Category Archives: Sales strategy

Risk Committees: An Antidote for Fraud

I have a writing problem that’s giving me fits. I’m knee-deep into fraud – that is, describing how to prevent it. Unfortunately, the subject doesn’t involve using fun, energetic words like transformative change and market domination.

Instead, I must become jazzed about ideas that are antithetical in our caffeinated, exponential growth-obsessed business culture: constancy and stability. I must double down on the Zen we supposedly derive from mom-and-apple pie values like honesty, transparency, and trustworthiness. What – no market disruption? I’d rather watch reruns of regular-season baseball games.

Please don’t take this as whining. I’m game for a new expository challenge. Fraud prevention . . . let’s see . . . I know! What’s the ROI of thwarting a nascent scam before it obliterates a company, its leaders, or both? What’s the value of slaying a scandal before it causes customers injury, death, or financial ruin? Now this gets me going! I can write about corporate managers and auditors as champions, armed with sharp ears and ready eyes. Finely-tuned algorithms able to detect the subtlest transactional anomalies. Deceit – headed off at the pass! Energy, baby!

Lead gen, content creation, and predictive analytics might nudge the revenue needle northward, but they won’t save a company from cataclysmic self-destruction. That’s a primary purpose of fraud prevention. There are cases to prove it. Oh, have I got your attention now?

Expect wretched outcomes when these are present in a company:

1. Ethical hypocrisy: senior managers model poor ethical behavior; e.g. The “Code of Conduct” or “Values Statement” – if they exist – are regularly violated or ignored by staff

2. Lame internal governance, oversight, and audit controls: revenue-generation processes that are disconnected from other departments; prevalent attitude that ‘what happens in Sales, stays in Sales’

3. Weak channels for staff to report unethical or illegal activity: no documentation provided to sales force regarding how to report problems; no formal process for mediation

4. Penalties for whistleblowing: sales personnel describe being harassed or intimidated after reporting issues to supervisors, or being castigated as ‘not a team player’

5. Dissonant strategic and tactical goals: corporate strategy champions growing long-term value of customers, while tactical goals are centered on achieving high monthly revenue targets

6. Sales incentives and compensation substantially skewed toward revenue attainment: low base salary, and commissions based exclusively on percentage of sales

7. Sales culture that glorifies achieving objectives unrelated to customer success: prominent recognition for quantity of new customer accounts opened, or number of appointments held

8. Unrealistic or supremely difficult sales performance goals, accompanied by stringent penalties for non-achievement: termination of employment for underachieving “stretch” targets

9. Arrogance: believing “fraud could never happen here . . .”; accepting the delusion that the company hires only “honest” sales candidates and managers

10. Lackadaisical or perfunctory mediation and redress for customer complaints: unabated customer difficulties with selling tactics and allegations of product misrepresentations

Preventing systemic bad behavior begins with the company’s board, whose members must recognize that executing strategy inevitably carries the possibility of doing harm to customers, employees, suppliers, and shareholders. “. . . the full board is ultimately responsible for taking ownership of risk oversight and making sure strategic risks to the business are regularly discussed,” writes Maureen Bujno, Managing Director for Deloitte’s Center for Board Effectiveness.

Soul-searching questions for boards to answer:

1. How might the activities of this company cause harm to its stakeholders?

2. Could our executive and sales pay plans / incentives create conditions that compromise or damage trust or safety for customers, employees, vendors, or contractors?

3. How confident are we that the senior management of this company will become aware of unethical or illegal activity when it occurs?

4. Does this company have adequate mechanisms to communicate and enforce its legal and ethical standards?

5. Has this company taken sufficient steps to reduce the possibility that its stakeholders will be harmed?

When it comes to preventing fraud and ethical abuses, boards should avoid becoming enmeshed in tactical details and operating minutia. One prominent exception: board members must be open to holding direct conversations with employees who want to report fraud. The risks to a company are simply too great for board members not to know when risky behavior or activity takes place. And as the Wells Fargo case has demonstrated, there is no certainty that the established channels for reporting problems will work, or that employees will feel safe using them.

Board-sanctioned risk committees as an elixir. Day-to-day operating risks can be addressed by a cross-departmental risk committee. Openness and transparency are useful antidotes for fraud risk, and companies can develop these capabilities in-house through a team dedicated to monitoring, identifying, and reporting conditions that might be unethical and illegal. The good news: establishing a risk committee doesn’t demand staffing it with specialized talent. And now the bad: risk committees succeed only when boards care about risk prevention, and management responses to the issues the committee exposes are both timely and adequately considered.

