You Gotta Beat the Devil

"… best-in-class projects should be classified as waste."

--Geoffrey Moore

A lot of high tech marketers run away from differentiation. They would rather be viewed simply as better-faster-cheaper -- not different. Most times, the value of being different is not self-evident to the customer. And competitors may paint you as simply being out of step.

I hate it when that happens, because most high tech people I know are passionate about their technology's differences. Besides, just because it's hard to communicate the value of your differences doesn't mean you shouldn't try.

In fact, according to Geoffrey Moore (read his blog) that's pretty much the only way to raise your margins and your revenues -- until competitors imitate you and take those differences away. His argument reminds me of a line from a Kris Kristofferson song, To Beat the Devil -- "If you don't wanna join him, you gotta beat him."

I do think, however, that there is a place for flawless execution, independent of whether you innovate. Is "best in class" service, for example, by itself a sustainable basis for high margins? I think so, especially in luxury brands. If you don't believe me, take a cruise.

Yes! We Are Number 2!

"The white paper we launched is very successful and has reached number 2 within a month, on TSS."

--Director of Marketing, GigaSpaces

This is the kind of email you like to wake up to on a Monday morning. That's the client telling you the white paper you wrote is getting great pickup. In fact, it reached the number-2 spot on TheServerSide.com. That is the enterprise Java community's version of the "Billboard Hot 50."


Why am I telling you this, besides just bragging? As I have blogged here before, virtualization (what this white paper is about) is a net contributor to the current tech expansion. By net contributor, I mean that even though it is not yet a hot seller itself, virtualization spurs invesments in other technologies (net consumers). Those include ERP, VoIP, business intelligence, and others that rely on cost-effective infrastructure build out.

Virtualization can also spur investment in another cool technology -- one now entering the main stream -- SOA. When people start connecting the dots between virtualization and these other technologies it will really take off. I think that's why the white paper did.

Vendor as IT Role Model

"…some pioneering companies have found a way to capture the benefits of packaged software in a customized-applications environment. They have adopted the approach of software vendors …"

--McKinsey & Company

Just after I blogged about how vendors should champion the cause of their IT customers, the spring edition of the McKinsey Quarterly published an article that says leading companies are already using vendors as role models … well, sort of. The article is titled "The Next Generation of In-house Software Development," written by Sam Marwaha, Ranjit Tinaikar and Samir Patil.

The basic gist is this: that companies can speed development, reduce lifecycle costs, and enhance their areas of strategic differentiation by essentailly creating an in-house vendor of commonly used software building blocks to serve particlar user "markets." The authors call these market-focused applications "archtypes."

Here's an example:

"All 'road warrior' applications … need tools that support offline work, the offline-online synchronization of data, PDA form factors, and early-morning and late-evening technical assistance. Companies essentially need to standardize these processes into products, designed once and then used over and over again for different applications, within a particular archetype."

This is a trend vendors should get behind. As the article states, some technologies, like SOA, lend themselves naturally to making application components more reusable. Another is enterprise decision management (EDM), as noted by James Taylor in his blog post on this same McKinsey article. (I leave it to James to explain why.)

The point I want to make is that here's a perfect example of where vendors can help their IT brethren promote a business case and thereby strengthen both IT's position and their own.

You Can't Learn Street Smarts

This is the art of business acumen: linking an insightful assessment of the external business landscape with the keen awareness of how money can be made — and then executing the strategy to deliver the desired results.

--Ram Charan

The latest and last edition of The Sopranos arrived this week and so did the spring 2006 Strategy + Business from Booze Allen Hamilton. This happy juxtaposition of events led me to see strategy in a somewhat altered light.

Take the article titled, "Sharpening Your Business Acumen," by Ram Charan.

Booze Allen Hamilton describes this as "A six-step guide for incorporating external trends into your internal strategies." In some quarters that might be read as: "How to learn street smarts." Step 1, for example, is to ask yourself "What is happening in the world today?" Tony (in a sarcastically pedantic mood) might have said, "What you need to develop here is some situational awareness." Or take Step 6 -- asking "What do we do next?" Tony might have said, "Okay, so can you guys get real for a second?"

I don't know why some people have street smarts and others don't, but I don't think it's something you learn after, oh, say the age of 10. It involves a predisposition to take risks aggressively without being careless, and an innate ability to see patterns where others don't. I think the fact that these "steps" are posed as questions instead of explicit guidelines tacitly acknowledges that point. And, by the way, I don't think real leaders "iterate" -- they learn from their mistakes and move on -- translation: forgetta about it.

What's on IT's Shopping List?

We expect CIOs to keep up the pressure to wrest cost savings from IT operations, not least because those savings represent a major source of funding for new investments."

--McKinsey

The spring 2006 McKinsey Quarterly is just out and headlining this issue is the consulting firm's survey of 77 IT executives on spending plans for the year ahead. What's interesting is how cutbacks in low-priority areas (keeping overall growth to 3%) will help fund major investments in high-priority areas. Some of that money will come from IT-based productivity boosters, such as virtualization.

The study was written by Kishore Kanakamedala, Vasantha Krishnakanthan, and David Mark.

This is becoming a familiar story: Not all IT is high tech anymore. But where it is high tech, that's where growth happens (although not always). But some high tech is higher than others -- and where you stand in the innovation cycle can mean whether you are a net consumer or net contributor of investment dollars.

