Thoughts On The Tech Industry

SOX In Europe?

I was in Europe last week and had an interesting thread of conversations with CIO's in France, the UK and The Netherlands.  It seems Sarbanes-Oxley (SOX) is alive and well in Europe!  Odd that US financial and accounting regulatory compliance legislation has crossed the Atlantic.  What's basically happening is the EU and most European countries do not currently have the level of SOX-like compulsory regulation, so in absence of it, European CIO's have begun to study up on SOX as a proxy for best practice in their organizations; a Dutch executive even quipped, 'hey Mark, we're just practicing a little CYA!'  Net-net is European CIO's I spoke with are not only very well versed in SOX, but are well aware of the various North American SOX vendors who have yet to cross the Atlantic and begin selling their compliance solutions in EMEA.  I smell an opportunity...

So What Do You Do? Fill In The (Blank)

Everyday, we meet a lot of early stage companies in the tech industry.  By the way some describe themselves, you'd think marketing consultants would be very busy, because a lot of these companies need a lot of help figuring out what they do, the problem they solve, or the market they address.

Here's a little exercise.  Fill in the blanks for what you think you are offering the market:

"The most important thing our product does is (functionality) because nobody else helps (target customers) solve this (business problem) the way we do because of (differentiation) and this is valuable because (so what)."

Can you easily fill in the blanks?  Better yet, get the rest of your management team to independently do the same exercise and compare the result.  Same answers?

5-Year Returns In Software

Catching up on a little reading this weekend.  Forbes, January 9th, 2006, p. 118 has a very interesting table.  'The Top 10' five-year annualized total returns (%) in software and services.  (no footnote, but presuming only publicly traded companies)

1. Activision (46.8%)
2. Autodesk (45.4%)
3. CACI International (35.5%)
4. Alliance Data Systems (25.0%)
5. Anteon International (23.0%)
6. Electronic Arts (21.8%)
7. Yahoo! (16.8%)
8. Affiliated Computer (14.6%)
9. Filserv (6.9%)
10. Perot Systems (5.0%)

Wow, we all knew it was bad, and the tech bubble is 5+ years behind us, but this tells us 10th place (Perot) only had an annualized 5% return over five years.  Notable the likes of MSFT, SYMC, ORCL and so many other tech leaders are omitted.

Blocking and Tackling

During a lunch conversation other day a client asked me what I thought were the most critical factors that affected revenue growth. While they may seem obvious, three very important areas, which often get forgotten during day to day activities, stand out:

1. Build and maintain a strong sales pipeline. Lead generation is the most challenging discipline for high tech companies yet it is the key to consistently meeting revenue goals. In working with clients we’ve found that while most lead generation firms and programs can generate names and appointments, the quality of leads, the conversion of leads to sales opportunities and the close rate on leads generated is poor. Anything that’s expensive and ineffective is going to be challenging.

To improve lead generation companies should first understand their customer’s IT buying process and where an opportunity is in that process.  Second, to get the prospect’s attention, companies should focus on identifying and qualifying customer problems rather than identifying and qualifying projects. Lastly, strategic alliances are often an under-utilized channel for leads. Making strategic alliances work can be an effective means to building a strong pipeline.

2. Increase your win rate. Chasing low-probability-win deals is a significant problem for many firms. Often it’s the result of the lead generation problem above. Without enough truly qualified sales opportunities, sales resources are expended on any customer who says they are interested. But just because a customer has  a budget, it doesn’t mean it’s a winnable opportunity for you.

    One solution is to conduct regular win/loss analyses to determine the company characteristics, competitive and other factors that drive the selection of your solution. Then, conduct pipeline audits to make sure you have a chance at winning the deals your sales people are pursuing. If done effectively your forecasting accuracy will improve along with your win rate.

3. Create a repeatable sales model. Some companies can drive growth through brute force and a few star sales people. But revenue growth, and ultimately the market valuation of your firm, depends on demonstrating that revenues are scalable and      repeatable. Can you turn those one-offs into a daily occurrence? Can you bring on new sales people and get them productive in a short period of time? Can increase the leverage of your marketing programs?

Developing effective sales process, consistent sales messaging and a disciplined hiring and training process is critical to creating repeatable sales.