Some recommendations for getting started:

Step 1: If the name Risk Committee doesn’t sound catchy, or fails to entice people to join, give the committee a different name.

Step 2: Decide how to recruit and appoint members. Sales and Marketing must be represented, but make sure other departments are, too.

Step 3: Select a capable leader – or ensure that one can be chosen.

Step 4: Write a committee charter to establish the purpose, objectives, goals, and authority. For example, “The purpose of the Committee is to provide oversight to ensure that marketing and sales strategies, tactics, policies, and procedures do not conflict with laws and regulations, and that they comply with the ethical guidelines of the company. The committee is entrusted with identifying and communicating all matters of concern to senior management, and when necessary, to members of the corporate board.”

Step 5: Establish the scope of what the committee will be able to do, examine, review, and report, along with expectations and guidelines for preserving confidentiality.

Step 6: Determine how often the committee will meet, the role and obligations for committee members, and the duration they will be asked to serve.

Step 7: Create a template for how the Committee’s findings will be communicated. At a minimum, that includes how to document or record incidents, determining who should be told, describing how they should be told, and guidelines for assessing and reporting the magnitude of the threat.

Step 8: Plan a kick-off event, and make sure senior managers are involved.

Step 9: Document the Committee’s activities and the actions taken in response to situations it has identified and shared with senior management.

What signals should Risk Committee members listen for? What conditions should trigger concern? For starters, any artifacts of the ten fraud-risk elements I described. In addition, whenever opacity, process silos, limited access to customer-facing personnel, reluctance to answer questions or provide information about customer complaints or regulatory compliance occur, risk indicator lights glow red. These situations should be considered for committee oversight.

Boards must recognize that companies face new risks when executives assume fraud and abuse problems can’t be controlled, when they claim that mitigation is too expensive, or when they dismiss oversight as a distraction for the business.

Foiled business scams rarely make it into news feeds. The activities that lead to their demise hardly seem remarkable. Often, an employee – or employees – shares information with a manager or board member who cares enough to act. Then, established prevention mechanisms kick in, and perform as designed. Routine – as it should be. No matter the size, industry, or leadership, an organization is never immune from causing harm through unethical behavior, misguided strategy, and sketchy tactics. Risk committees perform a vital role that no company can afford to overlook: oversight that reduces the probability a company will cause financial and physical harm through systemic bad behavior.

Wells Fargo’s Restitution Must Include Its Fired Sales Employees

Today, there’s a bold headline featured in full-page ads in newspapers across the US. In case you missed it, it’s printed in Wells Fargo red: “Moving forward to make things right.” Contrition, superimposed on a beautiful Western backdrop. In the foreground, a team of six strong horses in full stride pulling a stagecoach. No ethical feces anywhere to be found. All have been skillfully Photoshopped out of the picture. Great job!

“We are deeply committed to serving you and your financial needs . . .” the ad says.

OK – go on . . .

“We have provided full refunds to customers we have already identified and we’re broadening our scope of work to find customers we may have missed. If we have any doubt about whether one of your accounts was authorized, and any fees were incurred on that account, we will contact you and refund fees.”

As an IT professional, reading this makes me proud. Darn proud! – because I know that algorithms, flowcharts, decision boxes, and lines of code will rectify the filthy mess from human greed and poor managerial judgement. Geeks win!

But conspicuously missing from this humble outreach is any mention of the 5,300 or so employees who were fired because they “didn’t honor the bank’s values,” as Wells Fargo’s former CEO John Stumpf, phrased it. That’s wrong, because they, too, were victims.

In many instances, the bank hired young people just beginning their careers. Then, they manipulated their behavior through the Wells Fargo sales compensation plan – a tactic that included a sinister triad of low base pay, aggressive selling goals, and a menacing punitive cudgel for those who failed to “perform to expectation.”

Last week, NPR’s Planet Money podcast with Chris Arnold and Robert Smith made this agony visceral in their interview with Ashley, a former Wells Fargo employee who did not wish to reveal her last name.

When Ashley didn’t meet her quota, she recounted that two managers would show up at her desk. “They said ‘come with us.’ So I walked with them, followed the two of them through the large lobby, you know, past all my colleagues, whatnot – you know, it’s like being called into the principal’s office – sit down at the large conference table, no windows in this room. They shut the door, locked the door and put me on formal warning and say, ‘here’s your formal warning. You have to sign this. If you don’t meet your solutions, you will be fired, and it’s going to be on your permanent record.’ I mean, it was real, like, you were stuck. And it was the feeling that no other employer is going to want you because we will ruin you . . . I got sick to my stomach, and I threw up under my desk. Like, it really made me physically sick.”

