If I could only offer a single advice to a progressive CEO
This would be it!
“Imagining that you are deep and complex, but others are simple, is one of the primary signs of malignant selfishness” — Stefan Molyneu
BROAD STROKES GIVEAWAY
A good Advisory Board (AB) can add value and broaden horizons of CEOs, and Corporate Directors. It can benefit any organization: large, or small. Even informal advisers can improve understanding of company’s challenges, risks, and growth drivers — especially during a major disruption.
While Venture Capital often invests in unproven business models, Private Equity benefits from established traction, respectable earnings and experienced management teams at its portfolio companies. Moreover, while VCs often bring AI capabilities to untried business model — PEs can immediately demonstrate Artificial Intelligence’s value pertaining to: EBITDA Growth, Revenue Acceleration and Margin Enhancement.
So, why are PEs leaving SO MUCH MONEY on the table, allowing Venture Capital to run circles around PEs? IMHO, it boils down to PEs shocking failure to bring competent AI advisors on board — to complement PE’s remarkable functional expertise.
I have worked with many PE-backed companies in the past and some have done very well by analyzing their customers with granular details. Logically, they are selling their products and services to existing customers they thoroughly scrutinized. And yet, I firmly believe that there are HUGE and untapped opportunities to generate new revenues by focusing on …. noncustomers!
So, it became painfully clear to me over the years, that VC-backed startups often embrace outside advice and are open to opportunistic pivots. Unfortunately, many PEs — fall into a habitual “know-it-all” trap.
Disruption, or not, an expert advice on emerging technology, such as Artificial Intelligence (AI) — is always a good thing. Yet even the most innovative companies with sophisticated technologies — may still need help to sell their products and services.
Experienced advisers should therefore be viewed as an effective tool. The tool that is necessary to extend the range of CEO’s skills — beyond their existing fields of expertise. Better yet, Venture Capital (VC), Corporate Venture Capital (CVC) and Private Equity (PE) groups should all insist on seeing a suitable AB in place, too. Ideally, prior to advancing the funds!
If It Happened To Me ….
Exactly 20 years ago, I was on top of the world! My startup, International Neural Machines Inc. (INM) — has just successfully packaged neural network based Optical Character Recognition (OCR) software. It was the only commercial OCR s/w in the world — based on deep-learning AI!
All I needed — was a reliable distribution channel! So, I rolled-up my sleeves and went to work! Few weeks later, a $4B s/w distribution company agreed to sell our products. I was truly elated! All I had to do, was to ship 10,000 OCR boxes to their warehouses…and relax! Next, I was supposed to start watching our bank account grow! So, I did!
We financed fulfillment, packaging & shipments of our OCR s/w — at significant EXPENSE. Money was tight, so we used commercial loans. Relaxation, however …. was a different story!
After not seeing any revenues for about 3 weeks, we were asked to spend more money on advertising flyers. What was supposed to happen next — you guessed it: we were to relax and watch our bank account grow!
The initially discussed monthly advertising costs — turned out quickly into a series of bi-weekly invoices. When after 2 months of ZERO sales, I was asked to start advertising WEEKLY — we decided to run a simple test. I called the distributor’s 1–800 number, and placed an order, or rather: tried to! And it was horrifying!
First, they didn’t have a clue what is it that I’m trying to buy. My SKU numbers didn’t help, either. After spending about 20 minutes on a phone with their sales agent, I was told that the product was probably discontinued. To make things worse, their system was showing ZERO inventory level! So I repeated my “buying-spree” twice — just to be sure! Three different sales agents — identical outcomes.
Little did I know, I wasn’t the only client with a “phantom” product to sell. Nor did I realize that promotional advertising was not intended to support product sales, at all. It was simply distributors’ Revenue Center — that generated a healthy revenue stream!
Our distribution agreement clearly stipulated that the product that doesn’t sell, will be shipped back to INM, at our own expense. And one week after pulling our last ad from their flyers, the 10,000 boxes arrived back at our doors — like a boomerang!
When I look back at such disappointing experience, I realize that it could have been avoided! If I only talked to someone with s/w distribution experience, beforehand! What did I learn from it? The importance of an Advisory Board!
Luckily, we survived the ordeal. I can’t even imagine how many other startups needlessly failed — despite the fact, that a good advice is sometimes just a phone call away!
Reaching Beyond Your Board Of Directors (BOD)
According to Emotional IQ camps, the higher your score, the more you’re open to an outside advice. So, it’s not a total surprise, that many CEOs with a low score — barely tolerate advice from their Board of Directors. For them, enduring strategic discussions with people who may not even be shareholders — are hard to stomach.
Now, you may ask: is BOD the only “go-to” place for a CEO — to receive a healthy feedback? When I look back at my 30+ years of experience linked to applying AI to Technology, Finance & Renewable Energy — my answer is: a resounding NO.
