More information on YourEncore

6 January 2006

Here are some written comments from Brad Lawson, the President and CEO of YourEncore:

Notes from my interview with Brad Lawson are here, below his written comments, on this same page.

January 3, 2006

Topic: YourEncore 2005 Review and 2006 Outlook

2005 Top Line Summary

Growth

	Committed support from and active business with nine major companies
	Utilization of retired experts has increased by 2.5 times over 2004
	Number of retirees in our talent network has doubled
	Pipeline of potential member companies has increased substantially

Value to Clients

Defined and Demonstrated our Value Proposition

	Open Innovation vs. Supplemental Staffing
	Delivering High Value with Low Risk through Proven Experts
	Unique, highly qualified talent on-demand for about the same cost as a senior full time employee
	E.g. – “We had very precise needs and required highly technical requirements…I thought there was no way that anyone could find the type of folks we were looking for…YourEncore proved me wrong…twice!”
	E.g. – “YourEncore consultants were the only way for us to access the folks that had real life hands-on experience. The contributions from these folks were realized on the first day! They shed light on issues that had long perplexed both us and our outsourced manufacturing partners.”

Defined and established processes and procedures for complex issues:

	ERISA and ADEA risk mitigation
	Confidentiality and Intellectual Property administration and security
	Contracting Standards
	Conflict of Interest Avoidance
	Export/Import Regulations
	Human Resource Governance Policies

Value to Retired Experts

Demonstrated our ability to build a strong network of retired talent

Scientific and Engineering Disciplines

	Physical sciences
	Life sciences
	Engineering
	Information technology

800+ enrolled, 25%+ PhDs

Network of Innovation Leaders (25%+ PhDs)

Spectrum of Talent from Diverse Backgrounds (230+ companies)

Access to “Best Practices” experience from Multiple Industries

Project opportunities for experts has increased by 2.5 times over 2004

Major Accomplishments

Built a strong pipeline of major companies across major industries

	Pharmaceutical
	Consumer Products
	Materials Science
	Chemical
	Aerospace & Defense

Built a strong Management Team with Optimal Account Support Structure

Established Subject Matter Expert on the Aging Workforce

2006 Outlook

Increase number of member companies by 50%

Increase utilization of retired experts by 100%

Continue to emphasize our value proposition of open innovation

Continue to deliver value for our clients

	Leverage the common skills and experience of our talent network
	Project Management
	IP Consulting and Analysis
	Regulatory Consultation
	Etc.

Continue to identify and generate opportunities for our retired experts

Clarifications from March 14, 2005 article on Service innovations to watch in 2005

Not supplemental staffing for existing workforce

Companies do not hire our employees, they are engaged on a project basis in return for a consulting fee – they remain the employees of YourEncore

Statement that the appeal for retired works is we offer them a bridge between work and complete leisure

Partly correct, however…

Very few of our retired experts envision a life of complete leisure

The need to contribute is highest driver, followed by need to stay connected and then need to remain vital

Most of our retired experts are engaged in some activity which allows them to achieve these goals

	e.g., retired scientist teaching advanced chemistry at the high school level
	e.g., retired engineer involved in helping secondary educational school systems match other retired engineers with science teachers for team teaching

Statement that for sponsoring companies this reduces the breadth of choice of hiring – quite the opposite is true

	Only 2 degrees of separation in the scientific and engineering community
	We have been extremely successful in using our network to find the right expertise – some of which is very, very specific and unique
	Many companies state that working with us has allowed them to find “needles in a haystack”
	E.g. – “We had very precise needs and required highly technical requirements…I thought there was no way that anyone could find the type of folks we were looking for…YourEncore proved me wrong…twice!”