For this, Ashley made about $35,000 per year working in a branch located in Wells Fargo’s corporate headquarters building in San Francisco where she regularly saw then-CEO John Stumpf. She became disenchanted with the ethical compromises her employer demanded of her. Most poignant was the price she continued to pay long after she was fired, as this excerpt describes:

ARNOLD: As far as Ashley, she started to refuse to meet her quota. She was just saying, look, I can’t ethically do this. She was calling the Wells Fargo ethics line trying to explain this, but eventually Wells Fargo fired her.

SMITH: Ashley tried to get another job in banking, but she found that she never made it very far past the initial interviews. She suspected that Wells Fargo had put some sort of black mark on her record somewhere. And it turns out that is exactly the case. Wells Fargo wasn’t joking around when they said they would make it hard for her to find work again.

ARNOLD: No. Wells Fargo wrote her up on what’s called a U5 document. It’s like a report card for bankers basically. We tracked it down, and we asked Ashley to read what it said.

ASHLEY: Failure to perform job duties.

SMITH: Any bank – any bank that Ashley applies to will see this line, failed to do job duties.

ARNOLD: The form does not mention that those job duties were the sales goals that everyone we spoke to said were unrealistic and that are at the center of a series of ongoing investigations at the state and federal level.

SMITH: It just says failed to do job duties. It was the first time Ashley had seen it in print.

ASHLEY: It’s like having a black cloud that’s kind of looming behind you. And I’m always trying to get in front of the cloud, out of the cloud, into the sunshine, but it’s always there.

How many Ashley’s are there? I’m estimating around 5,300, which is the number of employees Wells Fargo said it fired over several years for not succumbing to the bank’s seedy values. In the coming weeks, I expect we’ll hear from many of them. What restitution are they entitled to for their wrecked careers, lost wages, financial stresses, marriage difficulties, and broken dreams?

Yesterday, John Stumpf resigned his position as CEO in shame, after relinquishing millions of dollars in bonus, and having millions more “clawed back” by the board. But he still leaves the company a very wealthy man who will be comfortable in his long retirement. His grandchildren are all but ensured of attending college and graduating debt free. Future generations of Stumpf’s will live in decent homes in good neighborhoods. Health emergencies won’t send them into bankruptcy. Sadly, even that modest future eludes the families of many of Wells Fargo’s wrongfully-terminated employees. That includes those who stood by their convictions, and refused to accede to management’s deviant will. No good deed goes unpunished.

When it comes to restoring customer trust, algorithms and adjustments in credit scoring will patch management’s wrongs. Bogus credit card accounts will be discovered and closed. Fees will be refunded, making customers feel better. People will move on, and loan money will flow once again. But restoring what was ruthlessly taken from Wells Fargo’s employee victims will be much harder to accomplish.

Cross-selling Is Not Evil!

You can’t read or hear anything about Wells Fargo without cross-selling popping up.

“At Wells Fargo, apparently, the solution in recent years was aggressive ‘cross selling’ of its existing customers – that is, urging them to open credit card accounts to go with their checking accounts, and so on, in order to generate more fees,” The Washington Post said in a September 22d editorial, Accountability at Wells Fargo.

OK. Now, tell us what Wells Fargo did wrong.

That’s a longer sentence. Here it is: “At Wells Fargo, apparently, the solution in recent years was to reward senior management with enormous bonuses tied to stock price appreciation regardless of the strategic and ethical risks, allowing them to set excessively high performance targets for low-paid sales staff, align pay incentives with sales goals unrelated to customer satisfaction, crush internal dissent, and emasculate internal audit controls.” Yep – That pretty much sums it up!

But that’s complicated, and it doesn’t sell newspapers, or bring eyeballs to a webpage. So cross-selling stays in lead sentences and headlines, carrying disdain that will now be hard to shake. If I were unfamiliar with business development, I might mistakenly think of cross-selling as a deviant or manipulative behavior, like getting the prospect to say ‘yes’ three times, or the reviled assumptive close.

