Thursday, June 14, 2012

Business Out of the Ordinary

By nature, business development is often more disappointing than validating.  That brilliant deal you thought was so obvious and beneficial can fail for all kinds of reasons.  Rallying internal support for a business initiative can be harder than finding the perfect external partner and there’s no accounting for how short-sighted or uninspired a company might be in assessing its position and prospects.  Most of my experience is in publishing and I am routinely surprised by the wide gulf between the small number of companies interested in exploring new ideas and the majority who can’t or choose not to.  Business development is all about mutual benefit--defining an outcome that balances the inputs to the product or project and the output of success.   Publishers, in particular, often seem to go out of their way to discourage advances from potential partners.

Thinking about this topic recently, I was reminded of a series of meetings I organized while at Berlitz, the language company.   When I assumed income statement responsibility for one of their business units, I found I’d inherited an unexpectedly lucrative licensing deal when the first-quarter royalty check came in at more than $98,000 when we had budgeted $100,000 for the full year. In addition to being pleasantly surprised, I realized we could do even more with the relationship, now about to enter its second year.

As business partnerships went, this was one of the best.  One day a couple of years before, two IT professors talked their way into Berlitz and happened to reach the right executive – purely by chance – with the idea that they could marry their CD-ROM technology with Berlitz’s self-teaching language material.  The product got off to a slow start and revenues were small for the first year, but the Berlitz executive who did the deal had pressed his advantage and we were taking 20% off each sale.  By the time that check came in, the guy who did the deal was gone and I (happily) was running my first real business.  The second-quarter check that year was $150,000 and we finished the year over $400,000.

That first foray seemed to indicate that technology had a role to play in the delivery of educational material despite the fact that, in those early years of ‘multi-media’ publishing, the CD-ROM product was simply a direct translation of the print/audio product.  But more sophisticated opportunities were obvious to anyone willing to think differently and, even before our one-product CD-ROM partner was acquired by a much larger company, I’d started to explore how we could expand this relationship.  Once The Learning Company (publisher of the Reader Rabbit series) acquired our partner, I began discussions to form a deeper association.  I got very little support from senior management at Berlitz, many of whom believed self-teaching materials would cannibalize in-class instruction and somehow damage the Berlitz brand (- an insane proposition).  Over the course of the next six months, I wrote business plans and extrapolated models with the sole goal of forming an equal partnership between Berlitz and The Learning Company (it took that long to get the two groups together). The idea was simple: Apply the Berlitz brand to TLS’s entire language learning product line rather than to just the one product they had acquired with their purchase.  

By that time, I had decided to leave Berlitz--arranging the CEO meeting was the last meaningful thing I accomplished and I did it proudly.  On my way out, I commented to our CEO was that there wasn’t anything else to do: We had agreed terms which were being reviewed, but it still took another year to complete the deal.  That unproductive year probably cost Berlitz over $1mm in profit.  Even more dispiriting was that fact that, once the deal was done, neither Berlitz nor TLC was able to expand beyond the language titles each already produced.  Had they done so, they would have created an education brand of far greater strength and depth.  Successful business development requires vision and commitment and, if these aren’t in play, all initiatives fail.

Good business development requires that you do your homework and have a clear idea how the project will be mutually beneficial.  In my development dealings, I’m less concerned about wasting my potential partner’s time than I am about wasting my own.  This isn’t arrogance on my part: I’m always comfortable in the knowledge that I’m proposing something of significant value to the target and, given the chance, I can present my case convincingly.  Sadly, many other industry overtures don’t fall into this category because no real thought has gone into the proposal and it’s often glaringly obvious.  In the run- up to the London Book Fair last month, I received many proposals for business services bearing no relationship to what our company does.  Bogus proposals like these cause all of us to be circumspect about any business development initiative because, all too frequently, they are irrelevant.  It can be hard to overcome this barrier.

Nevertheless, despite these spurious approaches, I am frequently baffled by the sheer lack of curiosity exhibited by some of the companies I’ve contacted.  Publishing and media are currently undergoing wrenching change—the way we now do just about everything will be very different five years from now (and maybe even next year).  Some, with withered hands firmly pressing against the figurative front doors of their publishing houses, deny entry to any new force as if they could overcome change with feigned ignorance and exasperation.  I don’t forget the few slammed phone receivers or nasty outbursts but I do relish when they come back for a second look--it proves that good business development eventually wins out.

Curiously, digital conferences are big business because, supposedly, there is a collective striving for  greater knowledge or understanding about the direction of our business.   If attending a digital conference is a substitute for real, proactive business development –actively looking for new ideas and partners – have we changed how we conduct daily business operations in order to be more receptive to development opportunities from potential partners from outside our traditional universe?   Not in my experience.  (Presumably, your conventional partners are all tapped out!)

Who on your staff is responsible for fielding the occasional new business opportunity?   Are they identified on your web site?  Let me take a step back; is anyone identified on your web site?  And, if they are, do you list their phone numbers and e-mail addresses?  I’ve visited many web sites where the only communication option is via an anonymous “info@” e-mail address!   I understand there’s resistance to hearing from all kinds of wackos but this is the way business is conducted.  And I’ve got news for you: For anyone with a modicum of patience, tracking down almost any phone number and email address is ridiculously easy so not putting these on your website is only an irritant.  A far better approach would be to identify the executive responsible for fielding business development proposals, describe the kind of business ideas you are interested in and define a format for proposing them.  Present press releases from completed deals to give visitors to your site essential background and context for prospective partnerships.  Proactively manage this process and you will not only save yourself (and your potential partner) valuable time while still opening up your company to new and interesting business opportunities.

One thing I learned when I attained a certain level of management responsibility was to be immediately and also politely forthright about my interest level in proposals.  Don’t just slam the phone down—take the time to clarify your understanding of the overture and then be clear about why it’s not something you’re interesting in pursing.   There’s nothing worse than wasting everyone’s time on repeated attempts to make something work if one party is really not interested: End it as soon as possible but do so professionally and with an explanation.  You say you don’t need to provide an explanation?  I would disagree; not only is it professional courtesy but the intellectual exercise of thinking things through is essential for seeing how, in the future, out of the ordinary ideas could support your business objectives in ways you hadn’t thought of.

As our industry continues to corkscrew through changes, we increasingly feel like its 'business out of the ordinary', but this is manageable and, while some of us might want to ignore our circumstances, most of us would like to survive in this new and different world.  That requires a receptiveness to new ways of working and openness to new partners offering ideas and solutions we’ve never thought of.  Therein lies the true opportunity for good business development.  Once, Berlitz was a company virtually devoid of technology: The customer experience was completely dependent on humans delivering live language instruction; their salaries and rent for school locations around the world comprised the vast majority of the company’s expense.  We knew nothing of technology but saw the potential in a simple CD-ROM product and it is sometimes upon the most tenuous of platforms that key relationships can be established.  I believe that those companies open to extrapolating beyond their current circumstances are those that will embrace business development as a function for growth beyond the confines of their existing environments and will prosper as a result.  Companies who don’t, won’t.

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