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Electronic Arts, founded in 1982, is a leading global interactive entertainment software company. EA Sports Madden Football is one of their premier products, first released in 1988.  It is a very high quality simulation game that allows you to be an actual NFL player.  It supports 1-4 players using game platforms like Xbox 360, PlayStation 3, Vita, and Wii.  EA estimates that the series has five to seven million dedicated fans, including NFL players, who typically play as themselves.  Several active players have given the game some credit for their skills – playing the game for hours and hours seems to be a reasonable training ground, without the risk of heat exhaustion or concussion.

The NFL reportedly considers the game series as their 33rd franchise.  Each week during the season, EA Sports receives the same film database of every play that the 32 real teams receive.  The game is the NFL’s second largest source of licensing revenue, after apparel.

EA Sports had been very profitable, but their last profitable year was 2007.  For their 2012 fiscal year their net revenue was more than US$4 billion, but they had a loss of over US$250 million.  This was their “best” year since 2007.

While Madden Football does require Internet access to get player statistics and other updates, when you are in the game you are playing entirely “in the room.”  You are interacting with people you can see and touch and the game is physically running on your game platform.

What happened to make Electronic Arts turn from extremely profitable to struggling?

In 2004 Blizzard Entertainment released World of Warcraft (aka WoW).  WoW is a massively multiplayer online role-playing game (MMORPG).  According to Blizzard, it had over 10 million active players at the end of 2011.  It is the world’s most subscribed and, according to Guinness World Records, the most popular MMORPG.  Like Madden Football, in WoW you are a character in the game whose actions you control.

WoW does not require any special game platform, just a Windows or Mac computer and an Internet connection.  The game is actually driven from Blizzard servers scattered around the world.  WoW is in the Cloud.  Much of the WoW play involves the completion of missions, usually called quests.  Quests allow your character to gain new skills, in-game money, and tools; as well as explore new areas.  When your character completes a quest, new quests become available.  While you can play as a single character interacting with a huge number of computer-controlled characters, some of the quests require groups of a handful or more human-controlled characters.  These groups form just like groups form in real life: people you know either in-game or in the real world, or characters you meet in the game who are looking to run the same quest.

Usually, you do not know much about the members of your group.  You know a lot about their character, but you may not know their gender, age, or even what continent they are on.  On the other hand, I know of at least one married couple that first met as WoW characters.

According to a skilled WoW player, in any group of 10 or more18-30 year old males in the US, at least one of them will be a WoW player.

There is at least a coincidental correlation between the growth of WoW and the decline in EA Sports.

Yawn, why should I care?

As I wrote about last time, your customers are in the Cloud.  They are interacting through the cloud with their relatives and friends.  I have a cousin who consistently sends at least 10,000 texts a month – I think that is her primary means of communication.  It doesn’t matter where her friends are; she stays connected.  I expect the actual technologies of social media to significantly change, but I believe that whatever it morphs into will be even more important in five years than it is are today.

More critically, I think there are some significant ways to take advantage of this trend, or at least should be considered.  As my friend SocialSteve says, it is time to shift from Social Media to Social Marketing.

  1. Should you do product placement in some of these very popular MMORPG?  Advertisers have found that product placement in TV shows and movies may be a less expensive and more effective form of advertising than the typical 30-second ad.  Would companies like Blizzard be interested in having sponsored quests, possibly with real world links and prizes?
  2. You probably have a customer advisory board, a group of your “best” customers who get access to pre-releases and product plans and who give you their opinion of those plans and products.  Instead of bringing them to your HQ for a few days every year, why not establish a private LinkedIn, Facebook or Google group for the purpose.  You could easily allow, restrict and manage almost any number of members. You can use these groups to set up discussions on your new product roadmap, or on their ideas for improvements.  You could use private YouTube videos to demonstrate your new ideas and products.  Let you best customers be a bigger part of your product development, reducing the opportunity for creating engineering-led updates that don’t meet real customer needs and probably making initial acceptance better.  You also do not have to wait for the next customer advisory board meeting.
  3. Embed you support teams in social media like LinkedIn and Facebook.  Let your customers rant where you can listen and quickly respond.
  4. There are a number of companies who are using games to train their staff.  While not necessarily MMORPGs, these games can help staff develop skills in support, facilitation, and other interactions.  A few universities and large companies are investigating the possibility of using these game technologies to set up real-world problems and allowing teams to come up with solutions.  Even the US Army is using these types of games for both training and determining a candidate’s suitability for specific assignments.

