Success Stories & Testimonials
Success Stories
The following are success stories of individuals and organisations that have used the methodology. Names and faces have been changed to protect the innocent (and not so innocent). Here are their stories…
New market strategy
Chris is an SVP of Marketing for a beverage company. The company embarked on an aggressive entry into the Chinese market with a specialty drink. Its major competitor is strong in this particular market. Chris is working on strategies to increase his company’s product appeal with an objective to capture additional market share. When working with his decision definition using the CSDM methodology, Chris realises that he has been under a spell of a simple assumption. He assumed that the rival company would focus on this segment with more products and would be as strong as it had always been. The latest developments, however, were pointing to a different story. The competitor had shifted its main focus to a different market segment. It was working on an acquisition in that segment and had introduced at least three new products there. Chris realised that his assumption about the rival’s current focus and strength in his company’s market segment was wrong. As a result, with this assumption, he was leading his company in the wrong direction. He was focusing on incremental measures such as increasing existing product appeal, rather than creating strategies for capturing the market lead while the competitor was distracted. Chris made the call to shift their focus and within less than 18 months, captured the lead in this segment.
Vendor selection
Vyomesh is the new CEO of a company that provides power to several states in India. His organisation is part of a very large utility company with several overseas projects as well. A large contract ($50M) is currently under negotiation. This contract is for the maintenance of the power reactor system installed at the plants under his management. The current maintenance vendor was the original developer and provider of the installed system. Vyomesh’s company has never changed vendors. As is expected in this situation, the current vendor’s price is very high. “We are being held ransom on the price,” Vyomesh laments. The current vendor is known never to change prices under customer pressure. A competing vendor has approached Vyomesh. They are a reputable company but with no history of working with Vyomesh’s company. The risk of switching vendors is high – if something unexpected were to happen, the downtime could cost Vyomesh’s company $300,000 per day! It has been decided to take the decision to the board of directors. The Vice Chairman of the parent company usually runs the meeting. After some discussion, the Vice Chairman asks for each person’s opinion; Vyomesh being the last person. The decision so far is unanimous to award the contract to the current vendor at their proposed price. It was now Vyomesh’s turn. With Decision Map in hand, he says, “I strongly believe that the current vendor will cave in on the price if we pressure them. You should personally call them and tell them that we are awarding the contract to the other vendor.” The Vice Chairman calls the current vendor’s CEO with all the officers watching him. At the end of the five-minute conversation, the current vendor’s CEO proposes a package reduced by $10M. What happened? While scoping out his decision on the Decision Map, he put in “current vendor does not negotiate” under the assumption column. He then placed several calls to industry experts who mention that the CEO was due to retire soon and Vyomesh concluded that he would not want to lose a major customer before his retirement. So, by reframing, Vyomesh was able to save his company $10M on the contract.
Selecting financing for a start-up
Bruce is an experienced CEO. This company is his third start-up. Less than a year ago, Bruce sold his previous company and was fortunate to receive significant multiples on his investment of time, money and energy over the past seven years. For this new venture, Bruce has teamed up with two people who have demonstrated a “proof of concept” for a new product. He became excited about growing the company from this base through franchising. He is now faced with a financing decision for this venture. He has several good options but none address his and his partners’ needs fully:
- Option 1: Bootstrap the company utilising his own and his partners’ money
- Option 2: Accept investment from a private equity fund. The problem with this option is that the money is offered at a lower valuation that he would have liked
- Option 3: Continue to search for investors with the right valuation
- Option 4: Find a strategic partner. Bruce has started talking to several potential partners and sees a growing interest
Bruce listed several concerns related to his decision converting them to constraints:
Concern: |
Constraint: |
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|---|---|---|---|---|
| 1. | He and his team wanted to open the first facility in three months. |
1. | Open the facility in three months. |
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| 2. | Even though he was unaware of the direct competition, he wanted to proceed quickly and benefit from being first to market and the associated publicity wave. |
2. | Get benefits of a publicity wave. |
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| 3. | He was concerned about losing momentum. If the founders continued to look for money and not sign the lease for the new facility, they might lose the space that was offered at a good rate. They might lose vendors who were lined up for the grand opening of the facility, not to mention losing the team's excited drive to get the company going. |
3. | Keep the momentum going. |
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| 4. | The aspect of valuing the business at the right level was especially important to Bruce. |
4. | Ensure fair valuation. |
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| 5. | His partner was more concerned about having enough money to make the venture a success and was scared of running out of money before the concept could be demonstrated. |
5. | Ensure having enough money. |
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Part of his Decision Map looks like this:
(Click on picture to enlarge)
The CSDM methodology helps Bruce identify the most important constraints as well as the two less important but crucial ones. Different perspectives on the decision that are created suggest that the second option is the most viable option. Moreover, he sees a way to negotiate the deal such that additional money is available to the company later and at a higher valuation. And that is what he did with great success. He signed the lease, got the facility up in the three months, rolled on the publicity wave and got the momentum going. Such was the effect of the CSDM for Bruce!
Evaluating merger proposals
Stanley runs a $200M public software company (RC). In the last six months, two competitors have approached the company with acquisition proposals. This process is coming to a head, with two offers on the table; both are similar in value and are considered to be “very good” by industry standards. One offer is from Mercury – an all-stock offer from a smaller, less profitable competitor, a public company as well, but whose capitalisation at this point is 1.7 times larger than RC’s. Mercury’s stock increased in price over the last six months. Stanley believes that the increase is due to the fact that Mercury has not done well in the past three years, but just recently the company became profitable and has remained profitable over the last few quarters. The second offer is from Pluto, an $800M company, privately owned by a group of financial people who deal with distressed real estate with no knowledge of the industry. They have acquired five companies in the last 18 months.
Staying the course is a very viable option. RC has also completed two acquisitions and has the stock power and the cash to acquire more companies. RC is a solid, profitable company with a good standing in the industry. Stanley is at a decision point. What to do – stay the course or take one of those offers?
One of the difficulties of course is comparing a cash offer to a stock offer from a shareholder’s point of view; complicated by the fact that the offers come from companies of different calibre and characteristics. A stock offer might have a higher overall value, depending on how the market develops in the future. The cash offer provides immediate and rather good returns to the shareholders. The second difficulty is a disagreement on the board. The board consists of wealthy individuals who have had a long tenure on this board. Many have gifted their stock in this company to their children and grandchildren. At the moment, the board wants to stay the course, having seen the strength of the management team and the successes with prior acquisitions.
In Stanley’s mind, however, the main consideration is shifts in the industry – the market is consolidating. He believes that players face a rocky road over the next two years. In addition, Microsoft has announced its intention to enter this specific market, which will slow customers’ decision to buy from other vendors. Stanley’s decision map with key uncertainties for every option is shown here:
(Click on picture to enlarge)
Contemplating the situation in the Clarity State and creating scenes associated with potential scenarios, Stanley realises that his internal reaction of not taking the stock option is negative. His reaction to Option 3, staying the course, was even worse. Going through the techniques of CSDM, the decision was clear and certain for him: take the cash offer and recommend that to the board. In the end, he rationalised to the board that they might not be able to cash out at this level that is being offered, and they should accept that offer. Also, cash is KING! The board agrees to this proposal and completes the deal in Dec 2006, just months before the subprime crisis wipes out millions in market capitalisation!