A colleague asked this question recently: Non disclosure agreements, half hinted at products, having nothing but hype to report at networking events; Secrecy can be a real hassle sometimes! So in this day and age of open sourcing, blogging and social networking, is it really necessary? Have you seen someone fail because of too much disclosure or secrecy?
In my experience, only a few senior execs and business owners actively evaluate this question – so its interesting that you asked. I can give some specifics for Internet business ventures, which we can be applied to other information technology intensive industries too, like life sciences and financial services.
If you break down your business into the 3 core parts:
- SUPPLY (talent sourcing, constituent software products)
- PRODUCTION (training techniques, development methods, etc)
- DEMAND (website, user management, etc)
From a business perspective, share whatever is required by DEMAND side (through blogs, ads, etc), but most clients are not interested in your SUPPLY and PRODUCTION details, and you should not share it.
So if someone asks, please check their motive. NDAs may or may not help. For a start-up, the only people who need to know all details are the investors.
But in many start-ups and even established companies, we find that the PRODUCTION or SUPPLY details are revealed, knowingly or unknowingly, in some document or interview, and the Competitors are happy to use it to sell against your company and you won’t know about it.
So, you should prepare a list of information items coming out from your business, and write who the required audience should be, and share that with the leaders of your ventures. Let’s treat information as an asset right from the start, and put the right flows and controls.
We often talk about exist strategy when talking about investments, be it stocks or new ventures. For example, before a person invests in your business, he/she will expect to see an exit strategy.
Different investors have different needs:Angel investors, who often come from close networks, are patient and willing to make long-term investment, but they want to see how they’re going to take return on their investment. Time-frames of 3-4 years are acceptable in most cases. The sale of shares to a larger investor is a common exit strategy; the sale or merger of the company is also a common exit strategy (especially preferred by debt-investors) – both options work, but both need you to constantly plan for their exit, because that’s important requirement for them.
The more viable your exit strategy, the more it attracts investors!
The interesting this is this – in many cases, the angel investors actually increase their stake when you are performing well, and give you more funding, without you having to do more road shows. So you get the money you want, from the people who have trust in you already, and without consuming your time to convince new investors.
How do you use this in regular business, as a manager of a well established business?
You will see it straight, if for a second, you think of your clients as your investors. They are putting in money too, but for short term returns and under service contracts – so it’s like a debt-investor, but without all the legal force that a financial debt brings with it.
So, if you explain to your clients and prospects that in case things were not going as well as planned for some reason, how they can leave your service with minimal damage. You can offer compensatory service or offer money back guarantees in some cases (in new venture terms – this is equivalent to reduced or zero premium for newer funding if you did not meet performance KPIs, which is very common).
For example, you can consider the following options (all of which I have seen implemented):
1. If your service fails to deliver up to a certain level (typically defined in SLAs in B2B contracts), do you have any form of refund policy to the client? (either money or effort). If yes, how much risk are you sharing? If you tell me 10%, you might as well not offer it! It looks humorous, but most companies will give you 99 reasons why they can’t do something more for risk-reward sharing. The reasons includes: Oh, we have promised x% QoQ growth to the market, how can we absorb such a thing? Our accounting system can’t allow it. Our sales incentive schemes have to be redesigned. Okay, if you don’t, somebody else will.
2. As a client, the extent to which your vendor is willing to share risk-rewards is a great indicator of their flexibility and aggressiveness. And these traits are not limited to small companies. Some specific business units in jumbo companies like ABB, Amazon, GE, Fidelity Investments, Wells Fargo Bank, etc are equally flexible, and have relatively attractive options if their service failed to deliver on target – and use that to win deals.
So think about how you can use this insight – the more viable your exit strategy, the more it attracts customers.
(The thought for this blo post came out of a few client discussions in the recent weeks, all of which seemed to revolve around how to get new clients, and reduce their attrition)
