The Blog

THE 4-1-1 ON EXECUTIVE COACHING

Written By Gary C. Harrell
Originally published 02 May 2017

Let’s begin this missive with one very plain thought: leaders need leaders. Even the best leaders among us are well-served to pursue outside counsel. And so, it is not uncommon for striving business professionals to seek the aid of a #mentor, advisor, or coach.

As we discussed in a recent missive, the world of executive #coaching has become a big #business. In fact, as a sector, executive coaching became a $1 Billion growth industry in 2014, and today, more and more organizations are working to pair their talented managers and team members with coaches, all in the common hope of spurring professional development, of improving performance and retention, and of bringing new ideas back into their organizations. So common has the practice of#executivecoaching become that nearly 6,000 individuals in North America, alone, identified themselves as “coaches” during a 2015 survey conducted by the International Coach Federation. Indeed, not to be outdone, as of 2016, even this consultancy offers AxSA Coaching Solutions for Business Professionals, a package of professional development tools and sessions designed for individuals, rather than for businesses. (We will talk more about that later.)

The goal of this missive is to unpack the murky industry that is executive coaching, in order to help would-be #clients of coaching services better understand what to expect. Rather than craft a long article, the best approach for disseminating this information is in Q&A segments – and so, let’s begin.

DOES COACHING REALLY WORK?
This is a perfectly legitimate question, particularly because hiring an executive coach can be a costly proposition. A would-be client is correct to pay attention to the value that any coach brings to the table. But as a whole, the industry flourishes for good reason. It gets results. According to a survey of 100 business executives, conducted by Manchester Review, executive coaching, where quantifiably tracked, produced double-digit improvements in areas like productivity, employee retention, quality, and organizational and professional development.

WHAT DO EXECUTIVE COACHES GENERALLY DO?
In the ideal engagement, the goal of an executive#coach is to leave the client better than he find him, while equipping the client with new tools for tackling the day-to-day world and meeting near- and long-term
objectives. In doing this, an executive coach would do the following:
• Identify and help the client to develop professional talents
• Act as a sounding board for ideas and concerns, while asking the type of probing questions that elicits thoughtful responses and actions
• Help the client to identify and address derailing behavior
• Evaluate and develop strategic career #goals and plans for #growth
• Coordinate priorities, help set goals, and develop measures for accountability
• Help the client to dissect and tackle difficult issues, both, at work and outside of work (Remember: one’s personal life does impact one’s professional performance.)

With all of that, coaches not only influence the behavior of the clients they engage. They also shape the client’s learning process, enabling the latter, in most cases, to think more objectively, creatively, and strategically.

WHERE DO EXECUTIVE COACHES COME FROM?
Finding an effective executive coach can be a challenging endeavor, particularly because the field is so ripe with individuals and groups claiming to provide such services. Executive #coaches come from a variety of sectors of the economy, such as#consulting, psychology, human resources, and the senior #management of disparate industries. Some even hail for the military and the world of sports and fitness. For would-be clients, it is important to know that an executive coach possesses both the acumen to lend the best advice. Therefore, knowledge and experience are both important.

To that end, coaches do not come cheaply. In fact, executive coaches – really good ones, more specifically – can charge clients anywhere from $200 per hour to as much as $3,500 per hour, as in the case of motivational speaker Tony Robbins. Consequently, it is important that a would-be client to get a good idea of what types of results can be expected, perhaps based upon the coach’s record, and have an understanding of the value to be delivered in the engagement.

IS THERE A PROCESS FOR EFFECTIVE BUSINESS COACHING?
There is no singular formula or approach for a successful coaching engagement. Nor should there be.

WHAT ARE THREE IMPORTANT POINTS TO REMEMBER ABOUT EVERY COACHING RELATIONSHIP?
(1) This is not about feeling good. A client is spending a handsome sum of money for objective insight and professional development. He cannot and should not expect an effective executive coach to placate him or enable him.
(2) Measurable results are everything… Unfortunately, the majority of coaching engagements do not provide quantitative feedback on a client’s progress. This is unacceptable. By not establishing the right type of metrics, there may be no way to link the coaching to improvements in professional performance or the harnessing of new skills… And how else would you be able to decipher value?
(3) Coaching should not go on indefinitely. In fact, the goal should be to build specific, new skill sets and enable the client to become self-reliant. Therefore, clear goals and a timetable for the coaching engagement are useful.

WHAT IS THE AxSA WAY?
The AxSA Coaching Solutions for Business Professionals is this consultancy’s own executive-coaching service package. While each coaching engagement is tailored to the client, we adhere to the same overarching approach, in order to ensure consistent results:
• Assessment
• Baseline survey
• Focal points – setting goals and timetables
• Monitoring through client sessions
• Intermittent surveys – gauging ongoing improvements and milestones
• Closing survey
• Engagement feedback

To learn more about AxSA’s executive-coaching service package, please contact us directly.

WHEN DOES COACHING NOT WORK EFFECTIVELY?
Coaching is not right for everyone, and under certain circumstances, a coaching engagement can be doomed before it ever really begins. Here are a few factors that can lead to a failed coaching engagement:
• A client who is too rigid and unwilling to explore new ideas is not entirely #teachable. All of the advice in the world is of little consequence to the man who refuses to hear it, process it, and apply it.
• A client who does not enter the engagement in good faith, or who is not honest about his circumstances or progress, will make for a difficult person with which to work. #Pride and dishonesty can have no place in an effort to make one a better version of himself.
• A client who harbors a toxic or negative disposition is problematic. If consistent, these bad thoughts really sour one’s mindset, and whereas thoughts impact feelings, #beliefs, and actions, there is a chance that such thoughts will also woefully cause the coaching engagement to fail.
• A client who is unwilling to own shortcomings or mistakes, or who projects onto others, is dealing with the same pride and egotism as those who are unteachable.
• A client who is unwilling to commit to the process, whether due to fear or laziness or “a lack of time”, will passively doom even the best effort. They are not ready.
• And of course, if clear goals are not set forth in the coaching engagement, the effort by both parties, the coach and the client, is really for naught. It is important to aspire for something and know, quite succinctly, what that something happens to be.

If #results matter, then Paul William Bryant is surely one of the best examples of effective coaching we will ever know. Usually just referred to as “Bear”, Mr. Bryant served as the head coach of the football program at the University of Alabama for twenty-five years. Naturally, as a coach, “Bear” was expected to lead his teams to victory, but he delivered in spades, with phenomenal consistency – 323 regular-season wins, 13 conference championships, and 6 national championships. To this day, the legacy of#BearBryant has helped to cement the University of Alabama’s reputation as a juggernaut among its peers on the football field.

