How Do You Evaluate Strategic Options?

A company has developed and shipped equipment that puts it into a new market

. They can continue to pursue this direction or make a significant shift that will open up a larger market opportunity. The CEO seeks the advice on which direction to pursue, and the most important considerations to this decision. What are the best ways to position this technology and company for growth?

Advice from a group of CEOs:

Before you answer this question, there are a number of points that you need to clarify. What is the magnitude of difference between the two opportunities? How much of a shift in technology is required to make the jump to the larger segment? How much of the expertise to make this shift do you have in-house, and how much must you bring in, acquire or develop through partnerships? On the personal level, are you a starter or a finisher? What is your personal time window - that is will you be staying with this business long-term or do you want to be doing something else in 3-5 years? What is your most likely exit strategy and how will each opportunity impact it?

Are you being realistic in your ability to meet development timelines? If you don't have deep expertise in the area that you want to develop, the answer is most likely yes. If you do have deep expertise in this area you can often beat your initial estimates. The technology shift may include both areas in which you have expertise and areas where you must develop expertise. In this case, the risk is that you will underestimate the time required to develop both the prototype and to turn the prototype into production quality technology.

If your ultimate objective is to sell the company, be aware that selling any company can be tricky, and you may not be able to sell the company for the value that you need to support yourself after the sale. Study other companies in your geography and market, and determine both the price that they received for their companies and how they positioned their companies for sale. Contact the CEO or owner who sold the company, and ask their advice. Do be careful, however, to get assurances of confidentiality before you share your own plans.

As an alternative to selling, consider hiring a general manager to run the company. This can free you to concentrate on your passion - developing new technological capabilities. It also increases the value of the company if you have an experienced and competent GM and decide to sell at a future date. Other CEOs have taken this step with great success. They are happier, their companies are doing better, and they are able to focus on their passion and long-term company growth. It will be very important to profile the personality of the GM. You will want to look for someone who is detail oriented, yet personable and able to manage others. You may want to get outside assistance to profile the position and select this individual.

by: Sandy McMahon

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