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Rovio Mobile, Developer of Angry Birds, Gets $42 Million in Funding

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The newest overnight sensation of the digital gaming industry has now officially been crowned. Rovio Mobile, a tiny mobile gaming company out of Finland run by Niklas and Mikael Hed (cousins), has ridden their Angry Birds game to lofty marketplace success (40 million active users) and a financing round of $42 million USD, led by Accel Partners and Atomico Ventures. 

Of course, someone gets the obligatory board seat, and in this case, that someone is Niklas Zennstrom, a co-founder of Atomico Ventures, as well as another company named Skype. He is going to sit on the board of Rovio Mobile, his new investment. He also issued the even-more-obligatory statement, saying, “Angry Birds is one of the fastest-growing online products I’ve seen, growing even faster than Skype, and the company has done a brilliant job of extending it across different platforms and merchandise.” 

It’s worth noting that little Rovio put out 50 titles before they went platinum with Angry Birds, courtesy of the explosion in smart phones; now that they have a thoroughbred in their stable, they intend to ride that horse until they can breed another winner. 

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Things Have Changed

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Yes, I am quoting a Bob Dylan song title on a business blog.

But things have changed with the passage of the 2010 Tax Relief Act two weeks ago, and I thought it would be a good idea to highlight some of the provisions that might hold the greatest interest for small and medium-sized businesses.

So, here we go:

Small Business Investment: Section 760 of the Tax Relief Act amends section 1202 of the Internal Revenue Code (the Code), with the intent of increasing incentives to invest in small businesses. The Code now states that if an investment is made in 2011 in stock of a qualified small business and the stock is held for a minimum of five (5) years the gain is tax free. Prior to passage two weeks ago, the Code section 1202 incentive was a 50% gain. Some details: The investment must be in qualified small business stock. That means the investment must be in new shares of a “C” corporation. The investment must be made as an original issue of stock and can be granted for money, property or services performed, except for service of underwriting. To qualify, a company must be a domestic corporation with a cap of aggregate gross assets of $50,000,000 USD before AND after the issuance of the new shares. And, a minimum of 80% of the total assets must be used in an active trade or business. An active trade or business is defined by the IRS as a trade or business other than a personal service business like law, medicine, engineering, consulting, athletics, financial services, and includes other trades or businesses where the business is dependent on the reputation or skill of 1 or more of its employees.

Small Business Expensing: Businesses will be able to write off 100 percent of their equipment and machinery purchases, up to $500,000, that were placed in service after Sept. 8, 2010 but before Jan. 1, 2012. The cost of the equipment (up to $500,000) reduces the total taxable income of the business.

Estate Tax: The revised estate tax level was set at a $5 million exemption and 35 percent top rate through 2012.

Payroll Tax: Employees will receive a 2 percent reduction in their Social Security (FICA) payroll tax in 2011. The rate for employees will drop from 6.2 percent to 4.2 percent. It is important to note here that employers (no matter what size) will continue to pay the 6.2 percent rate. Self-employed individuals will pay 10.4 percent instead of 12.4 percent. The FICA tax rates for everyone will return to 2010 levels in 2012.

Research Tax Credit: The research tax credit had originally expired as of December 31, 2009. The Tax Relief Act has now extended this for 2010 and 2011.

That wraps it up on this end, and I hope this provides a quick overview of some of the changes in the recent tax legislation. We are not tax accountants (not even close), so if you have questions, it is in your best interests to contact a certified tax accountant, not us.

Brendan Moore is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in marketing, sales, front-end operations, and strategy. Cedar Point Consulting can be found at http://cedarpointconsulting.com.

The Four-Funnel Approach — Strategic Planning for Small Businesses

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According to Confucius, “An unpointed arrow never reaches its target.” Yet, how many small business owners don’t do any strategic planning, hoping that floating in the wind will bring them a bulls-eye and success?

Arguably, strategic planning is even more important to many small businesses, including start-ups, technology companies and those in highly-competitive markets, so it’s critical that small business owners create and follow strategic plans. Plus, it’s New Years Day. What better time to start strategic planning for your small business?

Sure, finding a simple way to quickly build a strategic plan is much of the problem. While the Balanced Scorecard is, in many ways, a better strategic planning system, it takes quite a while to develop a strategic plan using Balanced Scorecard and requires training in the methodology to carry out effectively. As a result, the Balanced Scorecard is rarely available to small businesses, who can not afford to hire an expert facilitator for a multi-week endeavor.