Interestingly enough, though, despite being one of the greatest tacticians of America’s favorite pastime, the coach remained humble. “I’m no miracle man,” he said. “I guarantee nothing but hard work.” Such words epitomize the mark of a great coach.

As in football, an effective executive coach does not promise to make a client great. He promises, instead, to present the assignments necessary for a client to make himself great. The executive coach, much like “Bear”, stresses the importance of self-actualization on the part of the client. That is, he works to get the client to discover and activate for himself new #talents and ways of thinking. He also acts as a beacon for the client who must make practical these new traits in his daily routine. And he serves as a sober voice of support as the client conditions himself into a better and more promising version of himself. The executive coach guides; the client initiates and carries out the work. And as the results become more and more evident, therein lies the value of an effective coaching engagement – significant, lasting, and positive change.

#FromTheAxSANotebook

Gary C. Harrell is the founder and Managing Principal of Axiom Strategy Advisors, LLC. For more information about the consultancy, please visitaxiomstrategyadvisors.com.

©2017 All rights reserved; Axiom Strategy Advisors, LLC

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AxSA ON FEAR

MANY PEOPLE HAVE DREAMS OF STARTING THEIR OWN BUSINESSES, BUT ALL TOO OFTEN, THOSE ASPIRATIONS ARE DASHED BY #FEAR. SO IS FEAR A REAL THING?

Underlying fears are typically the most prevalent culprits behind indecision, inaction, stagnation, regression, and so on. And interestingly enough, many would-be #entrepreneurs succumb to hard-driving emotions. Like anyone else, they, too, whether knowingly or unknowingly, hesitate or recoil at the crossroads to their destinies. That is why the words of noted evangelist #TDJakes ring true: “Fear is the assassin of greatness.” And so, the answer to the question is simple: in a world where perception is a greater force than reality, yes, fear is a very real thing.

In order to overcome or manage fear, it must first be understood for what it is. Many are unlikely to admit it, but fear is something that resides in each of us. It is an emotional response to stimuli that, in humans, travels through our neural circuitry from the parts of the #brain known as the #amygdala, and because this emotion is connected to the self-preservation instincts of every living organism, it would be fair to say that its existence dates back to the dawn of creation. In humans, fear is triggered when the amygdala recognizes threatening stimuli being collected by the body’s senses, which also happens to be sharing this information with the brain’s cortex. Detecting a threat, the amygdala can bypass the neocortex and prompts the body into action, even without a conscious impetus, quickly initiating an evaluation of the perceived threat and determining an appropriate response. There is little that the untrained mind can do; fear can strike out of nowhere. And just as literal threats can cause a rush of insurmountable fear, figurative ones like uncertainty can also cause ongoing bouts of anxiety and apprehension.

In his best-selling book #EmotionalIntelligence, Daniel Goleman wrote that we have two minds—one emotional, the other rational—and that, for the sake of a healthy life, the rational mind had to be in control. He described emotional intelligence (EQ) as the ability to “motivate and persist in the face of frustrations, to control impulses and delay gratification, to regulate one’s moods and keep distress from swamping the ability to think, [and] to empathize and to hope.” Goleman believed that people were too often collared by their emotional mind, but through EQ, they could learn to temper their emotional propensities and discover ways to grow. And where fear was concerned, Goleman acknowledged that it was possible to reshape the human response to threatening stimuli, by working to help individuals understand why they are afraid, redefine the stimuli that frightened them, and replace negative experiences of the past with new and positive ones. This process was called emotional relearning.

Such a psychotherapeutic approach to understanding and overcoming fear is also useful in the business world, where fear can undermine new ventures, cause the suppression of much-needed talent and ideas, upend change initiatives, and (worst still) strengthen corrupt or obsolete leadership. Every new entrepreneur has arrived at a crossroads with a degree of trepidation, as he or she gazed onto the dueling #possibilities of promise and of peril. But only those entrepreneurs with the capacity to identify and overcome their fears of failure (peril) have a better shot at success (promise) than, say, those who elect to stand there, or perhaps those who decide to take costly detours, or even those who decide to walk away entirely.

Here are a few thoughts on how an aspiring entrepreneurs can begin to understand and overcome the fears affecting his new ventures:

–Recognize that he is standing at the crossroads. Here, fear is a common emotion, and it is nothing for which anyone should be ashamed. As he starts to make this recognition, he can begin to understand what the fear is and how it is impacting his prospects.

–Develop a #vision of the other side. The entrepreneur should ask himself the question: if not for this emotional impediment, where could his dream be? Could it be brought into successfully fruition? An honest effort to answer this question will enable him to paint of picture of where he would like to take his venture. From there, he can set attainable benchmarks and #goals by which to transform that picture into reality.

–Know the real enemy. Many fears are based on inaccurate presumptions. As he begin to identify his fears, the entrepreneur should also make an effort to fully understand where they come from, and determine more accurately their levels of potency and validity. What he find may surprise you: many of these fears may be unfounded or simply based on erroneous information.

–Get help. There is no shame in admitting limits, and this is the reason that people in my field consistently tell entrepreneurs that they need BAIL (“bankers, accountants, insurance agents, and lawyers”), as well as very bright #businessconsultants, to help devise and navigate the course forward. These people, along with the members of the entrepreneur’s team, will complement his abilities and serve as a support system.

–Take that first step. Once he has an idea of where he is headed, the necessary resources, and a plan – yes, a #businessplan! – for getting there, he does not have to be afraid to go for it.

–Persevere. When the entrepreneur confronts what should be fearful moments – and he will – the typical biological impulses may surface. Nevertheless, he must have confidence, and he should trust his rational mind, as well as his support system, to get him through the anxiety.

–Know that everything is temporal. Today’s times of challenge are tomorrow’s moments of #triumph. The entrepreneur must remember that what he faces today, if encountered effectively, can help to propel him forward, where undoubtedly, he will face a whole new set of challenges and where he may have to identify different types of fears. With any luck, though, the lessons learned from today will prepare him for much of what is further down the road.

 

Gary C. Harrell, the author of this piece, is the founder and managing principal of Axiom Strategy Advisors, LLC. For additional information, please write info@axiomstrategyadvisors.com.

©2015 All rights reserved; Axiom Strategy Advisors, LLC

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THE TURNAROUND MANAGER

By Gary C. Harrell

 

Today let’s talk about turnarounds, with a look at leadership, particularly the leadership recruited to salvage troubled enterprises, both big and small.

