Strategic Sourcing & Supply Chain Improvements
Business Governance
Marketing & Sales Best Practices
Value Driver Analysis for Business Profitability Improvement
Intellectual Property Licensing & Strategic Alliances
 

Strategic Sourcing & Supply Chain Improvements

Many joint venture owned manufacturing and distribution businesses have been under increased pricing pressure from their customers in recent years. This has required them to re-examine the competitiveness of their purchasing and supply base. The current conditions take root in the leveraged buyout and re-engineering days of the late 1980s and early 1990s. That was a difficult time for many procurement organizations, which were parts of larger public companies or leveraged companies. In such companies, the focus on getting close to the customer, short-term financial results, and overhead reduction resulted in a de-emphasis on and even a gutting of procurement departments in a misguided effort to be "lean and mean." One forlorn procurement manager once put it, "We went way beyond 'lean and mean,' all we got was skinny and teed off!" As companies saved money on the reduced cost of the purchasing department, it became more difficult to effectively manage the cost of purchases themselves, which can be up to 80% of the entire cost base of the business.

Still reeling from these initiatives, understaffed and overworked purchasing organizations picked up on a new buzzword in the 1990s-"partnering." The promise was to identify a few strategic suppliers, get close to them, commit to long-term relationships, and your business performance will skyrocket. Often, they maintained their long-standing relationships incumbent suppliers, which were frequently family-owned, middle market companies.

By the late 1990s, global competitors from Mexico, China, India, and Eastern Europe put enormous pressure on U.S. and Western European businesses. The suppliers from these regions are very competitive. Often they can deliver comparable quality at 30% to 50% lower-cost. This has required many purchasing organizations to revisit their "partnerships." The margins of many medium-sized companies have been squeezed in the process. But lack of information, trust, and the prospect of extended supply lines has prevented many companies from fully exploiting this historic global business opportunity, which means that pricing pressure may increase going forward.

A challenge faced today by many privately owned companies is that their larger customers are focused on seeking additional purchasing improvements. This, in turn, is forcing many family-owned businesses to re-examine their own procurement processes. Recent experience shows that companies who apply best practice procurement processes, e-sourcing technologies, and global sourcing strategies are consistently saving 15% to over 50% on purchases of both production materials and indirect purchases. Moreover, these results can have even more impact when purchasing focuses its efforts in the product design phase where new products can now be launched at dramatically lower cost. This can generate increased market share and earlier breakeven on products thereby making procurement a driver of company growth.

The focus on global procurement and supply chain improvements is requiring most, larger family-owned businesses to rethink their competitive positioning. Source's growth advisory team has considerable experience in working with clients on both the buy and sell sides of supply chain issues. For more information on how Source's supply chain and procurement services can increase the profitability of your business click here.
 

Business Governance

We believe that effective Business Governance is a process through which the controlling owners of a business create an atmosphere for nurturing quality input to maximize the effective utilization of a company's entire resource base. Effective Business Governance is especially important in joint-venture businesses because such companies typically lack a diverse group of shareholders and, therefore, they receive more limited external input. As a company grows, improved Business Governance becomes increasingly essential. Effective Business Governance involves assembling a trusted governance team, which typically includes controlling shareholders, capable outside members of a board of directors or a business advisory board who consistently demonstrate over-time a commitment to providing frank input on matters relating to the success of the company, and certain key members of the company's management team. Such a trusted governance team then participates in the periodic evaluation of the effectiveness of a company's strategy and its management teams' success in implementing the strategy, as well as the quality of the company's overall operating results. Business Governance also involves periodic evaluation of business reinvestment risks or opportunities, succession management and contingency plans, and exit strategies. Many joint venture companies, which have created an effective Business Governance atmosphere, also generate annual value growth progress reports. These isolate management's annual contribution to value growth creation for the owners. For more information on how to improve the effectiveness of Business Governance for your joint venture company click here.
 

Marketing & Sales Best Practices

The three most assured ways of growing a joint-venture business are to: (i) sell more of your products or services to current customers, (ii) attract new customers and (iii) find new products or services that will interest current and new customers. These methods of growth are typically referred to as internal or organic growth. However, despite efforts to improve growth through such methods, many joint venture companies continually fall-short of the sales growth targets, which are included in their annual budgets. The reason for this is that typically their marketing and sales functions are not executed at a "best practice" level of performance.

