Is AV in a Race to the Bottom?

Which things can we fix and which are here to stay?

By Tom Stimson CTS

Shrinking margins, unfair competition, price shopping customers, disloyal suppliers, greedy bankers, and a general lack of appreciation for the value of your services…does this about sum it up? Ten or fifteen years ago the industry starting mumbling about AV becoming a commodity. At that time 40-50% equipment margins and an exclusive lock on professional gear made AV dealers quite happy and the AV Industry very attractive to investors. Value-added services like design, programming, and project management were considered overhead costs and what little revenue they represented was just gravy on an already profitable transaction.

In 2010, we are singing a different tune. Hardware margins on integrated projects start at 20% and quickly erode to the low teens. And we find that as an industry we have trained the buyers to undervalue the labor we continue to underestimate. In the end, quality dealers are losing jobs to low margin competitors that can do a convincing job of estimating and are willing to work hard to recover the cost of installation. Customers have become so price-centric that they no longer take the time to consider the value of your “value-added.” And why should they? A tighter scope of work and a willingness to transparently cost a job is what the fringe competitors have to offer. When the veteran AV dealer does actually win a bid job, it’s either because they underestimated the labor or chose to do the work at a loss in order to win the cash flow. Which begs the question, how long can this go on?

The fundamental issue becomes, do you want top line or bottom line growth? Business has been in love with revenue ever since the dot-com boom, where profits were secondary to incredible growth. Entrepreneurs became millionaires without ever making a profit. Today’s successful company is just as elusive, but looks completely different. In the contest of AV CEO’s sitting around the bar jawing about their companies, the winner is the boss that can say, “We shrank by 40% but increased our overall profits.” This guy is buying the drinks, because the next best brag is, “We were flat on revenue but it ate all our profit.” How did anyone increase profits in these dire times? They probably started by defining an acceptable profit then engineered a company that could generate those returns. Profit is not what’s left over; it’s what you planned for.

Put a Stop to Shrinking Margins

In a tight economy, grabbing more market share is tough – especially if you cannot afford to do so on price. The solution therefore is to become smaller AND more efficient. The only way to stop the slide is to give up low profit opportunities (or turn them into high profit). This means giving up what may be a prized position as a BIG company, but that is just one more emotional choice. Becoming a profitable company again is a badge of honor you can get used to.

It is not enough to just set a gross profit threshold and stick to it. First you have to understand your true cost structure. (See Face Reality). Then apply gross margins in increments proportional to the risk of the project. Next, incentivize Account Executives on profit margins not volume. Charge operations with reducing overhead through better processes. And most of all protect the labor estimates made by your design and project management teams. Never fudge hours to win a job – but you can adjust the rates if it makes sense. In addition, examine your efforts on selling Project Management, Maintenance Agreements, and Design Consultation.  Successful companies are selling these services at a premium. When your sales team screams that they can’t win the job at these prices, then it’s time to remind them that order takers win jobs by dropping the price. Sales Professionals win by demonstrating value.

Face Reality

There are two scary practices going out there that affect our perceptions of an acceptable margin. The first is the under-recognition of direct costs in “cost of goods sold”. Job costs for many companies only capture the install and project management time that has been assigned to a specific job. The time not applied to projects drops below the line into overhead expenses. This is a big mistake. All direct labor is cost of goods sold, whether it was used on a job or not. By correctly recognizing direct costs, you will have a better understanding of what a profitable margin should be. You will also learn the true effect of your overhead costs on your business. If you are still following along, when business is down then overhead needs to be reduced. If operating profit is consistently low, then you probably need to outsource more labor instead of maintaining fulltime staff. Learn how to be a smaller company, if that’s what the numbers tell you.

The second scary practice is treating unfavorable outcomes as an exception. We rationalize poor results by citing a problematic job or incident, and vow that it won’t happen again. Then next month there is another incident – a different one – and it gets the same treatment. Problems and mistakes are normal. We can minimize them, but to act like they won’t happen again is just crazy. Mistakes are the cost of doing business and therefore are reflected in cost of goods sold. The average of COGS across all income determine what an acceptable margin should be.

