B-Plan Sensationalism: All Hat, No Horse

Solution: Stop listening to the techies, start listening to customers.


Solution: Stop listening to the techies, start listening to customers.

All companies, whether it’s Bob’s Basement Startup or Humongous Corp., prepare business plans to map out how to make a business vision real. A B-Plan is really a photograph of the future, but too often it’s thrown badly out of focus because companies take a product development approach instead of one based on market intelligence. They fall in love with their product and presume customers will too, a version of the “if I build it, they will come” syndrome. This is most common in the technology or engineering fields, where geeks are always hoping to outgeek the guy at the next workstation with some fantastic new gizmo or piece of code instead of providing something useful to customers. Since the core of all business is solving people’s dilemmas, well Houston, we have a problem here. THE PROBLEM In 2001 a new Vancouver company, MAKE Technologies, launched a product based on this very common way of thinking. MAKE was led by hot software developer Christian Cotichini, a serial tech-preneur whose credentials extended back to 1992 when he founded laptop computer security firm Absolute Software Corp. (which he later left but still holds a seat on the board). MAKE developed a tool that would allow heavy IT users like governments, banks and insurance firms to replace their patched-together IT software systems, many of which still used archaic programming language like COBOL, with new software that used the latest coding techniques and performed tasks far more efficiently. Everything seemed to be in place: MAKE had a brilliant chief, a brilliant idea that drew $500,000 in investment from local angels and a brilliant map to execute its plans. But the plan only sort of worked. By 2003, MAKE found itself in the unenviable position of being a one-off custom software developer that added such things as web capability to large and old IT systems, and fixed some of the peripheries. But when it came to work that paid big money, its target market wasn’t interested. MAKE’s customers had bigger concerns, like the fact that most of their IT-involved legacy systems had been around for years – sometimes decades – meaning that they couldn’t handle a lot of the newfangled software. They also typically contained millions of lines of software code, so replacement costs could run into the millions – not counting new hardware. As a final deterrent, because these systems often performed extremely critical functions such as billing, the risks of down time that often came with systems integration were menacing. The companies couldn’t afford to take their systems offline for extended periods of time. These concerns didn’t break MAKE but did hamper its growth considerably. Because it had misread the market, it was trapped in service business limbo, hired for the small stuff but ignored for anything important. THE SOLUTION In 2003, Michael Hagerman, an old-economy entrepreneur and manager with more credentials in his briefcase than the faculties of some business schools, stepped to the foreground of the picture. Hagerman, now 58, had criss-crossed the country running companies between stints as a consultant or MBA professor. Hagerman is no theory wonk. He’s logged time in the trenches helping to build Uniglobe Travel, which he co-founded, into a billion-dollar business, and starting Primerica Canada, a force in the Canadian mutual fund industry, where he was CEO. He’s probably forgotten more about business management than most CEOs know. The senior manager and young tech company got together in 2001 after Hagerman left his last gig, managing director of Vancouver-based investment dealer Goepel McDermid. At Goepel, Hagerman was frustrated by the inability of the company’s ancient computer systems to perform even the most simple tasks required by a modern financial company. The experience led him to search for modernized systems that could expand IT capabilities. Dabbling in angel investing, he became the first investor in MAKE and took a seat on the board of directors, eventually becoming its chair. When the board realized in 2003 that MAKE wasn’t, uh, making it, they recruited Hagerman to fill the CEO position and take the company in a new direction. Cotichini became the executive VP of strategy; Hagerman arranged investor financing and recruited key executives to help build the company in anticipation of a new direction. Then he did something elemental that many young firms, especially tech companies, routinely forget to do. He asked customers – specifically their CFOs – what they needed, instead of what it would take to get them to buy. He wanted to know: what was the pain that kept them awake at night? The answer was almost universal: Forget the whiz-bang new stuff – we’re just trying to keep our ancient systems going until we can afford and seamlessly integrate new ones. The techies might want the latest gear, but if the CFO says the return on investment isn’t there, forget it. So last year, MAKE embarked on a new strategy. Rather than merely providing exotic tools for the creation of new software, it would also help companies upgrade their old systems for use in the modern world. It created what it calls a ‘transformational legacy modernization’ practice that specializes in converting archaic systems into ‘modern J2EE applications’ – a state-of-the-art way of operating an IT system – for as little as a third of the cost of replacement. Even an IT-challenged executive like a CFO could now understand the game: instead of junking old systems and creating entirely new ones (the techie solution) big IT users could now update their systems at a fraction of the cost (the CFO solution) and with far less risk. As an offshoot, MAKE began offering a system that would help with another big problem: integrating and connecting disparate applications that run on various parts of their systems. There’s nothing like a well-crafted benefit statement with major cost savings and serious risk reduction as its bottom line to make a CFO’s heart go pitter patter, so once the word got out through partners MAKE recruited, top executives started listening. Last year, business took off and MAKE began serving a stable of big customers such as Royal State Insurance Group, one of Hawaii’s largest insurers, and BC Campus, a collection of 26 learning institutions in the province. Revenues doubled last year and Hagerman expects them to explode by 300 per cent this year. And all because someone listened to the customer when forming a strategy. LESSONS:

  • Adapt. Plans can be great and execution can be perfect, but it still might not work if plans are mere projections and situations change.
  • Earn your MBAA – Mastery By Asking Around. Managers worry more about bread-and-butter problems than exotic solutions, so query them about it – that’s where the business will be.
  • Provide pain relief. In a competitive environment, unless a company can relieve customer pain somehow, it probably won’t have a business.

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