 

When an enterprise finds itself facing an uncommon and worsening situation, the stakeholders of that enterprise traditionally must come to terms with reality. They might be hesitant to admit it, but their current management, though not for trying, may not be well-suited to reverse the course of a downturn. Consequently, with this realization, the stakeholders must look outside of their enterprise for help. The people to whom these stakeholders ultimately relinquish the reins of power are known as turnaround managers.

 

Most people in the general public have a preconceived and quite skewed notion about the practice of turnaround management. For starters, they believe that turnaround managers are ruthless and uncaring individuals, marching through enterprises like marauders in business suits. The general public also assumes that the use of turnaround managers is restricted to large enterprises. Quite to the contrary, however, most turnaround managers are not raiders, and their work is not limited to the big corporations. These managers, in truth, embed themselves into an enterprise, mostly on a full-time basis, actively managing the operations of that enterprise to produce much-needed growth, and they typically tie their compensation to the improved performance of that enterprise. A turnaround manager does not have the luxury of behaving like Gordon Gecko; the manager actually has to get his hands dirty, one enterprise at a time. What’s more, turnaround-management services abound for every stripe and size of enterprise. In fact, a whole cottage industry exists that provides services to struggling, early-stage and young enterprises, and among the providers in this sector is…well, need we say more?

 

Any turnaround can be a challenge to even the most seasoned manager, and there is no singular protocol for encountering every enterprise in a downturn. Indeed, the circumstances facing troubled enterprises vary from one to the next, and for that reason, a manager might find himself confronting a substantial and underserviced debt portfolio in one case, while the paramount issue might be a dated and inefficient facilities in another. That said, however, there is a broader roadmap for all managers to consider when preparing to undertake such efforts. This roadmap helps to move managers into the proper frame of mind, in order to achieve the most optimal results from whatever strategy he elects to deploy. Here are a few points from that roadmap:

 

  • Perform comprehensive intelligence. As the turnaround manager enters the troubled enterprise, he must do so not ready to act, but to learn. The manager must begin his work by gaining a clear understanding of the situation affecting the enterprise. He must study its current strategy, as well as its operational structure and capacity, and he must also learn as much as he can about the offerings and the pipeline for new offerings, the technology and systems used to make and deliver those offerings, and the competitive environment in which those offerings are sold. Much of this information needs to come in form of data points, but he must rely also on interviews and conversations with his immediate subordinates, the stakeholders, and key personnel. And before he goes further, he has to develop a keen understanding of just how the current strategy, along with other factors, contributed to the hardship of the enterprise. He should do this if for no other reason than to avoid prescribing and making the same mistakes as his predecessors.
  • Analyze the information. After all of the intelligence is gathered, and as the analysis begins, the manager must remember that some parts of what he has learned might be inaccurate or invalid information. After all, the current structure and its flawed strategy were in place and likely contributed to the downturn. For that reason, he must be very judicious about the use of the information from his fact-finding exercise, and he must not hesitate to dismiss anything that does not seem consistent with other portions of those facts or his own understanding.
  • Set transitional priorities. From his findings, the manager must begin to develop a new strategy for the enterprise, one that is designed to reinvigorate, and one that is detailed in the numerous pages of a strategic plan, a restructuring plan, a new operational model, a working timetable, a Plan for Growth, and so on. This new strategy must address any cultural and operational impediments of the enterprise that the manager identified during his fact-finding exercise, and it must give a vision of what the enterprise will look like and how it will operate going forward. More specifically, the strategy should set new, measurable goals for every area of the enterprise, and these goals should begin to produce marked results over the first twelve months and far into the following year. Making these goals clear to the stakeholders, and securing their buy-in, is an important step for creating the formulaic system by which the manager’s own performance can be fairly measure. (To be sure, some stakeholders might demand faster results in the first year, but a rational manager should remain steadfast, reminding those stakeholders that, since it did not take the enterprise a few short months to nearly collapse, it would be imprudent to think that corrective action might yield serious results in such a short time.)
  • Establish a turnaround team. Once the manager has corralled the support of the stakeholders, he must act quickly to institute his changes to the enterprise. This, he cannot do on his own; he will need a team. But before he starts hiring, he must start firing. The manager must purge the organization of its weaker personnel and those likely to resist the imposition of the new strategy, as both types of individuals would only be laggards in a new and more challenging environment. As the majority of the dismissals occur, the manager must begin to install his new team of leaders. It is important to understand that, while a few leaders might be carried over from the old management structure or promoted up from the rank and file, it is more common for a manager to hire from outside of the enterprise (if he has been afford such latitude by the stakeholders). The two overarching reasons for this effort are simple: he is seeking new and diverse ideas not readily found in the current talent pool, and he is hoping to transform the operational expectations and the general culture of the enterprise in a meaningful way.
  • Articulate the changes and expectations to the enterprise. People increasingly understand that change is the only true constant, but that does not mean that they will easily accept it or not be confused by it. This is especially true in the manager’s enterprise, where a whirlwind of dismissals and new hires, to say little of wholesale divestitures, promise to reshape everything, while leaving personnel to wonder how they fit into this equation. For this reason, the manager and his new turnaround team must act quickly to bring the personnel up to speed on what these changes means and how they will impact their work. The new leaders of the enterprise must demonstrate thoughtful and decisive leadership, articulating in clear terms the new vision for the enterprise and, from there, sharing with each work group and employee what is expected of them. The new leaders must secure buy-in from the personnel, as well, and where there is not any, find replacements. Then they must avail to the personnel avenues for short- and near-term feedback. Opening immediate channel for communication is a good approach, because the manager must assure that the goals of his strategy are being met and, if they are not, make corrections where necessary.
  • Score early victories. This can mean nearly anything, from restructuring debt to securing new financing to successfully winding down costly operations. Through small achievements, the manager and his turnaround team can act to demonstrate that their strategy is viable, and they can maintain the necessary support to go forward. To that end, though, it is understandable that larger goals may not be fully accomplished for some time. Nevertheless, the manager can still claim early victories. That is because, while the manager’s overall strategy is made measured by goals, the progress made in achieving those goals can be quantified by benchmarks. In goal-fulfillment, these benchmarks represent reference points by which the performance of the enterprise, its manager, and his turnaround team can also be evaluated over time. Therefore, it is necessary for the manager to report this progress to the stakeholders, in order to maintain their support for the strategy, and to the personnel, in order to bolster their commitment for achieving the goals.

