I had the extreme pleasure of attending a recent business roundtable where some NSCA members got together for benchmarking their companies and sharing ideas for business development. These thought leaders allowed me to share my ideas on the types of technology that would disrupt their business. In almost every case, we found that when a disruptive technology was mentioned, one of the companies had already developed a solution that could become a new profit source for their company. Whatever I introduced as a possible negative situation quickly became a positive with this group of business leaders.

For example, mobile devices have become the obvious and most talked about disruptive technology. It’s disruptive because it demystified the human interface to many of the existing systems we provide. As you know, one of my favorite industry sayings is, “there’s margin in the magic.” Well, systems that had a custom user interface often required hardware and programing that seemed like magic to the end-user. We were able to charge a lot of money for it since it was difficult to develop.

Moving forward the new interface devices will be simpler, more intuitive and less money. But the enhanced feature sets, overall system capabilities and the wide acceptance of the technology will create more demand for the solutions we provide allowing for huge potential growth in the scope of work we do.

One of my goals this year is to unveil a series of disruptive technologies by market sector and systems type. I’m going to include with that list what I believe is the barrier to growth and also the opportunity these technologies present to our members. If we understand the technology and the challenges it presents to the way we currently do business, then I believe we can also discover the underlying opportunities better.

I can’t think of a better way to help you grow your business than to share the insight from our industry’s leaders on what technologies will disrupt the norm, what barriers we need to overcome and how to spot the opportunities that will soon emerge. — CW

Integrators, I’m going to say this one last time; you cannot be successful if you are trying to operate a box sales business within your integration company by using the same overhead structure. I’ve never seen it work where a low cost provider is also operating as a value-added services company. The overhead structure is dramatically different from those who sell via the internet.

I spoke with a member just yesterday who said they have run a successful box sales division in their business for years and now are thinking it’s time to shut it down. My question was; how do you know it was successful? What made you believe it was? Sure enough the answer was “while it didn’t make us money, we got our volume up where we wanted it.” Ok, then what about cash flow, inventory write-downs, warehouse costs, returns, warranty repairs? The logic just doesn’t work.

And it’s not just box sales. We have to look carefully this year at what really makes us money. I would go as far as to break it down by market, geographic, system type, product line, even by customer in order to know what is working and what’s not.

Profit is the primary goal. Growth comes after that. Maintaining employment levels follows both. Companies are finally starting to get the message that profitability is the key and that revenue numbers and employment levels follow that in order of importance.

Walking away from any sales opportunity is very tough. Nobody wants to pass it up, but if the sale brings no positive contribution to the bottom line, then we need to pass. I’ve spoken to many companies who actually help their customers (who are looking for best pricing) buy endpoint devices readily found on the internet. They have no exposure, no liability, no warranty concerns, but earn the installation and maintenance work. It’s a very hard decision to make, but again; no contribution, no sale.

Many integrators are stuck feeling like they are just “trading dollars” right now awaiting a break in the economic slump. Some are really struggling with weak backlog and wondering whether to diversify or stay focused on what they do best. Some are stuck as the undisputed technology leader in a marketplace or vertical market that is very soft.

I know it’s hard but when you are faced with a declining sales outlook, you’ve got to make changes to the operation and business plan. Don’t hesitate to reach out to me if you find yourself in that situation. Likewise, if you have a great success story on a winning strategy to share with others, please share. CW

We find ourselves on that day when we have the “last look” wondering what to do. Should we take a chance that the project will go well and we have opportunities for change orders and ongoing service, or do we walk away? Can we get relief pricing from the suppliers after-the-fact?

Here’s my advice on how to feel more confident with your decision. Stop bidding jobs based on what you hear from others (except me of course!) and build yourself a fully-burdened cost up pricing model. This model takes the guessing out of the picture and allows you to develop a more systematic pricing structure for your projects.

Now remember not all projects are the same. There are factors that go into the more complex jobs and for the most difficult working conditions. Payment terms become factors. Is your first instinct to apply a degree of difficulty to your pricing model based on the type of project before discounting? Can you quickly account for the unique requirements of that project like surety, additional insurance, safety meetings, storage and delivery challenges, prevailing wage, and so on?