That’s unfair. Disclosure: I’m a cross-seller, and have been for many years. Cross-selling is “the action or practice of selling an additional product or service to a customer,” according to Wikipedia. As a software salesperson, I cross-sold hardware, software, services and third-party products. As an account executive with an auto-ID manufacturer, I cross-sold products from different divisions in my company. And I cross-sold services that my VAR’s (Value-added Resellers) provide. No one was harmed. Laws were not broken. In fact, my customers loved the convenience, and the revenue was credited to my quota. My W-2 and 401K became flush with dinero. Life is good!

Cross-selling offers substantial benefits for vendors, especially for large, diversified companies with multiple-divisions calling on the same buyers or decision makers. With cross-selling, they can reduce overhead and redundant systems. Buyers gain efficiencies, too. With cross-selling, they can work with account teams that have a “big-picture” view, and don’t need to schedule multiple meetings with reps from uncoordinated business units within the same company. What makes Wells Fargo’s actions reprehensible wasn’t that they engaged in cross-selling, it was how they did it.

Expect more cross-selling, not less. When customers implement projects and systems, they buy many interdependent technologies and services. Some vendors provide end-to-end solutions, but their complexities mean that few salespeople can possess all the required knowledge. They must collaborate internally and externally, and for that reason, cross-selling makes sense. So does paying salespeople for engaging in it – when customers benefit. That’s touchy, so I’ll widen the strike-zone: as long as customers are not harmed.

The right question to ask is not, “how do we restrict cross-selling,” or even “how do we prevent cross-selling from hurting customers?” It’s “how do we identify and mitigate situations when management has the opportunity to gain substantial compensation, but might unfairly harm employees and customers in order to obtain it?” Put another way, “when management has access to a cash cookie jar, how do we prevent them from screwing everyone over when they’re stuffing their hands into it?” Boards – are you listening?

One of the rules regulators are now considering is a “requirement for the biggest firms to claw back bonuses from employees engaged in misconduct that results in significant financial or reputational harm or any fraud. Those proposed rules would require banks to take back pay for wrongdoing for at least seven years after the executive receives the payment,” Yuka Hauashi and Christina Rexrode wrote in The Wall Street Journal on September 20th (Hearing to Amplify Ruckus Over Pay). It’s a good rule that makes sense not only for financial services, but for any industry.

A failsafe regulation would be peachy, but I’ll settle for reducing the risk that no more John Stumpfs (Wells Fargo’s CEO) will be allowed at the controls of a major company. As Holman W. Jenkins Jr. wrote in his column, Wells Fargo’s Incentives Go Awry, “All companies operate on incentives and systems that are not perfect. Comcast means for its ‘retention specialists’ to win back irate customers, not bully them in ways that end up on YouTube. Yet it happens.”

Consumers won’t be protected through more scrutiny over cross-selling, or from curtailing it, but we can make things better by getting rid of some damaging practices:

1. Committing to lopsided bonus structures that enrich individuals, not the company.

2. Providing low wages for wages for salespeople, and making subsistence income contingent on achieving “stretch” goals, or on meeting performance metrics that are extraordinarily difficult.

3. Heaping sophomoric praise on salespeople for “busting quotas” and “crushing their numbers,” without considering whether they have been ethical.

4. Assuming that salespeople “thrive” on pressure, as one popular blogger wrote. That’s a myth. Plenty of salespeople face pressure, but when there isn’t an upside for them, it’s hard to describe that as “thriving.” More accurately, salespeople with pay at risk (commission) have – or should have – a congruent tolerance for uncertainty.

5. Assuming that good salespeople will always find a way to make goal – no matter the odds. The sentence is mostly correct – just change good to clever.

6. Letting what happens in sales stay in sales. Companies must begin to have ongoing governance over their sales processes, or suffer the consequences when poop hits the fan.

Concern over cross-selling is misdirected. If you’re looking for the real culprit in Wells Fargo’s case, you will find it in the emergence of a trend: executive pay tied to stock price appreciation. “Changes like these are directly responsible for CEO’s seeing a 15-fold increase in comp in the last 40 years,” said Bobby Parmar, professor at the University of Virginia’s Darden Graduate School of Business Administration.

Parmar says that boards rationalize for fulfilling an obligation to grow and protect shareholder value. But he says this is based on flawed assumptions. “Shareholders don’t own the corporation. Public companies own themselves. Shareholders own a contract called a share. There is no legal reason to put shareholder interests above anyone else. It’s a choice, but not mandated. There is no legal duty to maximize profit. As long as executives aren’t violating the law, the courts won’t interfere with their decision making . . . Across hundreds of studies, there is no evidence that companies that maximize shareholder value are more profitable.”