Know When to Walk Away

If you went back and analyzed the business you won the past year, how much of it helped your bottom line and how much hurt? Is your business setup to make money on the kind of work you can win? Or should you be winning different work? The answer is probably a little of both. Many businesses choose to apply job costing to analyze their projects. Not all job-costing methods are accurate and most do not deliver the kind of information we need to make better decisions. The first thing job costing should tell us is whether the proposal budget was realistic. Next it should reveal whether we executed efficiently.

When it comes to writing an accurate budget, firms have to set gross margins in stone otherwise the decision about where to price a project becomes emotional. I.e., first the margin on equipment is whittled down, and then we hack the estimated installation hours to get to the magic number. Messing with labor estimates tricks you into thinking the job can be profitable. At the risk of oversimplifying, labor should be treated as an absolute just like hardware. Change the unit cost of labor, but never fudge the time.  When profit becomes too low, walk away. End of story.

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Success and Learning Companies

I was thinking the other day about companies that I admire and enjoy working with the most. What do they have in common? At first I thought it was that they are friendly and open, but that knocked a couple of favorites out of the running. I also know some very nice companies that are not that fun to work with. They are stuck in a pattern that cannot be broken without extreme intervention. When you are in a role like mine that is designed to help people, and they won’t let themselves be helped – it’s frustrating. Still, it doesn’t mean I don’t enjoy being with them.

So if I narrow the criteria down to “I really like the people,” and “I really like working with them,” I get a handful of choices. What sets these businesses apart is a willingness to learn and an open mind that considers alternatives. And the best of the best are the fast learners. So I started thinking about all the companies I encounter but may not necessarily have the privilege of working with. The visibly successful firms seem to be highly adaptable, and very quick at educating themselves. In fact, as I recall conversations with leaders in those companies I am reminded of stories about how they overcame mistakes with speedy analysis and change. Fast learners.

This is a indirect lead-in to what makes some companies more successful than others. I am going to say that for my tastes and values it is not enough to be good at what you do, you have to also be likable to be truly and sustainably successful. Being pleasant to work with comes from sincerity and says a lot about the people in an organization. Is being an fast-learning company an enterprise trait or another attribute of the people? Analysis of successful examples generally reveals a respectful tolerance for risk. Learning – and the mistakes that go with it – is potentially expensive. And responsive learning additionally calls for taking chances in trying new things.

There are two more attributes of fast-learning companies that I think are critical and they apply to the very tip of the firm’s leadership. These managers know that mistakes are part of the process. No one wants to make an error, but when one occurs it is embraced for the valuable feedback it provides. Second, these leaders can make timely decisions often applying some variation of my favorite credo: “Don’t let perfect get in the way of good.”

Being a learning company means having the aptitude and intent to continually improve and the ability to assess risks with an eye towards action.  These folks never assume they have found the best solution, just the most sensible so far. They hire people that are smart, but aren’t committed to one particular way of doing things. Learning companies also have a process for acquiring and applying knowledge. First, they have to make room for learning and value the investment it represents. Then there needs to be a means to discuss, refine, and model outcomes. Finally once a great idea is incubated, learning companies know when and how to apply it. Risk averse companies rarely enjoy the successes of a fast learning company.

And to take it one step further, aren’t your favorite employees those that can quickly understand new tasks and roles? Do you choose a supplier that only does things one way or one that can grow and adapt with you? My money will always be on the people and businesses that choose to be smarter.

Are You Doing Enough for Your Company’s Recovery?

Once upon a time, AV integrators made good money from equipment and labor with a healthy premium for engineering expertise. Today, equipment and labor have become commodities and engineering is the value-added service we don’t get to charge for anymore. The burden of profit is now placed upon project management and operations, which is still pretty much based on the 1990’s model. There have been vast improvements in making project management more professional and educating installers. These changes alone are not enough. We need to discover the service, product, or convenience that we can charge for today, above the commoditized time and materials we are so familiar with.

