Student Takes on What Went Wrong and What Could Have been Done if Anything
With T. C. Transitus Communications Inc.
Richard's Take
The only major problem I could think of after reading the Transitus case
is the lack of a common vision and a common path to reach this vision
between all members involved. Even though all members involved had a
common goal for their venture to be successful, they each had a
different approach "path" in mind.
The solution?
1- A clear written and agreed upon plan which clearly indicates the path
to be taken.
2- Updates can be made to the plan with organized meetings.
3- And finally, I may be way off on this one but I think one of the members involved should have taken the lead or have been elected to sell a compelling COMMON vision to the customers and to all those involved with the Transitus project.
Another problem which is minor compared to the first is the selling and
advertising approach taken by transitus. I think the ads should have
all been pre sold, no exeptions made. When an advertising spot is sold
out, new advertisers will think "wow this must be a good spot since it's
sold out". On the other hand, I am against the method of advertising on
the product itself (i.e. ads on the billboard that say "rent me, call
1-800-...") this method of advertising seems to cheapen the product and
credibility, advertisers think "well, if they aren't selling all the
spaces there must be something wrong...". I think this is especially
valid new companies with no track record like Transitus.
Richard- I think the second point you make is even more valid than the first one. Editor
Nikhil's Take
I believe the Transitus product was superior in
design, cost efficient and had the ability to create
revenues. The problem was not the product.
Problems:
1. Roles were not adequately defined.
Yes, everybody is in sales. Product and company knowledge is essential, but not everybody has the same role. Roles should have been defined according to project purposes, and individual strengths. With these roles defined, internal success measures should follow, keeping the overall objective in mind. This may have avoided the miscommunication between team members, and the unrealistic growth expectations.
2. Over promising advertisers, under delivering.
The contract with Corel should have been broken down
into separate contracts. The New York contract should
not have been signed until New York barriers were
crossed and ready to serve. A satisfied customer is a
returning customer, and an excellent advertising tool.
If they were willing to pay that much today, they
will likely be willing to pay tomorrow..
3. Shareholders and investors not treated equally.
With the existing shareholder plan, it would seem that the majority of power resides in a minority of investors. This may be a source of tension in the relationship of management and shareholders. When things get bad, external pressures can result in reactions that make the situation worse.
4. The target market is very different from the
traditional associated market of the advertising
medium.
The targeted advertisers feared the association of
their ads as being "cheap" because of stigmas
associated with the advertising medium.
Jeff's Take
What's the Problem?
Quality of the product: the cap-top looked very good, but it is associated with and suffers the stigma of cabs, which in Ottawa are not a high quality service --> the cars are old, boring and dull, and the cab-drivers tend to be rude drivers on the road.
Although the cap-top has 9 sides, none are particularly large, therefore the ability to get a message across is limited. Therefore it is used best for branding only (i.e. a red "Coke" or Nike logo, or $0.69 McDonalds Hamburger, etc.)
Targeted Customers: The large companies such as Nike, Coke, Pepsi, GM, McDonalds, can already afford the expensive advertising (such as TV), therefore the great value of the cab-tops is not as compelling, and, for them, just a small part of a much larger advertising campaign.
Growth Plan&People: Exponential, profitable, immediate growth for a start-up with no competitor quickly approaching, is an unnecessary risk. The business model should be proven, and the ability of effectively deliver on promises made to customers is required. If HR is a company's most important asset, this company appeared not to be run by the best. For immediate, exponential growth, an experienced team is required to make sure there minimal mistakes made, and they should have a proven track-record of selling advertising space to large corporations. This team appeared to be lacking in these areas.
What are some solutions?
1. Slower, city by city growth with a proven track record before moving to the next city.
2. Pre-sell at cost (or low profit margins)--> make it easier to sell and start accounts with customers and increase the visibility of the product in a city, and thereby get over any stigma of the product, and increase the value of the product while working any "bugs" out.
3. Target local companies with smaller budgets, who really do need the best "band-for-the-buck" with their limited advertising budgets.
Recommendations:
4. Have an experienced team
5. Start off in one city, to test and prove the business plan and practically of the business, thereby minimizing risk. Once proven, expand into 1 or 2 more cities at a time.
6. Target for local advertising. The high-tech boom of 1995-2001 would have been a great opportunity for small high-tech start-ups to advertise, and Dot-Coms to get their URL out.