The objective of marketing is to identify a qualified lead or opportunity. There are a number of processes used to do so. Some of the most familiar include:

• Advertising (TV, radio, billboards, magazines, etc.)
• Trade shows
• Referral management
• Internet search optimization
• Branding activities

The objective of sales is to pursue and close the sale, given a lead/opportunity by marketing. Salespeople are most effective when the following factors are optimized:

1. Knowledge: The salespeople know their products and services so well they can act as a true business consultant helping prospects solve real business problems.
2. Aptitude: The salespeople have a talent for sales that is in the DNA. This talent can be easily ascertained by testing.
3. Skills: The salespeople have mastered the Top Ten Skills of the Super Salespeople. These skills are not in the DNA, they must be learned.
4. Motivation: The salespeople are motivated to sell. Motivation can be partially ascertained with testing, but must be verified in interviews.
5. Process: The salespeople are working in companies that have best practice marketing processes to support them.

Source people can offer the following assistance in helping our client's businesses transition to marketing and sales best practices with the following four offerings:

• Step One: Conduct an assessment of the sales and marketing processes and provide recommendations on transitioning to "best practice."
• Step Two: Assess the aptitude and motivation of all current and future salespeople.
• Step Three: Train salespeople on the top ten skills used by the country's very best salespeople.
• Step Four: Conduct and facilitate a Strategic Marketing Planning offsite for company executives and salespeople. The output of the offsite is a roadmap for growing the company.

Value Driver Analysis for Business Profitability Improvement

The financial results reported by companies have been likened to the score on the board during a football game. They indicate whether you are winning or losing. However, the score does not necessarily provide insight into the state of play on the field. Similarly, analyzing the performance of a joint-venture company based solely upon a review of its financial results does not provide the critical insight needed to gauge a company's value driver strengths or weaknesses. The key Value Drivers in businesses are Marketing, People, Process and Information. Strengths or weaknesses in each of these critical areas ultimately will affect the financial results of a company. Is it possible to evaluate the Value Driver Strength of an organization to determine in advance how strong or weak its financial results might be? And, in fact, to enable the owners to improve the performance of a company before poor financial results are reported? From years of working with medium-sized businesses, Source has been able to examine the Value Driver performance of hundreds of companies and, by doing so, has developed a proprietary Value Driver Survey that can be used by clients to materially improve the future profitability and financial results of a medium-sized company. The Value Driver Survey will: (i) identify the value drivers that can have the most immediate impact on improving the value and profitability of your business, (ii) isolate the discrepancies among internal views held by owners or key managers, which might be hindering the effective implementation of business plans or otherwise causing progress to lag, and (iii) provide a highly accurate comparison of a company's Value Driver ranking relative to the qualitative performance of other companies. For additional information on our proprietary Value Driver Survey, please click here.
 

Intellectual Property Licensing & Strategic Alliances

Intellectual property is a key ingredient for value creation in most businesses. Intellectual property helps distinguish a company from its competitors. Distinguishing your business from competitors is a key ingredient in your overall value proposition to your customers, which ultimately determines how profitable and long-lived your business will be. The challenge for most medium-sized companies is how to develop or acquire intellectual property. Competitive pressures, the need to satisfy analysts with growth in EPS, and lack of surplus capital often limit the effort that a small public company can place on research and development, or engineering or testing. Further, in many instances, the most talented scientists or engineers are employed by much larger businesses and are unwilling to take the career risk associated with joining a smaller company. It is also quite difficult for smaller companies to support the business development efforts that would be required to seek external intellectual property owned by others and to acquire it directly or through licensing transactions. Therefore, the vast majority of small public companies are limited in being able to distinguish themselves to only internally developed intellectual property. This fact relegates many small public companies to limited growth opportunities, or to attempt to compete on price, rely upon updates to old product lines or to seek growth merely through business acquisitions. All of these can be limiting or risky strategies. Source has perfected an approach to cost efficiently evaluate whether intellectual property might be available for licensing from Fortune 1000 companies. Such companies are often eager to find smaller businesses that can commercialize their intellectual property for various purposes. Licensing intellectual property can be the most significant value-creating activity for many small public companies. For more information on how Source can help integrate the concept of intellectual property licensing into your Growth Strategy click here.