Notes from our Strategy & Growth Roundtable with Dave Hitz

By: Adrian C. Ott

I had the opportunity to interview Dave Hitz, co-founder and Executive VP of NetApp recently for the Harvard Business School Association of Northern California's Strategy Roundtable.

Dave is one of the few people on the planet that can say that he started and grew a business from zero to more than $3 billion today - quite an accomplishment. In addition, NetApp is an extraordinary company as it was rated at the #1 Best Company to Work for by Fortune Magazine in 2009.

Dave provided incredible insights about his experience as an entrepreneur and the risks that come along with starting a business. Here are some the highlights of our conversation.

When asked about taking risks to start a company, he advised:

The risk of the upside failing is actually not that bad, it's the risk of the bad things on the downside that people should focus on instead. He gave an example of his decision to start NetApp instead of pursuing his MBA. His rationale was that to get an MBA you remove yourself from the workforce for two years and pay a lot of money to a school. After two years, you graduate and get a job; about the same upside you would get if you stayed in the workforce. (not a huge upside.)

On the other hand, starting NetApp would also take him out of a paid position but the upside was huge. He surmised that if it didn't fly, the worst thing that could happen was that he would have lost some income and time out of a paid job. He could still return to a paying job. "But I would have learned a lot." Key point: the downside risk was not that bad, and the upside was huge.

For anyone person thinking about or starting a business during a downturn, he said:

"I have three words of advice that I think should be the guiding principle for somebody trying to get into business and the three words are: 'good enough considering'. I think a lot of customers out there, whatever it is they were thinking they would do, their plans are different and they are going to choose something that is 'good enough considering' instead of whatever they were going to choose."

On hyper-growth, Dave said:

"One of the things we learned in hyper-growth, it is next to impossible to install any kind of business process, business system, IT solution that was likely to last for 3 years and the reason for that was that most IT solutions are not designed to scale by a factor of ten. The difference between a ten million dollar company's processes, structure, business and a hundred million dollar - it's really different - and it is different again from a hundred million to a billion."

He went on to say, "So few companies grow that quickly. There's not really a market for products that will scale that much so you have to keep throwing the old one away and you get used to stuff being broken… We would do new hire training and I would tell people,' Look, everything around us is broken, here is the reason, it's a sign of success and you might as well get used to it'."

Elaborating on 'broken stuff' during hyper-growth he referenced the metaphor:

"A stitch in time saves nine would seem to imply that if you see something broken you should fix it…Suppose you have twenty stitches but only one of them is going to come undone and you don't know which one, now the math says you can fix them all and that took you twenty stitches or you can wait and see which one broke and it only took you nine; sometimes it's better just to let stuff break, figure out what broke and fix it as long as it's a low enough percentage of things that are going to be so badly broken that you actually need to fix it. ..in that kind of a hyper-growth, you just can fix everything."

Expanding on hyper-growth, he added:

"You can get to $100 million basically instantly, from $100 million to $1 billion it looked like the best you could do was double per year, and then after a billion it seemed like it slowed down to about 50% per year...in general, if you're growing your employee base, is the best you can do."

When asked about any regrettable past mistakes, Dave advised:

"I have a big belief that the thing you do starting out is a good thing for its time, just like the business system that you put in and it was good enough for three years and then you have to rip it out and put in another one but that doesn't mean it was a bad idea. So a lot of the decisions I've looked at were problematic but we survived them and I think if we just spend a whole lot more on that something we would have lasted another year but that would have been money from when we were really little and didn't have that much money and maybe we would've gone under and so I'm very hesitant to second guess the kind of success that we've had."

I'd like to thank Dave for sharing his interesting experiences and stories.

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Notes from our Strategy & Growth Roundtable with Microsoft


By Adrian C. Ott

The business phrase, “Build, Buy or Partner” has been an industry standard for decades, referring to the decision on how to strategically grow business. But as change is inevitable, the underlying interpretation of this phrase has also changed.

Today, many large organizations say instead, “Build, Buy AND Partner.” Large organizations of today manage a portfolio of products and services that they acquire and organically build over time. And as such, a set of strategic partners and start-ups form a funnel of innovation opportunities into the organization.

In the pharmaceutical industry, it is very common for companies to create partnerships, and then to ultimately acquire and enhance them; hence incorporating each of the build, buy and partner components of growth.