That’s not what I was taught in B-school, and I have little doubt that many vociferously disagree. But Parmar is right. It’s the relentless goal of growing revenue and the myopic pursuit of share price appreciation that ultimately creates substantial stakeholder wreckage.

A huge relief to cross-sellers. Now, you can come out from your hiding places. Be proud of what you do, and who you are!

Do Corporate Values Matter?

Visit the website of a great company, and you’re certain to find a values speil.

UnderArmour dedicates an entire web page to explain its Mission and Values. Whole Foods describes its Core Values, offering a subtitle, What’s truly important to us as an organization, to drive home the point. IBM outlines Our Values in a nearly-tweetable 153 characters: “Dedication to every client’s success; Innovation that matters, for our company and for the world; Trust and personal responsibility in all relationships.” Brevity you’d expect from a company that sells productivity solutions.

But value statements alone don’t make companies wholesome. Right now, UnderArmour is piggybacking off the brand appeal of the Rio Olympics, without shelling out a penny for sponsorship. A term has been coined for this, with an appropriate tint of bellicosity: ambush marketing. “Technically speaking, that’s not against the law . . .” a radio commentator said yesterday.

The disclaimer, technically speaking, should trip a circuit in the company’s Department of Competitive Ethics – assuming one exists. Danger Will Robinson! Fortunately, UnderArmour has a superb excuse: its admirable Core Values are silent about the morality of siphoning revenue from the investments of others – a tactic that’s existed since the birth of sponsorships.

Whole Foods strayed from one of its core values, healthy eating. “We sell a bunch of junk,” said CEO John Mackey in a 2009 interview, adding that the company had “veered off-course” by selling junk food and products that are unhealthy for consumers, according to a case study from the University of New Mexico.

IBM, too, has been muddied by ethics issues. And this April 20, 2012 post from exIBMandenjoyingit represents how the most aspirational corporate values can have the rug ripped right out from underneath:

IBM is thoroughly corrupted inside and my former colleagues are playing the game. As US employees we accepted the internal corruption ourselves. We saw organizations providing bogus sales numbers yet we look the other way because we too may have been paid on those numbers.

The IBM help desk in India participates in the corruption by closing older tickets and informing their internal customer to open a new ticket so that their time to resolution is not badly affected. This fish stinks through and though from decades of internal brain washing reducing employees [sic] integrity a little bit at a time.

Glad to be gone but I wonder if my soul is intact.

For these companies, public values statements did not inoculate them from ethical problems. If anything, they manufactured embarrassing hypocrisies. Despite producing stern values proclamations, unethical [stuff] happens at these companies and many others, seemingly unabated. Do corporate Core Values Matter? Or, are companies better off not defining them?

One researcher has examined these questions. Edward J. Conlon, faculty director of the Notre Dame Deloitte Center for Ethical Leadership within the Mendoza College of Business at the University of Notre Dame, studied corporate values by surveying at random the stated values of 150 multinational corporations.

The top ten values Conlon and his colleagues discovered, along with the number of surveyed companies that included the word or phrase:

1. Integrity (111)
2. Concern for customers (62)
3. Respect for all (58)
4. Teamwork (49)
5. Respect for employees (45)
6. Innovation (37)
7. Ownership of actions (31)
8. Excellence (30)
9. Safety (24)
10. Quality (23)

Curious that integrity was so dominant. I wonder what, if anything, companies do to establish and perpetuate that value.

In a follow-on exploratory survey of alumni from Notre Dame’s MBA program, “70% of respondents reported that their employer had a formal values statement, although 27% couldn’t recall any of the values it actually contained. Still, all of the respondents to the survey believed that the company had clear values. And for those reporting a value statement, most felt there was a strong correspondence between the statement and what was truly important to the firm’s managers and owners.

“The survey also included an experiment on the impact of values statements on employee judgments, assessing the extent to which a stated company value affected judgment when that value could be served by favoring some options over others. Overall, the simple inclusion of a value in a value statement didn’t affect decisions respondents made in the experiment. But when a value was frequently discussed with one’s boss, or when it was included in formal performance evaluations, it tended to have a greater effect. Discussions with peers and subordinates, or more casual discussions of values, didn’t have the same impact,” according to a Notre Dame column, Do Corporate Values Make a Difference? (emphasis, mine.)

Values are not a checkbox. “Corporate values and Guidelines for Ethical Conduct? – sure! We’ve got them. Let’s move on to the next topic . . .” Many executives feel safer by having these documents in the inventory of corporate communications and marketing collateral. But too often, they collect dust. What’s key is how they are used, as the Notre Dame follow-on survey uncovered. That goes well beyond including it in marketing fluff for wowing prospective customers and employees.

