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Enterprise organizations are taking a rigorous look at the principles used in the Lean Startup movement. They are carefully considering how they can incorporate the approach for building and launching new products faster to increase revenues and reduce costs.

Why? Speed of innovation and time-to-market can translate to millions in revenue gained or millions in lost opportunity costs for organizations of every size. One known fact for product-based businesses is that the typical time for market development can no longer take years for planning to launch. Competitive forces require organizations to be in cycles of continuous improvement and a constant state of innovation.

Some businesses acquire other businesses to gain momentum, others set up lean approaches within their product development and design centers. If enterprises want to compete with the “young and restless” entrepreneur community, they need to consider moving faster in definition, development and bringing new products to market.

The father of the lean movement is Eric Ries, author of The Lean Startup: How Today’s Entrepreneurs Use Continuous Innovation to Create Radically Successful Businesses. The Lean Startup methodology promotes shorter product development cycles driven by experimentation and validated learning. Instead of waiting until the final product is “complete” before launch, the lean practice recommends to use iterative releases to confirm adoption and use cases for a minimum viable product.

The constant develop-release cycle provides for ongoing feedback to modify and pivot to meet buyer and user needs faster. The goal for this technique is to speed products to market, maximizing early product adoption cycles and capturing the most market opportunity. This all translates to revenue.

The risks associated to this approach are primarily related to creating products that seem to never be finished. Consumers must have a strong loyalty to stay committed to products that are always upgrading. Businesses have to evaluate the risk-rewards of being first to market with products that are viable and utilize the information gained in the customer feedback process during each release to keep customers happy.

The growing consideration of going lean for many business owners today is whether they do so through an M&A strategy or reorganization of the product development operation. “The only way to win is to learn faster than anyone else.” – Eric Ries

This article appeared in the CKS Advisors CKS Updates May 2013 Newsletter.  Author: Jamie Glass

Have you joined us for our monthly CKS Advisor Connect Happy Hour? Now is the time. Arizona Advisors, Consultants and Market Movers will be getting together on Thursday, May 16 at the CKSLiving Room to catch up with friends and colleagues. Refreshments served. Please email your RSVP to jglass@cksadvisors.com. 

Date: Thursday, May 16, 2013 

Time: 4:00PM - 6:00PM 

Location: 6263 North Scottsdale Road, Suite 390 

 

NEW EVENT!  Innovation Arizona Summit – June 11, 2013 

Join CKS Advisors at the inaugural Innovation Arizona Summit on Tuesday, June 11 at Tempe Center of the Arts! This unique event offers startups, innovators and business leaders an opportunity to learn about all the organizations working to grow Arizona’s entrepreneur economy.

Join us to learn the who’s who in innovation and growth. Meet incubators, accelerators, funders and investors, entrepreneur program groups, education and supporting growth organizations. Learn more about service providers focused on startups and entrepreneurs. Click here to learn more! 

Date: Tuesday, June 11, 2013 
Time: 3:00PM - 8:00PM 
Location: Tempe Center of the Arts 

MIT Enterprise Forum Phoenix and Arizona Commerce Authority (ACA) are providing an opportunity to bring everyone together for an event filled with networking, educational breakouts, featured presentations, food and more. CKS is an affiliated sponsor of MIT Enterprise Forum Phoenix events. 

Click here to RSVP for the event.

A crossroad for business buyers and business sellers is at the intersection of innovation. Buyers seek to find companies that help them grow through the addition of pioneering products, services and people. Sellers, who can articulate and showcase their innovation, get more attention from these growth-oriented buyers. Whether the businesses converge is dependent on the price of acquiring the innovator.

As a seller, business owners need to carefully audit their communications and records of business to accurately reflect their investment and commitment to innovation. Executive summaries and business plans are a good tool for detailing internal and external approaches to innovation in all aspects of the organization, from operations to product. 

A company with visible innovations they can demonstrate, enables a better hands-on approach to market evaluation. What a potential buyer cannot “see” is how the business innovates internally. Sellers should also highlight in business communications their methodologies in people management, products, policies and processes that lead to demonstrative results.