The last word:

Over the years I have played games like EA Sports Madden football, first-person shooter games where you wander around mostly destroying things, and what you see is from your character’s point of view, and games like WoW.  In the last two categories, your character is constantly changing direction as it moves through the virtual environment of the game.  Based on a very unscientific study, I think there are at least two types of people: those who can automatically keep track of where they are in the game and those who can’t.  I have seen people running through these environments for an hour while constantly being distracted by other characters trying to do bad things to their character, and yet they always know exactly where they are and which direction is their final destination, even if they have never been in that part of the virtual world before.

That is not me; after five minutes in a virtual world, I am totally lost.  In the real world, I rarely get lost.  When wandering through a new city, I almost always know the direction of my final destination, even if I don’t know which roads might take me there.  This works whether I am driving, or off walking in the wild, even on a cloudy day with no visible sun or shadows.  I think it is because when you play a game, you do not change physical orientation.  While playing a game, you are physically sitting in the same place and always facing the same direction in the real world, no matter what you character is doing is the virtual world.  There are no physical acceleration clues to help your mind figure out where you are.

Most of those people who I have observed who always know where they are in the virtual world get easily lost in the physical world.  Take away their GPS and give them a destination 100 miles away, and they are likely to head north instead of south at some point.

I’m not sure what do with this observation.  Maybe ask for a million dollar federal grant to study it.  But the important point is that people are different.  Social Media will work for some, not for others.  Do not abandon your legacy marketing methods and always make sure your customers or prospects can actually get to a real person fairly easily, even if they aren’t connected.

Comments solicited.

Keep your sense of humor.

Walt.

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Where are your customers these days?  Unless you are providing a product or service that actually requires close proximity, you may not actually know or care where all of your customers are.  Even if you do have to be close to your customers, like a dry cleaners, manicurist, barber, or medical professional, your customers will still want to interact with you from anywhere by any means.  As your customers’ interface to the Internet collapses to a single interface (see Death of the Laptop?), they will want to determine your hours, schedule an appointment, look for a coupon, order a product, make a complaint or provide a complement from their phone, tablet, laptop, desktop or Internet-enabled TV.

Your customers really want on-demand self-service from anywhere at anytime.  That sounds a lot like the definition of Cloud Computing.  They want you to at least appear to be in the Cloud.  They want you to be available 24/7.  Have you made it easy for your customers to contact you when and how they want?

Does that mean you need someone to monitor your web site or watch for phone calls or text messages all the time?  Probably not.  But it does mean you have to have the processes in place to ensure that someone is checking text messages, voice mail, email and web inquiries every business day and reacting to them promptly.

These processes are critical if you are using social media.  Just having a Facebook page, Twitter account or blog does no good if you never update it or react to incoming messages.  An unwatched social media will quickly fade away from your customer’s thoughts.  If that has happened to you, I suggest you take a step back and decide why you want that social media presence.  What are you trying to accomplish?  Do you have measurable goals?  Then build a plan to create the initial content, keep it updated, and more importantly monitored.  Then re-launch that social media presence with as much splash as you can.  Periodically review hits and other activities and your progress towards the goals.  Change you plan as appropriate.

Everything above applies to your partners as well.  They also want to be able to place orders or give you updates from anywhere at anytime.  If it easier to communicate with you competitors than with you, your partners will drift away to them.

Do not forget your employees.  I wrote recently about BYOD, bring your own devices, where your employees will want to use their own phones and tablets and even their own homes as their office.  Some of your employees will use their own devices; you really can’t stop them.  If you make it hard, then they will find somewhere else to work.  Instead, you should get in front of this issue and view it as an opportunity.  You will find that many of your employees are used to checking social media periodically, and reacting to text messages, email and voice mail at all hours.  Expect to get a periodic message that one of your team made a sale or solved a customer problem during a commercial of their favorite TV show.  This is very satisfying to your employee and your customer, and to you also.

Your customers, your partners and your employees are in the Cloud.  You do not need to be in the Cloud to support them there, but it can help you provide that 7/24 presence that they all expect.