 

In a troubled enterprise, turnaround management can make the difference, forestalling an untimely demise and restoring the prospects for growth. Of course, even renewal takes time, but with a competent team and the right strategic mix of options, most enterprises can be pulled back from the brink, if the turnaround team is permitted to act quickly enough. In order for that to happen, though, before all else, the stakeholders of a troubled enterprise have to admit to themselves and to their current managers that they need help from outside. Such an admission never comes easily—but, alas, overcoming prideful decision-making is a subject for a different time.

© 2010. All Rights Reserved; Axiom Strategy Advisors, LLC. Reproduction and unauthorized use are strictly prohibited.

Gary C. Harrell is the founder and managing principal of Axiom Strategy Advisors, LLC. For additional information, please write info@axiomstrategyadvisors.com.

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A PRIMER ON TRADE CREDIT INSURANCE

By Gary C. Harrell

#AxSAKnowledge

 

For a small business, expanding into new markets can be an exciting time. This is particularly true when the new market is a foreign one. But, for all the excitement, a great amount of attention must be given to the way in which products are traded, promoted, and placed in these foreign markets. One misstep, one detail overlooked, can result in lost goods, non-payment from buyers, compromised intellectual property, or even reputational risks. Therefore, managing every stage of the export process is critical.

 

When it comes to safeguarding a business against the risk of non-payment, an entrepreneur-cum-exporter should consider trade credit insurance. This type of coverage is used by businesses of every category and size, and though only three percent of exporters used it in 2016, recent political events like Brexit, trade difficulties between the United States and China, and a swathe of business failures is making the coverage more popular. In fact, many banks increasingly require export receivables to be insured if such receivables are to be considered as collateral for credit lines.

 

Contingent on the breadth of coverage selected by the exporter, trade credit insurance policies may cover between 60% and 95% of the debt owed by a foreign buyer, if such coverage applies to specified circumstances resulting in the buyer’s non-payment, i.e., political instability or business failure. For this reason, it is advantageous for an exporter to seriously consider the risks posed, both, by the buyer and in the buyer’s market, before selecting the appropriate coverage for the transaction. What’s more, unlike most other types of coverage that policyholder put aside until they must be used, with trade credit insurance, the exporter must report to the insurer as the first shipment of goods or services is dispatched to the buyer; the exporters must commence the payment of premiums; and the exporter must remain in regular communication with the insurer.

 

While private insurers do offer trade credit insurance to well-heeled exporters, a good number of them do not make the coverage available to small businesses. For this reason, the Export-Import Bank of the United States has stepped into the gap, providing coverage in areas deemed too risky by private insurers. Of course, though, there are a few restrictions when using the EXIM Bank:

  • The business must have at least one year of operational history.
  • The business must have at least one full-time employee.
  • The business (and, in many cases, its owner(s)) must have a positive net worth.
  • Fifty percent or more of the costs of the contents of the goods or services to be shipped must originate in the United States. (This can also include indirect costs such as labor or administrative costs.)
  • All goods must be shipped to their destination countries from U.S. ports.
  • Goods and services must only be shipped to eligible countries.
  • The goods typically cannot be inclusive of arms or munitions for military, commercial, or civilian uses, unless the “dual use” of such goods can be clarified and approved prior to their sale.

 

Entering foreign markets can be an exciting time for a small business owner, because doing so can mean the growth of a brand and the diversification of revenue. But foreign markets come with their own set of challenges, and those are not limited to languages, topography, logistics, laws, customs, or tastes. Managing these risks requires a comprehensive understanding of the new market and proper preparation for exporting to it – not simply a casual desire to do so. Trade credit insurance is but one many facet of that preparation, and it can be a useful and reassuring tool for helping new exporters reduce possible risks in unfamiliar markets.

 

#                             #                             #                             #

 

Gary C. Harrell is the founder and managing principal of Axiom Strategy Advisors, LLC. For additional information, please write info@axiomstrategyadvisors.com.

© 2018. All rights reserved; Axiom Strategy Advisors, LLC.

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The 411 On Private Debt

#AxSAKnowledge

From the AxSA Staff

Debt is evolving as a financing strategy, and private debt is now the fastest-growing option for businesses of every size and in every sector of the economy.

For the providers of #privatedebt, these instruments offer contractually-based, risk-adjusted returns, typically well above the prime rate of interest. And for the borrowers, private debt may offer liquidity terms not readily available from a conventional bank or lending institute.

Decision-makers hoping to explore private debt should keep in mind these pointers:

○ Beyond #banks and other deposit-accepting institutions, the sources of private debt include specialty finance companies, #hedgefunds, insurers, business development companies, and even high net-worth individuals.

○ Private debt is witnessing its biggest year, thus far, as a swell of institutional investors have allocated billions to private debt funds and direct #loans. This has been positive news for businesses that are too leveraged for conventional lenders but too small to tap bond markets.

○ Loans originating from private debt sources are expensive and tricky. They routinely have a higher cost of capital, and they can be harder to obtain, if they are attached to too few attractive assets. Furthermore, in some instances, deals for private debt can include equity kickers, or the terms can contain covenants that convert debt to #equity under special circumstances.

○ The level of priority is important – and not just to the provider of the loan. A #borrower must understand that, if the loan is subordinate to other debts, then the cost of the loan may generally be higher, because there is a greater risk of non-payment in the event of the business’s #bankruptcy.

○ Due diligence still matters, and access to the business’s operational information and financial records is necessary for a lender to evaluate that business’s ability to repay the debt, along with surveying any other risks.

Businesses today have a wider array of debt financing options, but that money does not come without risks. It behooves decision-makers to carefully consider their long-term capital strategy before closing deals that add costly financing to their #balancesheet in the short term.

© 2010. All Rights Reserved; Axiom Strategy Advisors, LLC

 

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Got a Bad Customer Review? Now What?

#AxSAKnowledge

From the AxSA Staff

No one likes to deal with #negativereviews, but they cannot be ignored. For every business, negative #reviews will always crop up, because it is nearly impossible to please everyone, and because, often enough, businesses just get it wrong. And while no decision-maker likes receiving a bad review, the truth is, if handled properly, it can actually turn out into something good. That is to say, the review can offer businesses an opportunity to reassess their own workflow and customer-engagement models, and once handled effectively, the review serves as an entree to secure the loyalty of a customer who can evangelize on behalf of the business later.