According to McKinsey, this year's high priorities include:

• Industry-tailored ERP
• VoIP
• Business intelligence
• Hardware upgrades
• Wireless
• Disaster recovery and high availability
• Security

Interestingly, virtualization (which McKinsey cites as a productivity enhancer) does not itself show up as often on shopping lists as these other technologies. Perhaps that's because the technology is very high tech. It is still relatively new and not as well understood. McKinsey might also have mentioned service oriented architectures.

The reason I say that is because I just finished working on a white paper (for my client GigaSpaces) explaining how these two technologies relate to each other in the transition out of tier-based (client/server) computing. You can read the beginning of the paper here.

Now somone should write a paper on how technologies on one part of the innovation cycle help pay for the investments in another part.

Do You Face a "Growing" Problem?

"… many financial services companies are mistaking customer inertia for loyalty."

--BearingPoint

There is an ad running on TV right now about how some men in their 40s and beyond face "a growing problem." I'm reminded of it when I see the current campaign on the BrearingPoint website promoting the firm's partnership with Google. Under the heading, "The Growing Information Problem" is an image of a knowledge worker, clearly frustrated, as he searches the contents of an open file cabinet drawer while his computer sits useless in the background.

Get it? The cause of the problem is growing, so the problem is growing.


Meanwhile, on its Executive Insight landing page BearingPoint is promoting a white paper titled: "Wake-Up Call: To Fix CRM, Fix the Customer Experience Now!" Financial services customers face a growing problem of their own -- the proliferation of confusing service options and data that CRM systems throw at them. Those customer are not happy -- and that's a growing problem too for the banks, insurance companies, mutual fund companies, and other members of the sector that have invested billions to build those systems.

The common thread here is that users don't care about the plumbing (so to speak). All they care about is relieving the discomfort when the plumbing doesn't work. That picture of a frustrated knowledge worker at the office could just as easily be the picture of a high net worth individual at home pulling together the information he needs to do his taxes.

There is an important difference, however, between a pharmaceutical company's TV ad and IT thought leadership. In the first case, when someone says they're having a bad experience, you know exactly what they're talking about. In the second, that's not always clear. A lot more needs to be said and written about how IT infrastructure decisions impact real users. And in a lot more graphic detail.

As many financial service companies have discovered, leaving it up to angry users to describe those details -- and only after these decisions have already been made -- may not be the best way to go.

Be an IT Champion!

"Trouble usually starts with a chain of miscalculations that end up clipping IT’s wings. An IT project veers off course, undermining confidence."

--Bain

What does it say about you if your customer looks like a loser? Earlier this week, I called attention to an A.T. Kearney study that shows how business management is losing confidence in IT. Today, on Bain's website, I noticed an article that helps explain why IT's internal customers may be losing faith, titled: "IT-powered growth." The authors are David Shpilberg, Steve Berez and Thomas Gumsheimer.

Bain surveyed 362 senior business and IT executives around the world and found that 60% believe that IT inhibits growth. This lack of faith, not surprisingly, dampens IT spending. Companies that see IT contributing to growth spend more. Companies that don't, spend less.

IT providers often have to sell through this crisis in confidence. Bain talks about how project sponsorship must rest with business center managers, not IT -- if projects are going to have impact, if they're going to be successful, and ultimately if they are going to help IT regain lost stature.

Yes, but the question is: How do you get that buy-in? My experience is that successful IT providers do that by enabling internal IT project champions. They equip the IT organization with mission-level messages that help sell the big picture, rather than just tactical efficiencies. Not only does that raise the profile of the IT provider with key decision makers, it creates stronger bonds with IT, which will also increase share-of-wallet after the sale.

Today's Cost To Serve Trap

"For each combination of customer and merchandise, there is an optimal cost-to-serve strategy."

--Booze Allen Hamilton

Booze Allen Hamilton yesterday published an article titled "The Hidden Costs of Clicks," by Tim Laseter, Elliot Rabinovich, and Angela Huang. The article's key finding: that the more service an online customer is likely to require, the harder it is to make money. That's why 13% of both book and office supply U.S. sales happen online versus only 2.7% for furniture and 1% of U.S. food and retail. Before a company decides to sell online, it should factor in costs for things like returns, shipping, customer handholding, and the dissatisfaction customers feel when they have to wait a long time for products to be custom made. If these costs are too high, relative to the what enough customers are willing to pay, than the business is not worth the investment.

The article goes on to say the decision to invest should not always be yes or no. Different products in the same category may lend themselves to a variety of channel strategies and companies should modulate channel selection like they modulate other aspects of their marketing, like price or the content of promotional messages.

The cost-to-serve trap seems pretty obvious, doesn't it? Yet a lot of investors still fell in. Now, what I'm wondering is whether there are still "obvious" traps out there waiting. After all, today's Internet looks much different than it did when Amazon and furniture.com were hot -- and people might get lulled into thinking that fundamentals like cost-to-serve no longer apply.

Today's hot products are not the tangibles, like office supplies, but higher value intangibles like information, entertainment, and advice. Here, cost-to-serve could be measured -- not in shipping weight or number of boxes returned -- but in the time spent by high-value thought contributors. Take blogs -- one of the "heaviest" ways of servicing "intangibles" customers. Some commentators (like Slate.com's Daniel Gross) claim blogs are already overvalued. Others, like blog thought leader Amy Gahran ("Blog Bubble Bursting? Get a Grip"), counter that a blog, like any communications medium, should be used intelligently, not blindly. She also says that some channels (like blog networks) "take a ton of effort, skill, and time" -- in other words, may have an inherently higher cost to serve than they're worth.

There is little data on this subject. However, here's a start: Boston-based Backbone Media's survey of 97 corporate bloggers in "Corporate Blogging: Is It Worth the Hype?"