The last word:

I recently had a business trip to Fort Huachuca in Arizona.  While not related to why I was there, one of the labs in Fort Huachuca tests equipment for compromising emissions, mostly radio frequency, that might enable someone to figure out what is going on in a computer system by “listening” to it.  Several decades ago I saw a demonstration: we sat in a van on the street outside of a government building, and printed in the van exactly what was being printed inside the building by picking up the compromising emissions from the printer.  Around 1980, one of our salesmen came to me and said he wanted to bid our commercial terminal for a Department of Defense project.  I knew this terminal would never pass the testing – it had no shielding of any kind.  In spite of my objection, the salesman sent the terminal out for testing, and it passed!  I was astonished.  I called someone I knew at the lab and asked why they had passed it.  He said they had several long conversations amongst the engineers before they passed it.  It turns out the terminal generated so many emissions that it was impossible to pick up any usable data.

The US Department of Homeland Security was forced by a Freedom of Information request to reveal the list of words it monitors on social networking sites and online media for signs of terrorist or other threats against the U.S.  It is an interesting list with over 300 words and phrases.  It includes, for example, “Transportation Security” – one of the reasons why I always refer to TSA by the more descriptive “Terrorist Support Agency” since none of those words are on the list.  The list includes “Cloud,” “Security,” “Breach” and even “Tucson,” where I flew into to get to Fort Huachuca.  It includes “Power,” “Leak,” “Recovery” and “Flu.”  It includes “Prevention” and “Response.”

I suggest you get this list, not to avoid the use of any term on it, as that would be almost impossible, but to make sure you include a few of them in everything you write.  Virtually every posting in this blog includes a dozen or more of them since I write a lot about the Cloud, Cloud security, and breach prevention.  Let’s make the world so noisy that Homeland Security (another phrase on the list) rethinks what they are doing.

Comments solicited.

Keep your sense of humor.

Walt.

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It is strange what an insignificant comment can start.  Or maybe I’m just strange.  A while ago I noticed a statement on the “Years Ago” page of the November 2011 Scientific American magazine.  In November of 1911, “it has been estimated that, for each minute of time, the civilized world strike three million matches.”  It went on to note that matches were a lot easier to carry and faster than the flint and steal that had been used before.  Then just last week a friend pointed out some old marketing films from Burroughs Corporation in the 1960s.  They showed a lot of history and some people I knew from back then, but the thing that jumped out at me was people smoking cigarettes and, in one case, a pipe in a computer room.

The Chinese had a “fire inch-stick” in 577 A.D. that required a spark of your own devising.  The friction match was invented in 1826 by John Walker, an English chemist.  He dipped a small wood splint in a paste composed primarily of sulfur and potassium chlorate.  To light, simply pull it through a fold of sandpaper.  It did have one minor problem: it tended to drop flaming balls to the floor, setting carpets and dresses on fire.  It was banned in France and Germany.  Sulfur was replaced with white phosphorus, which unfortunately had very bad side effects, afflicting those who made the matches with serious bone disorders.  There was enough white phosphorus in one pack to kill you.  Eating the heads of matches became a “popular” suicide method.  An International agreement in 1906 banned white phosphorus in matches.  Meanwhile, in 1898 two French chemists patented a match based on phosphorus sesquisulfide and potassium chlorate.  In 1899 two Englishmen developed a safe way to make commercial quantities of phosphorus sesquisulfide.  The Diamond Match Company obtained the rights to manufacture the chemical in the US in 1900.  In 1911 at the request of President William Howard Taft, the Diamond Match Company released the patent “for the good of mankind.”

All of these matches were “strike-anywhere” matches.  Suzy remembers her great-grandfather striking a match on his shoe to light his pipe, and I think we’ve all seen the smart alecks who could strike a match with their thumbnail.

“Safety matches” can only be struck on the rough side of the box or pack.  That is because the two reactive agents are separated: one on the match and the other in the rough surface on the container.

By the end of World War II, Diamond was making ten million matches a day, and they were just one of many matchmakers in the US.  In 1951, Diamond Match Company had over US$100,000,000 sales in matches.  They still make matches, but also toothpicks (obvious expansion), straws (hollow toothpicks?), and disposable cutlery.  They are now part of a conglomerate, Jarden, which does not break out revenue or sales by components.

There has been pressure against matches.  Zippo started manufacturing lighters in 1933.  You can get your very own 80th anniversary edition.  BIC was founded in 1945 to manufacture parts for fountain pens and mechanical pencils, and launched the BIC lighter in 1973.  Their lighter sales grew 25% from 2009 to 2010.  Perhaps the most significant pressure has been the 2% a year decline in smoking in the US since 1998.  Perhaps the least significant pressure has been the surge in battery-powered candles for tables and other decorations. The 1980’s saw the collapse of the American match industry, caused primarily by rising production cost along with decreasing demand.  Diamond is now the only remaining US matchmaker.

