The Plight of the Canadian Small Cap

Among the other assorted pieces of junk mail waiting for me on my return from down south was this fluff piece from a recruiting firm I know. Well titled but absent much related substance, it's an interview with the last (as in, there won't be any more) CEO of a small public company I ran a few years ago.

It reads like the story of a traffic cop who shows up late to the scene of a head-on and looks for lessons in being a traffic cop, not the head-on.

Which is unfortunate because there are some important lessons about the plight of small caps everywhere.

The first is you don't want to be one. Being a small cap is like running a weather station in the arctic. A few people find your signals interesting but overall, being a small cap means being irrelevant. Which is why if you've made the mistake of becoming one, you'd better have or figure out a way (grow fast or sell) to not be one. Fast.

Secondly, learn to market and sell. In this case the company went public because they needed the cash. They needed the cash because they were way more comfortable inventing new stuff instead of selling what they had. When that happened....when they did start selling what they had...growth and profitability were easy.

Thirdly, it's way better being a company with a unique product that solves a customer need, than being a company with a unique core competency in search of a customer need. In this case - driving laser beams is cool, but the profitable, untapped market applications are all niches, not mass markets...meaning a never-ending search for more places to apply the core competency.
Ultimately, management made the fatal mistake of chasing a saturated, low margin mass-market that sealed its fate.

Finally, bad governance kills - whether you're Goldman Sachs or a company few people have heard of. The governors in this case made a series of questionable calls. A key one was not recognizing early on that selling the company was a legitimate option for creating shareholder value. Ultimately, that is exactly what happened, but years later and at gunpoint/low value. Ultimately, its not clear management or the Board ever recognized the reality of the company's capabilities, it's markets or of being public.

Bottom line. Small caps face the same challenges as all small companies but RUN differently because they're public. For companies who haven't mastered the basic challenges, dealing with the differences can be a killer.

Kill First, Investigate Later

The controller in one of my clients is originally from Mexico.

At a management off-site the other day, when discussing leadership styles, he explained that in Mexico they have a saying, born from years of brutal leadership - "kill first and investigate later". It was pretty funny.

We've all seen companies where that's the leadership style. Something goes wrong. Shoot somebody.

It's highly ineffective. It just about guarantees that no one in the organization but the leader will make a decision or take action. Progress, trust, teamwork, initiative are pretty much all out the window in those organizations.

Lots has been written about how organizations and employees have changed...about the lack of loyalty shown by either side any more.

It's true.

I still find it bothersome based on years of observation, how acceptable and easy firing one, several, many employees has become. OK fine, the business is well managed, the bottom falls out for whatever reason and survival is at stake - then I get it. I've been there.

But too often what I observe is that's not the case. Hirings are done poorly and without proper planning. Lack of training ensures the employee never reaches their potential. Strategic planning and day to day leadership are haphazard. The organization staggers from trouble spot to trouble spot. And employees get shot.

When companies are hiring, if they know what they're doing and to avoid mistakes, they do their homework on the potential hire.

Employees jumping to new organizations should do the same.

Sure the job sounds great but do some research! Find out what the leadership style is. Find out how the company is managed. Figure out what people in the organization think about their organization.

Here's a simple tactic - don't take the job without interviewing at least 3 people in the company at or below the job level being considered.

Get on Linkedin. Hook up with past employees.

Sure it's a pain, but it could save some serious job grief down the road.

The Inward Focused Business....

...is reactive. Fights amongst itself. Meets too much. Hires the wrong people. Has too much gossip. Makes bad decisions. Makes no decisions. Forgets why it's in business. Loses confidence. Gets bad results.

The outward focused business knows who its customers are. Understands what its customers are looking for. Exceeds its customer's expectations.

The outward focused business knows how to sell.

The outward focused business has confidence.

The outward focused business is proactive.

The outward focused business gets results.

The outward focused business is a better place to work.

Going from being an inward focused business to an outward focused business isn't difficult.

It's a mindset shift. Starting at the top.

Business according to Mr. Google

Here's a decent video interview with Eric Schmidt, CEO of Google. Not sure there are any big ah-has...which is alright.