When addressing negative reviews, conscientious #decisionmakers know that the biggest mistakes they can make are to simply dismiss them, out of hand, or to disparage the #customer for not being satisfied. Rather, the decision-maker should take deliberate steps to improve the customer experience. Here are just a few thoughts on how to engage the customer:

— Act swiftly once you become aware of negative feedback. The longer it takes for you to do so, the more disengaged and unconcerned you appear, and the more likely it is that word of the negative experience will spread to existing and would-be #customers.
— Listen to the customer with an objective ear. Much of this information can be constructive, as you discern where and why there might have been breakdowns in your business’s ability to deliver services. (NOTE: every customer isn’t crazy or looking for a reason to be for disgruntle. Do not approach them with such one- dimensional labels.)
— Offer a solution to the customer that expresses regret for the #experience and reassures them of your willingness to make things right. Be willing to work with your customer on a resolution that speaks to their point of concern. Afford yourself some flexibility in order to do so. And be sure to thank the customer for the #feedback.
— Make internal adjustments, if and where necessary, in order to dodge a pattern of dissatisfaction from your customers. If the negative review was the product of a systemic failure, then you can trust that additional negative feedback will fall soon and fast until the matter is added.
— Turn the customer into an ally, and take the opportunity to follow up with him or her from time to time, just to get an idea of how they rate later experiences with your business. Remember that customers who take the time to vocalize a negative experience could be primed to do the same about good ones, making them the type of sober #brand ambassadors that your business needs.

Dismissing negative reviews does not make them go away. Instead, decision-makers must confront them head-on. And while they may not be able to convince some displeased customers, a concerted practice of addressing reviews can ensure that decision-makers will, at the least, develop a reputation for making things right for customers who, after all, did spend money at the #business – a point that, itself, should not be discounted.

© 2017. All Rights Reserved; Axiom Strategy Advisors, LLC.

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For Cash-strong Businesses – the Acquisition Question Revisited

By Gary C. Harrell

 Ten years ago, the global economy seemed more than ready to fall on its sword. And there may have been good reason for the cynicism. According to the Government Accountability Office, the impact of the Great Recession totaled as much as $22 trillion in losses of both paper wealth and real economic output. In 2008, when this consultancy first visited this subject, writers like Matthew Karnitschnig of the Wall Street Journal were declaring that the Deal Age was dead, pointing out, with categorical accuracy, that “…the severity of the current downturn and the disappearance of credit is changing how Wall Street puts deals together.” Fortunately, for all of us, the doom and gloom were only for a season.

The global economy has recovered nicely over the last decade, and Wall Street seems no worse for any of it. Indeed, the good news abounds. Housing prices in the United States are robust, owing mostly to shortages of inventory in growing markets. Development in foreign markets from China to Turkey remains heady, as expensive megaprojects get underway. Energy markets remain stable. And notably, for the purposes of this missive, deal-flow through mergers and acquisitions has been impressive, as global M&A in 2017 exceeded $3.5 trillion in transactions for the fourth straight year.

Financial and strategic buyers found encouragement to do more deals in recent years for a number of reasons. For a time, while interest rates remained low, buyers were able to borrow more freely to execute their deals, and solid gains in the stock market gave many buyers the ability to use their own stock as attractive currency to complete deals. What’s more, shakeouts in industries like retail and the uptick in the number of cash-hungry startups meant that there was a bigger pool of acquisition prospects to choose from.

To be sure, the deal-making space is not where it was in the 1990’s or even before the financial crisis. In fact, of the $3.5 trillion in deals made in 2017, roughly $1.4 trillion of that number were transactions in the United States. That is a drop of roughly 16% in total value of transaction amounts. Still, a total of 12,400 deals were executed, domestically, with a significant number of them being the acquisition of small and midsized companies.

As we press onward from the scary days of the Great Recession, financial and strategic buyers have held on to one of the most invaluable lessons from those days: even as credit markets distance themselves from the past, and as more financing options avail themselves for would-be buyers, cash is still king. And that is particularly true in a landscape where the cost of capital is beginning to change.

There is perhaps no bigger influence on activity in M&A than interest rates. That’s because buyers love to use other people’s money to acquire the things they want, and up until recently, the cost of doing so was relatively cheap. The Federal Reserve kept interest rates low, in order to spur necessary economic activity, in the wake of the Great Recession, but lately, that posture has changed. Citing greater confidence in the overall economy, the Fed has begun to slowly raise the benchmark interest rate, now for the sixth time since 2015, with the goal of reaching 1.5 to 1.75%. Such hikes, even incrementally, add to the cost of capital, eating into forecasted returns, and buyers are left to retool their business case and wrestle favorable terms from a lender in order to justify borrowing for an acquisition.

Fortunately, incurring debt is not the only course available to some buyers. Utilizing piles of their own cash can be an attractive option that brings with it lots of leverage.

For the acquisitive spirits among us, this recovery has created some buying opportunities, replete with fresh prospects at better prices, and the same opportunities exist for cash-laden businesses who had been considering expansion projects of their own. Indeed, if companies with requisite capital (or with the ability to tap well-heeled investors) are willing to put those positions to use, they can produce long-term benefits.

The expansion of a business is, of course, never an easy process, inasmuch as it does require rigorous research, planning, budgeting, and management. But the environment remains hospitable for those seeking to execute their expansion plan. Building out new facilities, for example, can still come in under budget, as material costs and construction remain reasonable. Likewise, the pool of talented and skilled workers is larger, which means the costs of labor can be better contained. And in the buyout world, the price tags on target companies are not likely to induce sticker shock. Indeed, today’s environment still offers a chance for those dollars to go much further.

Even still, for a cash-strong business, deciding whether to build out new operations or to acquire the existing operations of another business can be as difficult a choice as any ever made. When faced with such a choice, some decision-makers believe acquisition to be an illogical path because, often enough, they can be messy and problematic. Indeed, amalgamating the business processes and integrating the supply chains of disparate businesses can take some time. There is also the matter of redundancies; all jobs, for example, cannot and should not be sustained in a post-merger business. And, if those were not enough concerns, some decision-makers would point to the inherent cultural differences of two companies as being a potential powder keg for destroying a merger, down the road. Hence, they consider it a safer bet to build their own operations.