Diamond Match Company AdIn reality, Diamond was not selling matches.  They were selling advertising.  They made a lot of their money by selling matchbooks with company logos and messages.  Almost all of Diamond’s advertising was to sell these ads to business, not to sell matches to consumers.

Are matches an important product?  Sure.  Like the World War II c- and k-rations and the MCI (Meal, Combat, Individual) used in Korea and Vietnam, the current US military’s MRE (Meals, Ready-to-Eat) each contain a couple of matches.  We still buy matches, usually the package of ten boxes of 32 matches each from Diamond every five to ten years.  Does it make sense to add matches to your product line?  Probably not.  Are matches unique in having a declining market caused by factors outside of the manufacturers control?  Also probably not.

Demand for products grow and shrink influenced by events and influences outside of our control, resulting in chaos for many businesses.

But there is even more chaos for businesses.  In 2010 Chris “Spence” Spencer, an IBM Emerging Technologies Strategist, published some interesting numbers about the amount of data that we all create.

The world is complex, and the amount of data that is generated every day is growing. In 2010, that number is expected to exceed 988 exabytes of information. It’s as if every man, woman, and child on the planet wrote 294,620 novels. This year. It’s also more than every grain of sand on every beach on the planet. In fact, it’s about 131 times more.

That was back in 2010. A petabyte is 1,000,000,000,000,000 bytes, or a thousand terrabytes.  An exabyte is a thousand petabytes.

We send about 200 billion emails every day.  There are a billion people on the Internet every day.  There are nearly 4 trillion RFID events every day.

The Internet is capable of handling over 65 exabytes every day, the equivalent of every person exchanging six newspapers every day.  Google alone processes about 24 petabytes every day.

There is great potential value in all this data.  That is, after all, how Google increases their power and revenue, by combining and interpreting all of that data.  Like Diamond, Google is in the business of selling advertising.

Your customers can watch their kids come home, turn on the lights, shut the garage door, and lock their car all over the Internet.  They watch TV, read books, and have video conference calls with their far-flung family on their phone. The tablet, or more appropriately, the user interface of the table will soon replace the current desktop and laptop computers.  Look at Apples new Lion OS X – a desktop / laptop operating system with many of the user interface capabilities of your smart phone.  In their private lives, people are more connected than ever before.  They can “talk” to their friends and family at any time.  They know where they all are.

Does your company fit into these new models?  Can your customers “talk” to you anytime they want?  Can they reach you from their smart phone?  Are you part of their social media network?

Most companies are growing their internal storage requirements at around 20% a year.  I have worked with one organization that is growing their data at 20% a month – they will increase their storage needs by a factor of 8 this year.

How can you keep up with demand and the new technologies?  For most companies, the only viable answer is the Cloud.  The Cloud can grow to exactly match your storage and processing needs.  The Cloud can keep your business running 24/7 through its disaster recovery capabilities, at far less cost than you could do it yourself.  Events like Katrina can impact locations 500 miles apart.  The Cloud can allow you to get into new geographic markets with a “local” presence, enabling you to compete with local companies.

The last word:

Do you periodically check your product lines for matches, a product or service with declining demand?

Do you periodically look at how you can take advantage of the new technologies your customers have to give yourself a competitive advantage?

Have you figured out how to take advantage of the Cloud?

Comments solicited.

Keep your sense of humor.

Walt.

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A few months ago I participated in a phone interview role playing session.  One at a time participants went to another room and called in for a job phone interview with a professional interviewer.  Those of us remaining in the room would then critique the conversation.  Because I had been on the other side of the desk I was asked to talk about the process from the interviewer’s perspective.  As I have been growing my own business, I realize that those same techniques work not only for a job interview but also for a project interview for a consultant.  Often your first real contact with a potential customer is over the phone, and the same opportunities and issues occur.  In both cases you are selling yourself.

Here are some things to think about when you are preparing and while on the phone.

You and I (the interviewer) have different goals.  You clearly are qualified, and I need to make a decision on whether to continue to consider you for the position or project.  In reality, my goal is to eliminate you.  I have other candidates who are just as good, at least on paper.  This process takes time from my real job, and I really don’t like to interview any more than you do.