How does an organization optimize their business portfolio and opportunities to ensure that they’re fuelling the innovation pipeline? Let’s take a closer look into the innovation of one of the world’s largest, and most recognized organizations:  Microsoft.

 

A Microsoft View On Innovation

Dan’l Lewin, Corporate Vice President for Strategic and Emerging Business Development with Microsoft, shared with us his perspective on the concept of the innovation pipeline and how it affects growth. (This session was hosted at Microsoft's campus in Mountain View California which Dan'l is also responsible for managing.)

The necessary pace at which innovation must occur is accelerating. Things within the open innovation funnel of an organization must move more quickly, and with more flexibility than in recent years. The primary challenge within Microsoft’s early history was innovating industries or markets which were merging into larger markets. For example, word processing did not stand alone as a market in the end, but eventually evolved into an office automation suite.

Dan’l cites another example within his organizations’ evolution being spell check. Spell check was originally offered as a stand-alone product, but today it is natural to be integrated into most of their office suite programs. The tech industry has rebuilt itself over time to fit this type of evolution.

Ideas must evolve; there must be new innovations and there must be the ongoing dissolution of prior ideas in order to create room for advancements. “Microsoft has excelled at this process and has embraced this global challenge, leading the way for innovation within the industry,” states Lewin.

Does IT Matter Anymore?

Dan’l observed that IT has seen dramatic changes over the past several decades, and it seems as though the speed of change has increased in parallel. But, the question posed by recent press queries, ‘does IT matter anymore?’ has sparked interesting debates amongst industry professionals. As technology continues to advance, how has the functionality of the more traditional IT departments changed?

Dan’l described a fundamental belief within the Microsoft organization that while either creating a new market or dissolving an old market to create a new market, that IT is the essential underlying enabler in facilitating these changes.

The pace at which change occurs has rapidly accelerated. Companies who are embracing IT to help enable how they touch and reach customers are those who will succeed within this new global marketplace. Microsoft fundamentally believes that efficiencies gained by applying computer power in virtually every industry have largely fuelled worldwide advancements.

Virtuous Cycle of Innovation

The Microsoft organization’s point of view for today’s innovation processes can be outlined as follows:

Incentive Systems→ R&D→ IP Incentives→ Collaboration and Competition→ IP Protections → New Products/Services enter the Market →→ Tomorrow’s Foundation!!

The foundation of tomorrow’s business innovation begins with establishing incentive systems. As you follow along the flow chart above, you will also notice the importance of research and development (R&D), IP incentives, collaboration with business ventures and partners as well as enhanced competition, protection of IP as this is at a business’s core value, and launching new products and services into the marketplace. Those businesses which engage and work through this process above are not only laying the foundation for the future of their industries, but will remain the most competitive within their field.

Decades of Open Innovation within Microsoft

Microsoft has withstood decades of innovation, continuing to hold their position as an industry leader worldwide. Dan’l cited key Microsoft milestones or achievements as:

·         Platform APIs

·         M&A

·         Commitment to Standards: XML, WSE

·         IP Ventures - Structured relationships through licensing with the outside world.

·         Interop Vendor Alliance

·         Secure IT Alliance

·         MSFP & Open Source/Shared Source

·         MSR (Microsoft Research)- Mission “Further the State of the Art” & RFP Process; the largest industry research team in the world

 

Dan’l shared that while M&A is not the largest contributing factor to the company’s innovation, it has played a role in their ongoing development. Over the past 10 years, Microsoft has been an industry leader in M&A, with over 62 total transactions and a disclosed value of $5.0bn. In comparison, Oracle completed 45 transactions with a $12.2bn in disclosed value, and IBM completed 49 total software transactions with a disclosed value of $9.3bn. Microsoft focused on acquiring smaller organizations over the majority of the decade, but has recently focused on larger, narrowly focused acquisitions.

 

The company exists today as a strong contributor in the industry large in part as it partners with over 700,000 companies or partners worldwide that do things in and around the Microsoft platform. “And as a platform company, we have made these commitments over time to programming, interfacing, upgrades which have made the company strong.”