Emotional pricing can be an ego thing, a fear of no growth, pride, or even a compassion for the employees who may not have work if the job slips away. I’ve actually seen the employment factor be the major factor of late. And I’m ok with that as long as you know what you’re doing. It’s the not knowing that gets our members into trouble. They discount margin from an unknown starting point.

We’re getting much better at this but the truth is, most of our members still don’t know what their true cost of doing business is as it relates to each project type they bid. With the harsh competitive environment that exists, it’s worth knowing. Many simply convince themselves that they will make up the discount they offered in better purchasing or more efficiency. Therefore, they’re transferring the burden for profitability to others.

We rationalize discounting to save peoples jobs. We convince ourselves we can buy the materials cheaper six months from now. Our gut tells us we can find ways to make up on the labor we already know is too low. That may be true, but to really know, you must build each project from the ground up knowing the true overhead burden, cost of sale, variable and fixed costs, etc. Too many of our members base this on instinct rather than the numbers and later wish they hadn’t. — CW

I recently participated in a technology webinar where a member was trying to leverage their position as a primary information resource, but it seemed as if they only managed to teach their customers how to do the technical work themselves. I agreed to be involved but spun the presentation to show why they needed a qualified systems integrator far more than they even imagined. To me this was a very odd strategy as their goal was to sell more parts by giving away their smarts. No offense, but does that really make sense for an integrator?

As you look back on this year and look towards next, be mindful of what things you currently give away in order to keep your customers happy. What does it mean to be engaged with each of your clients? What does that really get you and what does that really cost? Are you providing a service desk but not charging? How about training?

Examine your value proposition. Do your sales engineers extend so much free advice that they essentially design systems for free? Are you providing your clients with direct manufacturer links that have step-by-step video tutorials on installations? Do you disseminate white papers intended for authorized dealers?

You are probably thinking about using social media to be more engaged with clients. If so, will that lead to more business, or you providing more free information? Figure out the business purpose before you head in that direction. Use it to communicate your key messages, build your brand and sell services, but be careful that you don’t use it as an outlet for sharing free advice you should be charging for.

So the logic must be “If we don’t do it for them they will find someone else who will,” right? Maybe, but on the other hand most of your clients appreciate your expertise enough to pay for it, and most would expect to pay for it.

As you look toward 2012, I challenge you to focus on building up your managed services agreements with your clients. It will provide you with a competitive advantage for future business and allow you to be paid for your expertise in the meantime. If that’s not possible try using the block labor sales approach where your customers will get a significant discount for hours billed in advance in exchange for support services.

Don’t get confused between needing to be more connected, engaged or involved with your largest customers and giving away services you should be charging for. Learn from your lawyer how to charge for advice. That profession has mastered this concept. — CW

Fast forward to now and think about what I’ve said. Our members come to me concerned that they will lose the sole source provider status with their customers if systems migrate over to an enterprise level network. Most of our members don’t control the enterprise network like they did the independent cabling in a stand-alone system. And, if various brands of products can interoperate with one another, will their competitive edge be lost? Will the CIO in a company value the relationship with a systems integrator as much as the facility manger once did?

Do NSCA members have a real concern here? Sure they do. Is this the end of the preferred vendor status, the exclusive provider of the system, the loyal customer? Absolutely not. However, we have to come at this from a whole new perspective and at a much higher level that satisfies the needs of the CIO. We all need to sharpen our service-oriented business model and value-added sales strategy.

In reality you’ve never owned a customer – nor did you own the account based on the product you offered. You earned that business based on your expertise, your people, your level of service, and your response time and so on. It just made life a whole lot easier when you knew they would have to go through major expense to find a suitable replacement for what you do.

It’s still true and always will be – relationships and service drives customer loyalty. Now you have to earn your way on to the network, earn your way to managing the systems on that network, earn the right to help manage other applications and traffic on the network as you re-establish control of the account. You simply have to earn their trust in your company as a qualified and reliable network-savvy systems integrator if you want to play in that space. If you need help planning for this, we have the answers. — CW

The primary reason this month’s travel was so rewarding for me is the quality of people in our industry. I’ve said it a thousand times – our industry has great people who might move around some, but never seem to leave. I’m thankful for that as it makes what we do fun. Not only nice people, but smart and experienced in their particular niche.