“When you lead an organization – big or small – you are inevitably going to cross decisions where it’s not obvious what the right thing to do is,” said Tom Linebarger, Chairman and CEO of Cummins. “In other words, there are consequences on both sides. When those things come up, you have to apply good judgment and ethical frameworks to think through the thing.”

His advice: “not to use a financial framework first, and use my ethics to rationalize my decision later . . . instead, think about what you should do and then figure out what the financial consequences are, and then figure out how to mitigate those. The post-rationalization is a slippery slope.”

Linebarger should teach a course on marketing and sales ethics, because he has aptly described the conundrum biz-dev professionals face every day: make goal, but in accordance with corporate values. And you thought Marketing and Sales were mis-aligned? Look higher, my son!

In The Vision and Values of Wells Fargo , five primary values are given “that are based on our vision and provide the foundation for everything we do:”

• People as a competitive advantage
• Ethics
• What’s right for customers
• Diversity and inclusion
• Leadership

Odd that Wells Fargo cited ethics – but didn’t indicate whether they meant ones that are good, or bad. In fact, the value mentioned just below ethics, What’s right for customers, is open for debate. In November, 2015, The Wall Street Journal published an article, At Wells Fargo, How Far Did Bank’s Sales Culture Go? Regulators examine whether San Francisco-based lender pushed employees too hard to meet quotas. Here, in the interest of transparency, what’s right for customers should carry an asterisk, followed by the explanation, “provided we meet our audacious revenue targets.”

“Some of the worst transgressions start out by a very simple decision to maybe choose the more expedient way or the more financially attractive way with some post-rationalization for the next one and the next one, and before you know it, you’re down in a place thinking ‘how did I ever get here?’ and wishing you weren’t there,” Linebarger said.

He’s right. Perhaps the greatest benefit of having a statement of Corporate Values is that it lets people know when they’ve deviated from what’s ideal, and possibly how far they’ve gone.

Selling: Six Audacious Companies to Watch

“The future ain’t what it used to be,” Yogi Berra once remarked. A perfect advertising tagline for the nascent companies profiled in this article. For them, there’s no staying the course because there’s no course to stay. Their executives can’t use tried and true marketing tactics, and they can’t depend on what’s worked before. Their most basic sales assumptions could spark contentious debate, and the outlook for success is unclear. To survive, these companies must innovate marketing and sales strategies as they progress.

If there were a Mission: Impossible movie about selling, these executives would hear, “Your mission, should you choose to accept it, is to make quota without guidance from past performance indicators, industry best practices and benchmarks, or sales playbooks. As always, should you or any of your biz-dev team get fired or laid off, the VC’s will disavow any knowledge of your actions. Your company might self-destruct within four planning periods. Good luck!”

Memphis Meats

Opportunity: “Beef cattle production requires an energy input to protein output ratio of 54:1,” according to researchers at Cornell University. I suppose if I wanted to extend this perverse sustainability model, I’d drive to my local Wendy’s in a Lamborghini Aventador Roadster (12 MPG combined city/highway) and buy a Quad Baconator. No need to shut off the engine while I’m inside eating. I want that A/C blowing cold when I get back to my car!

“More than half the U.S. grain and nearly 40 percent of world grain is being fed to livestock rather than being consumed directly by humans,” Cornell’s Professor David Pimentel said back in 1997. “Although grain production is increasing in total, the per capita supply has been decreasing for more than a decade. Clearly, there is reason for concern in the future.”

Here is where Memphis Meats smells opportunity. Instead of raising and slaughtering livestock, Memphis Meats creates food off the animal, by “growing real meat in small quantities using cells from cows, pigs, and chickens,” according to the company’s website. And unlike raising livestock for slaughter, the company claims it gets one calorie of “output” from just three calories of “input.” No “Concentrated-Animal-Feeding-Operations” fraught with pathogens, feces, and antibiotics. Think “clean meat” – the utopia that Upton Sinclair might have envisioned when he wrote The Jungle.

Audacious sales challenges: “First, consumers will have to be educated as the ‘ick’ factor will be tough barrier to overcome. And one study has suggested that lab-produced meat may actually require more energy than farmed meat, so those statistics need to be sorted,” Leon Kaye wrote in a 2016 article, Memphis Meats Bets Lab-grown Meat Can Disrupt the Global Food Supply.

