Solution
The team need to learn how to collaborate before they could discuss the new strategy. Times were difficult, tempers short, and this group had never worked together before. Not only did they not know how to have difficult conversations, each person was representing their functional area as ‘not needing to change’ but other functional areas ‘would have to change’ to meet the new requirements. Sales did not visit the Manufacturing floor, Marketing did not work in alignment with Sales, and Accounting did not track Gross Margin for any of the departments.
We worked simultaneously on clearing unfinished business between the individuals, acknowledging the difficulty of the situation and getting them to phase that all aspects of their company functions had to change including their own, in order to gain them the profitability they needed. Using their own experience of how difficult change can be helped them to understand their Distributors’ mind set and how to work through the inevitable show downs that were coming.
Result
Paring the product line down from 200 line items to 30 with the best gross margin took six months. Working through all the distributor conflicts, took another six months. The team would learn to work with our Smart Team tools to help them strategize which products and what approaches they would take to work with the distributors. Instead of leaving the difficult conversations to the Sales VP, because “that was his job” the team worked together to support the VP’s work and they visited distributors in teams. When the manufacturing floor struggled with the line change, the Sales VP would go with the Manufacturing VP and communicate the market needs as well as acknowledge the struggles on the factory floor.
Within two years of the acquisition, the company had become profitable enough that the conglomerate chose to sell them again for a profit. The team felt proud of their accomplishment, meeting the time line of their investor and the needs of the market place.
Software Tech Case Studies
August 14, 2008
Our CEO, Lorraine Rieger McGregor was formerly Vice President of Marketing for a software development company she co-founded from 1987 – 1990. Back then, software companies were not well understood. Today, the market is changed. Software must fit into a complex group of interrelated products and do something that is unachievable more easily with a different method. Today’s software company has to be high specialized, deeply rooted in niche markets and have big partners in the right places to get a foothold for growth in the market.
Software companies need smart efficient and fast growth strategies. Our philosophy is to get them joint venture partnerships with large companies that will gain market share by adopting their niche solution. Here is a partial selection of the kinds of companies we helped grow. Want to find out how to take your software company to the next level? Call 604-306-7707 to discover your options.
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