I wrote about the importance of a well-structured BOD in my post, entitled: On Board of Directors — And Why Competence Is Not Enough. And yet, the more investors line-up behind your company, the more skewed BOD’s composition may become. And when Venture Capital (VC), or Private Equity steps-in — the infighting begins, in earnest. Who “deserves” more BOD sits, and why — may hijack BOD’s “counsel appeal”, and its “honest advice” premise.
Advisory Boards (AB)
As elegantly defined by Entrepreneur, AB is simply: “A group of individuals who’ve been selected to help advise a business owner regarding any number of business issues, including marketing, sales, financing, expansion and so on; a body that advises the board of directors and management of a corporation but does not have authority to vote on corporate matters”
Once more, I’m not calling for ABs to substitute BODs. Far from it. And whether CEO brings only one, or few advisors on board — is irrelevant. What is important, however, is the ability of ABs to help CEOs and BODs — to better understand high-level issues. Such might be linked to: disruptive technologies, economics, distribution channels, demographics, etc.
And yet, in spite of broad understanding, that nobody can build a great business alone, both: startups AND established entities — lack access to a good advice.
Now, ABs can actually enhance organization’s odds of success — and here are some numbers to back it up. In a recent BDC study entitled: Advisory boards: an untapped resource for businesses — the findings speak for themselves:
· Only 6% of Canadian Small and Medium‑sized Enterprises (SMEs) have access to an advisory board that helps them manage their business
· Canadian SMEs with advisory boards perform better financially than those without advisory boards
You may ask how significantly better was it anyway? Well, “sales growth was stronger after instituting an advisory board. In the first three years after an advisory board was set up, sales grew 66.8% compared with a growth of 22.9% in the three previous years”
So, I asked myself: why don’t we see more CEOs embracing ABs without hesitation?
Granted, I’m not a licensed psychologist. But the more responses I see, the more I tend to classify CEOs without an Advisory Boards — into 2 distinct groups:
· Pathological narcissists
· Ignorant laggards
The narcissists may often resort to a comment such as: “If you want a friend, get yourself a dog”. They also frequently quote famous Cicero’s advice: “Nobody can give you wiser advice than yourself” — Marcus Tullius Cicero
On the other hand, the ignorant CEOs, do believe, that to form a great Advisory Board — it will take too much work, time, and effort. So, they don’t even try. To them, I often remind the proverbial three letters story:
Obviously, explaining the logic behind the need for more ABs — is not working very well. With some of the narcissist, perhaps a bit of convincing might help. You may try bringing their attention to the following photograph. It depicts a young Steve Jobs asking for advice from Robert Noyce — the founder of Intel. Apparently, Steve Jobs wasn’t shy to ask for advice. Your message: “If it worked for Steve Jobs — it may work for you, too!”
A much bigger impact, however, may arise– by following the money! In other words, instead of convincing individual CEOs, one by one — why not approach their financiers, instead. Turning ABs into Key Performance Indicators (KPIs) for VCs, CVCs, and PEs — could become EXTREMELY persuasive!
Focusing on mentoring, growth & development strategy — works best at High Level. Even the “back-of-the-envelope” advice will do. As long, as it helps cover cost cutting initiatives, investments in new capabilities & untapped opportunities — you don’t need a fancy presentation. No matter the stage of your corporate growth cycle — a good AB is worth its weight in gold!
With some luck, you may even find a single adviser offering true mentorship linked to a specific industry AND to your day-to-day entrepreneurial activities.
And by the time CEOs begin to see AB as a non-threatening sounding board — your mission is accomplished!
THE BOTTOM LINE
No matter the size of your company, surrounding yourself with smart, pragmatic, honest, and extremely capable AB — is as important, as hiring the right employees.
So, you’ll be pleased to know what Steve Jobs famously said about hiring the right people: “it doesn’t make sense to hire smart people and tell them what to do; we hire smart people so they can tell us what to do.”
Oleg Feldgajer is President & CEO of Canada Green ESCO Inc. Oleg is positioning the company to become a leader in financing AI enhanced green energy projects and ventures. CGE’s mission is to guide DISRUPTIVE businesses in ENERGY & TRANSPORTATION toward profitable business models. Oleg is passionate about such mission, and firmly believes that without AI based innovation, we will all prematurely choke on polluted air and dirty water. CGE delivers 100% financing (levered and unlevered) to its clients — and utilizes large equity pools, and non-recourse debt. Oleg offers creative, fresh ideas to open-minded businesses — that embrace both: logic AND opportunistic intuition. CGE stands against mediocrity & its modus operandi is quite simple: If CGE is not invited to join your BOD, or Advisory Board — we failed!