Maybe we are going about this all wrong. Perhaps the challenge isn’t to just survive the recession. Aren’t we supposed to be reinventing ourselves? I don’t have all the answers, but I can start the line of questioning and may be we can collectively come up with some ideas. Here’s some thinking fodder:

Rich Karlgaard of Forbes Magazine spends a lot of time analyzing the trends of big business and writing about his latest consumer acquisitions (recently bicycles and airplanes). He is staunchly free market and pro-business but the first to admit he was blind to the economic collapse last year. He also believes that the US economy on a whole has been on the rebound since mid-March 2009. In a recent blog he reminds us that recovery is an uneven proposition.  On the whole it is U-shaped, but within the smooth curves there are V’s and W’s. We won’t all share equally up (or down) the curves.

“The V part of the VW economy includes dynamic growth companies and large exporters. Apple is enjoying a V recovery. Salesforce.com just reported a big, booming V quarter on Friday. Mobile broadband is an entire industry that will enjoy sustained V growth. Low-tax states like Texas, Tennessee and North Dakota are experiencing V recoveries.

America’s W economy includes all those companies, industries, states, cities and personal careers where deteriorating value propositions were masked in good times. It always happens that way. Recessions unmask bad business models. The 1973-74 recession laid bare the inherent inefficiencies of slapped-together 1960s conglomerates. The 1990 recession unmasked the problems of IBM and the minicomputer industry. IBM made adjustments and fought another day. The minicomputer industry just died.

Today’s W economy: newspapers, McMansion builders, inefficient manufacturers, high-tax state and local governments, and workers unable to adapt, relearn and relocate.”

Which brings me to the questions behind my blog today: Is the Audiovisual Industry part of the W economy? If so, can the industry as a whole adjust in time to avoid becoming irrelevant? Are there V businesses hiding amongst many outdated AV business models?

I can accept the argument that some of today’s pricing issues are the result of an overcrowded marketplace. But isn’t that one of the symptoms of a W segment? Even if the number of audiovisual companies were reduced, would that change the fact that the value proposition is outdated? Aren’t the technology barriers to entry dropping daily?

If you don’t think audiovisual is poised for a big post-recession letdown, let’s examine the typical AV integration business: High-tech, high-risk, and low profit. The AV value proposition was established in the early 1990’s when video display, control systems, and complex systems integration were all cutting-edge. Manufacturers could break new ground every few months with new products and better pricing and dealers reaped the benefits in higher profits. The margin on equipment more than compensated for the mistakes made in engineering and installation.

The basic integration business model of today still reflects this sales bias. But post 2001-3, the industry began to lose critical margin as high-tech manufacturers turned their sights from businesses to consumers. Pricing transparency and competition leveled the playing field. Lack of efficient operations, design standards, and professional credentials among audiovisual purveyors led to loss of market share to IT companies, electrical contractors, and do-it-yourselfers.

Did the game change and AV folks miss it? If IBM could miss the personal computer trend, I think it is plausible that AV missed its opportunity to evolve.

So your homework for today is to ponder this question: All things being equal in terms of product and service, what would cause a customer to pay you more rather than hire your competitor?

Are You Still Competing On Price?

If you still struggle daily with low price competitors, here are a couple of mantras for your wall:

1. At any given time, SOMEONE can do it for less.

This means that despite your best efforts, another bidder or rival for the project at hand could easily trump your low price. They may do so because they made a mistake (isn’t that how you won that big job last year?), don’t care about profit, or have secret, unfair advantage that you just don’t understand. What is more likely is that they know HOW to do it for less, but if the other excuses help you sleep at night then please use them. The fact is you cannot always be the low bidder, and you probably don’t want to.

2. At any given time, there is always something more important than price.

Regardless of what the buyer may tell you, the only time a low bid is appealing is when the other most important issue has been addressed. Consider the extreme, if the low bidder is incompetent or otherwise inadequate for the project – they can and will be rejected. If they are not rejected, then maybe your assessment of their suitability (and therefore your opinion of where you fit in) was wrong.