His comment on the Longtail...that the internet makes the head even more important isn't new.... but it is worth keeping in mind.

Also, as a management consultant and observer of many different organization cultures, Schmidt's comments on management make me smile. First, that you need a leader to enforce deadlines in the group - "otherwise you have university". Second, that you need dissent - "otherwise you have a king". Simple, good insight.

Here's the link.

Summer '08

So much for serious blogging. Not a hope. That's the problem with a good summer!

Quick update on stuff.

Been spending Monday - Wednesday in Toronto then heading north to Muskoka for the weekend. Muskoka is Toronto cottage country. It's beautiful. Too bad the season is 8 weeks.

This is a lifestyle I could get used to. About the time something really starts pissing you off, you're sitting on a dock having a beer. Now if I could just get the helicopter to get me here...

It's also been great spending time with the kids. Both are home from school for the summer. One's working up here for the summer. She's getting her first true business insights working for a golf course that's part of a major, respected hotel chain....that seems to have very little idea what they're doing. The hotel they were supposed to open many months ago won't be open for another few months. Good things it's a fractional ownership. Because after Labor Day weekend, Muskoka is pretty dead.

The other just got back from Australia. I had to laugh (...or cry) at a comment he made on the weekend: "I don't think I like working". There's only one response I could think of..."how would you know?!"

Life has definitely changed for kids. Travel is big. Life-style is huge. I see the girls getting reality way more than the guys...and working way harder. It's cool to see their determination and hard work pay off in terms of opportunity and perspective. And they're doing way better as result.

However, I still see that guys are more street/how-low-is-the-bar smart...and that gives them a strong competitive advantage that frequently enables them to sneak in there, regardless of how hard the girls work. Women need to learn this skill.

Business-wise, I'm working with software companies, a software M&A firm...and a hospital. Every one of them a challenge and I learn something from every one of them too.

Over the years, I've become an indadvertent (unplanned) expert in partnerships. It's just something I've worked with almost everywhere I go. I know in a previous post I committed to capturing some of my learning - I still plan to do that. Partnerships are very interesting beasts. Anyone working in a successful, stress-free partnership should consider themselves lucky. I don't care how good you are, partnerships are not easy relationships.

Here's a bizarre one. I'm also inadvertently becoming an expert in coaching determined, strong, female entrepreneurs and managers. Again, it's just something that's developed over time on many different projects. Bottom line. These women are better managers than most men I know. They're great leaders. Solid with details. Masters of execution. No fear.

What they frequently lack is the inside track, networking and relationships that men lever the hell out of to get what they need. And not because these women couldn't do that better than most men too if they wanted to. Unfortunately - and I have no idea how you change this - men are intimidated by successful women. So it's easier to hang with the boys, ignore reality and keep the status quo.

My advice to these women: Get more like guys. Build your networks. Get to know the influencers. Learn to golf. And have options. Never be stymied. Have a plan and keep moving it forward.

Other stuff. Hmmm. Let me see....

I joined Facebook. Jim D Crocker. Have a few friends and still trying to figure what it does for me. More hits on Flickr?

Joined Plaxo. Jim Crocker. Even fewer friends. I haven't tried. But what I notice is that Plaxo seems way more business friendly than Facebook. I see way more business connections on Plaxo than I do on Facebook. My goal in September is to spend more time trying to figure out where both fit from a business, marketing perspective. Interestingly, all of my kids friends have said they'll add me as a friend. That could be interesting...and I guess it shows how they're growing up and Facebook is changing.

I remain a major search marketing evangelist. Being there when someone is looking for what you have is just way more efficient than shot-gunning your marketing budget all over the place hoping you'll be remembered when the time is right.

If you don't believe me check out the power of GPS combined with local search on the new Blackberries (and I presume i-Phones). Find your location. Local search for pizza...or whatever. And...if you're the closest pizza or whatever guy - you just got a new customer. It doesn't get any more efficient.

Anyways, summer's almost over. Hope it's going well for you too. I'll get back to this in September. Really!