What struck me as remarkable with the folks I spoke with was how grateful everyone was that they had a job, still getting some projects, a few new orders and have re-calibrated to the new normal. We’re starting to laugh again, telling more jokes and instead of layoffs and business failures. People for the most part feel that things are looking up.

This is and always has been a people business. A really great people business, where the most successful companies just seem to employ people with fun-loving personalities. I had the pleasure of being around hundreds of these folks. We may have toughened up a bit over the last couple of years – having to work twice as hard and for half as much, but the rewards are paying off, and we all believe in a very promising future of our industry.

The consensus of owners had a theme of “you take care of them, and they take care of you”. It seemed to be a universal message in my journey. When we do come out of this stagnant economic period I think the business owners will find a new level of loyalty from those who you kept their jobs.

Don’t ever underestimate how important your people are to your company’s success. And the networking we do, it’s crucial to developing new partnerships, building better relations with vendors, telling your story, sharing ideas and so forth. For those of you I saw this month, great to see you smiling again. And thanks for your kind words on my blogs and giving me hundreds of future topic ideas. CW

I believe that this current wave of bashing CEO’s and business executives is completely unfair. It seems to be led by people who have never known the pressure and stress of being responsible for payroll. Sure, some large corporations have abused CEO compensation and greed has led to many unethical practices, but basing public opinion and holding demonstrations on these few companies will only lead to further government intervention and regulations that will become a deterrent to entrepreneurship and innovation. Let alone create a bigger monster of more regulations for companies that always seem to find ways around them and still the small business owner is the one most affected by more regulations.

Instead of protesting over the few bad CEO’s, we should recognize and applaud the thousands who provide jobs for those unwilling to take the risks of ownership. We have veered off course from a time where successful business people were once admired and young people aspired to become one. You can’t blame business owners, especially small business owners for the condition of our nation’s economic condition.

Penalizing business owners by excessive taxation and discouraging them further with these tail wagging the dog labor laws, healthcare mandates, etc. will kill the entrepreneurial spirit if not corrected. If the majority of profits go towards taxes, employment-based regulations, or penalties – then our government has done far more harm than good.

I ask our members if they knew then what they know today, would they still risk everything to start a new business? One that involved employees? It’s becoming a very strong no. The tipping point, taxing profits.

How else can the majority of people build wealth? I may be wrong, but wealth is what provides the tax base (income, real estate, gains, etc.) that supports government services and agencies. Spreading the wealth created by the business owner isn’t fair.

Trying to contain how much wealth a person has seems totally absurd to me… And how do we get back on track when the voting population is growing up in a world of entitlement and wanting others to take care of them? I suggest that rather than encouraging our youth to be part of a rally against CEO’s, we encourage them to become well-educated on economic policy that encourages more incentives for them to one day be a business owner. Just my opinion… — CW

This is often a result of the funding entity, yet other times it seems like a game. I’ve spoken to several members who are starting to keep track of the time spent by project managers and office staff in just getting requisitions done, chasing payments, filling out forms, etc. I know it’s grown dramatically and has become a major profit killer and especially troubling when the margins are lean to begin with. 

Are liens the answer? I hope not, although I know some members who file a lien the same day they sign their contract in order to be in line, just in case. I think more importantly we have to focus on knowing the game, understanding who we are contracting with and reading carefully the front end of the spec book.

Ok, so what’s the correlation between the spec book and payment terms? I have seen other contractors expedite payments by knowing their rights as it relates to stored equipment, their schedule of values, exact dates for submitting requisitions, etc. I know members who send there A/R person out to meet in person the payables staff at the GC before the first billing. You see that’s how the game works. When the CM or GC knows the game better than you do, they keep your money longer, but you can level that playing field.

A few quick suggestions;

• First, never fall into the trap of showing your invoice pricing upon request for payment. Instead, submit a schedule of values with your itemized marked up selling price. Read the contracts carefully before submitting a price.
• Second, don’t get caught believing a payables clerk when they suggest late requisitions will be allowed… No they won’t. Keep your house in order and it will eliminate many of the excuses why you can’t be paid this month. 
• Third, remember our type of business is very equipment oriented work back at the shop vs. the more obvious job site labor oriented trades. This requires you to have excellent documentation, time sheets maybe even video clips showing your work in progress. They don’t believe you because they don’t see you at the front end of the job.    

