DIRECTIONS - Architecture for revenue growth

June 2014

NOTE FROM THE DIRECTOR

Richard (Dick) Van BelzenA lot can be learned from watching professional golfers. Most of the time, they make a very tough game look easy. But besides playing the best courses in the world, while competing against the best players in the world, a lot goes into making a professional golf game what it is. The one constant I find most interesting is the relationship between a pro golfer and his caddie, a partnership based on trust and communication.

Caddies provide a range of support to the golfer that is indispensable, but often goes unnoticed. They perform a number of roles—from analyzing technical aspects of the golf course, including hole and shot distance—to calming the golfer down. Being a good caddie isn’t about carrying a golf bag around the course, almost anyone could do that. It’s about being a subject-matter expert and using that knowledge and experience to improve their golfer’s game. And, golf pros know that the right caddie makes all the difference.

In this way, business consultants are like caddies. They can focus on and fret over a number of things, so the client can focus on the task at hand in order to maximize their company’s position. An effective business consultant will utilize their experiences, insights, and tools in specific areas that a client might not have, to improve the situation and ensure momentum is continued without introducing additional complexity into the situation. For most clients, their greatest fear when working with a consultant is the potential disruption to their business vs. the probability of results. To ensure success, it is imperative that both parties agree on the path to growth, and that they can get at least three layers of the client’s team to buy in. And yes, that is possible. Just like in golf, where there’s input from sponsors and fans, and the golfer relies on the steadfast support of his caddie to get him through, the same holds true for business, where the client must rely on his consultant, the one who knows the course, and will carry his bags while offering insightful advice and moral support.

Sincerely,
Signature
Richard (Dick) Van Belzen
Managing Director

Northpoint Advisors, LLC
1173 Pittsford-Victor Road, Suite 250
Pittsford, NY 14534
Phone: 585.233.6707
Email: dvanbelzen@northpointadvisors.com

CURRENT EVENTS

Silicon Valley's Top Ten Tech Trends
Written by Jacqueline Vanacek. Reprinted.
View the original article on Forbes.com

Within the next 5 years, a woman entrepreneur will create a technology legend that yields a $50 billion exit. Banks and health insurance providers will cease to exist as we know them. And Austin, Texas will replace Silicon Valley as the world’s startup headquarters!

These were just a few of the bold predictions discussed by venture capitalists (VCs) at last night’s 16th annual Top Ten Tech Trends, hosted by Silicon Valley’s Churchill Club and sponsored by Luxembourg Trade and Investment Office. Belgian and Australian trade commissions were also in attendance.

At the event, a panel of VCs shared 2014 trends that are not obvious and will be big disrupters for the next five years. The panel included Ping Li from Accel Partners; Rebecca Lynn from Canvas; Mike Maples from Floodgate; Bryan Roberts from Venrock and James Slavet from Greylock.

While some past predictions have proven true, others have not. The one that stunned me was that Software-as-a-Service was first predicted to replace licensed on premise apps in 1999. And look where we are today with the cloud!

See which trends you agree with – or not. Many of us in the audience agreed with most – but a few predictions were ‘out there!’

2014 Top Ten Tech Trends From Silicon Valley

Trend #1: Today’s Enterprise business applications will be completely reinvented. The opportunity is huge because no ERP apps were originally designed to run on mobile devices. And most of today’s cloud apps are built on stacks that are 15 years old. But consumer apps like Twitter and Facebook are intuitively easy to use and provide real-time feedback when data is entered. These parameters have become the ‘new norm’ for all software and users will expect the same consumer experience with their business apps as well.

Trend #2: ‘Digital disintermediation’ will eliminate banks as we know them. Startups are invading every sector of financial services, from banking and lending to wealth management. Peer-to-peer lending models allow for direct connections between borrower and lender in startups like LendingClub. Startups are also developing algorithms to manage $13 trillion in mutual funds better than people can. However, since financial services are complex, regulated and have long established relationships between providers, regulators and politicians, most of the VC panel and audience believe that banks will at least diminish in importance in the next 5 years.

Trend #3: Smart home networks will explode. It’s the end of dumb routers and extenders and the era of intelligent, software-powered networks that interact with devices and products in the home. Most panelists and the audience agreed on this trend, but the question was raised – would you want everything in your home wired?

What about cybersecurity? Our homes, cars, everything will be vulnerable to hackers, as we read almost daily in the news. The obstacle will be – do we really want that?

