Interview with Aldonna Ambler
Interviewer: Andrew Zezas, SIOR
Following is the transcript of a CFO Studio interview between Andrew Zezas, CEO of New Jersey based Real Estate Strategies Corporation and “The Growth Strategist” Aldonna Ambler, CEO of Ambler Growth Consultants.
Visit www.CFOstudio.com to read about this interview and to watch the entire video interview.
The U.S. is Bleeding from the Middle
Zezas: Hi this is Andrew Zezas, your host at CFO studio. I have the pleasure of being joined today by my good friend “The Growth Strategist,” Aldonna Ambler. Ms. Ambler is CEO of Ambler Growth Consultants. She’s got a pretty interesting background, having being a business strategy consultant for more than 40 years. She’s the founder and manages a suite of companies that help mid-size companies continue to grow. Aldonna has won over two dozen entrepreneur of the year awards on both a state and national level including Alumnus of the Year from the University of Pennsylvania. Aldonna has a master’s degree in Business Marketing and Social Work, and yes I said Social Work not Social Media. Aldonna is here today to talk to us about a very, very interesting topic: The US is Bleeding from the Middle. Aldonna, it’s wonderful to have you here on CFO Studio.
Ambler: Thank for the invitation, Andrew.
Zezas: Bleeding from the middle, what the heck does that mean?
Ambler: Well, we’re talking about mid-sized companies, and let’s do a little bit of the statistics. Historically mid-sized companies, and I am talking about the ones between 10 and 200 million particularly, they have constituted about 40-45% of the GNP and only 33% of the companies, so it means that they have been giving really good contribution money wise, job wise, and product wise. Okay, so, with that 33% number staying the same, they’re hanging in there, and there are still an appropriate number of mid-sized companies.
Zezas: Staying the same even throughout what’s been going on with the economy recently?
Ambler: Yes, 1/3 of the companies are mid-size.
Zezas: Still hanging strong.
Ambler: But the 45 is in free fall. So they are still mid-size companies, but they were 75 million, then they were 50 million, and then they were 25, so we’re bleeding from the middle. Scary.
Zezas: Alright, alright so I see that. Tell me for the people who are watching us, give me a little of your background so they understand your perspective and your view on things? Who do you serve, what kind of companies do you serve, how do you serve them?
Ambler: Well as a growth strategist, I’ve specialized in mid-size companies in that range. And a lot of our clients are doing fine because they’ve faced strategy and made some decisions, but the statistics say that “we’ve got a problem” and like I’m saying in the economy, we are bleeding. And one of the issues is that it’s family owned companies, and so that 90%, the mid-sized companies view themselves as family held even if there’s no sibling or no kid involved. It’s fascinating, and the baby boomer generation is getting older, so more people have to deal with succession, and more people have to think about what they’re doing. And I didn’t answer the question, what I provide the mid-size companies? Do you want me to go back to that?
Zezas: Sure, sure.
Ambler: I’ve gotten almost really passionate about what’s been going on with economy. Because if you think about how people are sounding; they are mad that the large companies got the bailouts, and the financial problems that happened, particularly in ’08, hasn’t been fixed. And they have access to the really expensive accountants, some lawyers, and such.
Zezas: And service providers?
Ambler: Yeah, and they are okay really.
Zezas: The large companies are okay?
Ambler: The large companies are okay. Small companies have the SPA, low docks, loans, and they have waivers, and they have set asides, and all that kind of stuff. And what the mid-size companies have is that they are subject to all the regulations, all the mandates, and all the taxes. And they were disproportionately damaged and hit when the recent recession happened.
Zezas: And they are shouldering most of the burden?
Ambler: Not just that, but their pensions and their retirement funds were disproportionally hit. So combine the fact that the privately held ones are owned by the baby boomers who thought they had retirement figured out, they are now staying stuck. So there’s inertia in their behavior, and their children, you know 40 year olds are looking at mom and dad saying “you worked an awful hard, I don’t know if I want this?” So there’s more inertia, and in the meantime the economy is moving really quickly. The changes in technology are moving really quickly, competition is increasing really quickly, and demands for what we should be doing are changing. So even though my clients aren’t the ones in a lot of pain, we still need to deal with the inertia in the middle, or it hurts all of us.
Zezas: It hurts the middle, it hurts the top, and it hurts the bottom?
Ambler: It hurts all of us. It hurts the tax base of NJ if we don’t figure it out.
Zezas: So we are talking about fear and inertia, all at the same time? Success on the top end, not so much fear or pain at the bottom end, but true bleeding from the middle?
Zezas: And your clients are not only are here in NJ, but around the country and globally if I’m not mistaken?
Ambler: Yeah, 33 countries, 49 states.
Zezas: So with all this going on, are companies now in position where they need to change their business model?
Ambler: Yeah, and I think some of them because they’re lost; a historical pattern for mid-size companies has been that they know how to do things well, they’ve been in business for a while. You know especially family companies, they’re generations that grew up in the industry and are really proud of what they’ve done, and they’re very private and they’re really smart. They must have made some good decisions to be at 20-200 million. They know a lot and they are a little resistant to taking on some new ideas. What they’re really good at is improving what they’ve been doing.