Leap of faith to justify initial $50,000 investment

Value proposition has been proven several times over with documented case studies

	E.g., a new product gets to market six months ahead of schedule
	E.g., a damaged manufacturing facility is brought back on line weeks sooner than originally projected
	E.g., a new drug submission process is streamlined allowing for earlier market introduction and capturing of market share

Revised membership fee structure with lower cost of entry alternative arrangements

While there is still an economy where supply is greater than demand, paying some who has the ability to know where the supply is located, has the ability to make it available, and the knowledge and the wherewithal to apply it effectively, is significant reason to join our network

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Notes from my Interview with Brad Lawson

Committed support from and active business with nine major companies; we had three or four in March; added five more; in the same $50,000 sponsorship. We’ve revised our arrangements somewhat. Some people say $50,000 is too high – we’ve changed that to $10,000 / yr on an annual basis, and if companies achieve a significant amount of volume, that waives subsequent years.

	The membership fee is a qualifier. It helps us offset the costs that require us to get up to speed with a client. That was the intent.
	People were interested in this idea, but we found ourselves doing pilots to prove out the business cases.
	We changed the membership fee structure. So it’s more conducive to coming into the network.
	When you’re a company dedicated to a network of companies; you have to make sure that whatever you do coming into the companies.
	Can’t say who the new companies are. They are major organizations. They want to get a good year’s.
	A lot of companies want to talk with us about the retiree aspect. People want to do business with us because of the innovation aspect.
	Part of our services are to implement the processes and services that allow companies to re-engage some of their own retirees in a manner that is compliant with the host of regulations, from ERISA to DOD security standards.
	The member companies are aware of each other – they work in a collaborative fashion. We have a formal conference at least once a year. Also sponsor different forums. Sponsor an HR forum – to get together and discuss what each company is doing about impending retirement bubble. Facilitate interaction across the companies.

Each company has its own personality – one organization uses about 80% of its own retirees. They are using their own retirees across different business units. They are using their retirees to work on projects with their key suppliers. They are ensuring that their suppliers are adhering to their key processes. It’s become a huge win for them to do that.

Another organization uses less than 20% of their own retirees. Of those 20%, a major portion are being deployed in projects where they have outlicensed technology to other organizations for marketing, mfg, distribution. One org’n outlicensed technology to another org’n, but the problem was that the legacy product lacked expertise – process dated from the 1960s, placed them with the company that licensed the technology. The whole concept worked well.

Some retirees Going to completely new places: engineers from Boeing are in high demand; e.g. medical devices – need a disciplined approach to define requirements. Systems engineers from Boeing who have the background and the rigour to manufacture. They are a great fit in that area, and are being used prolifically in a life sciences company. Another organization has used several Boeing project managers who are disciplined. Boeing has adopted very rigorous project management protocols – to assess the project management expertise and implement.

Conversely, a lot of consumer research expertise from P&G has been in very big demand from every company in our network.

Usage varies by client. Different organizations have very different usages. Some people deploy across diffeerent business organizations. Depends on the client, different business situations.

All clients use all three different ways of doing this. Some clients don’t want to bring back their retirees altogether.

Our client within the client is almost exclusively in R&D or technology areas. It’s not in HR areas. While we interact with HR and Legal to ensure compliance. Mostly it’s in the scientific and engineering areas – folks with the problems and the budget to solve them. Our individuals are placed on time-bound projects – they are engaged more like consultants rather than employees.

Utilization of retired experts has increased by 2.5 times over 2004;

	When people sign up with YourEncore – we got started and founding internal companies made their retirees aware of it.
	Since that timeframe we’ve grown organically, primarily through word of mouth and our network.
	Only two degrees of separation; through extensive informal network we’ve been able to find individuals via our network. Through that we’ve recruited them into the network. Our major recruiting areas

Number of retirees in our talent network has doubled (greater than 800 – about a third are from member companies). There’s an 80-20 rule; it’s more like a 35-65 rule.

Our utilization rate has been about 35%. 35% of the folks have been engaged in some project over the last year.

Surprises: of the 35%, initially, it was much lower. I see the utilization rate growing as we add more companies.