Should small business owners simply give up, assuming good strategic planning is out of reach? Of course not. There is an effective way for small businesses to create and executed strategic plans – the Four-Funnel model. While not as good as the Balanced Scorecard, in my opinion, the Four-Funnel approach is simpler, faster and can be done by a business as small as one or two individuals.

In this article, I outline the Four-Funnel model, describe how it can help small businesses to create solid strategic plans.

A Little Four-Funnel Background

I originally encountered the makings of the four-funnel strategic planning approach in business school at RH Smith at the University of Maryland, where Dr. Brad Wheeler (now at Indiana) described a four-funnel approach to problem-solving. In his approach, he drew four funnels on a white board and labeled them, “Identify Problems”, “Prioritize Problems”, “Identify Solutions” and “Select Solutions”. The diagram looked something like this:

Four-Funnel Problem Solving

As you can see, the four funnels represent the increase and decrease of information as you complete each step in the problem-solving process. First, identifying problems gives you a list possible problems; prioritizing those problems reduces the list to only those problems that are most important; identifying solutions gives you a range of solutions for each problem; while selecting solutions again reduces your list to only the best solutions for the most critical problems. In short, there’s really nothing radical about four-funnel problem-solving, but it’s simple and it works.

Fast-forward to our strategic management course (also at RH Smith), where we were expected to use business cases to develop strategic plans in a matter of hours. Certainly, we learned the strategic planning process in depth during the class, but our challenge was to deliver a good plan in a very short period of time, particularly for case competitions. In response, my team and I applied the four-funnel approach, this time to strategic planning:

Four-Funnel Strategic Planning

Since then, I’ve used four-funnel with my own small business more than a half-dozen times, while coaching other small businesses through the process. It only takes a half-day or so to do, so it’s not too much time and effort, considering the big payoff.

Four-Funnel Strategic Planning Steps

Ready to start? Here’s each step:

  1. Identify strategic needs. Using SWOT analysis or a similar technique, write down the strengths, weaknesses, opportunities and threats relevant to your company and your industry. Many of these are easy to identify — a competitor just moved in down the street (Threat), only one staff member knows how to operate a particular machine (Weakness), you just received recognition as the best in your region at what you do (Strength); or, one of your vendors just created a new product and offered you exclusive distribution rights in your area (Opportunity).
  2. Prioritize Strategic Needs. Along with your co-workers you’re bound to come up with some very solid strategic needs, especially if you do a little homework about industry trends before you meet. But, if you stop there and try to achieve all of them, you’ll almost certainly fail. Before you move forward, you need to prioritize your strategic needs, eliminating the ones that are least likely to be successful and produce the least value. I suggest narrowing down your list to four or five strategic needs for your entire business if you have fewer than ten people, and no more than three needs per department (e.g, marketing) if you’re larger.
  3. Identify Strategic Actions. For each high-priority strategic need, brainstorm ways to meet that need or take advantage of that opportunity. Your possible actions don’t need to be long or detailed — a one sentence explanation is enough. And, be sure to give everyone an opportunity to suggest actions — you’ll be surprised when you find that the most innovative marketing ideas don’t necessarily come from your marketing manager or the best technology initiatives don’t come from IT.
  4. Select Strategic Actions. Just as you prioritized strategic needs, you need to do the same for your actions. For each high-priority strategic need, pick one or two of the best actions for you and your business to take during the coming year. Make sure their achievable and affordable – no point in risking your current business on a long shot.
  5. Assign and Act. As a team, assign someone in your business to complete each strategic action. As you do, make certain the person assigned has the authority, knowledge and resources — including funding — to complete the action. If they don’t, you’re merely setting them — and you — up for failure. In addition, be sure to stagger out the deadlines for each strategic action throughout the course of the year. Otherwise, you and your team will spend December rushing around to complete them, learning to hate the strategic planning process rather than appreciate its value.

Does it Work?

It’s not a miracle cure-all, but the four-funnel approach does work. In my experience, businesses who adopted four-funnel strategic planning grew around 20-30% per year, while those same businesses grew at 0-10% before hand.  (My own business grew triple-digits every year but one, so of course I’m a big believer in four-funnel).  As a lawyer would say, that’s not a guarantee of future success, but past results have been good.

When you try the process yourself, you’ll find it takes between four and eight hours for a group of three or four to complete the four-funnel approach, depending upon the size of your business. That’s not much of a time commitment, considering it’s going to benefit your organization for the next year, and beyond.

