Focus on End Users: a flash of the bleeding obvious

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I’ve been re-reading Terry Leahy’s “Management in 10 Words”; Sir Terry was the CEO of Tesco until recently. I think the piece in the book introduction relating to sitting in front of some Government officials was quite funny – if it weren’t a blinding dose of the obvious that most IT organisations miss:

He was asked “What was it that turned Tesco from being a struggling supermarket, number three retail chain in the UK, into the third largest retailer in the World?”. He said: “It’s quite simple. We focussed on delivering for customers. We set ourselves some simple aims, and some basic values to live by. And we then created a process to achieve them, making sure that everyone knew what they were responsible for”.

Silence. Polite coughing. Someone poured out some water. More silence. “Was that it?” an official finally asked. And the answer to that was ‘yes’.

The book is a good read and one we can all learn from. Not least as many vendors in the IT and associated services industry and going in exactly the opposite direction compared to what he did.

I was listening to a discussion contrasting the different business models of Google, Facebook, Microsoft and Apple a few days back. The piece I hadn’t rationalised before is that of this list, only Apple have a sole focus on the end user of their products. Google and Facebook’s current revenue streams are in monetising purchase intents to advertisers, while trying to not dissuade end users from feeding them the attention and activity/interest/location signals to feed their business engines. Microsoft’s business volumes are heavily skewed towards selling software to Enterprise IT departments, and not the end users of their products.

One side effect of this is an insatiable need focus on competition rather than on the user of your products or services. In times of old, it became something of a relentless joke that no marketing plan would be complete without the customary “IBM”, “HP” or “Sun” attack campaign in play. And they all did it to each other. You could ask where the users needs made it into these efforts, but of the many I saw, I don’t remember a single one of those featured doing so at all. Every IT vendor was playing “follow the leader” (and ignoring the cliffs they may drive over while doing so), where all focus should have been on your customers instead.

The first object lesson I had was with the original IBM PC. One of the biggest assets IBM had was the late Philip “Don” Estridge, who went into the job running IBM’s first foray into selling PCs having had personal experience of running an Apple ][ personal computer at home. The rest of the industry was an outgrowth of a hobbyist movement trying to sell to businesses, and business owners craved “sorting their business problems” simply and without unnecessary surprises. Their use of Charlie Chaplin ads in their early years was a masterstroke. As an example, spot the competitive knockoff in this:

There isn’t one! It’s a focus on the needs of any overworked small business owner, where the precious asset is time and business survival. Trading blows trying to sell one computer over another completely missing.

I still see this everywhere. I’m a subscriber to “Seeking Alpha“, which has a collection of both buy-side and sell-side analysts commentating on the shares of companies i’ve chosen to watch. More often than not, it’s a bit like sitting in an umpires chair during a tennis match; lots of noise, lots of to-and-fro, discussions on each move and never far away from comparing companies against each other.

One of the most prescient things i’ve heard a technology CEO say was from Steve Jobs, when he told an audience in 1997 that “We have to get away from the notion that for Apple to win, Microsoft have to lose”. Certainly, from the time the first iPhone shipped onwards, Apple have had a relentless focus on the end user of their products.

Enterprise IT is still driven largely by vendor inspired fads and with little reference to end user results (one silly data point I carry in my head is waiting to hear someone at a Big Data conference mention a compelling business impact of one of their Hadoop deployments that isn’t related to log file or Twitter sentiment analyses. I’ve seen the same software vendor platform folks float into Big Data conferences for around 3 years now, and have not heard one yet).

One of the best courses I ever went on was given to us by Citrix, specifically on selling to CxO/board level in large organisations. A lot of it is being able to relate small snippets of things you discover around the industry (or in other industries) that may help influence their business success. One example that I unashamedly stole from Martin Clarkson was that of a new Tesco store in South Korea that he once showed to me:

I passed this onto to the team in my last company that sold to big retailers. At least four board level teams in large UK retailers got to see that video and to agonise if they could replicate Tesco’s work in their own local operations. And I dare say the salespeople bringing it to their attention gained a good reputation for delivering interesting ideas that may help their client organisations future. That’s a great position to be in.

With that, i’ve come full circle from and back to Tesco. Consultative Selling is a good thing to do, and that folks like IBM are complete masters at it; if you’re ever in an IBM facility, be sure to steal one of their current “Institute for Business Value” booklets (or visit their associated group on LinkedIn). Normally brim full of surveys and ideas to stimulate the thought processes of the most senior users running businesses.

