Caveat Expectation:

Public Relations Strategies for Emerging Growth Companies

Copyright Jeffrey Geibel, APR

Larry Ellison's much-touted concept of the Network Computer ( NC) went into hibernation and Oracle also lost its top executive for that division. Several other vendors have quietly dropped their products. Similarly, Apple's Newton has been abandoned by the company, six years after then-chairman John Scully's much-touted technology was introduced. About a decade ago, the artificial intelligence industry (expected at the time to be the next major technology growth area) fragmented into a dozen players, and never reached their lofty revenue or market projections. In fact, the stigma is still so bad that you would be hard pressed to see the term 'artificial intelligence' used today, even in actual applications. (The term 'expert systems' is preferred.)

All of these events are warnings for emerging growth companies on the use (or more accurately, misuse) of public relations as a tool to help them attain their business and industry goals. The irony is that public relations, if properly understood and utilized by emerging growth companies, is perhaps the most effective tool to rapidly establish a foothold in a technology market and then to expand that beachhead into market share. However, any tool, if misused, can cut both ways, which often results in self-inflicted wounds.

How can an emerging growth company effectively utilize public relations to support its continued growth, yet avoid the dangers of misuse? Here are some guidelines for the management team:

Keep Your Predictions Within the Zone of Credibility

Enthusiasm and vision are two important characteristics for emerging growth companies. However, this adrenalin has to be tempered with the concept of credibility - that at some point in the not-to-distant future, you will have your remarks compared to reality. Everyone is familiar with the venture capital yardstick that your business plan better show you to be a $50 million company in five years, and suitable to go public with a 40% annual return on the VC money, or they won't even talk to you. But how many companies reach that goal? Not many - which is why the VC companies need to have such high rates of return - to be able to write off all the turkeys. (Notice that VC companies never release figures on how much they write off each year? That yardstick would show which ones are better at spotting the real opportunities.)

That being said, you still have to make projections and forecasts. Better to keep the forecasts reasonable such that you can meet or hopefully beat them. The tempered approach today will pay off in increased credibility in another 12 to 18 months. There's another side to that - when will your company have a higher value (and you will correspondingly know how much it is worth) - at the forecasting stage, or once you have reached your initial targets? Today's temperance can pay off in tomorrow's dollars.

Use Technology or Business-Case Analogies, Not Specific Company Analogies

One of the most powerful public relations communication tools is the analogy - a comparison to some set of facts or circumstances that your audience already knows. How many times have you heard the cliches batted around that a certain company will be the next Yahoo, eBay or Microsoft? How often do you think that comparison is taken at face value? (Hence resulting in an instant lack of credibility - just when credibility is desperately needed.) The big danger there is that the use of those comparisons provide specific, historical benchmarks that you will be compared to. Isn't it much better to say "This will do for our technology market what the graphical browsers did for the text-based Internet." You are still biting off a lot with that remark, but at least you haven't pinned yourself down to a specific performance that you may regret later. For example, if you tout yourself as the next Microsoft, you may find that you are being held up for some substantial stock options packages when trying to recruit key employees. After all - you created the impression of the next Microsoft' and everyone knows how much money the initial employees of Microsoft made on their stock options (all of the inital founders are billionaires.) If you set the expectation, by design or default - you had better be able to meet it.

Explain Your Analogy- Don't Leave it Open to Interpretation

Even though the correct selection of analogies for your company, products or market potential can allow you a lot of wiggle room, those analogies are best tempered by an explanation of why you selected that analogy, and why you think it is appropriate. Otherwise, the audience for your remarks (the media, potential customers, investors, current and future employees) will draw their own conclusions - which may not be what you had in mind. Consider using a broad-bush analogy to get attention, then narrow that comparison by further clarification so that you wind up in a space where you can fulfill the expectation. For example, if you say that you software will do for your market what secure encryption did for e-commerce - then quickly explain by that you mean it will help customers to accept the new process and complete the transaction - that still leaves a lot of room for the realistic expectation of what your product will do.

Provide Periodic Updates to Your Forecast

Credibility is critical in sales, marketing and public relations. The more you can demonstrate the ability to forecast accurately and hit your targets, the more credibility and leverage you will gain. Conversely, do you notice what happens to the stock prices of publicly-traded companies that do not meet their earnings or revenue forecasts (and especially to those who did not provide a head's up to the analysts?) The stock price takes a pounding - often dramatically and immediately. Similarly, your use of public relations to disseminate your forecasts and projections should be followed by periodic updates that key back to those forecasts. If you want your company to be a company to watch' - then you had better expect that you are being watched - and your projections are not necessarily forgotten. If certain members of the management team are aggressively pushing for dramatic (and questionable) projections - you might just want to ask them - "Will you be around to explain this forecast"?

Public relations is a powerful and viable tool for the emerging growth company to gain attention both for itself, its products and markets. Like any tool, it can be used correctly or incorrectly. Using public relations to set realistic expectations for your company's performance can pay significant dividends when you meet, or hopefully exceed, those expectations. Also, management's understanding of the need to establish and maintain accurate and open communications with the various publics' in its industry can establish early-on credibility and positioning as a company to watch'.

Public Relations for Emerging Growth Companies - A Definition

Public relations, in a nutshell, is the management of the communications process between a company and its publics'. A public' is simply a group of individuals that have a common characteristic or interest which make them of value to the company. Customers, potential staff, investors, third party developers, strategic allies, venture capitalists, stockholders, etc., - each is a public'- with a specific communication need (e.g., of specific interest to the company for a specific reason) and that should be kept in mind when developing a public relations program to reach that specific public'. A more thorough definition of public relations would be that it is the management of the two-way communication process between a company and its publics, for the purpose of gaining understanding and acceptance of the company's corporate goals, products and market objectives.

Copyright Jeffrey Geibel All Rights Reserved.

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