I really don’t care about your weekend or what you do in your spare time.  I want to know how you will help me.  If this is for employment, I will ask you why you left your last job.  In any case I will ask about what you are most proud of, and I will ask you to tell me about a time when the wheels came off.  How did you handle it, how did you try to get thinks back on track, and did you succeed.  I don’t care whose fault it was, and to a certain extent I don’t care if you actually did succeed – I want to know how you reacted.  I will then pick two or three things from your résumé and do a deep dive.

Hint #1: If you can keep these answers related to my business, and even better the reason I need this position filled or project completed, I am much more likely to be really paying attention.

I get easily annoyed by someone who forgets that this is my meeting.  Keep your answers short, no more than 30 seconds or so.  Make sure I can get in with my next question, and let me lead the discussion.  Don’t try to anticipate my next question.

Always tell me “why” and “how” and “what happened” for every question.  Why were you doing what you were doing, how did you do it, and what were the results.

Hint #2: Make sure you can talk for a minute on anything that is in your résumé.  Practice.

I believe the stress of the interview should match the stress of the job.  I can add stress in a number of ways:

  • Jump among different topics.
  • Interrupt you.
  • Ask multiple questions in one breath.
  • Ask confrontation questions (Why did you do it that way?).
  • Propose a problem with insufficient information and ask for a solution.
  • Talk faster.
  • Use silence.

Silence can be a weapon.  Most people have a need to fill silence.  Just for grins sometime when you are on a phone conversation, stop speaking and see if the other person can wait seven seconds without jumping in with something.  Most people can’t.  Resist the urge.  It’s OK to ask something like “Would you like more information on this?” but don’t just start up again.  It is too easy to get off your “script” and say something that hurts you.

Hint #3: How do you handle stress?

  • Breathe.  Often, but quietly.
  • Stay calm and don’t react.  If I start talking faster, you shouldn’t.  Keep talking in your normal voice.
  • It’s not personal, and it is OK to clench your fist – I can’t see that.
  • Smile – I can hear this.

You are at a real disadvantage with a phone interview.  You really don’t know who is on the other end of the call.  You should assume there are silent listeners.  Don’t be surprised if a new voice suddenly appears.  It is OK to ask who it is, but answer the question first.

Hint #4: If you are given a phone bridge to call in, try to call in two or three minutes early.  You can often tell when people join and get a better idea of how many are on.  If the other person is on a speaker phone, there may be other lurkers.

The worst thing about a phone interview is that there is no body language, and body language is about 55% of communication impact.  You can’t see me, and I can’t see you.  You need to listen for verbal clues.  Watch for negative or positive reactions, and pay attention to where the questions or comments seem to be going.  Listen for clues that indicate they didn’t hear what you really intended to say, and take an opportunity to go back and rephrase an answer.

Hint #5: Pay attention to what is not asked.  For example, if I don’t ask you about some recent experience that seems to match the job or project, then either I have already decided “no” or I have already decided that you have the technical qualifications and I’m exploring whether you are willing to do the job and will you fit into my organization.

Your voice has to become your body language.  It has to indicate your interest, enthusiasm, confidence, and initiative.  Stay focused.  Don’t plan your answer to my next question while I’m speaking.  You probably won’t guess correctly.

Don’t tell me things you shouldn’t.  I had an interviewee tell me unannounced product details from his previous employer, a competitor.  I guess he was trying to impress me with what he knew, but the conversation ended right then.  If you will tell me someone else’s confidential information, you will tell someone mine and I won’t hire you or contract with you. Talk about past projects that could be confidential in general terms, not specific.  “I increased sales by 30% the first year” instead of “I increased sales of the Kalinka Model by $5M in the first year.”

Hint #6:  Always act as if you are still employed at your last job and I work for a competitor.

Control your mental and physical environment for the call.

  • Help your mindset by smiling and dressing for the interview.  While you may not need to wear a suit or equivalent, dress like you would for a meeting with the executives of your last job.
  • Control your environment.  Make sure you won’t be interrupted by family, someone knocking on the door, extraneous noise or other phone calls.  If your neighbors or family are likely to come calling, put a sign on your door asking that you not be disturbed for the next hour.
  • Turn off your email.
  • Make sure you are comfortable.  Personally, I prefer to stand during the interview.  It makes it more like a presentation than a casual conversation.  Whatever you do, make sure that you don’t make noise moving around, including don’t use a chair that squeaks.
  • Use a headset, but test it.  Call someone you know and make sure you can hear and be heard clearly.

Hint #7: Make sure you have the phone number or email of the admin before the appointed time in case there is a problem with the phone number, especially with a phone bridge.