I often teach sales folks to focus on the second or third most important thing to the customer. In today’s economy, it’s unpopular to have anything but price as most important. Quality or suitability comes in second (but really, that’s probably their most important criteria!). If everyone addresses only the biggest two issues, the proposals will all look the same. There may even be a third criteria that the decision-maker values, but is uncomfortable emphasizing. Maybe the third priority is something you are uniquely qualified to offer. DO IT!

Don’t be the low bidder. Check.

Do address the buyer’s second criteria. Check.

Put the force of your value proposition into the tiebreaker. What have you got to lose?

Who Decided That a Month Is a Benchmark?

Is one bad month a trend? Compared to what? The month before? The same month a year ago?

Ask any manager “How’s business?” and you will likely get a response like, “Well, we are down for the year, but we just had a great month,” or “We’re having a great year, but next month looks really bad.” Why not use a week or a day? Our Wednesdays are way up this year… My issue with the use of months as a measurement is that for most of the AV Industry, one month isn’t relevant. The lead time for projects and events is often more than one month. Additionally, the success or failure of a month is often the result of a one day shift in revenue or expense. The exceptions are of course box sales and rentals.

Executives are more likely to respond the “How’s business?” questions with quarterly data and maybe tie it to the economy. “Q1 was down over last year, but we were down less than the stock market. If we can keep beating the market, we will have a good year.” Outside stakeholders will measure success in terms of expectations, which is what most stock market data is compared to, “We are way ahead of plan.” (When I hear this I always wonder if their planning is ever accurate.) Owners and C-level folks tend to look at years: “We expect to up/down x% this year.” Their bankers may be looking at months, but senior executives try to keep the big picture in perspective.

Different industries need different time measurements to be relevant. Separate companies within the same industry could use diverse time periods to gauge progress. Just because accountants and banks think in months and quarters doesn’t mean that is what is best for your situation. How much time, energy, and angst could you save if you weren’t compelled by convention to recognize revenue by a deadline based on reporting periods? Deadlines are important – don’t get me wrong. Have you ever rushed a job to finish or pressured a client to sign-off just to put the project into the current month? Maybe you have artificially inflated a traditionally slow month by closing a lot of open jobs (and then recognizing the profit)? Using the wrong period of measurement leads to games.

My point is that these arbitrary measurements don’t prove anything and often cause us to make poor business choices. If we think of period reporting as the current score in a very, very long game then  think our overall attitudes about accounting might be a bit healthier.

What about a project or job as a measurement tool? This is another thing that can get me wound up. AV companies often apply job costs to an installation or live event to measure the gross profit on a job, but does that really tell you the whole story? It’s very likely that the firm executed multiple jobs over the same period and some were more profitable than others. One project will always get access to resources that the other didn’t. Commissioned sales people certainly understand this.

This leads to firms that take very low margin jobs in slow months. Companies apply a system of arbitrary measurement (months) to potentially undermine their business strategy. The best way for a customer to whittle the price down is drag out the negotiation into a traditionally slow period.

I can’t offer a definitive solution because every firm has to set its own priorities. What I do suggest is that managers pick one time period to measure success and stick to it. Stop punishing teams for a bad month when the quarter is meeting expectations. Don’t freak out over a low profit job when overall profit is up. Conversely, don’t over-celebrate a good month in a bad year. Understand the why’s and how’s of the circumstances and share that story.

The InfoComm 100 and a Roadmap for the Future

In April, 2009 I was fortunate to participate in a landmark event for the AV Industry, the InfoComm 100. InfoComm International brought together one hundred industry leaders and key volunteers from around the world for a two-day think tank. The “100” as we came to be known, brainstormed about future trends that will affect the AV Industry over the next five years. The final report called A View of the Near Future of the AV Industry will be available soon on InfoComm’s website.

Over the next several blog entries I will often refer to the “100” and the insights, prognostications, and implications for the AV Industry that were shared there. There are several themes that permeate the report and I want to expand on mast of them in the coming days. Here’s a taste:

The Industry

It is getting more and more difficult to define the AV Industry and even harder to define the barriers to entry. Yes, it can be technologically challenging, but society is getting very comfortable with technology. Plus, an increasing number of products will be plug and play or otherwise much simpler to use. This is all compounded by the fact that as an industry it is very difficult to claim electronic sight and sound as our private domain. IT and Telecom are much larger and more influential and are stomping all over traditional AV grounds.