We’d do a better job in the IT industry if we could replicate that focus on our end users from top to bottom – and not to spend time elbowing competitors instead. In the meantime, I suspect those rare places that do focus on end users will continue to reap a disproportionate share of the future business out there.

The Art of Decoy Pricing

Over Christmas, I read Dan Ariely’s “Predictably Irrational” – a fascinating Book. One surprise, then a few snippets that suggest Apple execute a few important things to textbook standard – albeit with one glaring mistake.

The one surprise was from The Economist, who offered:

Economist Subscription Offer

At first blush, a silly offer. In tests, 16% chose the Internet only edition, 0% the print only one, and 84% the print plus Internet offer. However, offer only the basic and top flight offer:

Economist Revised Offer

and the takeup goes to 68% and 32% respectively. Hence, the presence of a similar, but clearly inferior, decoy swings the takeup of the high priced option from 32% to 84% of the takeup. Which is exactly what happened when Apple’s iPhone line-up became the iPhone 4s, 5c and 5s – with the 5c and 5s prices starting at circa £469 and £549 respectively. Everyone jumped at the most expensive 5s model, leaving short supply of that model and a glut of the slightly less expensive (but less capable) unsold 5c models.

As to the more positive things that reminded me of Apple, the following struck chords:

  • Perceived prices being high through restricted product supply
  • Setting (high) price anchors with arbitrary coherence; Johnny Ives gushing verbals at Apple announcement events, no less. Reassuringly expensive, just like some french lager ads.
  • the use of “free” components to take all risk out of a risk/reward comparison
  • Social norms of help at a Genius Bar versus competitor costly pains when a product goes wrong
  • Minimising options. I recall Steve Jobs redefining the Mac lineup to a 2 x 2 matrix; consumer/professional vs laptop/desktop, one model in each box. Likewise iPhones and iPads to good/better/best models.
  • Lower prices distinctively make us believe lower quality; Apple do the opposite, even wrapping the packaging to reinforce the quality feel. Even their boxes are things of beauty, apparently no expense spared.

There are further snippets about folks following a herd instinct as a sense of belonging (ordering meals aloud in a Restaurant; make sure you call your choice first!). Also the fact that if you affirm your honesty in some way before initiating any task, you are likely to follow it with the absolute truth – something our judicial system does very well.

I ended up in a difference of opinion with a friend on DNA testing (Jane ordered a testing kit from 23andMe, just before the US Food & Drug Administration told them to stop releasing results of their genetic tests). Textbook defence on my part having invested in one side of the argument, just like supporters of opposing football teams having self centred views of the exact same incident (it’s a penalty! No, he dived! How could you think that, it was right in front of you! …).

So, with that, some karma. I know how I’d react, and I could see my own irrationality.

People. They are confusing things. And in all ways but one slight pricing hiccup, Apple are eerily clever.

Crossing the Chasm – on one page of A4

Crossing the Chasm Thumbnail

Among my many Business books, I thought the insights in Geoffrey Moores Book “Crossing the Chasm” were brilliant – and useful for helping grow some of the product businesses i’ve run. The only gotcha is that I found myself keeping on cross referencing different parts of the book when trying to build a go-to-market plan for DEC Alpha AXP Servers (my first use of his work) back in the mid-1990’s – the time I worked for one of Digital’s Distributors.

So, suitably bored when my wife was watching J.R.Ewing being mischievous in the first UK run of “Dallas” on TV, I sat on the living room floor and penned this one page summary of the books major points. We grew the DEC business from £12m to £52m in 2 years after using this work, so a lot of the lessons appeared to be good ones. Just click it to download the PDF with my compliments. Or watch him describe the model in under 14 minutes at the recent O’Reilly Strata Conference here. Or alternatively, go buy the latest edition of his book:

I did use this as part of a project to increase sales of Trafficmaster SmartNav jam-avoiding in-car navigation systems, which I conducted with the assistance of two professors from Cranfield Business School. We picked three target use cases to take us over the Chasm, with varied success.

I did manage to get 300 of them installed in the complete Virgin Atlantic “Upper Class” Chauffeur Car Fleet, which avoided the normal driver practice of having to wake the passenger up with an abrupt piece of braking as they neared the customers destination. Also saved a phone around to find out who was closest to a customer who just called in (found that the McDonalds outlets around Airports was a favourite haunt of their drivers).