7. Once the product is more accepted, and many cities covered, then target the large corporations.
Jeff's footnote: One word -- YES, consider this -- 1999, an army of cabs completely covered on
all nine sides at night with bright blue "NortelNetworks.com/jobs" on the
side lit by halogen bulbs. I think it would look great and be eye catching.
As an advertiser, getting the entire top with one consistent colour and
message would be a more attractive option than just a side.
In the high tech boom, getting noticed cost effectively in a local market is
important. This could have been a great enabler.
ps. I think that it has to do with large, negative, initial gut reactions to the idea of ads on taxis. When I saw the cab tops, for the first hour and half into the lecture, I sure thought "what a lousy idea" -- until I saw the financial numbers, and saw how cheap this was compared to other mediums. The demo tops with 9 sides -- have the advantage of lots of space to sell to many
different companies, but to me, my first reaction was that the space was so small that it limited the advertiser's message. Also, depending on the angle you view it at, you would see up to three sides simultaneously, which creates more of an advertising "noise," not the ability to push a message. I think it is a better looking, more dramatic and professional looking product by
selling the entire top to only to only 1 advertiser.I think people will have to see it to believe it -- on the street in action
-- it's a hard sell otherwise
Robin's Take
What went wrong?
- not enough advertisers
- unrealistic expected growth rate
- investments made based on this expected growth rate
- a person, or several people, within the company were working for
personal goals that did not coincide with the goals of the company
i.e.. promises made to advertisers and not kept.
- Possible Motivation:
The people who perhaps put personal goals ahead of company one's probably came on board with the anticipation
of making millions. They found the company was not meeting the growth rate they
expected and concluded the company was doomed for failure. At this point their goal
became to get as much as they could out of a sinking ship.
Solutions?
Problem: Not enough advertisers
- maybe the price was too low
- perhaps the targeted advertisers perceived the medium as sub standard because of the low price
- should have targeted small advertisers
- it appears that only large advertisers were targeted
- large advertisers want a proven advertising medium
- large advertisers are not as concerned about cost as small advertisers
- find the smallest ads in the newspaper and contact them
- stick with regional advertising (how to do this without setting up sales teams in each city?)
Problem: Unrealistic expected growth rate
- ensure everyone has a more realistic growth rate expectation
- pre-sell everything as discussed in class
- bring in an accomplished accountant
- find out if there was anything else going on
Darcy's Take
Problems
The Transitus company had four main problems that resulted in its failure. The first is the speed at which they tried to grow. Transitus tried to open operations in multiple major cities. This was a strain on the organization's resources and didn't allow them to remove the little mistakes that inevitably occur during start-up. Secondly, the industry has a pour stigma about the companies that advertise on taxis. Most companies that advertise on taxis are casinos, alcohol, cigarettes, and questionable nightclubs. This stigma made acquiring new advertisement very difficult, as most companies didn't want to be associated with the above. Thirdly, an operational problem arose regarding the taxis. It was difficult to get all the taxis in at the same time to change the advertisements. Plus, there weren't any incentives for the drivers. Lastly, the management team was found to be deficient. Various activities were occurring that lead to the cessation of operations. These ranged from the lack of supplier payment and other problems.
Alternatives
The first alternative is to start the company again. Start the company in a small-medium city. This will remove the "kinks" during start-up and build a reputation with clients. Bring in a new management team, one that can be counted on. Before starting operations again pre-sell all contracts. This will help greatly in financing and assure a complete launch of the product. A reward system for the taxi drivers should be created. This can be through a union or the taxi company, either way it has to be monitored for effectiveness. A second alternative is to sell all the assets, crystallize the losses and move on. The third alternative is to develop the business model, business plan, and engineering plan, and sell it.
Recommendations
Start the company again with a trust worthy management team in the city of Ottawa. Ottawa is a large enough city to develop all aspects of the company and remove all the problems before integrating into large cities. Ottawa also has a tremendous amount of corporate capital that has a need to advertise. Create an incentive plan for taxi drivers. This plan will consist of partial revenues linked to maintenance of the advertisement cap. After securing Ottawa the company will expand into Toronto and Montreal where new problems will occur due to the size of the metropolitan areas. After solving the new problems, the second expansion will be to Vancouver, New York, Chicago, and Detroit. The third expansion will be North American wide.
Darcy's footnote: One option is to sell the assets to the competition or a taxi company, or see if they want to buy them. Are there more visible outlets to advertise the sale of this business? Personally I think this is a viable business model. Granted, I agree that it isn't a large money-maker, but it will bring money in. All you need is a new management team. Build the company up to a good size and sell it, maybe franchise it.