The biggest AHA I had is the availability of such dramatically and highly qualified individuals who want to be engaged and stay connected. Their biggest driver is that they want to contribute. Very qualified individuals who have a world of experience. They are available and want to contribute.

Starting the company, there was a question about whether retirees would want to do this.

The other AHA – will these retires come in and work hard? They get to come in and focus on solving a problem don’t have to worry about email or their careers. They come in, do a great job and the results are phenomenal. We measure the satisfaction levels of every project at the end. Rank 1-5. We average between 4.5 to 4.6 ongoing as far as satisfaction levels in terms of the project being done. About 90 percent of projects are done ahead of time and below budget. That’s a tribute to work ethic and dedication of retirees.

A tribute to retirees.

Competition - not aware of another company out there that is doing what we do. The way we’re approaching it is unique. Our biggest competition is lack of awareness – be aware of who we are, what we do, and how they can use is.

After that, our biggest competition is acceptance. Most people say it’s a wonderful idea, putting it into practice is another challenge. We have inertia and norms to overcome. Organizational inertia; and skepticism. We’re continually improving that. What we see is a rampup of our services.

We’ll not get the project because they’ve decided not to do the project, or do it internally. Haven’t run into other companies.

Innocentive - not a competitor – a partner. We work in the same area; both are working in the concept of open innovation. Someone who works with Innocentive has a predefined problem, looking for a predefined solution.

	People come to us when nothing is defined.
	Services are complementary to each other.

9 Sigma – same as innocentive. Many times, companies can engage our expertise to manage the proposal process and see how it’s.

Technical consulting firms – they are potential competitors, but we haven’t run across them yet. An organization will come to us for unique, one-off expertise. Might look to Batelle as a broader organization to provide technology expertise in mass to provide information. They’ll come to YourEncore for knowledge transfer, while to Batelle to do the project.

Relative to cost, don’t know Batelle’s.

We try to keep our cost low – pay our experts a fair compensation. Our costs will be about what people pay from a senior technical full-time employee. Our fees come out of the lack of benefits and overhead. And can get them on-demand.

95 percent of the people who are doing this are not doing it for the money. They want to be compensated as an acknowledgement of their value, but that’s not the primary reason.

	They’ve retired, but want to stay connected, want to feel vital, and contribute.
	Majority of individuals in our network have gone through learn, earn, and return. They are in the “return” stage. It is an intellectual challenge for them. Get to interact with people in their old companies, and get excited by working with companies they haven’t been with.

2006 – I’m very optimistic. We don’t have the growth goals that Skype has. I want to increase the number of member companies by 50%. I know who they are, and will make it happen.

	I want to increase the utilization of our retired experts to 50%. And increase our current network.
	Need to continue to emphasize our value proposition – a lot of people want to talk about retirement issue – we are really about open innovation; finding unique expertise to solve technical challenges that you might not find everyplace else.
	Continue expanding and leveraging the skills we have in the network.
	Starting to develop a commonality of skills and expertise in our network. Several individuals who have background in project management; and regulatory compliance. Offering packaged skill sets around these areas.
	Building on the foundation of where we are. Continue the steady growth, adding companies in an ordery fashion.

Company has been funded internally – there’s no additional investment required. It’s funded from its employees and investors. We’re a C corporation with some private investors. We’re profitable and continue to grow profitable operations.

	We have a lot of individuals who have approached us and are interested in investing.
	Right now, our focus is on continuing to prove out this concept, and develop credibility, focus on value.

Look at BLS reports on salaries of technical consulting firms. We come in quite favorably in terms of costs.

Most of the projects are very custom and unique. This is why we’re trying to pull together common skill sets and provide offerings.

Built a sophisticated system to manage projects and talent networks. Most of the organization is put in place to support our clients. Use a combination of account manager; use the retirees to help us, and beneficial. Helps us understand the client needs.

Implementing a collaborative system to interact – but haven’t made any progress in implementing that.

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