Trend #4: Health insurance industry mirrors Kodak and goes ‘poof!’ While many of us would love to see this, many were skeptical of the viability of this prediction. Most employers with over 500 employees self-insure and have information systems that can eliminate physician networks, adjudication and coding processes. Today, Stanford Medical Center contracts directly with many companies in the San Francisco Bay area. Insurance companies add little value anymore in our connected world. But healthcare is so inefficient overall that no one believed that health insurance providers would disappear anytime soon.

Trend #5: The Last Second Economy. This prediction was most embraced by all. The ‘last second model’ for on demand taxis and food delivery will explode across all sorts of services that redefine how we live and work. Addictively easy, real-time access to quality services will be the ‘new norm’ at the intersection of technology, business and culture.

People check their mobile phones an average of 150 times per day. The next step will be instant access to professional knowledge through our devices on the Internet. Accessing physicians, tutors and other professionals anytime online will replace the need to wait or leave one’s environment. Services will be brought to us. And innovation is already flourishing around participatory applications.

Trend #6: Future cyber-attacks will target the home. It was hard to argue with this prediction, based on the daily news of yet another data breach. And Target’s data breach was caused by hacking into an HVAC system! So our homes, with less sophisticated security than at work, will become vulnerable. This will be another ‘new norm.’

Trend #7: Data-driven healthcare (from your gut). The combination of personal health and fitness data, genomics, and even microbiomics will drive healthcare choices from real outcomes and individual probabilities. And since the bacteria in our digestive tracks has greater influence on our health than previously known, we really are what we eat! Data analytics is so pervasive in medicine now that the Mayo Clinic will include IBM’s Watson in physician roundtables about patient care. But panelists disagreed over the lack of scientific understanding of the biological basis of disease, which some think is more critical and will be the real area of breakthrough.

Trend #8: A woman CEO/Founder will invent a legendary technology platform, akin to Google or Facebook, with a $50B exit. The expectation that any startup would create a $50B exit in the next 5 years was why panelists were skeptical about this prediction. That’s a huge valuation rarely achieved by any startup. And with only 3% of startup CEOs and VCs being women, the prospects seem unlikely. But with barriers to innovation collapsing because of the cloud and other technologies, a ‘dark horse’ could emerge from anywhere in the world.

Trend #9: Spot pricing for healthcare procedures. Given the high fixed costs and under-utilization of medical equipment like X-ray or MRI machines, dynamic, on demand pricing with providers will evolve as in other industries. This prediction was not at all agreed to by the panel. But it stands to reason with today’s cost and complexity of healthcare that personalized pricing between patient and care provider might be worth a look.

Trend #10: Credit cards are the new app platform. Because they are ubiquitous (500 million in use) and have processing infrastructure in place, credit cards will download and store new apps and data related to payment, from a central platform. For example, new product purchases could include download of product warranty information and manuals. Marketing campaigns could combine preferences on Facebook with specialty discounts automatically applied at the point-of-sale.

While ideas for such apps abound, panelists were skeptical about hidden obstacles that prevented adoption of such ‘smart cards’ years ago. Nonetheless, startups are innovating around the payment layer with web/mobile access, so changes will occur in this space regardless.

And if you are wondering about who might replace Silicon Valley as the beacon for entrepreneurship? Other contenders were New York, Los Angeles, London, Berlin and Tel Aviv. But they’re a real longshot!

INSIGHTS

Great Complements in Generating Profitable Growth:
Value Chain vs. Value Proposition

We use the word “value” to mean many different things. And one could make the case that it’s been overused. For this article, “value” means the unique and differentiated benefit we provide our customers, that which we expect to resonate with them. Creating and delivering value is the process of offering our customers something that will get them to buy from us. Not just today, but repeatedly and over time. Providing value is like a race without a finish line. It’s a moving target that is affected by what our competitors do, as well as advances in how the value is created and perceived, as time moves on.

I suggest using a simple framework to help you assess and adjust the value of your offerings:

  • Get an overview. Assessing the value proposition first enables you to judge whether your value proposition resonates and provides favorable points of difference. In a prior post, we spoke about how to assess the value proposition. It is at the core of any offering, business, and opportunity. As we market our company’s products/services to customers, they must understand the unique value being offered vs. available alternatives in order to not only choose our product/service, but to also become a loyal repeat customer, for maximum value. It’s important to gain objective data regularly (which will not come from the sales force, even though that would be ideal) on the various favorable points of difference that resonate with customers. This should be done no less than once per year.
  • Use the Value Proposition to determine the current status of your offering. When going through a typical value proposition exercise, we want to determine various attribute levels vs. alternatives/by competitors. In doing this, we stratify each attribute by favorable points of difference, points of parity, points of contention and unfavorable points of difference. From this process, which could take several sessions and points of view plus analysis, we will get a strong snapshot of where the product/service stands. This effort will help you/your teams understand the level of separation you have from others in your space. Then you will need to determine how this attribute array resonates by client segment and point of contact at your customers. We learned in 2009/2010 and even now that providing customers with too rich of a set of attributes/features can hurt sales as much those who do not have enough separation. Customers have been looking more for what they really need vs. what would be nice to have. In the most completive businesses, where providing separation with current and future value propositions is difficult, leaders often look to business adjacencies and use of the value chain to add more to the offering for customers.
  • Use the Value Chain as a complement to your Value Proposition. A value chain is a chain of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market. The concept comes from business management and was first described and popularized by Michael Porter in his 1985 best seller, Competitive Advantage: Creating and Sustaining Superior Performance. This approach can apply to small and large businesses alike. For small companies that aren’t highly capitalized, the cost to add value via the chain my be cost prohibitive, detract focus and difficult to implement. For larger companies it’s much easier to consider and is needed if your company has little separation in the value proposition array (this needs to be broken by products/services and overall product platforms.) The process to assess a value chain solution (organic or acquisition) is often referred to as market adjacency mapping. Many large companies, including United Technologies, GE, and J&J, deploy this process. While these companies may also have solid value propositions and innovation, they look to the market adjacency to be able to offer a broader solution to their customers.

Between defining and redefining a core business lies the second element of our growth strategy, adjacency expansion from the core. Adjacency expansion is a company's continual move into related segments or businesses that utilize and, usually, reinforce the strength of the profitable core. Critical to improving the odds of profitable, sustainable growth are:

  1. Identifying adjacent business opportunities and recognizing the most common patterns
  2. Assessing and choosing the right adjacencies
  3. Avoiding some common pitfalls of adjacency expansion

What makes adjacency expansion different from other growth strategies is its use of existing customer relationships, technologies or core business skills to build competitive advantage in a new area.

Companies pursuing new growth initiatives without jeopardizing a strong core can benefit from methodically inventorying and mapping out their adjacent opportunities.

In working this “value to value” process, we involve both business development (who typically manages adjacencies with senior team and other inputs) sales, marketing and technology/innovation on the value propositions. So each group can work in a coordinated way to complete this effort. The timing of this is often done in preparation for the strategic planning process. We recommend this being done each year so the leadership can continue to gain a true sense of how the various offerings, product lines and groups/divisions face off or are expected to face off in the market. It also presents a baseline to make decisions and take action in the coming period.

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FOR YOUR CONSIDERATION

d

Facts vs. feelings people on teams - When putting together subgroups and/or task forces, it’s most helpful to assign folks that are complementary to each other. In sales for example, most of the members tend to be feelings types. So having an analytical and fact-driven person, or persons, on the team can help provide balance. On cross-functional teams, we’ve often placed individuals from the finance department with those from marketing and sales to balance the teams out. Once you get the right level of feelings vs. facts, you’ll also need to look for levels of assertiveness so one person doesn’t run the others over. Generally speaking, feelings people tend to be creative and base input more on emotions and less on process. So while leaders often look for people strong on content and subject-matter excellence, the behavioral profile needs to also be considered.

boat

Should you rock the boat? As you move through roles and responsibilities, there are various dilemmas you’ll face. One of the most critical is challenging the status quo and how things are done. While the company or your manager may suggest open and honest feedback, you need to be very careful. We’ve seen some of the best business executives end up in uncomfortable situations because they failed to be careful with their input. The best way to judge your company is to be aware of whether those that rock the boat (and do it the right way) progress with their career and are rewarded for their ideas and challenges. Look around at your more experienced peers, and those above you, to determine whether you can take chances.

THE LAST WORD

We are becoming accustomed to a more highly regulated and slower growth economy in the U.S. and beyond. This level of less growth has been termed the “new normal” by many thinkers. A few things to consider:

How can you effectively bring about growth when the economy is slow?
growth

How do you engage to determine your customers’ needs? Are they buying “needs” or “wants”?
engagement

What are your competitors doing in this slower growth period? Can you outperform them?
competitors

NEXT MONTH

Sales Channels in B2B: How can we examine our market coverage model and gain better access to customers?

examine

Northpoint
Revenue Growth Experts
1173 Pittsford-Victor Road, Suite 250, Pittsford, NY 14534
Email: info@northpointadvisors.com | 585.233.6707
Visit us online at www.northpointadvisors.com
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