Give it a try. And, if you like some assistance, contact Cedar Point Consulting and we can help.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy.  Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

For Successful Business Leaders, Sometimes it’s Right to be Wrong

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One dreary October day in the late 90’s, I sat in my local Fidelity office waiting to shift funds from one account to another, a common practice in an era before online banking and financial services. That fifteen minutes sitting would have remained forever unmemorable, were it not for the fact that I picked up a business magazine sitting on the coffee table next to me and read a brief article on CEO’s and decision-making.

According to the article, researchers studied the decision-making of CEO’s at both successful and unsuccessful businesses, categorizing their strategic decisions along two dimensions — correct/incorrect and fast/slow, as shown in the table below:

CEO Decision-Making Success Fast Slow
Correct    
Incorrect    

As you might surmise from the labels on the table, “correct” was defined as making decisions that accurately gauged the market, adapted to changes in the business environment, and made new expenditures or trimmed costs in ways that helped their businesses to out-perform competitors; “incorrect” decisions were the opposite.  Along the other dimension, “fast” decision-makers were among the first to make a decision–right or wrong–and then act on the decision, while slow decision-makers took their time, often deciding and acting well after the counterparts in their industry.

Not surprisingly, the CEO’s who made fast, correct decisions led the most successful businesses, while the CEO’s who made slow, incorrect decisions were the least successful. However, the second most successful group of CEO’s came as quite a surprise to me, ultimately affecting how I lead and make decisions to this day. It turns out that the second-most successful CEO’s made fast-but-wrong decisions — not the CEO’s who made slow-but-correct ones. The completed table below summarizes this:

CEO Decision-Making Success Fast Slow
Correct 1stMost successful CEO’s 3rdThird-most successful CEO’s
Incorrect 2ndNext most successful CEO’s 4thLeast successful CEO’s

Why were fast-but-incorrect CEO’s the second most successful group? It turns out the slow-moving-yet-correct CEO’s were simply too slow to take advantage of changing business landscape. They waited too long, letting good opportunities slip by and causing their businesses to under-perform. However, the fast-yet-incorrect CEO’s did something that was really not very difficult–they monitored the results of their decisions and, when they determined they were wrong, they corrected their mistakes.

All of this makes thorough, complete analysis and extreme caution – even in the worst of business climates — look like a pretty bad decision-making model.  Sure, we should base our decisions on facts, research and data, weighing the options along with our trusted advisers. But, we shouldn’t wait until the last piece of information finally makes its way to our desk, assuming that having a complete picture is the only way to certain success.  Because if we do, we’ll probably be too late.

(If you’ve read my previous articles, you’ll notice that I’m pretty thorough about citing material appropriately. The article to which I refer needs an appropriate reference, but while I’ve looked and looked, I simply can’t find the original article, published in either Fast Company or Inc Magazine between 1996 and 1998.  Certainly, the publisher and the researchers deserve the credit, so if you know of this article, send me an e-mail and I’ll give credit where it’s due).

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

Watch that Basket-Seven Ways to Identify Troubled Projects

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Though the traditional advice is “don’t put all of your eggs in one basket,” the celebrated author Mark Twain is famous for saying, “…put all of your eggs in one basket and — WATCH THAT BASKET.”

Whether you’re a an entrepreneur leading a small business , a C-Level executive (CEO/CFO/CIO/CTO) at a mid-sized business, the head of the Project Management Office (PMO), or a business manager watching out for your department, you are often stuck in the position of having to “watch that basket” with your most critical projects.

Even worse, many times you’re never truly sure if one of your key projects is in trouble until it’s too late.

Fortunately, there are some signs that can help you identify a troubled project early, so that you can intervene and put it back on track. I polled our project recovery services specialists at Cedar Point Consulting, and we thought of seven effective ways to identify a troubled project:

