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Talking Technology By Steve Burns, Captial News contributor Life as a CEO of a technology company is nothing short of frightening. Sometimes I wonder how technology CEOs do it. It's a case of innovation versus cash flow. Technology companies thrive on innovation—the unique characteristics of their product that differentiates them from their competitors. But how does a CEO balance the need for innovation and the need to generate sufficient cash flow to fund their company? While investors may have deep pockets, many CEOs do not have this privilege. The solution is what I call the ICFP—the innovation cash flow plan. This is the plan that clearly outlines what innovations the company is seeking, are prioritized and supported by market research that clearly demonstrates the market need. How much innovation is required before the customer will purchase the solution from you? What innovations can be funded from cash flow generated from existing customers? Do we have credible market research that will help us prioritize which innovation to pursue? What innovations are really customized solutions that existing customers could pay for as part of a separate project? The discipline required to put an ICFP together applies to new products and the ongoing process of innovation at a technology company. Having an ICFP helps the CEO build the business case required to evaluate an investment in a particular innovation. Then there's optimism versus reality It is a classical dilemma. How does a CEO balance the need to be a leader that is optimistic about the future with reality of how their business is actually performing? For some CEOs, optimism about the future becomes a blinding weakness—they are continually over-optimistic about the future and, as a result, they fail to make critical decisions quickly enough. Team members stop believing the CEO's overly optimistic messages and respect for the CEO is lost. The opposite is also true. When a CEO loses their zeal for the business, they can become complacent and rather pessimistic about the outlook for the business. I often see this happen shortly after a very difficult decision has been made. This has huge implications for the team as the tone of the company is set by the CEO. The result is that other leaders in the company also become disenchanted with the business, which can be difficult to recover from. However, why do these two extremes exist? The reason is that being the CEO of a technology company can be a very emotional roll coaster ride. One minute your innovation project is on track and the next you are back to the drawing board. One minute you are excited about a sale that is about to close and the next the deal has been lost to a competitor. One minute you have an investor ready to invest in your company and the next he or she is having serious reservations. One minute you are about to move a critical new team member across Canada and the next the employee's spouse spouse is having second thoughts about taking the position. Last month there was enough cash in the bank and the next month an unexpected expense or a delayed receivable results in a cash flow crisis. Dealing with the ups and downs of the marketplace, cash flow, team members, investors, and suppliers is nothing short of draining. Pursuing the right market opportunities, in the right way and in the right timeframe is one of the most effective ways for a CEO to avoid the cash flow extremes and help prevent the emotional roller coaster ride. While this may be easier said than done, I suggest that the ICFP helps you to prioritize and pursue the right opportunities with more than gut feel. An ICFP that is founded on solid market research, helps to ensure that your investors continue to back during the tough times. Your plan must be more than gut-feel to be credible. So if you are a technology CEO, take the time to build your Innovation Cash Flow Plan. It will help you stay sane. Steve Burns, is t president and CEO of Burns Innovation Group Inc. and Steve Burns Inc. chartered accountant which provide consulting and accounting services to entrepreneurs. You can reach Steve at 763-4716. |
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