 

In the next generation of web based start ups, the company intends to engage aggressively with the young entrepreneurs and new companies who are bringing about new solutions and underlying web based technologies worldwide. ”We will continue to look for industry patterns demonstrating where the activity is, so that we can strategically approach individuals and businesses to shape productive partnerships, which will fuel our ongoing goal of innovation,” added Lewin.

Many thanks to Dan'l for sharing his interesting perspectives on innovation and for graciously hosting our event on the Mountain View campus.



To listen to Dan’l Lewin’s full podcast presentation, sign up for our Exponential Ideas^® newsletter which contains not only this recording but others from companies such as Cisco, NetApp and other industry leaders and visionaries.

Link to complete Microsoft podcast 

 © 2009 Exponential Edge Inc., All rights reserved 

        

Notes from our Strategy & Growth Roundtable with Cisco

By Adrian C. Ott


At one of our recent Strategy & Growth Roundtables, Steve Steinhilber, Vice President of Cisco, shared his perspectives on how Cisco fuels their innovation pipeline and how it impacts growth.

According to Steinhilber, one thing which is clear is that innovation is going to be the only long-term method of creating and sustaining value for organizations. He continued, suggesting that innovation is the engine that drives Cisco’s growth, supported and encouraged by the corporation’s culture.

The corporate culture at Cisco shifted several years ago to place focus on innovation. To explain this shift, Steinhilber asked, “What does this mean other than putting it on a badge”?

He responds by suggesting that, “for Cisco, a culture of innovation means: 

·         We recognize and reward innovation.

·         We are willing to take risks and we don’t punish people for making mistakes.

·         We bring in outside ideas.

One of the most important things we can do is to create a culture within an organization that fosters and encourages innovation.”

The Many Dimensions of Innovation

Innovation can occur anywhere within the value chain of your organization. And, it can cut across business divisions and departments.

Steinhilber offers an example of how one innovation idea can impact an entire organization. Cisco’s Network Academies, formed several years ago, offered one of the best ROIs the company has ever seen. These academies established around the world have created a series of jobs and have extracted targeted expertise from worldwide partners. Cisco offers the process for setting them up, empowering people to do what they are capable of doing.

What have these academies meant for Cisco?

These academies have created a pool of expertise around the world that will continue to fuel the growth, development and innovation the organization needs to remain competitive.

Innovation can also occur in business process.

Innovation within Cisco also occurs through the following processes and examples:

·         New Business Model-Linksys

·         New Product or Service - Storage Networking

·         New Process Business Councils

·         New Education Engine-Networking Academies

·         New Market Unified Communications

·         New Customer Experience-Network Advanced Services

·         New Technology-CRS-1/IOX

·         New Channel E-Commerce

As you look across the Cisco value chain, you will see that people can create innovative ideas within any department of an organization. According to Steinhilber, “The key is to funnel it.” And Cisco does this through creating and sustaining an innovation culture.

Innovation Drives Company Growth

According to Steinhilber, there are three primary strategies of innovation growth within Cisco, “Build, Buy, and Partner”. All three innovation strategies work in partnership, creating the ongoing growth the organization is seeking.

 “Build”: Growth in New Markets-Technologies

Steinhilber stated that, “when looking at new technologies, we often don’t know exactly what customers are looking for. So, our innovation process for new technologies often follows this process:

→Appliance→ Blade→ Chip/Feature→ New H/W or S/W Technologies→

We may offer new capabilities as a standalone appliance initially. As we learn through the innovation process, we discover which features the customer is looking for and in which we could add upon, expanding through innovation. This appliance then becomes blade technologies, which are plugged into the Cisco systems. Finally, our organization looks into which technologies can be moved into chip/features. Many times our organization does not know which new innovations will successfully move through this entire process chain. But, taking the first step is the first step required to innovate.”

Steinhilber continues, “to suggest that the process above provides the framework for working through innovation with new technologies; ‘Refresh, Renew, Repeat.’ At Cisco, where we innovate and when we innovate is just as important as the dollar amount spent on innovation.”

The Cisco build process in simplest terms can be described as:

Find Ideas→ Filter →Incubate →Initiate (Business Unit Formed) →Accelerate

→Graduate or Repurpose

Overall, the frameworks utilized by Cisco offer a structure for communicating their processes to the outside investment world and to their internal employees. These frameworks take complex concepts and make them easy to follow, easy to understand and are relatable.