Technology

Software is the new microchip. It can be completely flexible, open source, and value-added – claims no longer held by hardware. Customers will continue to commoditize equipment and will even devalue much design engineering. The trend will be toward a holistic engineering solution for building communication and control. Again IT may have the dominant hand, but it also appears that IT doesn’t really want the job of managing end points. It’s like the highway department managing gas stations. They are connected; they share customers; but they have very different deliverables. IT will be about the delivery system and AV will be about the user experience.

Demographics

It’s hard to get excited about demographics until you think about the growing human need for visual communication over text-based information. The next generation (or perhaps this is true for Gen Y) will read more words electronically than in print. And they will do it anywhere they darn well please. Social media is having huge influence in how the younger generations communicate and it is trickling up to previous gens. Grandma’s on Facebook! AV will include content delivery systems we haven’t even imagined, because we have a public that will embrace almost anything that enhances their visual and auditory experience.

Social Values

Contrary to the goals of much of the newest AV technology, people will still need to meet face to face. How this will be reconciled with sustainability will be interesting to watch. In any case, the InfoComm 100 feel that “going green” will be part of the social fabric and that sustainable solutions will be a key part of future business for the AV Industry. Equally as important is the trend towards more active involvement by customers in the specification, design, and integration of AV products. This will have serious implications for the traditional AV integration model that relies on “black box” products and design steps.

Global Economics

It’s always interesting to watch a businessperson with a narrow regional view suddenly realize – often as he or she is debating economics with someone from the other side of the world – that macroeconomic issues almost always connect back to local ones. The demands of global communication will dictate that innovations in AV will be distributed evenly around the world. The technology required to put a modern classroom in an African village is the same as in an industrialized urban setting. The content dictates the medium. AV Systems will be a business, education, and social requirement for every society.

Government

There is clearly already increased movement by governments across the globe to better regulate, certify, and manage the definitions of the AV industry. AV encompasses most of the building trades, many of the engineering professions, and increasingly competes with with regulated industries like telecom. It would be naive to think that AV will avoid licensing of AV engineering, regulations regarding the definition of “systems,” adopted Standards, or mandates regarding sustainability of products AND processes.

In future blogs I will touch on some of the implications of these prognostications to key segments of the AV Industry. What will our choices be? Who will decide? What can we do if anything to change the course of future view?

Tom Stimson, CTS is a management consultant and adviser to the AV Indsutry, He is also the 2009 President-elect of InfoComm International. tom@trstimson.com

Dragging Management Into the New Information Age

I am not an expert on Web 2.0, social networking, blogging or any of the other time-sucking web-based tools on my computer desktop. I am however becoming an avid user. I am not a fan of the time-sucking part, so I have devoted some (Time) energy into learning how to use these tools so they do NOT take so much effort. The key is to not hunt for things to read, but wait for them to come to you. Or search for specific topics when you need them.

This doesn’t change the fact that many of us thrive on the constant electronic updates of friends and family. It is also true that our co-workers are often our friends. Hence, there is often a blurring of lines between someone’s business and personal posts. This makes MANAGEMENT nervous. It has been difficult enough keeping employees from blabbing about a difficult client or secret initiatives at public events or in incriminating email. Now they are doing it on semi-public social networks or completely public micro-blogs like Twitter. I bet HR managers are inundated with requests for “Appropriate Use of Social Networking in the Workplace” clauses in employee handbooks.

The reality is – I believe – that these managers are just seeing the tip of the iceberg. If they knew how pervasive their perceived “problem” really is, they would curl up in a fetal ball and surround themselves with lawyers. I think their concern is founded, but a better response is to learn how this all works. What I have discovered is that I can connect a lot of news, blog, and personal streams down to one or two readers and scan for what matters to me today. If I find I want to know more about a topic, I can search through past postings and gather them in one saved listing. Let me give an example:

In my home of Dallas, we are having some challenges in the school district that would affect funding at the Magnet school my kids attend. What has been frustrating is that the school board relies on its information from the administration, which only tells the board what the superintendent wants them to know. The public can read and research and find out more using the very tools I have described. The board could do this themselves, but they are not the most electronically connected people – kind of like many business managers.