The challenges notwithstanding, there are still some tangible benefits to making the acquisition of an existing operation. This consultancy would like to take this opportunity to point out just a few:

  • Acquiring an existing enterprise will give a buyer operationally-ready assets faster than buying all new assets and building out the necessary infrastructure to make them ready.
  • Rather than attempting to invoke competition, an acquirer will obtain the customers, personnel, brand name, market share, geographic positioning, intellectual property, and product lines of a target company.
  • By acquiring an existing enterprise, the cash-strong business will have access to additional production capacity, or service capabilities, and it will be able to spread more of its fixed costs over a larger customer base. What’s more, when the acquisition is vertical in nature—that is, when an acquirer is buying a supplier—the former has the ability to drive down costs and increase the profit margin on the ultimate goods or services that it sells.
  • With the acquisition of an existing enterprise, buyers will gain access to new markets either geographically or through its new product lines. This access typically provides diversification to the company’s revenue stream.
  • From a tax and accounting perspective, the acquisition of an existing business can be more beneficial than an expansion. That’s because the transaction costs associated with a buyout, in many cases, can be amortized over an longer period of years, in accordance with the IRS Tax Codes. (As an example, the Codes offer a “safe harbor” provision that, in some cases, grants acquirers a ratable amortization of fifteen years on intangible assets without consideration for the useful life of those assets.) Unfortunately, no such provisions readily exist for a company only wishing to expand. Instead, an expansion will only impact the assets of the company’s balance sheet, and the costs of the effort will only be expensed in that single year.

Will every acquisition work? Naturally, the answer to that question is not an entirely positive one. Acquisitions require thorough amounts of analytical due diligence, and the effort to integrate the operations of any two existing businesses must be meticulously planned and perfectly choreographed, in order for there to be post-transaction success. So, the process needs to tap leadership, resources, and genuine expertise, to make things happen.

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Gary C. Harrell is the managing principal of Axiom Strategy Advisors, LLC. For additional information, please write info@axiomstrategyadvisors.com.

© 2018, Axiom Strategy Advisors, LLC. All rights reserved.

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FIVE TIPS ON FINDING A MENTOR

Written By Gary C. Harrell

 

A remarkable number of business professionals have been turning to executive coaches as a way to help them realize better performance and bolster their careers. In fact, according to marketing firm IBISWorld, by the close of 2014, executive coaching had become a $1 Billion growth industry in the United States, alone. Not to be outdone, of course, at the start of this year, Axiom Strategy Advisors had joined the fray, expanding its own scope of services to include executive coaching – a model wherein the consultancy’s advice has been tailored for individual professional development, as opposed to the businesses for whom those professionals work. The new service model has been a good fit for us, so far.

 

Today, while writing a separate touchpoint, titled “AxSA on Effective Executive Coaching”, which describes how our services aim to produce a solid return on investment, I came to an important realization: we all can benefit from some form of mentorship, particularly when we are serious about bettering ourselves.

 

The American poet Robert Frost once said, “I am not a teacher, but an awakener.” And that is precisely the most authentic description of what mentors do. Mentors do not just aspire to inform; they make efforts to bring out the best within us. Whether they come to us from the altars of our synagogues or from the corner offices of our industries, and whether they have refined their acumen in classrooms, on fields of play, or over operating tables, mentors provide a wealth of experience and applied knowledge that can be used to shape our understanding of situations. They serve as sounding boards for our ideas and fixed points to whom you can be accountable. And unlike family members, friends, co-workers or current bosses, mentors provide the type of objective perspective that we often need to hear, whether in the form of affirmation or scrutiny, in order to propel ourselves forward.

 

If you do not already have a mentor – and statistically speaking, you probably do not – then here are just five tips for identifying a mentor and ensuring that the relationship is a successful one:

 

  1. Seek a mentor outside of your network.
  • Our personal and professional networks tend to be pretty limited. Therefore, use people in your existing network to gain introductions to new people.
  • Do not be afraid to make cold calls. Sometimes, the most important relationships you will ever build are the one that happen with total strangers.
  • Be open-minded. We tend to be get very comfortable with what we know, but the truth is, relying too heavily on points of view too similar to our own, or on perspectives from those likely to agree with us, is always problematic in the end.
  1. Don’t go for a know-it-all.
  • No one person will ever have a lock on all of the wisdom you could utilize. Try to identify experts in a variety of disciplines, and create a comprehensive network of mentors. Just think of it as your own customized support group.
  1. Develop an understanding of you goals and expectations.
  • It is always useful to periodically conduct a self-assessment or SWOT analysis of your life, assessing your strengths, weaknesses, opportunities, and threats, in order to identify areas in your personal and/or professional life that need improvement.
  • There needs to be a clear direction for you and the mentor. Without a set of goals, there may be no way to measure the ROI on time, effort, or money.
  1. Allocate the appropriate amount of time to the relationship.
  • As the mentee, you should know that it is your responsibility to keep up the relationship, as well as to determine the appropriate frequency of meetings, so as to effectively work toward the stated goals, while not overly burdening anyone’s schedule.
  • Time matters. You and your mentor must keep in mind that too many cancellations or rescheduled meetings on anyone’s part looks very unprofessional. And even a single brush-offs is, well, downright disrespectful and virtually unforgivable.
  • Keep your meetings structured and concise for the most optimal use of time. Having a solid meeting agenda could be helpful.
  1. Make sure that your mentor has the right mindset and approach.
  • Your mentor must be mentee-driven and focused on the approach meant to help you achieve the right results. Even as circumstances might change, or as you might resist the effort, your mentor should always keep his eyes on your personal improvement.
  • Your mentor must be a good listener.
  • Sober and honest feedback is always important from your mentor. He cannot be afraid to provide you with constructive criticisms.
  • You and your mentor should always make an effort to promote positive momentum towards your goals. End each meeting with a Plan of Action, one to which you, as the mentee, should commit to executing and reporting back to your mentor.
  • Your mentor should have very little tolerance for your excuses. If you are not making progress, then he should tell you, and suspend the mentorship.

 

Of course, there is no guarantees that having a mentor will change your life, but as you can see from these tips, a successful mentorship can expose you the type of invaluable thought leadership that you can use for the rest of our lives. What’s more, the right mentorship could easily put you in position to take advantage for a host of new opportunities. So get ready to grow.

 

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Gary C. Harrell is the founder and managing principal of Axiom Strategy Advisors, LLC. For additional information, please write gcharrell@axiomstrategyadvisors.com.

© 2016. All rights reserved; Axiom Strategy Advisors, LLC.

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WHEN A BUSINESS CLOSES

Written By Gary C. Harrell
31 July 2017

Let’s start this missive with the kind of sobering admission that we all know to be true: many businesses – in fact, most businesses – do not work out. As we noted last year, according to statistics from the Small Business Administration, one-third of all new businesses close their doors within the first two years of operations, and half of the remainder, beyond that, do the same within their first five years. These statistics accurately point to the fact that, in spite of the best-laid plans, many entrepreneurs, whether new and experienced, find themselves making one of the most grueling decisions of their lives.