External Innovation

One of the external mechanisms Cisco utilizes to encourage new ideas is the I-Prize. The organization offered $250,000 for the best idea for new concepts in 2008. As a result of this announcement, 1,200 ideas were presented from entrepreneurs all over the world (104 countries). The winning concept came from two Russians and a German for an IP framework which could lower electric consumption by making devices ask for power from the grid when required. This idea may be funded for development by the organization. This concept is a great way to encourage external innovation. According to Steve, this type of external system will become more and more important for bringing new ideas into the organization on the R&D side.

“Buy”

According to Steinhilber, one thing learned in the business is that market timing is everything. So, buying is another important part of the innovation process. What does Cisco look for in investments?  

“Sometimes we invest when we feel like a really important technology is coming, but we don’t know which approach is going to make the most sense,” says Steinhilber. So, the company will place their bets in more than one space and will watch to see how things go. The organization also invests to support enabling technologies which can help Cisco at large win in another space. The company also invests to learn, to better understand a specific market in which it is not a current area of strength. 

But, as Steinhilber already mentioned, ‘market timing’ is everything. In some cases, there isn’t enough time or there isn’t the current level of expertise required to utilize internal resources or an external investment. In either of these cases, acquisition may be a viable option for Cisco to consider.

The Role of Acquisitions at Cisco

There are two primary reasons why Cisco would consider acquisitions: new market entry or to expand within a market. New market entries involve acquiring internal leadership or channels, access to large, new revenue sources or to expand a current product line. Market expansions occur when the organization is looking to strengthen their current advanced technologies, to acquire technology and talent to drive leadership or to allow expansion into adjacent growth markets.

“Partner”

The third and last piece of the innovation equation with Cisco is partnership. Partnerships allow the total pie size to increase, benefiting everyone involved in the industry, when they are formed in a strategic manner. Most of the strategic partnerships within Cisco are formed with large organizations who compliment their capabilities. Their partnership model has evolved over the past twenty years, becoming a scalable model. One of the aspects of partnerships which Cisco recognizes today is that they all follow a lifecycle:

Evaluate → Form→ Incubate →Operate →Transition →Retire

Evaluate- Involves defining Cisco strategy, analyzing the current portfolio, evaluation of the ecosystem, evaluating the partner and building the business case

Form- Partnering value proposition, secure sponsors, negotiations and agreements, intellectual properties and announce the alliance

Incubate- Structure alliance governance, build the operations model, plan communication, partner engagement model and marketing, metrics and performance reporting

Operate- Executive communication and boards, business planning, alliance solutions and initiatives, field engagement and marketing, metrics and performance reporting

Transition- Review strategy and value proposition, value curves and trends, update strategy goals, confirm joint commitment, and determine future investment requirements

Retire- Conduct management discussions, determine exit strategy, build exit strategy and plans, define activities and timeline, and create messaging models

Cisco works to manage their innovation portfolio by reviewing alliances across business sectors and their associated strategies: HW/SW platform companies, service companies, telecom solutions companies, vertical solutions companies, and device companies. Partnering is and will remain a primary focus of the Cisco innovation model, according to Steinhilber.

In summary, Steinhilber suggests that innovation must be constant, it must occur along the entire value chain of an organization, it must be developed in a framework to be scalable and repetitive, it must extend beyond the organization, it involves taking risks and failing and most importantly, it is the only ‘true source’ of long term differentiation.  Thank you Steve, for an excellent and insightful presentation.

 

To listen to the full podcast with Steve’s complete presentation and download his slides, sign up for our Exponential Ideas^® newsletter.

Link to Complete Cisco Podcast 



© Exponential Edge Inc, All Rights Reserved

        

By Adrian C. Ott

While attending a recent presentation on customer loyalty, a question from a member of the audience sparked my imagination.  

"Do Millennials care at all about loyalty?  Does loyalty to products and brands still exist?" 

When I looked around the room, there seemed to be a mood of skepticism about the topic of customer loyalty. 

Another woman responded, "It is hard to be loyal because there are so many options out there today. There are always new products that seem interesting."

Are they correct?  I remember my parents unquestioningly buying Ford automobiles, or insisting on filling up at "Herb's" corner gas station. 

Are loyal customers an endangered species in the business world - soon to join the fate of the dinosaur? or the typewriter?  Are executives and marketers deluding themselves?