Unless you are a trained actor, I can tell when you are reading something, and it is a big negative to me.  I want someone who can think.  I know you have prepared answers for many questions, but don’t write scripts, write notes so you can talk naturally.

Hint #8: Use positive words and action verbs.

Try to minimize the “ah”s, “er”s and “you know”s.  If you can without adding even more stress, listen to what you are saying.  I watched the same senior person give a similar presentation three times. The first time he had lots of “you know”s, the second time a lot of “well”s but not a single “you know,” and the third time he seemed to start every third sentence with “so.”  He didn’t notice while he was giving it, but I did.  If you can listen to yourself in real time, you can usually stop the behavior.

Have a set of questions ready.  Hopefully you have done your research and know what my company does, and if you have someone in your network that works for me or my company, you may know a lot about what the real problem is.  Ask questions that show you have done that research, and show that you are interested in my problem.

Hint #9: Ask what the next steps are.  I probably won’t tell you if you don’t ask.

When I’m the interviewee, I try to have a list of what I would do first.  The list should be designed to show that you can be productive immediately, that you understand what the main goals are, and that you know what things are important to keep the organization functioning while you do learn.

Hint #10: Smile and enjoy it.  I can hear the smile in your voice.

The last word:
Sometimes, unfortunately fairly often, you will get the clueless interviewer.  In that case subtly take over.  Ask questions about the job or project.  Use the interviewer’s answers as invitations to provide information about your related experience, enthusiasm, and leadership capabilities.

Comments solicited.

Keep your sense of humor.

Walt.

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If you are just starting up a consulting business, one of the toughest questions is how much to charge, especially if your “product” is just you.  How much is all that experience and knowledge and insight you have accumulated worth.  There are ways to make it easier.

I usually do all of the calculations in “hours” even though I often charge by the job.  In reality, all you have is time to spend.  I suggest starting by looking at your value from two sides: yours and theirs.

Start from your side.

  • How much do you want to make (i.e., what do you want your W2 to say)?
  • What’s your sales and marketing overhead in hours?  These are real hours that you will have to work that aren’t billable.  This is usually expressed as a percentage of your billable time, usually in the 20% – 40% range.  When you start out it is higher, and you might expect that it will decrease as you increase your set of customers.  Even if you are overbooked, it should never go to zero, especially if you rely on just a couple of clients for the majority of your work.  When one of them says “bye” for whatever reason, if you haven’t been keeping yourself visible it can be just like when you started.
  • How many hours are you willing to work in a year?  Include both billable and non-billable hours.  Don’t forget to take vacation and holidays into account.
  • What’s your “corporate” overhead?  Include the annual strategy planning trip to Aruba, the monthly gym membership, medical, taxes, communications  including phone and Internet presence, travel, retirement, ….   There are usually two parts to this.  The first is fixed costs that don’t vary whether you actually have income or not (like medical, rent, and communications).  The second is variable, which you can usually express as a percentage of revenue (like taxes and retirement contributions).
  • From that, you can calculate an hourly rate. For example, if your marketing overhead is 30% and you are willing to work 2,500 hours a year (50 weeks at 50 hours per week) then you have 1,923 billable hours available.  Let’s assume your fixed overhead is $20,000 per year and your variable overhead is 50% of revenue, and you want your W2 to say $80,000.  The total the company has to earn is $80,000 + $20,000 + $40,000 = $140,000 per year.  You have 1,923 hours to generate that revenue.  Therefore for this example, your rate is $72.80 per hour.  Since these are really an estimate, let’s call it $75.00 / hour.

Start from their side.

  • How much is your time really worth?  If you recently worked for a large company that “sold” people like you for customer projects, you have it easy.  What your company charged for you is one measure of your value.  It also allows you to figure out what your prior company’s overhead + profit was, often 2.5 to 4 times what they were paying you.  Thus your overhead isn’t as high as a big company, unless you really want that annual strategy meeting in Aruba.  Baring unusual circumstances, you need to be at least 20% under your prior company’s rate.  Many organizations are willing to pay that kind of premium to get the perceived safety that a large company provides.
  • Find out what your competition is charging.  This may be harder than you think.  Some won’t want to reveal their rates, but the biggest challenge is to make sure you are comparing yourself with someone of comparable experience and skills.

If the “your side” rate is even close to the “their side” rate, you are done.  Live long and prosper.