As for the e-paper, I don't know anything about it. Gut feeling--taxi's are highly abused assets, I would think that e-paper maintenance would be high due to the rough nature of taxis. Stick-um-on ads are easy to produce and easy to replace.
Gita's Take
I think the main problems with Transitus had to do with the association of
cab ads with nightclubs and alcohol (and I guess the fact that Transitus
had decided not to allow the advertisement of alcohol would have meant the
loss of potential advertisers), and the fact
that this type of ad could seem less "exclusive" to an advertiser than a
billboard or bus board. By less exclusive, I'm referring to the fact that
the ads are on the small side and that the advertising space is shared
with others (unless of course the advertiser puts ads on all sides of the
unit, which might seem like overkill). I think that this type of
exclusivity is important to major corporations. This is why they buy full
page ad space, billboards, and busboards. While the GAP advertises on the
sides of buses, GAP ads inside the bus (where there are many other ads up)
are not very common.
One question I have is (I may have missed the answer to this in class), can photographic images used on the Transitus units? I noticed that in the pictures of the units most of them had logos/text on them, whereas many ads today are photo-intensive.
(Good take, Gita. The Transitus ads can be full colour with lots of visuals including photo quality images. Editor)
Kate's Take
1) What's the problem?
¨ Transitus had trouble marketing to companies which weren't related to alcohol or strip joints. The companies they tried to market to didn't want to be affiliated with the types of companies who use that type of advertising.
¨ They chose the wrong target market and business segment to focus on.
¨ They started too big. Went in the USA right away.
¨ They made promises they couldn't keep about taxi ads in New York City.
¨ Very new company, no track record yet.
¨ Bad management of corporate assets (losing money) and some bad employee choices.
2) Possible solutions?
¨ Sell the ad spots to liquor companies and tobacco companies, etc.
¨ Start local to gain experience and then go larger when there is demand for it.
¨ Don't make promises that you can't keep. They should have made sure they had the taxi's available for the ads to be put on.
¨ Could have brought some management on board who had some prior experience in this field or industry.
3) Recommendations?
They should have done the opposite of the problems that were mentioned in question number 1. It is obviously easy to say what went wrong after the fact. The solutions mentioned above would have helped but who knows if it would have actually made a difference.
Q. Should they have sold the units instead of the advertising?
Al's Take
What are the problems?
The case study, Signs Inc. and T.C. Transitus Communications Inc., looks good when I read it.
· Good research was done (Transitus Market assessment, GRP for moving billboards)
· Financial projections look good
· Owner & management team looks strong
o Dr. B., well-known for his entrepreneurship and innovative business sense
o Scott, experienced entrepreneur
§ Has a successful and rapidly growing operation
§ Winning the Bronze Young Entrepreneur of the Year (1996) from the Ottawa-Carleton Board of Trade
· Assessment and identifying the risks seem realistic
With additional information about the situation,
· Learning about awkward method of doing business
· Learning Nu-Tek Signs Inc. and T.C. Transitus Communications Inc has a strict policy on who is able to advertise
makes it clear that these issues are major problems. The first issue is the downfall of the venture. There is no way a business is going to thrive when one of the key personal is not focused on success.The problem is that Scott worked with Dr. B. on other projects and delivered. Plus he won an award form the Ottawa-Carleton Board of Trade, which also gives him credibility. The second issues regarding a strict policy on who is able to advertise, although commendable and ethical, did not allow for a better chance of attaining income in the beginning to sustain the business financially – cash is KING!
Solutions / alternatives
All the solutions and alternatives are meaningless because the venture was going to fail from the beginning. There is no way a startup company can have a key personnel who is not focused on success.
Recommendations
A lesson I learned from this case, if you are going to partner with someone or another business, a full check must be completed. Regardless of how it looks.
So, my recommendations,
· Check all personnel's background that affect major decisions within the company.
To me, it was a simple reason why this venture failed. I thought it was a great idea with a potential to make a lot of money. There are some other issues like the individual cabbies not receiving a share of the advertising. If this venture were to start up again, instead of physically having to post the ad onto the individual cabs, going to an electronic mobile sign would be a better concept. Less labour involved and reaction time to posting the ad is very quick.
Jackie's Take
In my opinion, the concept was a good one. The
weakness, I think, was in taking on too much too
quickly. Penetrating both Canada and the US
simultaneously was a bit ambitious for a company just
starting out. I think Transitus would have been
better off limiting itself to the Ottawa area and then
growing as success in Ottawa gave them a solid track
record.Another suggestion I would make is that all the
advertising should have been pre-sold. That way,
potential clients could have been enticed by the fact
that X amount of ads had been sold already.