By hook and by crook, we also managed to get test units in the cars of board members of 7 of the top 10 System Integrators in the UK at the time (given they had hundreds of expensive staff on the road every day; thought keeping them out of traffic jams would help their bottom line). Incorrect thought as it turned out; staff competitions to win a one of ten SmartNavs in each company (to promote them down the line, hoping for bottom up demand) invariably ended up with a glut of them on eBay.

Trying to engineer a bridge over a chasm proved difficult when the product is already designed and the B2B use cases wide ranging, especially when sales appeared to be over a myriad of different small segments. The company subsequently went B2C, and I suspect directly into the headlights of the steam roller that TomTom became.

My PA redrew my hand-drawn sheet of A4 into the Microsoft Publisher document that output the one page PDF. I may have the source file somewhere, so if you want a copy of the source file, please let me know – drop a request to: [email protected].

The Hard Thing about Hard Things

I pre-ordered the Kindle version of Ben Horowitz’s new book back in January, and it was duly released and appeared on my iPad Mini yesterday morning. Fantastic book, finished it in two sittings.

Ben is co-founder with Marc Andreessen (of Netscape fame) of Venture Capital firm Andreessen-Horowitz, otherwise known in techie circles as A(16)Z. I recall the two companies he ran in his earlier years – Loudcloud and Opsware. At the time, the Divisional Manager of BT Ignite was more interested in a company called Jamcracker, principally because she liked their name. Meanwhile I was being sent in to do technical due diligence on a few potential acquisitions, just before the dot com crash.

While the VC’s feeding ideas were ex-colleagues of the then CEO (Peter Bonfield), the quality was generally shocking; promising scale to hundreds of thousands of users with software written in Visual Basic, or (with the help of Rothschilds) proposing sale of a domain name business back to BT for £70m before finding 2/3 of the customers were referred to them by… BT. That latter one eventually IPO’d for £12 million a couple of years later. Not to mention some hosting businesses, albeit they didn’t know i’d managed to size their server numbers and customer mix per Datacentre – routinely scuppering their slides when they deviated from an exact truth. One I looked at had 14 servers deployed in one very large building; others we monitored had frequent outages (and we knew which end customers were affected each time). But I digress.

Loudcloud and Opsware, unlike most of those companies I was asked to look at, were of the highest quality. Having said that, the impression reading the book is that being the CEO of both operations was quite a job. It sounded like someone running over a field chasing a tractor trailer with tons of cash accelerating away, but pursued at the same time relentlessly by a Combine Harvester. And then finding a lot of running track between the two was littered with tripwire and sinking sand. In both cases, Ben made it to the tractor trailer – just – despite enormous challenges. Very impressive.

I can relate to the story of folks visiting him where two co-founders wanted to share all the decision making in their proposed business. The one thing I learnt indelibly from my “Leadership and Followership” Management Training at Sandhurst was, that in any team setting, however ad-hoc, job #1 was picking one leader that everyone would defer to. So, while we were free to propose any action, the ultimate call was from that one person. And once they’d made that call, it was our job as a team to execute the decision made to the very best of our mutual ability.

There is a lot of truth in Business Books talking about “Peace Time” CEOs (which get written about all the time) and “War Time” CEOs (which rarely get mentioned). The first acknowledgement of the phenomenon i’ve seen outside the excellent writings of Simon Wardley (just wish his knowledge finally made it into book form). This will become key, as the world of Enterprise IT is going to descend into war type conditions for many vendors by this side of 2017.

The other thing that struck a cord was his coverage of hiring “older” folks to positions in a company. I went for 6 months trying to get interviews at the young age of 55, something that proved virtually impossible – this despite a long, successful track record of running large Software and Internet operations for Market Leading companies and always delivering my numbers. And of developing my employees, many of whom became regarded as “fast track talent”.

Ben reminds people that the chief advantage is “time”; while some tasks like engineering can be internally focussed, that there are several things that relationship networks and business building skills in an older candidate can deliver that truly make a difference between success and liquidation. So while HR and Management ageism is endemic (and it’s not controversial in any way to suggest that – it is a fact of life), it’s my job to point out areas where I can help any organisation. There are some excellent examples of techniques taught in Andy Bounds fantastic book The Jelly Effect: How to Make Your Communication Stick that should make a material effort to that effort.

In the meantime, Ben Horowitz has written a fantastic book. Very recommended.