If a seller’s business is lacking in tangible innovation, it is recommended to assess how the business innovates internally before posting a for sale sign. If the business needs an innovation kick-start, an easy first step is to invite the executive leadership to “retire” an old idea or way of doing something to get into the regular practice of internal innovation. Where there is opportunity in a business to innovative, there is opportunity to change, improve and grow.

A buyer’s history of acquisitions and how they invest in new products and services provides sellers a window of understanding the buyer’s propensity for determining value before they acquire a business.

A company that shows constant and systematic innovation to stay competitive, grow or maintain sustainable profits is a company worthy of evaluation for acquisition. The lack of innovation is a red flag of a stagnating performer. If a business lacks innovation, it is probably not maximizing the potential of products, people, policies or programs. Before entering the intersection for acquisitions and mergers, a seller should stop and evaluate their approach to innovation, then communicate their innovative success. It can help attract the “right” buyer.

The statement company leaders would like to make to provide confidence and security to their employees is that no changes will be made after the merger is announced to the public. The statement is usually never accurate and most often is the exact opposite of what will take place once integration begins of the two companies.

Mergers and acquisitions require change in order to fully benefit from joining the two entities. The goal of the assigned integration team is to identify all the positive synergies and maximize profits between the two entities while reducing risk. In other words, clean up and improve in areas that are not equal or performing at optimal levels.

The event of bringing two businesses together requires change in heart, mind and attitude as well as change to process, procedures and infrastructure. There is a lot of change that will take place. Cultures have to mix and technologies have to fuse. Policies for managing people and activities need to align. Agreement on how the businesses will operate in the short-term and long-term needs to be communicated. Plans need to be executed. Day-to-day will be different. The businesses are changing. It’s time to embrace what is inevitable.

To start the change process, the first step is to assign the leaders who will be defining the integration strategy and overseeing the implementation. Second step is to assess value of all assets, to see where the combined entities can maximize value and eliminate waste. The next step is to communicate the plan and process with specific timelines and milestones. The last step is to measure success of integration and continually look for opportunities to improve. Integrations are long-term and require constant oversight. How change is managed and how the organization evolves are barometers that measure the success of bringing together two fluid entities.

Take steps to make sure you position and communicate how change will improve both organizations and benefit all. Avoid the comfortable claims of what is certainly never true post-merger, “no changes will be made”. Do not fear changing or how people might perceive or react to change. Without change, you certainly lose the maximum benefits of combing the two entities. Change is the basis for mergers and acquisitions.

by Managing Director, Dennis Cornelius, CKS Advisors and CKS Securities Email: dcornelius@cksadvisors.com

CKS Advisors Connect – March 21, 2013

Meet up with Arizona Advisors, Consultants and Market Movers on Thursday, March 21 at our monthly business happy hour. Stop by the CKS Living Room to catch up with your colleagues. Refreshments served.

Date: Thursday, March 21

Time: 4:00PM – 6:00PM

Location: 6263 North Scottsdale Road, Suite 390

Email: jglass@cksadvisors to RSVP

 

New MIT Enterprise Forum Phoenix Event:

Medical Technology – March 26, 2013

CKS Advisors is a partner with MIT Enterprise Forum Phoenix and Arizona Commerce Authority (ACA), supporting the entrepreneur event series. The next event is a discussion about medical technology and Arizona’s investments in leading research institutions, innovative healthcare companies and consumer medical products. Matthew Likens, President and CEO of Ulthera, will discuss funding, FDA approvals and explosive growth during tough economic times. Click here to RSVP for the event held on Tuesday, March 26 starting at 5:30PM.

CKS Advisors Connect – February 21, 2013
Meet up with Arizona Advisors, Consultants and Market Movers on Thursday, February 21 at our monthly business happy hour. Stop by the CKS Living Room to catch up with your colleagues. Refreshments served. Email jglass@cksadvisors.com to RSVP.