Matha's Take
THE TRANSITUS CASE
Major Problems:
There were many problems that should have been addressed before putting such a heavy commitment into the project. However, I think that the two major ones were as follows:
* Started too fast. Before making sure that the project would actually work and there were definite customers and a demand for such service, there were already 35,000 cabs running at multiple locations
* Skipped certain steps that were critical. Some of this things were: a background check of personnel, signing long-term contracts with multiple companies, etc.
So in short, the major problem was that the people behind the project wanted to get rich fast. In thinking that “it’s a great idea, we’ll make lots of money” they didn’t analyze everything thoroughly.
Possible Solutions:
* Stop running the cabs until there is a definite demand and more companies that will agree to advertise.
* Get new target market for possible advertisements. Since the customer that is being targeted is not responding, perhaps finding another niche is the key.
* License the idea: ‘for a fee you can “rent” transitus and advertise whatever you want’ - type of deal. This way the customer will come to you, not you having to run after the customer.
Recommendations:
* Have a more detailed business plan which includes step-by-step constraints and pre-thought-of solutions to problems or pitfalls that may arise - like hypothetical situations. Ex. If X happens then we will go to Plan B.
* DEFINITELY do a background check on personnel. You don’t want to be doing business with someone you don’t know. Even if you both have to examine each other's credit or bank records..... It’s a good way to develop trust among the partners: I have nothing to hide or be ashamed of so I will show you......if you don’t have anything to hide then show me. (that kind of thing)
* Slowly withdraw from markets that are not being profitable to re-distribute assets to more profitable markets. If nothing is profitable, then move to less costly locations or narrow market (not so many cities, etc).
Rob's Take
Upon reading the material on Transitus, two issues seemed to surface.
(1)The business idea seemed solid enough and the benefits were well laid out however, I think that the initial planned geographical distribution of the project was far to large and scattered. The company seemingly has no name/credibility that could mitigate the issues encountered with such a scattered distribution.
(2)A lack of commitment on behalf of the purchasers. There seemed to be a lot of interest in the project but that's all there was...interest.
Solutions
Begin on a smaller scale. Focus the efforts on an area where your core competencies are maximized (Ottawa for starters).
Apparent core competencies would be:
==names known within the business community. Instant credibility!
==local area knowledge...policies, market...
==formal and informal networks...contacts
Pre-sell. Pre selling although a little more difficult makes a huge difference in at least two ways.
==Pre-selling gets commitment...contractual commitment!
==Pre-selling is "self-propelling". Businesses often do what others are doing. If Transitus had pre sold to a few key clients the business would immediately bring with it more weight when trying to secure other clients.
Cathy's Take
What are the problems?
After hearing and reading the Transitus Case, a few of the possible problems are:
1. Too large of a target market. The initial target market was too large and the company should probably have focused on a smaller market and then once successful move into a larger market. This would have lowered the risk that the company was exposed to, as before they move into a second market they will have had to be successful in the first market.
2. Didn't pre-sell anything. By pre-selling the company could have hedged their exposure to risk.
3. The lack of vision and capabilities of the management team. There was perhaps not a strong enough vision for the company as a whole which led to many people trying to pursue there own personal goals that were not totally in line with the goals of the organization.
4. Targeting a market with little interest in the product due to the prior association of the product to cigarette, beer and strip joint companies.
What are the alternatives/solutions?
· Pre sell everything! This will allow the company to hedge their risk and would put them in a much better financial situation.
· Have a clear vision. Ensure that the company has a clear vision and realistic goals that employees can understand and work towards.
· Start in a much smaller target market and aggressively target one small niche market before moving to a larger market. Perhaps target the product to the Ottawa market and when the company has been successful and has a good reputation then expand to a larger market.
Recommendations
· Find a very capable management team that can create a strong vision and mission statement for the company. The management team should clearly outline their goals with a list of milestones that they want to achieve before moving to the next step. An example might be that they want to capture x% of the Ottawa target market before moving to the Toronto area.
· The company should start selling their product to a very small market and they should move to a larger target market once they have been successful.
· The company should pre sell everything and they should ensure that they don't make promises that they cant keep.
· Perhaps the company should implement a few changes and try to target the same market for advertising. If the changes work and the company is successful than keep this market. If the company is still not successful then perhaps they should target cigarette and alcohol companies.