  1. Perpetual Green Lights, Little Activity. Many of us are familiar with the approach of labeling projects green when they are on schedule and budget; yellow when the project is falling behind; and red when the project is far behind and/or over-budget. Perhaps your key project has been reporting green for the last three months, but oddly there’s been very little activity related to the project. This is probably a good signal that the project is actually in trouble.
  2. Lot’s of TBD’s. Effective risk and issue management are critical to the success of most projects, yet they are often ignored. If your key project is well past the early stages, but is reporting back a lot of TBD’s (to be determined) in the “resolution” column for risks and issues, then it’s probably a troubled project, even when the schedule doesn’t show it.
  3. Avoiders. The leader in charge of your key project may be a formal project manager or a manager of a business line, but regardless of who they are, you are getting the unsettling feeling that they are avoiding you. Perhaps they are missing at meetings, they’re head the other way down the hall when they see you, they’re not returning phone calls, or they’re not providing status reports. Unless you have a problem bathing, the project leader is likely avoiding you because the project is in trouble.
  4. Troubling Trends. Experienced project managers are familiar in using techniques like earned value management (EVM) to identify project progress by comparing actual to planned results for work completed, costs incurred and time spent. Though you may not be using EVM on your projects, you can watch for dramatic increases or drops in spending, dramatic changes to the work being delivered or sudden changes to schedule with no new schedule dates. In many cases, your key project is in a free-fall.
  5. Non-Progress Reports. You’re wise, so you have asked your project manager to provide status reports on a weekly basis. However, they’re more like “Non-Progress” reports than progress reports because no progress has been made. In particular, if you have received two weekly status reports where no progress has been made, you’re well on your way to having a troubled project on your hands, if you don’t already.
  6. Inability to Show Tangible Results. Well in to your project timeline and knowing that interim reviews are a good idea, you ask for a review or demonstration of work completed thus far. However, your review meeting is repeatedly delayed and rescheduled, sometimes by a few days and sometimes by weeks. Even worse, you’ve tried a quick visit by the desk of the project leader and it resulted in the person shoving documents in their desk instead of sitting with you to review tangible results. If so, this is likely a troubled project.
  7. Spidey Senses Tingling. Like Peter Parker in the Spiderman comic book series, you know which projects are highest risk and every time the subject of your key project comes up, it sets your spidey senses tingling, though you’re not certain why. While I’m a big believer in science over emotion, there is surely something very scientific that you’re reading so trust your instincts. Your likely to find something amazingly like trouble in your key project.

Of course, identifying a troubled project is one thing, but recovering that project is a completely different challenge. I provided some tips to recover troubled projects in a previous article that may be of help.

However, particularly if you don’t have experience recovering troubled projects and the stakes are high, it might be time to consider getting some help.  Our firm provides project recovery services and we’re proud of our success rate, but other competent firms do, as well.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy. Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

Product Pricing: Avoiding the Dead Zone

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I was talking to an entrepreneur-friend recently about product pricing for business products, and the fact that there’s a dead zone between the $1000 and $5000 price range that most successful products avoid. That dead zone exists for a reason and it’s important to avoid it, as I will explain here.

For most businesses – even large ones – a purchase under a $1000 can typically be made by a first-level manager and even by a staffer. In some cases, they put it on a corporate credit card and in others they use a discretionary budget, but when the user wants your product, the sale is usually pretty quick and simple.

In contrast, a sale of $1000 or more often requires a mid-to-senior level manager’s approval, a signature from purchasing and even a formal purchase order and invoice. In some cases, I’ve even seen $1000 plus sales rise to the VP level for approval, so this can become heck of a hurdle to clear to close a sale.

As a result of these restrictions, it makes sense to stay below $1000 if possible. But, why might your product need to be priced at $5000-plus instead of, say, $1500? The answer is the sales person. Over the $1000 price range, you not only have more hurdles to clear before closing a sale, you often have to use a one-on-one selling approach to close the deal, which requires a sales person. This sales person earns a small salary, makes commissions, generates expenses and only closes a portion of their leads, so suddenly a $1000 sale becomes very unprofitable.

It turns out that, in most cases, a sale through a salesperson is not profitable until the price reaches over $5000. Hence, the dead zone between $1000 and $5000.

So, if your business product or service is priced in the dead zone, there are things you can do about it.

  1. If possible, move your product below the dead zone. Find a way to lower the price just below the $1000 threshold, break the purchase up in to multiple payments across multiple months, or sell a service-based subscription that generates monthly revenue.
  2. If going lower is not possible, rise above it. Consider ways to bundle your product with others so that you can charge more and justify a salesperson, sell maintenance or support along with the product, or sell your product to someone else who can bundle it.
  3. Stay in the zone. While this is the least appealing option, this option can work. Instead of using an outside salesperson, consider online ad campaigns with inside sales representatives at lower costs. Or, consider a multi-tiered marketing approach that allows for slack labor (college students, work-at-homes) to sell your product. Or, a viable option for a small business may be to sell the product yourself.  (Hey, I already said it wasn’t very appealing).