Usually your rate is significantly higher than their rate.  There are two possible reasons for that:  your estimation of your value is not realistic, or you aren’t comparing yourself to your real competition.  What makes you unique?  What niche can you absolutely claim as yours?  The smaller your niche, the more you can charge.  As a side benefit, the smaller the niche the smaller the target market and the more focused your marketing and sales efforts are.

I’m not a believer in discounting rates to “buy-in” to a customer.  That first project sets a lot of precedents, including your rate.  I would rather give away maybe a day’s consulting as pre-sales effort.  Personally, I believe in the creeping commitment plan, also known as the camel’s nose in the tent ploy.  I start out with small projects, each leading towards the customer’s real goal, but always with the clearly stated ability of either side to wander off at any point.  The trick is to make sure that each little project provides measurable value to the customer, and appropriate revenue to you.  The end of each project includes a report which emphasizes the results and the value the customer received, along with a proposal for the next phase.

Find out how much the person you are dealing with can sign for without requiring more than one layer of approvals.  Keep your proposals under that value until you have established your reputation.  The best way to be successful is by making your customer contact person a hero.

The last word:
Smile a lot.  People would much rather work with a competent person who is pleasant and seems to be enjoying the project.

Comments solicited.

Keep your sense of humor.

Walt.

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If you run a business or some division of a larger one, some of your revenue probably comes from responding to a request for proposals, or RFP.  Many large organizations and almost all government entities use RFPs for most or all of their procurements.  It, in theory, brings structure to the procurement process, defines the decision methodology, and gives a perception of fairness to the murky business of buying product or services.  In theory, the buyer advertises the RFP, allows for a period of questions, has a specified date and often format of the response, and a documented decision process and timeline.

Preparing an RFP response is like a term paper in high school or college.  You spend a lot of time creating it, and there isn’t much good that can come from it.  Every hour you spend working on the response is an hour you aren’t earning any money.  So how do you decide whether to bid or not?

There are some obvious questions, like does the organization have budget to actually award the bid and do you really want to do the job and be associated with the procuring organization.  But to me the most important question is how did you get the RFP?   Did you find the RFP yourself on some website or through some service, or did the client send it to you or at least ask you to bid on it?

Years ago I was asked to set up a technical pre-sales organization for a major division of a well-known computer company, as we called them in those days.  My real task was to figure out why we were only winning about 1 in 10 RFP responses we submitted.  After one year, we were winning about 1 in 3.  In this specific environment, it cost about $1M to put together a proposal, but the awards were eight-to-ten digit numbers, so this improvement had a noticeable benefit to the bottom line.  We made a number of changes, like only bidding on deals that we could actually deliver.  But the most important change was that if we weren’t in there influencing the deal before the RFP came out, we did not bid on it.

Being there allows you to get answers to many of the basic questions before you decide to bid: do they have budget, what is the decision process, who makes the decision and who influences that decision, is there an incumbent they like or pre-selected winner that will be hard to overcome, and, most importantly, what is the real problem they are trying to solve.

Too many RFPs are written by desperate people who don’t understand their own problem.  They have somehow determined the solution, and put out an RFP to get that solution.  If you really understand the underlying issues, you can put in a very strong proposal that indicates you do understand and have the ability and desire to fix it.

Most RFPs are written by people who have never written an RFP before.  This is true even in large companies with a separate procurement organization.  The procurement folk may manage the process and have templates, but they don’t control the technical content.  And those people have rarely had much experience writing an RFP.  When you see something strange, question it.  You probably have a better idea of what the client really needs then they do, especially if you have been working with them for some time.  And it can be a key part of gaining the attention of the influencers and decision makers.

I suggest that you treat a proposal, and the pre-sales effort leading up to it, as a project with a budget.  As you start working on it, estimate the potential total value of the award and determine how much you are willing to spend on getting it.  This might be a percentage of the expected client payments over two years.  I wouldn’t go above 10%.  Keep track of your time and other expenses just like you would for a “real” project.   Check on the status periodically, and be prepared to walk away.  I’m working on a deal right now that was originally supposed to close in June, now maybe in December.  I’m still pursuing it, but with a lot less time and effort.  Two things I carefully watch:

  • If the award date is moving away faster than the calendar is moving forward, it will never close.
  • If the expected value of the award is dropping, so should your proposal effort budget.

Don’t make the common mistake of saying “gee, I’ve already spent 100 hours working on it, maybe another 50 will close it.”  If it isn’t profitable at 100 hours, it isn’t going to be profitable at 150.  Take that 50 hours and find another deal to work on.