Great quote from the website: “With our home-base in the San Francisco Bay Area, but strong roots in Memphis, Tennessee, we’re using the innovative spirit of Silicon Valley coupled with the rich culinary traditions of the American south to provide better meat for the entire world.” – Now that’s a cosmopolitan meatball!

My advice – no extra charge! “What has to come first is truth” regarding the benefits that come from the company’s products, Eric Stangarone of, told me in an interview for this article. “The moment consumers believe the company is pushing nutritional snake oil,” he said, “they will be turned off.”

Peloton Cycles

Opportunity: A peleton is the main group of riders in a cycling race, the company’s website explains. That definition hints at Peleton’s big sales pitch: Athletes can improve results and increase performance when others are actively involved in the workout. Call it Exercise 2.0 – what you get when your bike has an IP address, and you can experience the camaraderie of friends pedaling in place at the exact same time you’re pedaling in place. There’s more. Peleton’s videos show moms and dads working out in gorgeous homes, conspicuously free from clutter, gnats and mosquitoes, oppressive humidity, mud and dirt, and the omnipresent stench that accompanies Pilates class with eighty or more sweating humans packed in a small room. Exercise, comfortably. A grand idea! Not a bratty kid or gym stalker in sight to disrupt a workout. With Peleton, once the kids are tucked in bed, dad can seize 30 minutes of quality time to work out with his cycling buddy three time zones away.

Audacious Sales Challenges: Price. And the ephemeral nature of The Best Exercise Intentions. Peleton cycling machines sell for nearly $2,000, plus $39/month for a subscription to video rides. And you must commit to one year of them. The company gives skittish buyers a prominent reassurance, Financing available, near the ‘add to cart’ button. Not surprisingly, the company’s showrooms are ensconced in some of America’s best neighborhoods, including Corte Madera CA, East Hampton NY, Manhasset NY, Newport Beach CA, Short Hills NJ, White Plains NY, and Tyson Corner VA. That says a lot about the company’s target buyer.

Great quote from website:
“Ride now, pay later.” – No kidding!

My advice – no extra charge! Grow the community first – and fast! Consider offering customers a social media experience, but without having to buy the bike right away. As it stands now, Peleton is a premium exercise bike, with benefits. Namely, real-time access to friends and rock star coaches using the same apparatus.

Local Motors

“I want to start a Company that will re-invent semi-recent cars to embody the design esthetic of the cars of the 50s and 60s,” User marcuslaun posted on the Local Motors website in June, 2016. Marcuslaun doesn’t work for a car company – yet. But Local Motors takes his aspiration seriously, and they have developed a platform to help him produce a hydrogen-powered, snap-together simile of a 1954 Corvette – if that’s what he wants to do.

Local Motors is a technology company that designs, builds, and sells vehicles by combining global co-creation with local micro-manufacturing. It’s hard to describe what LocalMotors does without slipping in tech jargon, like Direct Digital Manufacturing, or DDM. If you don’t have time to bone up on the details, you should know that “DDM uses 3D computer-aided design files to drive the computer-controlled fabrication of parts,” according to Larry Schuette and Peter Singer (Direct Digital Manufacturing: The Industrial Game-Changer You’ve Never Heard Of, Armed Forces Journal, October 10, 2011). In June, 2016, Local Motors introduced Olli, the first self-driving vehicle to integrate the advanced cognitive computing capabilities of IBM Watson.

“At Local Motors, we are hell-bent on revolutionizing manufacturing,” said John B. Rogers, Jr., CEO and co-founder of Local Motors. “Car manufacturers have been stamping parts the same way for more than 100 years. We now have the technology to make the process and products better and faster by linking the online to the offline through DDM. This process will create better and safer products, and we are doing exactly that.”

Short time to market, low manufacturing overhead, and open-source design – three proprietary advantages that could leave larger manufacturers in the dust.

Audacious Sales Challenges:
Capitalization to fund R&D, expanding university partnerships, and developing brand equity.

Great quote from website:
“We are Local Motors. And the world is full of companies nothing like us.” – Wow. Most websites don’t get that existential.

My advice – no extra charge! Champion the Maker Movement. There are millions of people brimming with ideas and engineering talent who don’t work for the world’s car companies.


“Since the Bronze Age,” the company’s website tells us, “advances in metals technology have involved two things: modifying chemistry and modifying microstructure. In thousands of years, that hasn’t changed, until now . . . Modumetal is creating a revolutionary new class of nanolaminated materials that will change design and manufacturing forever by dramatically improving the structural, corrosion and high temperature performance of coatings, bulk materials and parts.” Translation: Modumetal’s technology makes it possible to grow metal using electricity – not heat – as the primary input. And those materials can have highly specialized characteristics compared to traditional metals.