Interestingly, a dead zone exists to some degree for consumer products and services just as it does for business products, though the zone for consumer products is a good deal lower and it doesn’t appear to be quite so “dead” – it’s probably between $100 and ending at $500. It may be coincidental, but $100 is about the point at which I start running purchases by my wife and she runs purchases by me. Hmmhh.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy.  Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

From Chaos to Crisis to Calm – Nine Tips to Recover a Troubled Project

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Brendan Moore, a fellow Principal at Cedar Point Consulting, recently reminded me that, “You can’t manage chaos, but you can manage a crisis.” These are very wise words, but they reminded me of the early stages of a trouble project — one which is far behind schedule, well over budget, not delivering results, or all of the above.  If anything, a troubled project is chaos waiting for a strong leader to transition it to crisis, and then ultimately to calm.

Whether you’re a C-level executive, an entrepreneur or a project manager, you may not have encountered very many troubled projects in your career, so you may not be familiar with how to transition from chaos, to crisis, and finally to calm. We consultants are often brought in to deal with just such problems, so I have a few tips that should help:

  1. Don’t Panic! Douglas Adams references aside, you may have just learned that a key project is in trouble, but it’s important that you not panic. First of all, panic spreads, so you create chaos from crisis, and it won’t be long before your co-workers and your subordinates are panicked, too.Second, panicked people don’t reason effectively – they make “fight-or-flight” decisions instead of rational ones, so you’re far more likely to make a bad decision or push others to do so.
  2. Be Methodical. At Cedar Point Consulting, we have a 5-step process that we follow to recover projects – Review, Recommend, Respond, Transition, Close. While this is not the only way to recover a project, it does consistently work – by step three, the project is making progress once again. Regardless of the technique or methodology that you choose, don’t attempt to solve the project’s problems until you have an understanding of their causes. Do take measures to stop the bleeding, until you’ve effectively identified root causes.
  3. Read the Tea Leaves. Whether well run or not, nearly all projects have documents that tell you where the weaknesses are and whether they are being managed well. At minimum, even the smallest project should follow a standardized process ( project methodology); a charter (with a project goal); a project plan that includes a schedule, a budget, and assigned staff; regular meeting minutes and regular status reports. If these exist, review them to assess where problems are occurring. If they don’t, find out why.
  4. Be From Missouri (“Show Me”). Reading current project documents is a good start, but what if someone is fudging the numbers or painting a rosier picture than reality? For select documents, like staff hours, project schedule and project budget, confirm that they are reasonably accurate independently. Which brings us to the next tip…
  5. Use an Independent Third Party. Whether you hire a consultant or have someone in another part of your business lead your project recovery effort, they should be an independent third party. Having a friend of the Project Manager, the Project Manager’s immediate superior or one of their subordinates jump in to help is unlikely to be successful.
  6. Change Leadership or Change Process. At the most basic level, projects most often fail because either the project manager is not up to the task or the project management process is preventing them from succeeding. A good project manager controls time, scope, cost and quality on a project. If they don’t control at least two of these and influence all four, then they are likely to fail. Conversely, if they control all of these but the projects headed off a cliff, you probably need to switch project leadership.
  7. Increase Communication. When you’re trying to identify problems with a project, it helps to increase communication within the team. Schedule and require participation in regular meetings – daily, if necessary, like Stand-ups or Daily Scrums. Finally, increase the frequency of status reports to key parties, such as the client, the sponsor and key stakeholders, even if the reporting is informal.
  8. To Thine Own Self be True. There’s always a need for optimism in every situation, but good leaders are also honest to themselves and to others about the current state of a project. Depending upon how far behind the project truly is, consider reducing scope or resetting the schedule. Failing to do so may doom the project and the project team to yet another failure – one from which they may not recover.
  9. Start Small, Review Frequently.  After you’ve planned your recovery, be sure to start with small deliverables and shorter milestones, reviewing the project’s progress frequently to make sure the conservative short term goals are being met. While this is not normally the best approach with a project, starting small enables the team members to practice working together as a team before they have to tackle the larger, more challenging deliverables of the project.

The list above isn’t a comprehensive recipe for solving all the problems of a troubled project or for complete recovery, but it is a good start.  In a subsequent post, I’ll provide a list of ways to minimize the possibility of troubled projects altogether.

Donald Patti is a Principal Consultant with Cedar Point Consulting, a management consulting practice based in the Washington, DC area, where he advises businesses in project management, process improvement, and small business strategy.  Cedar Point Consulting can be found at http://www.cedarpointconsulting.com.

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