Only 2.5% of Consumers are Loyal

No doubt, our relationships with brands have significantly changed.  The Financial Times cites a two year analysis of 685 brands using data from 32 million consumers that in 2008 the average brand lost a third of its most highly loyal customers. These customers were lost to price and promotions from other brands - something brand marketers considered improbable in the past.

B-to-B executives constantly complain about pricing pressures and reverse auctions as vendors are deemed as replaceable. Even products and services that were considered fortresses of differentiation reach commodity status at a record pace.

The CMO Council and Pointer Media Network study further reveals that 80 percent of brand sales are attributed to only 2.5 percent of shoppers - not 80/20 as previously thought.  Searching for traditional brand loyal customers is like looking for a needle in a haystack.  These figures suggest that such customers could be considered as endangered species.


Tilting at Windmills of Unwavering Customer Allegiance

According to Merriam-Webster's Online Dictionary, "loyalty" is an act of unswerving allegiance. Synonyms are: faithfulness & fidelity.  These terms connote an unquestioning devotion - an effect on our emotions that drive our actions.  Analogous to a marriage where using competing products constitutes a terrible act of adultery - something to be avoided at all costs.

Consider the products and services you use personally and for business.  How many of those items truly stand out for you? How many would you drop if something better, (or cheaper with equivalent quality), came along?

Rather than tilting at windmills in pursuit of unwavering allegiance, a more pragmatic and fresh approach is needed.  Let's stop focusing on diminishing returns of 2.5% of customers and think about the rest of the 97.5% of customers out there.  Don't they have money to spend?

Customer engagement today is different because there is a greater risk of distraction.  Time is limited. We multitask as we juggle different types of technology. The Internet and globalization have enabled a plethora of products and services that vie for our time and attention.  We can buy products and services from across the globe. 

Consider a teen that has choices to spend his time on World of Warcraft, The Wii, Halo3, a social network, or texting.  He actively considers competing alternatives on how to spend his time. Understanding the forces that compel a customer to spend time with a product or banish it as "background noise" is key. 

Traditional customer loyalty is blind to the alternatives. Today's customer has access to all the alternatives. When customers are compelled and see value in an offering, they give a share of their time and attention to what they deem as the best alternative.  The following chart highlights these differences:




This demonstrates that the term "Loyalty" is an imprecise way to describe contemporary customer relationships.  Ask around and you will find few, if any, customers that view their relationships with brands as a faithful, loyal marriage - many don't even consider it a betrothal. 


Customer Engagement: Speed Dating versus a Faithful Marriage

There is simply not enough time in our day to devote our attention to all the products and services we purchase and consume. This results in varying modes of engagement. 

Customer traction is possible, however the reasons are not uniform and not always based on emotions or attitude.  Behavior can be just as profitable as words of affection.  For example, some people always buy the same brand.  However it is not because it tugs at emotional heartstrings as branding agencies would like us to believe. The product simply works. We don't want to think about it further. We want to move on to more important decisions in our lives. 

With hectic lifestyles, most customer interactions are like speed dating combined with a few serious brand relationships where customers are willing to invest more of their precious time and attention. Alternatives are waiting in the wings that are ready and willing to replace your products and services.  Distractions from technology abound. 

Changing our mindset to address the reality of today's distracted, multitasking, digitally-savvy customers calls for fresh approaches to engage them.  

Future blog posts will describe strategies based on our work with leading clients, and three years of extensive research with innovative companies who have gained sustainable traction in this hyper-competitive environment. (Hint: These strategies involve entirely new ways of thinking that go well beyond social media, and tactical loyalty programs.)

Food for Thought: Dogs are loyal. Customers are not dogs.


What do you think? Is the term "Loyalty" outdated?  Is there a better term? Is there a difference in the way the generations engage with products and services?   


© Copyright 2009, Exponential Edge Inc.  All Rights Reserved 

 

        

By Adrian C. Ott        

Not far from my home are the grounds to a large western rodeo.  Dusty pick-up trucks drive around town sporting bumper stickers that say, "Cowboy up!" 

"Cowboy Up!" means that when you fall off the horse you have to get back up, dust yourself off, and keep trying. It is a shift in attitude from "can't" to a positive "can-do" with confidence.  It is a non-complaining spirit that becomes contagious. 





