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WHEN BUSINESS FREEDOM COMES BACK TO BITE YOU

Stefano Maifreni is Founder & Director of Eggcelerate, the business expansion advisors.

 

Small companies often bask in the privilege of being fast on their feet — unshackled by corporate culture. However, can companies with few rules start to spiral out of control? Moreover, if so, how can this be avoided?

 

Anyone who’s worked for large, global enterprises will know how refreshing it is to be part of a leadership team at a small company. While SMEs can lack the deep pockets of their corporate counterparts, you can avoid departmental politics, stifling administration and that sense of being lost in the machine.

 

Stefano Maifreni

When new business opportunities come along, you can have a real impact. Decisions get made quickly, plans roll into action, and the results become visible. The sense of satisfaction is enormous, and the financial rewards may be significant too.

However, can all this ‘running free’ go wrong for small companies? Unfortunately, Yes.

 

Where is everyone?

Have you ever been out in the sea on an inflatable or a bodyboard? Maybe you’re enjoying the waves and splashing around with friends. After an hour, you return to shore, only to find everything is different and, worryingly, your clothes are nowhere to be seen!

 

However, after two minutes of panic, you realise that amid all the noise and excitement, you’d merely drifted. Bit by bit, you’d been swept quietly by the current. You look up and spot your family — 200 metres away.

 

Unfortunately, there’s a similar scenario that can affect small companies. It could begin to impact any smaller company going through significant business growth and change at any time. So how does it happen?

 

Five steps to chaos

Growing organically as a small company sounds natural and healthy. However, it could be straightforward to lose sight of what you’re all about and to lose connections with each other.

 

Imagine a small company of ten people that’s been operating 18 months. Business is going well, the client base is growing, and now there’s a new round of funding to take things to the next level. Full of optimism, the company expands.

 

Here’s what might unfold…

  • Step 1: In the early days, the founders had a clear idea about company objectives. However, nothing was written down; it was so ‘obvious’. Today everyone has a different interpretation of these goals.
  • Step 2: The workforce increases from 10 to 15 and then to 20 people. However, nobody gave the new joiners a clear vision of the company. Often, there’s no time to explain everything.
  • Step 3: Big decisions need making. However, the once-united management team is now at loggerheads. Their hopes for the company seem to clash. Each accuses the other of being reckless, having a lack of imagination or losing the plot.
  • Step 4: Rather than being agile and nimble, the company seems to be stalling. The passion has ebbed away. Staff lack direction and inspiration.
  • Step 5: Customers start to notice. They’re getting mixed messages depending on whom they speak to about new features, support issues or order completion. It feels like a mess, and they lose confidence in the company.

So, can this scenario be avoided? If you make some essential changes early on, then Yes.

 

Keeping yourself focused

Yogi Berra, the American baseball star in the 1950s and 60s, was well known for his pithy statements. One often-attributed quote goes like this: “If you don’t know where you’re going, you might wind up someplace else.”

Small companies might even want to have this framed and stuck up in the conference room because there’s a fundamental truth here.

 

Going back to our seaside analogy, if you don’t keep yourself level with a visual marker on the beach like a clump of palm trees or a cafe — while being buffeted around in the surf — then you’ll be someplace else soon enough.

You need to fix on something, keep checking yourself against it and make it your destination.

 

Down to earth

There are things we all loathe about the corporate world. However, some practical tools and procedures keep companies anchored — and can be calibrated to suit smaller companies too.

 

Many of us have wasted hours in conference rooms thrashing out a corporate Vision, a lofty Mission and a set of Values — only for these to amount to a vague wish-list.

 

However, Vision/Mission/Values can work well for smaller companies and be the roots of effective operations if you approach them in the right way and use them correctly.

 

Small companies should aim for a ‘light’ version of these, perhaps just a couple of lines under each heading. Think of this as minimal governance: Something simple and down to earth. The earlier you lay them down, the better — and they can become the “one” story you share with new employees.

So how does it work in practice?

 

Balanced and focused

Rather than forming a strategy to conquer the world, this is about setting a clear direction that everyone understands. Try to see your Vision/Mission/Values as tools to drive the right decisions in day-to-day business and to place the right level of governance around them — not too much, not too little.

 

You can do this if you are small AND if you know where you are going. It’s the best of both worlds.