Zezas: Improving what they’ve been doing but not innovating?
Ambler: Not bringing in a whole new thing, changing industries, modifying their approach, and being open. I’ll take my industry should take a hit, that a lot of strategy people really only come in and do analysis paralysis or agonize over the mission statement or they do a SWOT analysis and everyone falls asleep, and the directors all give progress reports of what they did yesterday.
Zezas: And they kill a lot of trees?
Ambler: And nobody looks at where the market is going, and so they perfect what they did yesterday, and with the classic phrases they are perfecting buggy whips.
Zezas: Say that again, they are what?
Ambler: They are perfecting buggy whips. Something that is not wanted, nobody needs it.
Zezas: No demand? Nobody cares? Nice to hang on your wall, and not much else?
Zezas: So there is a need, but why are companies inert at this point? Why don’t they recognize they need to put new business models into place?
Ambler: Well, sometimes I think it is related to the strategy process, and I’m going to talk about CFOs for a second because this is one of the reasons I wanted to do this interview with you. The CFOs’ I’m seeing get unstuck are the ones that that have a progressive thinking, forward thinking, and future oriented CFO, not just a CEO, and they have a different way of doing strategy. I’ll give you an example. Over the years, I mean I’m not sure if I would have seen it 40 years ago, but we had to create four different approaches to strategic planning. We didn’t want our fee to be an issue, to get people to get past “we can’t afford to do strategy, we have to get back to the real work” and “why should we talk about that we know what we’re doing?” Well they do need market research, they do need something different.
Zezas: Let me interrupt you. You saw that a major obstacle was the value proposition: what I’m getting versus what I have to pay for, and I don’t want to have pay this much money to get that because this is my focus, and I don’t see a whole lot of value in that. And you kind of had to turn things around?
Ambler: Yeah, if it’s not integrated in the day to day, and it doesn’t look like it’s going to pay off in the short term, it feels like it is taking a course or doing something academic or making a book for nobody. So you have to find a way to make it real and some companies still haven’t done that or they bring in act of admission or someone who is talking at them or won’t stand up. Real strategy has a dynamic field to it. It’s almost like in some cases an argument of position; of what’s your philosophy, and why should we do it, and how much risk can we take, and why should we bother? And if it doesn’t have some energy I would be the first one to say “why are you doing it?”
Zezas: And if strategy is done properly, it is an effort of challenge. It’s not everyone going like this and let’s go down the same path. It’s why, and what else should be doing and what are we not thinking about?
Ambler: Yeah. In fact in our kind of company, for example, would turn down any kind of assignment where the CEO or anybody else is sitting there saying “we want to do strategic planning because we want 1% improvement in our profit.” That’s not strategy; you need somebody else who is a productivity specialist to do some cost cutting and to help you make a little more money, big deal. But lots of folks need real analysis. I’ll give you an example of one of the companies that we’ve dealt with recently. Service firm, and they spend a lot of money and time creating a new product they actually had a new business model in mind. They didn’t do market analysis though. So they’re all excited about what they are doing and they’ve got this complementary product, so they bring us in because they’re so excited that they want to make sure they are ready for exponential growth. So anybody who is in strategic planning really has to do some research. Pieces of it is interviewing customers, interviewing employees, blah blah blah. The first twenty interviews I hear from the clients, and you don’t have to be a statistician to know this is significant, the clients complained that they don’t like the new product, they felt forced into it, it wasn’t complementary to what they were doing, and they missed what they had, but they’re loyal to this company and like the people. So the combination of longtime loyalty and liking them and feeling like this isn’t good, you know what it made them do? Stay quiet, not complain, and start shopping.
Zezas: Wow, those of us who are focused on true customer service and customer excellence hope for complaints because in our view a complaint is an opportunity; I find out what the problem is now all I have to do is fix it.
Ambler: Yeah, but now you’re getting logical. If you’re running a mid-size company, and you’re invested in what you’re doing, you love the customer service you’ve had, and everyone has been loyal to you for what you’ve done, it reinforces the past. So if they need something new or what you’re considering isn’t right, it does take future oriented research to find out if you are still going to have the loyalty that you had. So this has been interesting because their initial reaction was to argue with the findings. They had a whole survey related to the whole company, and it cooperated what we are talking about and they’re still arguing with it, so they are normal.
Zezas: They’re normal.
Ambler: They’re normal, it’s fixable, but they’re normal.
Zezas: So let me take you back to something you said a moment ago because you said a major obstacle previously was that your prospective clients were having a problem getting over fees and the cost of this kind of analysis. But now we are talking about new business models, innovation, and disposing of the buggy whips and driving toward a new way to conduct business. That’s got to cost a lot of money to achieve that, so when they come through the strategic planning process, and they come to the point that they say “yes this is the path we need to take,” how do they finance that? Especially now in a world where the banks would prefer to leave their funds in treasuries and the credit markets, and the capital markets are in disarray for the middle, how do they finance this?
Ambler: Particularly if you’re a service firm, and there’s no capitalization, there’s no collateral, there’s no assets, and all that and the banks don’t want to do any none asset base lending; go back to the strategy, and if you have an exciting idea money is out there.