Indeed, the economy is rough right now.  If we are not hurting personally, we have family and friends that are experiencing pain.   We are suffering the consequences of lost jobs, lost income and lost opportunities. Businesses are suffering as well.

Employees and the media whine about why things don't work...and then we wonder why they don't. Have you ever heard of a situation being solved by whining?  During tough times, it is far easier to lay low, burrow into deep trenches and say "No" rather than having the courage to say, "Yes, let's try to make this work.' 

But we have the power to change all of that.  The U.S. is the most entrepreneurial country in the world today. The Silicon Valley specifically is renown for fast-paced innovation. Gains are not made by abiding by rote learning, and hard and fast rules. Winners thrive on change and flexibility to act. When a start-up, or new technology or new market doesn't work, we learn from it and move on.

We should not let fear of the economy keep us from pursuing risks in penetrating new markets, and higher-potential opportunities.  Risk-taking is a wild ride even in good times. Let's not hobble our employees, entrepreneurs and venture capitalists with more rules, more taxes, and more reasons not to contribute.

Take a look at your product and service portfolio for your business.  Is it comprised entirely of safe bets and low reward product extensions?  Or do you have a portion of your new offering pipeline invested in a few high risk, high reward opportunities? 

Now is the time to "Cowboy Up!" on innovative market opportunities, lest we stay on "safe" ground and get kicked in the head by our competitors.


(c) 2009 Exponential Edge Inc.  All Rights Reserved

        

by Adrian C. Ott

I hate to do things twice.  Re-work, system crashes and "do overs" are very frustrating.  Why?  Because they take precious time that could be spent elsewhere.  We all want to do things once and move on. 

With the proliferation of social media platforms we are hitting a saturation point - Facebook, Ning, Twitter, LinkedIn, MySpace, Biznik, Plurk, corporate networks, industry communities and others .  My head is spinning.  My colleagues and clients are telling me this as well.  How many communities can we participate in and still have a life? 

In 2007, we predicted in Fast-Forward 2010: Social Media Shake-out  that people will make decisions as to where they will spend their precious time.  Once social media is understood, customers will avoid duplicating efforts.  Customers will strive to be more efficient with their time by consolidating their regular social media interactions to a number of favorite communities. 

Customers will gravitate toward communities that give them the biggest return and highest value for their time. Critical mass (or what economists call "network effects") plays a key role because the value of social networking lies in locations where others congregate.  If we need to reach John, do we need three social networking sites to link, friend or follow John?  One will do nicely thank you. 

This scenario is beginning to play out as customers are flocking to sites like Facebook and Twitter. Mark Zuckerberg of Facebook recently stated that they have more than 200 million users.  If Facebook were a country it would be the fifth largest in the world.  Indeed, a few mega-communities will dominate, however I don't envision a one-size-fits-all. We have different dimensions to our lives and sometimes we like to keep things separate (e.g. work and personal).  What I foresee is:

• Customers will belong to one to three mega communities.  These will house our master profiles. For example, Facebook for friends.  LinkedIn for business.  Customers want to manage a limited set of profiles.  This is why we see many sites with system generated user pictures in the members list.  Most people don't want to bother setting these up multiple times. 
• Customers will belong to a limited number of niche communities:  Customers will focus on a few communities that offer unique value-add to their life and interests.  For example, a professional industry community, a personal hobby community, a civic service community etc..  Certainly everyone has niche preferences, that's what makes us all different and special. We expect that most people will participate somewhere in the range of 2 - 10 niche social media communities. Note: This is not in the hundreds or thousands, therefore not every company will be able to build an active community.  Let's not confuse customer service with an emotional customer attachment.   
• Certain niche communities will reside inside a mega community: This enables companies to reach and leverage users that are already registered in a larger community.  LinkedIn groups are an excellent example of people with shared interests coming together. 
• Consolidated reporting and propagation tools will increase in popularity:  Tools that allow one to see a  consolidated view on their desktop of activity across their social networks are a great time saver.  Certain social media users will opt to broadcast to their communities using a single propagation tool to save time getting the word out.  We are beginning to see this with tools such as TweetDeck (www.tweetdeck.com) that enables Twitter users to segment and filter Tweets and Facebook entries, and Minggl (www.minggle.com) that crosses many of social communities.