The decision to shutter a business for good is typically a financial one. Even still, the closure might have emotional ramifications on the business’s owner. An entrepreneur can be devastated by this loss, and there is an overwhelming sense of defeat, particularly as he recounts the possibilities that could have saved the business. What’s more, if the losses sustained by entrepreneur are great, the risk of the entrepreneur withdrawing from the world and sinking into depression can be equally real and just as concerning.

While there is no easy way to tell the owner of failed business that he should cheer up and prepare to move on, Axiom Strategy Advisors feels that it is important that every entrepreneur be equipped with the tools necessary to overcome the uncertainty and emotional challenges that might follow a business closure. Indeed, we recommend an entrepreneur prepare himself in five areas, in order to reduce the stress that will come in the long days and weeks following a closure:

1. Sources of Optimism
It is very easy to succumb to pessimism in the wake of a business closure. An entrepreneur may feel, among other things, drained and embarrassed, and he may simply not want to do anything for some time. After all, he has just shuttered the physical manifestation of his dream. Consequently, he may even begin to question the viability of any his other dreams or aspirations. But he should not do that. The best way for an entrepreneur to restore his hope in things to come, along with faith in his own abilities, is to find competing sources of optimism. He can look to things like his family, his hobbies, his civic involvement, and other personal interests as barometers for measuring his effectiveness and ability to still contribute to the world. As they preoccupy his time, these personal interests can also serve as the motivators necessary to galvanize the entrepreneur back into action.

2. Support System
Everyone needs a support system – and in the wake of a business closure, no one more so than an entrepreneur. In fact, being able to speak candidly to others helps the entrepreneur gain perspective, and it prevents him from bottling up difficult-to-process emotions. While family members and friends are acceptable outlets, it is extremely useful for an entrepreneur to include like-minded professionals and, when appropriate, mental-health clinicians in their support system. Those with experience in dealing with these challenges will offer the entrepreneur the best way to navigate through uncertainty.

3. Acceptance
We do not always win. We cannot always win. In fact, our moments of failure in life are just as common as our moments of success. That is perhaps the hardest realization for anyone to accept, let alone the entrepreneur – a man who stakes copious amounts of time, energy, and treasure on the physical manifestation of a dream. And so, when that dream proves unsuccessful, the entrepreneur might resist the notion that the failure is not personal, but it isn’t. It really just happens, irrespective of person, as would any social or behavioral phenomenon, and of course, there are times, statically speaking, when the risk of that failure is just greater, particularly for the adventurous and the intrepid, for the creative and the enterprising. That said, entrepreneurs are well-served to consider the words of Albert Einstein: “A person who never made a mistake never tried anything new.”

4. Objectivity & the Lesson of the Moment
Oprah Winfrey called failure, quote, “another steppingstone to greatness”. This is a description that should resonate with an entrepreneur. We all make mistakes, and some of those mistakes can be quite costly. Nevertheless, it is very important that an entrepreneur have the presence of mind to exploit even a difficult moment for what it is worth, by taking the opportunity to identify the lessons to be learned. For the owner of a failed business, the practice of taking a moment to step back, reevaluating the circumstances that led to such failure, and processing the lessons from those events are more than just about gaining perspective. These can become life-lessons that help to pave the way forward.

5. A Fresh Start
From the start, an entrepreneur possesses a unique sense for identifying opportunities that few others recognize, while also mustering the courage to act on them. That superpower is not lost in the wake of a business closure. In fact, it is just as keen as it would have been on the first day, when the entrepreneur originally conceived the idea for his first business. Consequently, it is very important for the entrepreneur to approach the next chapter of his life with the same confidence and zeal that enabled him to move forward in the past.

To the general public, business closures seem to occur swiftly, almost overnight, and in an orderly manner. We consultants and a world of entrepreneurs know differently. When a business is headed to its closure, it takes a long and agonizing march filled with unexpected twists and turns – glimmers of hope, waves of disappointment, moments of contention, and weeks of endless, new questions. Indeed, each day is more painful than the one before it, and each turn chips away at the veneer of a once-hopeful, once-determined entrepreneur. To that end, there is perhaps no greater evidence of the destructive consequences of a business closure than the toll it takes on the people involved, particularly the entrepreneur.

Understanding this, Axiom Strategy Advisors takes great care in working with entrepreneurs facing the decision to close a business. This is also the reason we elected to share these points. We hope to stress a singular message to entrepreneurs who, in the end, need to be reminded to remain positive, open, adaptive, and driven.

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Gary C. Harrell is the founder and managing principal of Axiom Strategy Advisors, LLC. For additional information, please write info@axiomstrategyadvisors.com.

© 2017. All rights reserved; Axiom Strategy Advisors, LLC.

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A TREP’S GUIDE TO SOURCING IN CHINA

With all of the talk about tariffs and trade wars, AxSA has been getting a lot of questions about what it’s like to manufacture products in China. The biggest one: Does China really cheat on intellectual property? And our answer is simple: Hell yeah, it does – and you are still going to do business there!

 

That is the reason we published this piece of wisdom four years ago.

 

January, 2014

Written By Gary C. Harrell

______________________________

 

It is not uncommon for entrepreneurs to fear the idea of sourcing their products abroad, particularly to suppliers in a country like China, a place where the shanzhai culture of counterfeiting goods can be such a pervasive practice. Nevertheless, China still ranks among the world’s leading destinations for outsourcing. In spite of the risks, producers are still attracted to China because of its high technical prowess and relatively low costs. So are the fears warranted, or is what we are hearing simply overblown? Well, there is no discounting that the theft of intellectual property is a real risk in a country like China, but the fears of such risks may, in some cases, be misdirected.

 

In speaking with entrepreneurs, one thing this consultancy has found is that many are most afraid of the prospects that their own suppliers will be the culprits behind counterfeiting their goods. That is a real possibility, but we believe there are a few rules that entrepreneurs can follow to reduce the risk of this happening.

 

Select a reputable sourcing agent. 

Many businesses, and particularly most small entrepreneurs, lack the knowledge to circumnavigate the business environments of foreign countries. Consequently, they may hire third-party sourcing agents to facilitate relationships with suppliers. This can be a useful entrée into those foreign countries, where differences in language, culture, and infrastructure may pose challenges. That said, though, entrepreneurs would be well-served to keep in mind some key points when selecting their sourcing agent:

  • The sourcing agent must have real familiarity with the local business terrain, and he should also maintain an on-the-ground presence in that market.
  • The sourcing agent should have a strong track record as a liaison, providing the entrepreneur with a fair number of references.
  • The sourcing agent should report to the entrepreneur, in writing, on a regular basis, even if nothing new or unexpected is occurring.
  • The sourcing agent is not a permanent fix. No business should foster an indefinite reliance on a third-party agency without cultivating its own direct channels for communications and accountability with its supplier.
  • The sourcing agent needs to work for the entrepreneur, not the supplier. No exceptions.