Zezas: Say that again, money is out there?
Ambler: Oh it’s out there. Private investors are looking for something that is new and hot. The bankers or anybody who is looking at money right now and looking at what their future is doesn’t want to finance something that is perfecting the same, that’s the first cue. So here’s a question that we ask in strategy sessions and here’s a test, and the CFOs can help with it. If you pose a question that is provocative, instead of what’s your mission and your vision, if you ask something like “could we triple our gross revenue and if we did and when we did could we only double operating expenses?” Now I like that kind of question, because it’s provocative and it surfaces all kinds of premises and the way they view their business. So if you couldn’t triple your business and if you couldn’t even imagine it; what’s wrong with your product, and what’s the matter with the service that you can’t even imagine tripling? I didn’t even say fast, which is the next set of questions. And then we debate about pace, but if you can’t even imagine tripling, maybe something is wrong with the current business model and the product you are doing. And if you are buying into technology or you’re assuming that all you’re operating expenses will also triple, why? Then maybe then you bought into the whistles and bells of technologies and didn’t make it pay off. And if you couldn’t get some economies of scale, why not? So that kind of question really helps make the strategy session more real, and the CFO can help because then you can start looking at the pacing part. I know a strategy session worked out, if at the end of it they are asking the question a different way than you just said, instead of saying “how do we find money?” It feels like that if you’re financing the old junk, you’re begging for money because you are in trouble, but if you have something hot, the way the question starts to go back and forth between it at the table is “I wonder who should we let, or who should we invite, or who has permission, who would we allow to have a piece of this and let’s make sure we don’t lose too much control?” Because now they get proprietary and controlling about their cool idea.
Zezas: That must be very exciting.
Ambler: It’s a much better question, and in fact strategy is not done until you ask the financing question that way.
Zezas: Right, that may be very exciting for you.
Ambler: That’s why you stay in the business; to get people to not look at their business strategies is just kind of a band-aid of the of the same time and having it to be boring, life is too short to have your business be boring.
Zezas: Are companies getting this?
Ambler: Some are. One of the things I noticed is a pattern, and again why I wanted to do the interview. The role of the CFO has changed. They sometimes were put in the position of “how do we afford this and run the scenario of cost cutting,” and it would be a boring assignment, and then they get typecast as boring. You don’t want to look at the past performance as much as you’re talking about what can we do to create the future, so they do need forward thinking and analytical strategic CFOs. And one of the first things when someone is looking at us to talk about strategy, I’m not just evaluating the CEO, I look to see who do they have in the finance seat. Do they have a glorified controller? No offense, but somebody who is an accountant versus a strategist is very different. And so that’s one of the first places to look, and if they don’t have it inside, you have to bring it. I’ve brought in Rent a CFO for somebody to truly take that role to make sure that it’s in place.
Zezas: Who can support the CEO from the strategic perspective and be the engine to drive the direction you need me to drive in?
Ambler: And knows the different kinds of financing and isn’t motivated by “no”.
Ambler: Some controllers are motivated by cost savings, and the answer is no, rather than we’ve got a yes. Now how do we make it happen and how do we have the risk evaluated so we could say yes more often.
Zezas: Aldonna, this is fascinating, I actually think we could talk about this for hours.
Ambler: Oh not that I care about it at all.
Zezas: Not that you’re not too passionate about this and not that you’re not having too much fun. But I actually have time for just one more question, and it’s actually a personal question about you. I know you’re a reader, I know you’re a sponge in terms of how you upload information, what do you read at night, what’s on your nightstand?
Ambler: Oh that’s fun and it’s not going to be too sexy I guess. You know on the E-reader is a lot of magazines. I take in what’s on Fortune, what’s in INC magazine, what is the Economist saying, all that kind of stuff. But on the nightstand next to the bed, I’ll have books on something about the ones I really want to get into, they are there in hard form, I don’t know why.
Zezas: So you’re both an E-reader and hard form reader?
Ambler: Yeah, and I don’t know why.
Zezas: A lot of people are both.
Ambler: But when I go into emergent mode what I do and I am doing this now, I’ll buy let’s say 10 books that are on the generational issues and companies because I am seeing an awful lot of issues with that, and what do you need to do to retain generation x-ers and the next-ers and all that kind of stuff. And if I immerse myself in a whole bunch of the books I get a range of opinions about saying some things that work, and it improves us as strategic planners.
Zezas: So what are you immersed in now?
Ambler: That. The generational thing is what I am right in now. And another book I just finished was President Clinton’s book on back to work because it is related to this kind of topic, and he’s really recommending the non-government organizations, the corporate collaboratives. And I am working on an initiative right now that’s about that, and I think that he’s right on, but I have to make sure I find a Republican that has said the same thing so I can get heard.
Zezas: On that note Aldonna, this has been great. I want to thank you for visiting with me on CFO studio.
Ambler: Thank you for the invitation.
Zezas: This is Andrew Zezas, your host at CFO studio, with the Growth Strategist Aldonna Ambler, saying thank you for watching.
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