Customer decisions to save time and avoid "do-overs" is driving this trend to consolidate their social media interactions. Customer want to accomplish more in less time.

Executives need to be mindful of these narrowing choices as they make their social media investment plans. The game stakes have been raised as sites reach critical mass.   In certain markets they may have already missed the wave to build a proprietary community because critical mass has been achieved through other means.  Alternatives need to be considered.

        

by Adrian C. Ott
     

I recently moderated the 2009 Silicon Valley Chief Alliance Officer Roundtable that was hosted by Cisco.  This was my second year moderating this annual event that was organized by the ASAP Silicon Valley Chapter.   

Twenty-seven VP and C-level senior executives responsible for alliances and channels from firms such as Intuit, Adobe, HP, Microsoft, EBay/PayPal, IBM, SAP, Oracle, Cisco, Seagate, LinkedIn, Salesforce.com, Capgemini and others attended this meeting. 

The executives represented an excellent view of trends and best practices shaping the technology and alliance landscape.  "The companies represented today, contribute $464 billion to the U.S. Economy. With a total combined market cap of $859 billion, these companies not only shape Silicon Valley's economy but also the world's high-technology landscape," welcomed Jim Chow, President of ASAP Silicon Valley.

According to Steve Steinhilber, VP of Strategic Alliances at Cisco, "As we have seen in the last few months, markets can change overnight.  Sharing ideas and best practices in meetings like this is vital to staying on top of today's fast-paced environment."

The topline findings are:

1. A majority of executives view strategic alliances as more important in a downturn, but several challenges to growth such as regaining momemtum after cost reduction, and overcoming business risk confidence issues impede forward progress.
2. Executives are continuing to invest in disruptive technologies (e.g. Cloud Computing/Software as a Service (SaaS)) and new market penetration opportunities.
3. New business models such as SaaS are changing the role of channel partners.  This will result in new compensation and services models for the channel in line with these new models.
4. Most companies are re-evaluating their alliance portfolios but also changing the measures by which they value and resource the relationships.  For example, evaluating the financial viability of even the largest partners and customers has become a necessity. 
5. The need for new partner evaluation criteria is surfacing as new partner models such as talent-swapping emerge.
6. Partner metrics beyond revenue are evolving that are increasingly tied to profitability and "Forensic Accounting."
7. Internally communicating the value the partner organization remains a key priority in light of downsizing and cost reduction.
8. Current macro-economic shifts in wealth distribution in the U.S. and abroad are expected to impact the partner portfolio mix.

As best summarized by Erna Arnesen, VP of Global Services Channels and Alliances at Cisco, "What we are seeing right now in this time of economic crisis is a more engaged and frank dialogue across the strategic alliances community....This will put all of us in a unique position to increase our focus on joint revenue, contribution, and investment returns."

To access our white paper with complete findings and our analysis of this event:

http://www.exponentialedge.com/sv_chief_alliance_summit.html

 

        

By Adrian C. Ott


The recent credit market crisis causes us all to reflect about how we approach our businesses. We’ve undoubtedly encountered staff reductions and realized evaporating sales opportunities as companies and consumers retrench their spending. Worst of all, many of us have realized losses to our personal investment portfolios,

Although painful, the bright side is that these changes offer an upside for businesses seeking growth – to take advantage of this, we need to reset our thinking to visualize opportunities in this new landscape. 

Below are five approaches that help you to not just survive, but thrive in an economic downturn:

• As markets dissipate, new industries emerge. Although spending is curtailed, businesses and consumers still need to purchase goods and services. What has changed is that they are spending differently. Adapting to new markets that emerge during these times is pivotal to success in this new market climate. Although real estate mortgages are imploding, foreclosure, and credit counseling services are booming. Print and media advertising is declining, but internet advertising is growing – Google’s recent strong financial results are a testament to this transition.

Alternatively, offering products and services that help companies to downsize or reduce costs could be a vital new revenue source. Rather than further entrenching into your existing market that is going nowhere, consider new market green fields.

• Are you shifting investments in your offerings and marketing campaigns to reflect the realities of economic down cycles? Consider shifting your offerings to reflect buyer realities. Assisting companies to outsource software as a service instead of implementing in-house creates a lower entry point, fewer staffing requirements, and less stress on capital budgets.
• Can you offer services that help customers achieve greater ROI on existing assets rather than buying new equipment?
• Can you help them make existing employees more productive?
• Can you reduce organizational disruption to reduce stress on remaining employees.