 

Small companies can still retain their ability to adapt and be agile. However, when circumstances change, you won’t be blown off course. There’s a danger within small companies to play everything by ear — or for the ‘issue of the moment’ to suddenly overwhelm everyone. Your Vision/Mission/Values will help you to keep balanced and focused: you can check decisions against your goals without it being bureaucratic; you can make decisions quickly too, without the swirl of the involvement of too many emotions. It’s far less likely that people will fall out with each other. Moreover, if they do, you’ll be able to see who’s gone adrift.

 

That said, it’s essential that you don’t set your strategy in stone. Also, this is another advantage you can have over corporations. Because your goals are lightweight and flexible, they can adapt quickly. You can feedback what you’re learning as a company — and revisit your Vision/Mission/Values and your strategy from time to time.

 

Checks and balances

If crafted carefully, your goals won’t throttle your growth. Instead, they’ll serve as useful checks, balances and inspiration to help you to thrive.

 

If you rarely end up needing to refer back to these guides, then that’s great. However, if the waters get choppy or you want to ride some monster waves, then you’ll know whether the company is sticking to its correct course and headed in the right direction.

 

Stefano Maifreni, Founder & Director of Eggcelerate

Passionate about helping companies to succeed with their business challenges in effective and profitable ways. An engineer by education, product manager by role and expert at achieving growth by career, Stefano has an outstanding track record in business strategy, operations, product and marketing, with extensive P&L management and international expansion experience.

 

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Business

BACK TO SCHOOL – CEOS NEED TO LEARN A NEW LANGUAGE, FAST!

By Simon Axon, Financial Services Industry Consulting practice lead in EMEA, Teradata

 

Chief Executive Officers of banks know all about change. Leading responses to new challenges, new opportunities, new regulation and new markets is all in a day’s work. But the existential challenge posed by Big Tech requires a totally new set of skills. It is an entirely different beast that inhabits a totally new environment and speaks its own language. CEOs now need to learn the language of data to survive in the emerging digital world.

Learning a new language later in life is hard. CEOs need to fully commit to accomplish it. Becoming data literate means mastering the basics of vocabulary and grammar. Gartner defines data literacy as the ability to read, write and communicate data in context, including an understanding of data sources and constructs, analytical methods and techniques applied — and the ability to describe the use case, application and resulting value.” Extending the language analogy: the building blocks are an understanding of logical data models – the basic vocabulary; meta data providing rules and information about data is the grammar.  Learning needs to go beyond parroting a few key phrases and acronyms. To really communicate in this new language CEOs must not only be data literate – but data cognitive. Language shapes thinking, and to succeed, today’s CEOs need to think data like digital natives.

Simon Axon

As anyone who has learned a language will recognise – practise makes perfect. This means rolling up your sleeves and getting into the data ‘lab’. Run some queries, experiment with data to test theories and learn how data can, and should, inform all aspects of business management. It is daunting, and different functions are fiercely protective of their data. But that’s one of the big cultural shifts the CEO needs to lead. Data is more valuable when it is used across the business. Developing safe and secure ways to combine, refine and analyse data at an enterprise level is fundamental to competing with Big Tech. The Chief Data Officer can help. Spend time with them and use them as a teaching-resource to get more familiar with what can and cannot be done with your data.

As you practise you will build confidence and move from school-level conversations to business-class data fluency. Spending more time looking at and working with data and you will begin to recognise ‘quality’ data, identify attributes and flag anomalies. This will build confidence and essential trust in data. Last year KPMG found just 35% of CEOs trusted the data in their organisations. This shocking stat undoubtedly stems from a data skills deficit among CEOs themselves. If they don’t know what to ask for, and can’t recognise what they get, they won’t trust it. To stretch our linguistic analogy, if you are not confident in the language then you’ll be anxious ordering food in a restaurant!

Ultimately, no one expects the CEO to personally implement data-analytics programmes across the business. But unless they have the confidence and the skills to accurately communicate what’s needed, to sit at the head of the table and ask the right questions about the menu, then the organisation is unlikely to put the right emphasis on the data strategy.

In How Google Works, former Google Chairman Eric Schmidt outlines how every meeting revolved around data – it is simply how Big Tech works. Banks need to adopt the same approach. Exploiting data in all scenarios must become second-nature. By modelling the use of data across the business – dissolving silos rather than sticking to narrow data sets that reinforce them, the CEO can define a powerful data culture. Operationalizing data strategy will, just like using language skills, stop data literacy from becoming rusty.

Entering any new market requires investment in understanding the language, culture and business environment. In the Big Tech world, data is the lingua franca informing every decision. Bank CEOs need to learn from them and invest in building their knowledge to become data fluent. There are no short cuts. Throwing money, bodies and tech at the problem will not get you there.