If you get good enough to win one in three proposals, then spending 10% of the expected value on each proposal means you are spending about 30% of your revenue on sales, plus whatever else you are spending on your marketing efforts including demand generation.  If you are only winning one in ten but still spending 10% on the pre-sales for each, then it is easy to figure out why you aren’t making any money.

One more point: treat your proposals as a marketing document that can be reused many times.  The format of each submission may be significantly different, and some will require deeper detail in some areas.  After you have submitted six or so proposals, 85% of the actual content should be the same. After all, that’s why “cooy” and “paste” were invented.  If you are writing significant new material for every proposal, maybe you haven’t found your niche market or the right potential clients.

The last word:
This is just one of many issues you need to confront as you enter the realm of consulting.  Peter Osborne and others have set up a Consultants Launch Pad.  The goal is to help people decide whether consulting is right for them, and then show them how to quickly set up their businesses and become successful.  It includes experienced consultants who offer advice.  Check it out.

Comments solicited.

Keep your sense of humor.

Walt.

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You have just created a new product.  It might be something you can touch, some software, or a service. You know the market your product is aimed at, your general target market.  These are the people you will approach after you get that first reference account.  How do you find that first customer?  Who do you go talk to?  How do your choose your first Target Market?

You already have your web site, your 10 minute high level power point deck, and your thirty second elevator statement.  You have focused these on business value, of course.

Let’s talk some more about that elevator statement.  It is called that because it is the message you can give in an elevator between the lobby and the other person’s floor.  It has to be directed to someone outside of your area of expertise, with no jargon, acronyms, or technical details.  It should be easy to understand by almost anybody.  Have you tried it on your child’s teacher?  That strange uncle in another state?  The cashier at the coffee shop you go to every morning?  They may not be interested, but they should be able to understand what you have.  You may meet someone you haven’t seen in years who asks “what are you up to.”  She may end up being a customer or know someone else who will be interested.

The elevator statement should have four components:

  • What your product is.
  • What problem it solves.
  • What makes it different.
  • What the business value is.

It needs to be vague but compelling.  Don’t dive into the technology, tell the person “why.”  Practice until you can give it without sounding like you are reciting something.  Make sure it is short.  Thirty seconds is a long time.  Say it out loud and time it.  Keep tweaking it and trying it out with anyone who will listen until you get the “aha” response.

Finding that first customer may be easy if there are other existing products that are very similar (but yours is much better, naturally), or if you already have a large customer base for products that are related to your new product. What if “none of the above?”

Use your network.  Update your LinkedIn status, put it on your Facebook wall, tweet about it, send a “what’s new” email to everybody in your address book, ….  Don’t just go to those in your target market.  Bet you didn’t know your spouse’s hairdresser/barber lives next door to the CFO of a company in your target market.  I suggest you check out Social Steve’s Blog.  He recently posted a seven part series on “Social Media: How To Go About It.”

If you know someone in the likely market or can get a good introduction, one technique is to ask for an advisory meeting. “I’ve got this nifty new product and I would like to get an opinion from an expert in the field.  Can I have an hour for a conversation?”  I have found that conversation often leads to a pilot with that organization or another lead.  Plus you get good information that will usually allow you to improve your product and confirmation that you understand the real customer requirements.

I have seen companies who waited until they had the perfect product before going to market.  I have never seen a successful company do that.  As I have said before, “Perfection is the enemy of the good.”  Or, more importantly, “Perfection is the enemy of revenue.”  Strive for good enough. Strive for what satisfies your first potential customer’s requirements, but no more.  In the early days, strive for what will convince your customers that you will be able to satisfy their needs quickly.  Drive your development to meet those few who look like they will be your early adopters.  Make them your focus.

What if the first really interested person is not in your general target market but in some market you hadn’t even considered?  If your product can be quickly tailored to satisfy that customer and there aren’t other obstacles like special certifications, I suggest you go after it.  A reference account is good, even in another market.

The last word:
Don’t give your product away.  Even if you decide that it is worth it to not charge that first customer, give him an invoice with the list price and a 100% discount.  Make sure they understand the value. Make sure they will be a reference account if they are satisfied with the product.  If it is a software product, make sure they sign an evaluation EULA (end user license agreement) that at least limits the time frame they can use the product at no charge and protects your intellectual property.

Comments solicited.

Keep your sense of humor.

Walt.

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