So, yesterday there was a public rally outside the district headquarters prior to a board meeting. My oldest daughter attended and signed up to address the board. Back at home we felt cut-off from the happening. All the local news stations were there and reported briefly on their newscasts, but it wasn’t very satisfying. My daughter did send us text messages from inside, but I wanted more. So I got onto Twitter and search the district name (DISD) and found a reporter that was posting from the meeting. I let her know I was reading and she increased her posts. I also discovered – by checking her Twitter profile – that she had a blog page. I went there and found she was updating it from the meeting with even better blow by blow reports. I scanned her earlier posts and found other writers who had been documenting the controversy. I ended up adding my reporter’s blog and several others to my RSS feed page in my Google Reader. I now have a saved Twitter search on the topic. This helps me keep up with relevant tweets instead of just scrolling through the (gasp) hundreds of daily posts I subscribe to. Now if I want to tweet something on this subject, I just add a “hash” – in this case, #disd. When other twitterers do the same we can all easily find each others posts even if we are not subscribed to each others’ feeds. Just this morning I have found several relevant blogs and people I want to follow. It is all gathered onto one screen that I can scan when I have time to see if there is anything worth reading. If I can figure out how to do this, so can you.

So let me get back to the management issue (I am picturing a bunch of middle-age white guys like myself). Guys (and Gals), we are not that old. We may have started our careers before personal computers, voicemail, and email, but we adapted. We may have fought PDA’s and email on the phone, but we can’t live without them now. We are pretty well connected technology-wise, but our brains are still wired to a logical, linear stream of information. The younger crowd (you know, 30-somethings) and the real young crowd (Gen-Y) continually process data and update their conclusions all the time. They don’t wait for the compiled code to see if the program runs. If it makes sense to them, they go with it. No point in trying to stop them. We have to adapt.

Here’s what I would recommend to anyone who has been reluctant to get involved in all this. Work your way into the early part of this century. Do these things, in this order:

1. Go to Google. If you do not have a Google sign-in, get one. All it takes is an email address and a password. Click on News. See if there is a news source that you like. Click on an article then find the RSS feed. Subscribe. It will ask you where to put the subscription. Google Reader is easy to use and you are already signed in.
2. You are reading this blog. Maybe you read others. They all have RSS buttons so you can add them to your Google Reader. Do it.
3. Take a break, that was hard.
4. Go to Linkedin. Build your own profile. You do not need your whole life or work history, but at least post a nice picture of yourself.
5. Add your employees as connections on Linkedin. Read their profiles. See if any of them are connected to your competitors – you know you want to. Notice that if your connection is connected to someone, that you can connect to them to. Think about the networking possibilities.
6. Spend a week or two checking your Linkedin homepage to see your connections’ updates. Join some networking group. See how little they actually do. Invite a few more business associates to connect to you. See what they are up to.
7. Feeling brave? Go to Facebook. Works just like Linkedin in terms of getting started, but has a very different flavor. Get your teenager to show you around. Smirk. Connect to some friends. Get sucked in.
8. Notice how people post their status as if other people cared. Find yourself pondering someone’s post and feeling the need to comment. Do it. Feels awkward at first, but you will get the hang of it. Notice how many folks seem proud of you for FB’ing (facebooking).
9. Twitter. It is just a bunch of updates like on FB and Linkedin. What are these tiny url things? They are shortened web page links created to stay under the 140 character limit. Everyone uses them in text messages and postings now. Google “tiny url” to find out how to make them. Hmm, could I post a tiny url that directs people to my press release?
10. Search Twitter for a subject. Try InfoComm. Lots of chatter, marketing stuff, this and that. Anything you are interested in? Click on the screen name of the person that posted it and see what else they have to say. Follow them – it’s like subscribing, but now their posts will show up on your Twitter home page.

