Outsourcing? Ok…maybe yes.

June 28, 2009

I have never been a fan of outsourcing. In fact, I was even quoted saying as much in a 2004 BusinessWeek article on the subject. While I still believe a company should never outsource “mission critical” components of their business, I recently discovered areas in our business I believed were core competencies actually were not.  And this got me thinking about outsourcing differently.

A company’s core competencies define what the business is and serve as its competitive weaponry. A business’ core competencies should remain within the business so they can be protected, managed, cultivated and enhanced. Cogent Road is a software manufacturing company – we design, build and distribute three enterprise software applications. Naturally I assumed that software coding was one of our core competencies – and thus off limits when it came to outsourcing.

Now this may be a blinding flash of the obvious to everyone else – but I only recently discovered that software coding was not among Cogent Road’s core competencies. It happened during a recent Focused 40 session in which my partner and I were unpacking Cogent Road’s competitive advantages. What was Cogent Road, what business were we in and what made us competitive?

We came up with the following list:

Our software engineering methodology. Cogent Road uses a software development model called Extreme Programming, developed by Kent Beck in 1997. Over the years we have customized the XP process for our type of work at Cogent Road. We all speak in shorthand which helps get large projects completed quickly and under budget – something not easily duplicated by competitors.

Our product ideation methodology. My partner and I have a natural ability to think abstractly – which is good and bad. While no one at the company is going to ask Alan or I to plan the company’s Christmas party (in our minds it would be great, but in reality we’d neglect to book the restaurant) – we easily come up with scores of software features that have never before existed. The result is that Cogent Road’s applications are full of beneficial tools our clients can’t get anywhere else. Again, a significant competitive advantage.

Our customer service commitment. A significant portion of our software is never even used by our clients. In order to better serve our clients, Cogent Road regularly devotes significant R&D resources to developing automation and back-end tools that route, manage and distribute customer service orders and requests. (You can see our latest example here). While it’s true spend time (never enough!) training our account managers – our service commitment transcends the individual to create an overall positive experience with our software, even if the client never contacts us. This too is difficult to duplicate.

On a side note, during this process we made the painful discovery that our sales process was not a core competency. It actually should be, but we have some work to do.

What else did we learn? Writing software code was not a core competency at Cogent Road. This meant that if we found qualified, highly competent outsourced partners – we could plug them in to specific areas of our engineering process. In the same way an architect can use any number of building contractors to assemble her blueprints, Cogent Road can use outsourced programmers.

Still, we are starting slowly with one specific highly compartmentalized project. However, so far I am very pleased with the speed and quality of the work. If the project is successful, and I have every reason to believe it will be, Cogent Road will likely incorporate more outsourced coders into the mix.

I’ll keep you posted.

3 Comments | Funding Suite, entrepreneurship, internet software | Tagged: , , | Permalink
Posted by Caped Crusader

Thought Leadership

May 31, 2009

My partner and I were recently entangled in a lengthy discussion about thought leadership and its importance in a company’s sustained success. You can find volumes written about creating competitive advantage through leadership in products, marketing or even employees. But leadership in thought? Not so much.

Cogent Road is growing rapidly and my partner and I are extremely busy. To ensure we spend time thinking, we engage each day in what we call our “Focused Forty”. This is committed block of 40 minutes during which we sit in front of a whiteboard and discuss the future of the business. For those 40 minutes we sit atop Cogent Road’s crows nest peering through binoculars to determine which way our ship should go. If we didn’t schedule this time, we may well drift any which way the industry winds blow.

It was during a recent Focused Forty that we began harping on our competitors. Over the years we have watched our competitors copy nearly everything we do. More than a few competitors have even cut and pasted entire pages of copy from our website  into their own. (I’m talking entire pages word for word!). And they’ve copied our software innovations too. Most recently ScoreAll, an innovative idea in which all available credit scores may be purchased for a low cost with a credit report – and the highest ones added to the file.

Yet, after a short time we laughed because we realized Cogent Road had thought leadership. Rather than  creating their own futures – they are simply looking at us. Where we go – so go the rest. For them, this is easier and safer. But in the long run this management style is self defeating.

Instead of worrying about your competitors copying your latest strategy – stay focused on the future. Spend time thinking and creating innovations that will lead your business into new markets – and hence new revenue streams. Competition exists when two or more companies battle it out using the exact same products, service and strategy. Consider the airlines or the American automobile industry. This is a bloody war that leaves no victor. Instead, look ahead…where there is only endless ocean and blue sky.

Thinking like this is difficult. Acting on your ideas is harder still. But as the leader of your business, there is no more important work.

1 Comment | entrepreneurship, internet software, management, mortgage, mortgage broker, strategy | Tagged: , , , , | Permalink
Posted by Caped Crusader

The Most Valuable Resource in Any Business

March 7, 2009

Cogent Road sells Software as a Service (SaaS) applications to the mortgage industry. This places us smack dab in the middle of one of the most violent economic storms our economy has ever endured. Over the past year the world has witnessed established, deep rooted mortgage related companies tossed about and destroyed with the violence of a tornado ripping through a mobile home park. When the dust finally settles, the mortgage landscape will be forever changed – operating in ways entirely unfamiliar.