 

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Business

REVITALISING THE TOKEN MARKET

By Gavin Smith, CEO at Panxora

 

With interest rates near zero and fears that whipsawing stock markets are set for further plunges, many investors are turning to alternative markets in the search for returns. Money flowing into cryptocurrency hedge funds and trusts like Grayscale is at all-time highs and the large cap coins seem to be entering a bull phase, but that capital is not trickling down into new token projects. Why are blockchain token projects struggling to attract funding?

 

Seed investor scepticism

Setting aside the reputational issues with mainstream investors, even those educated in blockchain tech are not signing on the dotted line. This is certainly due in part to the hangover from the early token market.

During the heady days of 2016/17, investors could buy tokens during the token sale, and if the project was legitimate – even if the business case wasn’t particularly strong – prices would soar based on market enthusiasm. Early investors purchased at a discount and cashed out almost immediately for a handsome profit – and then repeated the process again. The token sale allowed founders to amass a war chest large enough to finance the entire token project – without having to give up a large chunk of company equity. Everyone got what they needed out of the deal.

Running a token sale is far more expensive today than it was during the boom. Getting the attention of the token buying public in a market where advertorial has replaced editorial is expensive. This coupled with a regulatory framework that requires the advice of accountants, solicitors and information gathering of KYC details for investors all comes with an escalating price tag.

To accommodate the change in cost structure, tokens now need to acquire funding in two rounds. Frequently there is a first round where capital is raised from a few, large investors. This cash is then used to finance setup and marketing the main token sale. The token sale, in turn, provides the capital needed to run the entire business project.

 

Bridging the gap between token projects’ needs and early stage investors

To successfully get a token through the capital raising process, founders must acknowledge the risk assumed by those very early investors and reward them appropriately. And given that tokens may stagnate or fall in price post token sale means that a deep discount in token price is not necessarily attractive enough to get investors to commit.

Many tokens have turned to offering equity in the business in the effort to raise that first tranche of capital. If you look at the number of successfully concluded token sales, the downward trend has continued since Q2 2018, so offering equity is not sufficiently stimulating the market.

 

Two sides of the coin

So, what is the answer? It’s a complex question but one thing is certain. Any solution must be rooted in a deep understanding of what both parties need to successfully conclude the deal.

On the one hand, token founders’ needs are clear: they need enough capital to get the token ready for and through a successful liquidity event that will provide sufficient funds to build the project. The challenge lies in striking the right balance between accruing that capital and making sure not to offer so much project equity that give up either the control or the incentive founders need to drive the project forward.

On the other hand, while the needs of the seed capital investors are more complex, there are two areas of key concern: transparency and profit incentives.

 

Transparency can mean many things, but almost always includes providing more informative cost and profit projections, as well as answers to a whole range of questions, not least the following:

  • What happens to investor capital if the token sale event fails? Token founders must be transparent from the outset. The token market is highly speculative and early investors run the risk of losing their money should the project fail. Therefore, investors require a well-established fund governance process in place throughout the fundraising so they can make informed decisions on whether the project is worthwhile. 
  • How are the assets for the entire project managed? Investors need to know that their money is in good hands and that proper treasury management techniques are being used to manage cryptocurrency volatility risk. Ideally, an independent custodian will be used to hold the funds and limit founders’ ability to draw down the capital – releasing funds to an agreed-upon schedule of milestones.
  • How are the rights of investors protected, for instance in the case of a trade sale? Investors need to know what happens if the company they are investing in is sold. What impact could this have on the value of their stake? Would a separate governance framework need to be established? These are critical questions and investors aren’t likely to settle for any ambiguity in the answers.

Profit incentives are important when it comes to encouraging early participation in a project. Investors need convincing that the proposition will keep risks to a minimum and focus on providing a strong probability of a return. This means that founders need to be able to defend the case for the increase in the value of their token.

But this isn’t the only incentive that matters. Investors can also be incentivised by preferential offerings such as early access to projects and services that might help their own business.

Let’s not forget that investors don’t support just any project. What really matters is that there is something special and unique about the business being underwritten by the token. Preferably something that could be shared upfront and directly benefit the investor – proof that the investment is really worth it.

And that’s what it all comes down to. Ultimately, while token projects are having a hard time finding funds at the moment, if they can prove their worth and provide full transparency and clear profit incentives to ease investors’ concerns, the money is out there. And deals can be done.

 

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