Your staff know your business well--well enough, in fact, to copy it. Here's how one company coped.
Employees sometimes worry about bosses stealing the credit for their ideas. But what do you do when it's the other way around?
That was the conundrum facing Ray Sjolseth, president of Seesmart, which makes LED lighting for offices and homes. LED lighting, he says, is the "lowest hanging fruit to achieve energy conservation." It's a green technology, which brings high interest from both investors and customers. "We have the right product at the right time in the right space."
The problem with having something so right is that others want it too, Sjolseth discovered. "We've had this problem with several salespeople over the years who worked for us and thought they could do it bigger, better, or faster, so they started their own competing companies. We've had distributors and dealers do the same."
How does Seesmart deal with this kind of betrayal? Here are some lessons Sjolseth says he's learned:
1. Take it as a compliment!
If imitation is the sincerest form of flattery, then having someone try to recreate your entire company should make you feel positively fawned over. "You can look at it as a) 'You're ripping me off!' or b) 'I'm flattered because you like what we're doing,'" Sjolseth says.
In a few egregious cases, Seesmart has issued cease-and-desist or demand letters, but it's never gone so far as to actually initiate a lawsuit. "We're limited on people and on time, and when you get to a position like where we are, where we've had some success and are a growing company, we need to maintain our focus. Anything that gets in the way of that can easily become a distraction, so we have to pick and choose our battles."
Besides, he says, imitating Seesmart products isn't as easy as it appears. "In some cases it's easy to replicate a product from the look standpoint. Performance is a different animal. We have some proprietary technologies, and some we license via exclusive agreements. Also, some of the components we use to meet our performance standard aren't readily available."
2. Don't be a 5 o'clock client.
One problem Sjolseth discovered was that its contracts with employees and business partners had loopholes would-be imitators could exploit--even though he and his business partner had invested in a high-powered law firm when they started the company.
"The problem was, we were a 5 o'clock client," he says. Seesmart executives would call the law firm and get their attorney's voicemail. They wouldn't get a return call until 5 p.m. or later--when the attorney's energy and focus were already spent.
As a result, things were overlooked when it came to drafting Seesmart's contracts. "The counsel didn't really understand what we were trying to do, so the contracts were improperly written," Sjolseth says now. "If I could do it over again I would screen a lot longer and harder for law firms."
Today, Seesmart has much more effective counsel and calls are answered. "You need to find someone who's down to earth and who understand what you're trying to do, and isn't just looking for a home run," Sjolseth says.
Since retaining new counsel, the company has rewritten its contracts with employees, distributors, and dealers. "There were a few dealers we lost because they wouldn't sign the revised contract," Sjolseth says. "That's unfortunately a risk you take. We have built a company and a brand that we need to protect."
3. Pay attention to employee behavior.
"Generally, the people who seem like they're absent really are," Sjolseth says. So an employee who doesn't seem committed to the job or is frequently away from his or her desk bears watching. "When I look back, the people who would disappear were the ones starting their own companies."
Part of the problem is that, in the face of rapid growth, the company had become less stringent in its hiring. "We started out with A+ players, and we got distracted trying to add bodies," he says. "Now we're back to to A+ players. If your team isn't all A+, move on. You can't afford to lose ground that way."
The same goes for dealers and distributors, he adds. "You're inviting a stranger into your family. So you'd better do your due diligence on that stranger."