 

Identify a reliable supplier.

Once the entrepreneur and the sourcing agent are ready to do so, the vetting and selection of a supplier really is no different from the way it is done domestically. The entrepreneur should verify that the supplier has the competency needed to build the products being sourced, the capacity to meet the requisite needs, and the ability to scale that capacity up when demand increases. Accessibility should also be a concern for the entrepreneur; a lack of critical infrastructure near the supplier can hinder both communications and transportations, thereby adding to logistics costs. And, of course, the entrepreneur will need to confer with references provided by the supplier, to evaluate the supplier’s track record on, among other things, quality, timely deliveries, services, communications, and ethical business practices.

 

Lawyer up—and document everything!

“Shanzhai” is a Cantonese word used to refer to the inferior knock-offs of well-known products being churned out of some Chinese factories. As more and more outsourcing came to China at the end of the last century, the number of knock-offs exploded. Today, the shanzhai culture is so pervasive—and, unfortunately, so much more improved—that counterfeiting in China is estimated to cost businesses nearly $20 billion in potential revenue.

 

For small entrepreneurs new to the sourcing world, this can be disconcerting. And while there may never be a way to completely head off the risk of counterfeiting, having product designs properly patented and trademarked, alongside working with legal counsel to draft comprehensive manufacturing agreements that conform to both domestic and foreign rules of law, promises to be the best way to reduce such risks. A well-drafted series of contracts between the entrepreneur and the supplier (as well as any subcontractors, if necessary) should help to make clear the terms and expectations in this new relationship. In addition to a number of other components, a good manufacturing agreement should specify, in detail, the following:

  • Product specifications
  • Product standards
  • Procedure for manufacturing
  • Identification and descriptions of any subcontracted parties
  • Payment schedules
  • Deliveries
  • Warranties
  • Site inspections
  • Framework for legal recourse
  • Acknowledgement of intellectual property rights
  • Confidentiality and non-use agreements
  • Exclusions
  • Shipping specifications (with details about performance, control of goods, insurability, etc.)

 

If the supplier has a reasonable reputation for being above-board, then there is probably little reason for immediate concern that this partner will be the culprit of any counterfeiting. In fact, the problem, more than likely, may originate with manufacturers with whom the entrepreneur has no contact and, consequently, no working agreements. These unconnected manufacturers are notorious for reverse-engineering products, sometimes at the behest of an entrepreneur’s competitor, and mass producing replicas of, or developing slightly different versions of, the entrepreneur’s product. To this end, the entrepreneur would be well-served to use resources in the foreign market, like those provided by some larger sourcing agencies, to monitor the foreign marketplace and identify incidents of counterfeiting.

 

Conduct on-site inspections and establish communications channels.

An entrepreneur cannot rely too heavily on the efforts of the sourcing agent. He must travel to the supplier to assess the operations. These site inspections not only bolster the entrepreneur’s familiarity of the manufacturing process, they provide him with a great way to build a direct rapport with the supplier. The goal is not to completely usurp the inroads forged by the sourcing agent, who should continue to work as a tactical representative of the entrepreneur, but the direct channels of communication can be useful when unforeseen issues arise.

 

Understand the role of the foreign government and the legal landscape.

To simply say that an entrepreneur should have ready and competent legal counsel at his disposal is a glaring understatement. Many foreign countries—and China, particularly—can be a litigious minefield for even the savviest businessperson, and for a small entrepreneur, legal challenges in these markets could overwhelmed their personal savings and the finances of his new business. Therefore, it is quite imperative for an entrepreneur to retain legal counsel with a broad wingspan of resources in the market in question. He should also attempt to learn, in advance, as much as he can about the legal terrain of the foreign country, so as to fully understand where, if any, potential liability exposure may reside.

 

What’s more, it is important to have a clear picture of how intellectual-property rights are protected in the foreign country. China poses an interesting case, inasmuch as its overall handling of the shanzhai phenomenon has been spotty, yet foreign firms have still elected to outsource to this country. The proper treatment of intellectual property had not always been a matter of serious interest in this country. In fact, it was not until 1992 that the Chinese entered into a Memorandum of Understanding with the United States, wherein China agreed to acknowledge the trademarks and patents of companies filed in the U.S., and in doing so, agreed to provide similar protections against the infringement of those works within its borders. That language was largely codified into law in 1996 with the signing of the Sino-U.S. Agreement on Intellectual Property Rights. Suffice it to say, though, the law did little to reduce infringements, and the intellectual-property arena remains as murky and troublesome as ever in China.

 

Part of the problem in China exists in its patent framework, while another part of the problem is owing to the manner in which culture and biases trump the rule of law.  First, China splits its patents into three significant types: invention patents (which, until recently, were only available for product made and originally made in China); utility model patents (which protect the shape, structure, and composition of a good for a period of ten years); and design patents (which, of course, only protect designs). In order to enforce these patents, officials in China deploy a “double-track” system that allows an aggrieved party to challenge an infringement through administrative channels or a judicial course of action via the courts. While the administrative approach may seem less costly, it can be tremendously time-consuming with no assurance of resolution. Meanwhile, costs notwithstanding, the courts pose their own hurdles. In 2004, the number of patent lawsuits filed in Chinese courts stood at just over 2000, but by the end of 2008, that number rose to 8000, creating a backlog of cases threatening to overwhelm an already-burdened system. Complimenting this, though, is a problem deeply rooted in xenophobia. Judges have shown suspicious deference for local companies, and since many of these judges do not consistently write or publish their rulings, it is often impossible to determine the motivations behind their decisions.

 

For all of these reasons and others, an entrepreneur should follow the lead of larger businesses, who elect to fight infringement cases, when or if the opportunities ever present themselves, in the United States or other countries with more transparent courts and histories of upholding the rule-of-law, rather than places like China.

 

The outsourcing of goods can, of course, saves many businesses significantly on production costs, while increasing the margins on those businesses’ products. This fact has proven itself true for companies as large as General Motors in Detroit and as small as an industrial clamp maker in South Texas. But what is also true is that both businesses face the risk of losing their intellectual property to the shadowy side of manufacturing in a place like China, where counterfeiting has become a lucrative business. For this reason, like their larger counterpart, small entrepreneurs must do everything they can to protect their intellectual property. The high points shared in this missive are a good first step in that process.

 

© 2014 All rights reserved; Axiom Strategy Advisors, LLC

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