For us at Cogent Road, the past year drove home a single point that is, without hesitation, the most important business lesson our company ever learned. Rather than simply telling you, let me illustrate the answer in the following example.

In highly stressful situations the mind absorbs data and feedback very intently. Talk to anyone involved in an automobile accident and invariably you’ll hear the same thing – the experience seemed to happen in slow motion. What actually occurs is that in times of great danger the human mind processes visual information at significantly higher speeds. So fast and with such clarity that events seem to slow down as our brains absorb nearly every detail.

Our body’s natural response to highly stressful events is one of survival. Without conscious thought our nervous systems takes command of every bodily function, sifting through a myriad of possibilities – and finally choosing a course of action with the greatest possible chance of success. And there it is. What instinctively occurs in the blink of an eye also reveals an important business truth.

In my opinion business fail for one reason – they stop trying. I’m not being trite; the business leadership simply stops thinking about they can do to change and improve. In stressful market conditions, these business succumb to fear, which is to say the literally shut down creative thought completely. That is to say the response is entirely contrary our natural inclination to stressful events. Rather than assessing possibilities, they stop thinking and choke off their very lifeblood – which if it doesn’t kill the business outright, it nonetheless leaves it crippled and weak.

My partner and I learned that in good times or bad, we must continually think about how we can grow our business. This means creating an environment which fosters knowledge sharing, crazy ideas and healthy debate. And most importantly it means taking the action you feel is best, despite anything fear may throw at you.

I know what I am saying is true – because Business Spaces, our new workflow automation system is a direct result. Cogent Road management spent countless hours thinking about how we could use existing resources to provide new solutions to the mortgage lending market. We filled up whiteboard after whiteboard with ways in which software could help mortgage lenders get more production from fewer people. We designed improvements over existing paperless solutions while incorporating ways for lenders to enhance the overall experience for their borrowers. Client response has exceeded our expectations.

While a deteriorating market environment kept screaming at us to hunker down and cut spending – we did the opposite. We assessed the market, thought through our options and realized that to grow we’d have to act on the best one.

I encourage you to do the same.

1 Comment | entrepreneurship, mortgage, mortgage broker | Tagged: , , | Permalink
Posted by Caped Crusader

What I Learned from Fire Ants

May 13, 2008

I’m flying back to California from an extended weekend at my in-laws eighteen acre farm in Tennessee. It’s not a working farm, but one of those beautiful pieces of land perfectly accessorized with hundreds of yards of three board fence, ponds full of large-mouth bass, and lines of spectacular sixty foot tall oak trees. It’s the kind of place where you wake up to sounds even the Philadelphia Harmonic can’t duplicate. It’s a setting that, in the words of my brother in law, “will completely unwind a man”.

With the quickened pace of our California software company just hours away, and the quiet stillness of Tennessee only hours past, I’m stuck in a place that’s got me thinking just how important having a clear vision of who you are and what you want to be is to the success of your business.

You can learn a lot by watching chickens. Or fire ants. Or the way horses respond to a looming thunderstorm. Nature, for all practical purposes, is reactionary. The response may be simple, the way fire ants pour out of a hole made in their ant hill in such volumes it looks like blood streaming from some mortal wound. Or nature may respond complexly and more slowly, as in the way a tree will grow too tall for its own roots as it strains for light in a dense forest. Yet, no matter how beautiful, nature is a well orchestrated symphony of cause and effect.

Man, however is not a part of this symphony. We sit outside of nature’s rules in much the same way as the composer transcends the boundaries of the symphony being played. Man is gifted with the greatest of all gifts, an ability to envision, a capacity to create.

If you are a business owner, or an aspiring one, my weekend excursion into nature has compelled me to share one bit of advice: You will be successful if you continue to think and create. As you strive after your vision, you will grow. Become reactionary, (which this weekend has taught is the natural way of things) and you will stagnate. Keep creating. Keep growing.

My partner and I began Cogent Road with a simple vision – provide loan officers with innovative software that can help boost their business, and ultimately their incomes. This caused us to think about different ways in which our software could deliver this vision. Rather than trying to be a specific type of company, we focused solely on helping our clients. We began in 2001 with a credit platform we leased from a third party. As we thought about our vision, we created different ideas in which credit could be used to increase our client’s business. This led to ideas on how we could help our loan officer clients help their own client’s, the borrowers. It led to ideas in which credit could be used to increase our client’s word of mouth business from referring sources and previous borrowers. The led us to create Funding Suite, and in turn the concept of credit proofreading, which we believe to be the most powerful business building strategy a loan officer can use. And credit proofreading is leading us into new software offerings for loan officers that Cogent Road could never have anticipated just a few years ago.

Reflecting back on a weekend lived right out of the pages of Field and Stream, I realized how much we, as business people need vision. Perhaps for the first time I realized how contrary to nature a creative vision actually is. And likewise how difficult. Vision takes thought, and thinking may well be the hardest work a man can do. So it goes that I encourage you, wherever you find yourself right now, to begin creating. Begin the work of thinking about what you want to do and why you want to do it. Then by all means get to doing it. Break free of the reactionary nature of your industry, your competitors or even your own habitual way of looking at your business.

You possess what nature does not – the ability to create. Now get composing.

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Posted by Caped Crusader