While I’m not one to shriek “disruption!” before the fact, Modumetal’s innovation portends profound changes for the industry, including where metal can be manufactured, the sizes of production runs, and the serviceable life of parts deployed in the field.

Audacious Sales Challenges: Protection of Intellectual Property (for Modumetal, there’s no such thing as over-protecting engineering information); scaling production.

Great quote from website: “The company’s manufacturing process for nanolaminated metals – think metallic plywood with really thin layers – is also a breakthrough, able to deliver materials at a cost that is competitive with conventional alloys.” – That’s a shining example for how to make a complex technology approachable!

My advice – no extra charge! There are many opportunities for Modumetal to provide value and benefits, and it’s easy for Sales to get distracted. Especially now, stick to developing customers in the most profitable segments.


Opportunity: In 2015, 1,215 rhinos were poached in South Africa alone. In 2007, that number was just thirteen. The reason is the precious horn, which is “more valuable by weight than gold, diamonds or cocaine,” said William Ripple, an Oregon State University professor of ecology, who published a study. The current value: $60,000 per pound. Demand from Asia has contributed to the scarcity. “In a survey in Hanoi and Ho Chi Minh City in 2013, 37.5% of respondents said that rhino horn can help treat cancer,” according to The Economist (A Dilemma of Horns, August 8, 2015). For rhinos, the threat of extinction accompanies this explosive market demand. In addition, the poaching method is particularly cruel, involving tranquilizing the rhinos before the horns are harvested. Most of the animals die from blood loss or suffocation.

Pembient aims to replace the illegal wildlife trade, a $20B black market, and the company has tackled the problem from the supply side. “Next year it will begin selling synthetic rhino horn for $7,000 a kilo. This will undercut the market for the real stuff, says CEO Matthew Markus. Others, though, fear that advertising synthetics may boost sales of real horn,” according to The Economist. In 2015, Pembient was one of eleven companies admitted to the inaugural class of IndieBio, a San Francisco-based biotech accelerator (IndieBio also funds Memphis Meats, profiled earlier in this article).

Audacious Sales Challenges: Making sure the basic pricing assumptions play out in the market; convincing buyers that the fake product is better than the real thing (studying the history of faux fur might help).

Great quote from website: “Subscribe for updates on our progress.” – Clearly, Pembient does not anticipate that success will happen overnight.

My advice – no extra charge! I don’t sense that consumers of rhino horn are particularly concerned about conservation or animal cruelty. Success will come from positioning synthetic products as more potent. Is it ethical to pitch a product’s unproven benefits? No, but in this case, it seems so much better than the alternative . . .


Opportunity: “Get an extensive set of data from every run. The mobile app monitors your foot landing, contact time on the ground and cadence, and tracks other familiar parameters. Connect the app with heart rate monitors (HRMs) that communicates through Bluetooth Smart to also monitor your heart rate. Get detailed visualization of your activities right on the smartphone after your run,” Sensoria’s website tells me.

OK – I get it. Sensoria is for fitness enthusiasts and others who like their personal data big.

Audacious Sales Challenges: Convincing customers to trade in their prosaic shorts, socks, and wicking t-shirts and go electronic. Also, persuading consumers that the rechargeable ankle bracelets, left and right socks (it’s true!), and Bluetooth sensor monitoring haven’t sucked the simple joys out of running and walking, and made these activities into a self-indulgent data-mining extravaganza.

Great quote from website: “Each sock features magnetic contact points below the cuff so you can easily connect your anklet to activate the textile sensors.” – What? Wait a minute – I just wanted to go out for a jog . . .

My advice – no extra charge! Focus the sales effort on a) people who have medical concerns where activity monitoring is essential, and b) fitness enthusiasts who love gadgets. If I were selling this product, I’d stop every person I see wearing an Apple watch and running shoes, and encourage them to try Sensoria’s products.

“You can’t overlook the lack Jack/
of any other highway to ride/
It’s got no signs or dividing lines/
and very few rules to guide.”

– Words by Robert Hunter from the song, New Speedway Boogie.

We thrive on extrapolating the future from the past, and finding well-marked pathways to revenue success. But I most admire organizations that accept the challenge of blazing new trails, even when the effort seems borderline impossible. I wish all of these companies well. Stay tuned!