My CEO Life

This is the age old question faced my management when they are growing businesses.  Do i build it from scratch, buy it or something in between.  I have just had a discussion with one of my board members that comes down to this very topic.  He was asking me why are we buying a business when we can build it for less.  On the surface he had a clear point, however once you delved below the covers, it became clear that there is far more to this than just a financial calculation.

So i thought i would give you my 10c on this hairy topic.

I think the answer is simple - what are you trying to acheive?

If you want to build something that is strategically important and provides a competitive advantage then you need to either  build it or buy it (as in a business) and own it, or at least have an option over owning it.  The last thing you want to do is allow your competitors to have access to what makes your business tick.

As for all the rest - let someone else do that hard  work and just implement the results.  E.g. who would want to build an accounting system.  That is why the JD Edwards of the world make money - allowing you and me to customize what they do.

Much of the value is created in how you use a product or a service not the product or service by itself.  A great example is Google maps.  Let them do the hard work and you incorporate them into your site in a way that you think will create the most value.

Suffice to say you can apply the same logic to acquisitions.  You don’t have to own it all today especially if you lose the passion and excitement of the owners / entrepreneurs who will make it happen.

I received the following question the other day

“Would you say there was one single concern that topped the list of concerns for CEO’s of large companies (e.g., Fortune 1000 size)?  In other words, while I know there are a lot of issues, and they vary depending on company, industry and location, but would you say there was one challenge that of all the CEO’s of large corporations face that is greater than any other?”

The first thing that popped into my head was all about finding and retaining great people. Then after thinking about it for a while, i still came to the same conclusion.

I dont think it matters how big or how small the business is, hiring great people and then keeping them in the business is always the greatest challenge.

Hiring is all about getting the marketing message right.  The product is the business and its culture and the best way to market the opportunity to join the business is by targeting where the employee is and then getting the offer right.  We have a person in our business who is specifically tasked with poaching staff from competitors.  We know their organisation structures, their staff and most importantly who is good and who is not.

When retaining people, we implement a balance of salary based initiatives (shares / cash etc) and other benefits.  We offer programmers a day a week to work on their projects.  We offer education and training based on the development plan put in place for an employee (by the employee) and we work hard a creating a culture that is hard to say good bye too.

The bottom line - an employee is a customer.  Most businesses dont get this simple message.