I can go on like this for a long time, but you have been a good reader and have a lot of things to do. Mark this blog as a favorite so you can come back to it. Happy Web 2.0’ing.

Projects Can Have A Mission and Strategy Too

I want to share another Seth Godin’s post.

A clean sheet of paper

from Seth’s Blog by Seth Godin

The range and availability of freelance talent is greater than it has ever been before. World class designers, artists, illustrators, photographers, strategists, potters, copywriters, programmers–they’re all one click away.

There are two ways to work with talent.

The first is to give someone as clean a sheet of paper as possible. “We have these assets, we have this opportunity, here is our budget, go!” That’s a great way to build a house if you have a ton of money and brilliant architects.

The second is to give someone as strategic and defined a mission as possible. “Here are three logos from companies in other industries, together with the statement we want to make, the size it needs to be, the formats we need to use it and our budget, go!” If you do this, you’re almost certain to get something you can use, and almost certain not to be blown away with surprise. Which is the entire point.

Confusing these two approaches is the #1 cause of client dissatisfaction when working with talent.

The strategic mission takes more preparation, more discipline and more difficult meetings internally. It involves thinking hard without knowing it when you see it. It’s also the act of a mature individual, earning his salary.

The clean sheet of paper is amazing when it works, but involves so much waste, anxiety and pain that I have a hard time recommending it to most people. If you’re going to do this, you have an obligation to use what you get, because your choice was hiring this person, not in judging the work you got when you didn’t have the insight to give them clear direction in the first place.

The moral of the story is: If you want great results that meet expectations, then set some boundaries before you begin. This applies to our businesses, any projects we may undertake, and even the family vacation. Here’s some questions I would want to have answered before embarking on a journey:

• Why? What is the thing we are trying to address or the need we perceive that brings us to this discussion?
• How? How do we measure success? Is it money, a change in behavior, more or less of something tangible, or a state of mind?
• Who? Who will benefit from a successful and practical deliverable? In other words, who are the customers?
• What? The final question is about Values and what you are willing (or not willing) to do to achieve success.

As Seth says, starting with a clean sheet of paper might yield great results, but clear expectations almost always will.

Why The Underdog Can and Should Win

I know we all live in a blog world where information and ideas come in snippets, bullet points, and 160 character micro-thoughts. Just once in a while we need to stop and read something of substance to be reminded that brilliant ideas take time to evolve and grow. Malcolm Gladwell is the new master of intuitive counter-intelligence. Please set aside fifteen minutes and read his recent article in The New Yorker titled “How David Beats Goliath”. It will make you wish you were an underdog again.

In many respects Mr. Gladwell validates what I have felt for a long time: startup businesses have a greater chance for game-changing success than established institutions. Of course startups are more nimble and have less financial overhead, but there is something more intangible than that. “Effort can trump ability… because relentless effort is in fact something rarer than the ability to engage in some finely tuned act of motor coordination.” Startups are underdogs, but we all fear them. Underdogs can circumvent pricing conventions, offer value-added services without discretion, and have nothing to lose by giving it their all. And if you think about it, they have more time because they have few hard-won, high maintenance clients to placate – until they take yours.

When my consulting clients complain about the competition, I try to decipher what the core issue is. It generally comes down to the violation of perceived conventions. Pricing, services, perceived quality of products – tough competitors seem to ignore what they are supposed to do and get the customer’s attention by being bad. In fact, the underdog’s lack of understanding of how business is done seems to be their advantage. It’s like the unruly kid in class that gets all the teacher’s attention while the good rules followers are left to fend for themselves.

My solution? It’s not to be bad, per se. It’s to change where your effort is placed and then double it. If you have been selling at grass roots and butting heads with competitors, then switch gears and sell at the enterprise level with extreme prejudice. Underdogs risk it all. If you go up against your competitors at the enterprise level, then start a grass roots campaign. Or maybe you should sell to your customer’s customer. In a highly competitive market, tremendous effort on the weakest, most unattended entry point will get penetration. It’s great to know what your rivals are doing if for no other reason than you should do something else: Think like a startup and win like an underdog.