Can you make your offerings less financially stressful and easier to digest for your customers?

• Avoid peanut butter budget cuts. Rather than cutting expenses by 10% across the board, use this as an opportunity to “prune the tree” by eliminating less desirable programs in order to focus growth and energy on a few key areas. Use this as an opportunity to rethink what you are doing.
• Your competitors are also cutting back…and are distracted. Markets that seem impossible to penetrate during strong economies present opportunities as competitors curtail efforts. This may evoke a strong entry opportunity that can take hold when markets turn upward. The key is to be poised to take advantage of it. If you can execute a focused strategy quickly while your competitors are consumed by organizational changes and loss of employees to execute, you will achieve the upper hand.
• Start Executing. Although we often want to lick our wounds with corporate change, getting your organization adapted to changes and in motion again is paramount.

As one of my tennis coaches once told me, “If you are losing, change something in your game because you are not doing something right.” In this same spirit, if your firm is struggling, use the downturn as an opportunity to  capture a new market opportunity and re-focus and poise your business for the upturn.

        

Last week I was invited to lecture at U.C. Extension by my respected colleague, Gary Katz, CEO of MO Partners www.mopartners.com.   I enjoy these opportunities because I am able to test some of my latest ideas. Most students at U.C. extension are college graduates who work full-time in Bay Area businesses.  They are continuing their studies to remain current with the latest trends in their field.  

Sharing ideas with the students not only enables the class to explore intriguing new ideas, but provides a terrific real-world perspective outside of my client network. 

A Student Question on Product Porfolios:

After the class a student e-mailed me:

Thank you for your presentation last night.  You mentioned that when the engineering group presents 120 products to the marketing group, the marketing group needs to sort out the product category and marketing priority.

In my experience, the engineering group's goal is to provide the product that meets the functional requirement provided by the marketing group based upon the market inputs. Therefore, the marketing group shall have known about the marketing priority of the products and have guided the product production forecast and new design requirement. It seems to be contradictory to your example. Would you please explain?

My Response:

To answer your question on product priorities, many large companies have more than 100 products and services in their portfolio.  Although marketing may define the requirements for each product or service upfront, the entire offering portfolio must be prioritized in relation to market priorities.  These priorities may have shifted from the time that the original requirements are created and by how engineering executes the offering based on the market information.

Product releases may include:

• minor releases (e.g. a 2.01.01 bug fix and features)
• a major upgrade (from 1.0 to 2.0 version)
• brand new products

Marketing needs to differentiate the marketing investment between these different types of releases. For example, product launch investments may be categorized as "A", "B" or "C" priorities.  The market investments associated with each varies.  An "A" launch may be at a big event with all hands on deck.  A "C" launch may only include an announcement on the website and combination with other "C" launches into an installed base e-mail communication.

Several companies that I work with differentiate these priorities not only by the type of release but also by whether the offering is an extension to an existing market or penetration into a new market.

An acquisition complicates such priorities. Product and services in the new company must be prioritized in terms of markets and products relative to existing products so marketing knows what types of campaigns to launch and how much to spend.  Marketing cannot afford to execute 100 campaigns and needs to define relative priorities.  We've helped client with models to determine these priorities. 


Prioritizing the Product Portfolio is Important

Prioritizing the product portfolio enables marketing to focus investment on products that will provide the greatest ROI and not over invest in cash cow products.    Although marketing is in involved in prioritizing individual product requirements, attention to the product portfolio is also important.

 

        

By Adrian C. Ott

I was invited to speak at this year's Strategic Planning Annual Conference in Marina Del Rey, California.

While attending the conference, I had the opportunity to sit in and listen to presentations by other strategic thought leaders.  Although I was unable to attend every session, key topics in this year's conference were:

1) How to increase the pace and quality of decision making
2) How value chain analysis can result in better customer understanding
3) The role of the Chief Strategy Officer
4) How technology innovation is more predictable than you might think.

I will write about these topics and my thoughts on implications in subsequent postings.  In addition, I will share information about my presentation on Customer BehaviorNets.  You will hear more about this in the coming months.