My advice to our integrator members is to learn the game on the contract side. It’s not fair to your vendors to hold up their money when you’re not paid, but that’s the current remedy. When you sign a dealer agreement, then you should honor the payment terms of the manufacturer. Likewise, when someone buys from you, they need to respect and honor your terms and conditions. No one wants to be the bank… including some banks. — CW

Challenges can come in many forms; too much work, not enough, natural disasters, business interruptions, loss of a key employee, vendor disputes, lost customers and so on. About every new construction project will throw some challenges your way and dealing with certain customers has its challenges.

A strong leader develops strong managers. Strong managers demonstrate every day (whether they know it or not) to their direct reports how to cope with situations. As a result your entire company will form a culture of behavior based upon your style.

I spoke with a member recently who said he would never share any bad news with his employees and the second he does they become instantly paralyzed by fear of losing their job. This behavior causes hours of time spent worrying and scanning the internet for job openings. His belief is that the owner should be the only person to carry the burden of bad news.

In my experience the best way to tell what type of person you have in your staff is to call them in specifically to have them solve a difficult situation facing the company. The good ones relish the opportunity to solve the problem, rise to the challenge, find ways to attack the issue and make the bad situation better. Your best employees will absolutely take on a challenge.

On the other hand many employees will quickly run. They want nothing to do with anything that would jeopardize their job or associate them with failure. It might be your best technician who simply sees that fixing a problem only creates more work for them. These employees find blame in others, never themselves. These are the people you need to identify quickly and hope they move on quickly to your competition.

Run through a list of your employees and think of which ones will help solve the problem, or either cover it up or run from it. My guess is you know exactly who they are. Keep that in mind as you evaluate your team and position it for the future. It’s as important as nearly every project has some sort of challenge to deal with. – CW

Who in your company decides what product line to lead with? Does an overcrowded channel (too many competitors with the same brand) ever dictate your product selection? Does knowing that a manufacturer will sell their products to your biggest competitor sway your buying decision?

Channel conflict and channel management seem to be at the forefront of systems integrator minds. On one hand the integrator wants to have top brand names in their product mix. On the other hand if their marketplace is saturated by a specific brand, how can they make money?

Some of our integrator members have noticed a shift away from product loyalty. In fact, many believe the days of exclusivity are pretty much over. Some say that the independent reps in their territory were very good at managing channel conflict, but now the manufactures are avoiding exclusivity. Competitive pressures and lofty sales goals have forced sales reps to open up the line to all.

When I first spotted the trend on how much product is moving through distribution, I too wondered if the days of brand loyalty are over. I’m now more of the mind where the biggest factor that determines brand loyalty is the investment it takes — from both parties — in providing support and specific training requirements. After getting to know more about the way the stocking distributors operate, I see that they have no real desire to go in between you and the manufacturer. Many even want to strengthen that bond.

How do you rationalize loyalty with particular manufacturers? Do you prefer to carry top lines even if non-exclusive? Or, does it even matter as long as the products are a part of a fully-integrated solution? Again, who in your company decides what brand you lead with?

I recently visited a company where the CEO couldn’t answer this question. Upon seeking clarity, he was shocked to find out that spiffs and incentive trips led to many of the decisions (by the way that changed the same day). He was surprised that the relationships he spent years to build were being eroded, not because of poor sales, but because of self-serving substitutions.

In this case, brand loyalty was being created on multiple levels within the same organization. The engineering and sales team building relations with distributors and field sales reps, the owner building relationships based on his longstanding relationships, contacts and knowledge of the local competitive landscape. Sadly the owner didn’t communicate to his team that they had quotas to meet, the payment terms he had from preferred vendors, etc.

Have you ever sat down and wrote a purchasing policy for your company? If so, you will find yourself writing one conflicting statement after the other. “It depends upon the situation” is most often what people tell me. I don’t buy that. It should always depend upon the overall health of the business, reputation management and the satisfaction of your customer. I encourage you to explain your philosophy on brand loyalty to your staff and then monitor the situation on a regular basis. — CW