Date: Thursday, February 21
Time: 4:00PM – 6:00PM
Location: 6263 North Scottsdale Road, Suite 390

MIT Enterprise Forum Phoenix and ACA Present: Digital Education – February 26, 2013
CKS Advisors is a partner with MIT Enterprise Forum Phoenix and Arizona Commerce Authority (ACA), supporting the entrepreneur event series. The next event is a discussion about digital education and the impact on K-12, Higher Ed and corporate training programs. Rich Fennessy, President and CEO of eInstruction will share insights on the costs and opportunities. Meet Arizona startups and entrepreneurs taking the lead in digital education. Click here to learn more and RSVP for the event held on Tuesday, February 26 starting at 5:30PM.

When selling a business or seeking investment, it is critical to be aware how the business will be viewed by an acquirer or investor. There are distinct ways of how a business will be evaluated by those that are spending money in comparison to those working in the business of interest. 

We advise business owners and CEOs to understand how the business will be viewed from the buyer or investor prism. During this preparation, we address a series of questions to best understand the different vision. Does the current management team have the experience and ability to take the business where buyer wants it to go? Does the acquired business have the ability to escalate sales and maintain or improve margins? In three to five years, will this business yield three times the sales and enterprise value it does today? How are the profitability, value, and competitive positions of the business enhanced through this investment or by acquisition?

The most “successful” sales of businesses are those often valued at elusive earnings multiples. The reality is a buyer or investor often believes they possess a missing ingredient the target business currently lacks. It could be access to untapped sales or distribution. It might be an upstream link in the supply channel or value chain. The buyer’s CEO is often running a pro-forma used for valuation that is very different from the way the targeted business looks on paper today.

To prepare a business for how it will be seen through the eyes of a likely buyer or investor, CKS Consulting Financial Practice works with owners and CEOs through an advanced due diligence to understand, manage, and position the business for maximum value. The complete process helps businesses create value and prepare for liquidity for owners by understanding the view point of an investor or acquirer.

Most importantly, the work to prepare and understand how the business will be assessed sets proper expectations and determines where there is opportunity for a business to be matched up with the right strategic investors and buyers.

By Bryan Neff, CKS Advisors, Financial and Operations Advisor

bneff@cksadvisors.com

Bryan is an experienced private Company financial and operational executive. He currently provides Strategic, Financial and Operational Consulting to privately owned businesses and their investors. He was appointed to the District Export Council (Arizona) in 2012 by the US Secretary of Commerce to contribute leadership and international trade expertise complementing the U.S. Commercial Service’s export promotion efforts through counseling businesses on the exporting process and conducting trade education and community outreach.

REFLECT TO MOVE FORWARD IN 2013

by Joel Strom and Dennis Cornelius

We enter into 2013 with optimism, as leading economists report that Arizona continues to show steady signs for recovery and growth. As we preview outlooks for business transitions and valuations, CKS clients notably continue to execute on definitive plans for mergers, acquisitions, turnarounds and investments in market expansion in the coming year.

One way CKS Securities and CKS Consulting helps a client prepare for the next 12 months is through our proprietary Strategic Value Assessment process. We use this process to evaluate four components within an organization: Financial, Strategic, Operations, and Market. Data used in the assessment gives us the proper reflection on historical performance and future potential. Depending on where the client is in their business life cycle, CKS will utilize the outcomes of the assessment to help the client construct a road map based on short and long-term goals. We then work closely to assist in executing on the best path forward.

No matter the chosen direction, whether to sell, to acquire, succession or a leadership transition, CKS uses this process to increase the market attractiveness and value of companies. Businesses with high strategic value create higher revenue, margins and profits. This results in increased current income and a stronger business with greater options in years to come.

As you reflect on where you have been this past year, we hope it gives you the confidence to create a strong path forward.

We wish you a prosperous and joyous New Year!

UPCOMING ARIZONA EVENTS

CKS Advisors Connect – January 17, 2013
Join us for our first business happy hour in the New Year!  Meet up with your fellow Arizona Advisors, Consultants and Market Movers to share your latest updates and outlook for the coming year. Refreshments served. Email jglass@cksadvisors.com to RSVP.