I recently received an unsolicited email from a major customer complimenting my company for doing a great job with an important project. He emphasized how much of an impact our software was making in his organization by citing both numbers and the reaction of executive management. And as I read his note – which I shared with everyone in our company – I remembered the power of the positive note that unexpectedly arrives.
I spent some time in the Silicon Valley last week and again noticed two prevailing behaviors that are fairly common in the technology world. I’ll pass them along, and include a couple thoughts on how best to deal with them when they arise.
The first is the tendency to give old ideas new names and pass them along as a groundbreaking innovations. Many years ago, when mainframes were the center of computing, a new architecture emerged called the three tiered client server model. In short, the database, business logic, and user interface were separated from one another. The physical manifestation of this were databases, servers, and clients. That model has more or less held true over the past few decades, but there is a constant shift of power and delivery between them.
The same is true for delivery methods (on-premise vs off-premise) and development (on-shore vs. off-shore).
Within these simple constructs the technology industry shifts constantly. Off premise software delivery rules the day for the moment, and there has been more on-shore development lately after a huge rush to go off-shore a few years ago. Mobile phones are much more powerful today so you will see more business logic processed on the mobile device rather than the server. Then again, doing too much on the mobile device can create manageability issues given the fragmented nature of the Android market in particular. And so it goes.
While understandable, this leads to old concepts being warmed over with new names. When a company outsourced computing in the 80’s, they were thought to be using a “service bureau”. In the 90’s and early 2000’s, they would have viewed that service as “On Demand Computing”, or an ASP (Application Service Provider). Now, of course, the same model is called “The Cloud”.
To be sure, there are a number of differences as off-premise computing has changed over the years, but the tendency of the Valley to establish – and then collectively get behind – a new term can be miraculous, and if emphasized too much can set off an immediate bullshit detector with a customer.
I have found that it is best to acknowledge honestly what you’re selling, how it works, and downplay the importance of new terminology. In the case of cloud delivery, the key is manageability and flexibility, not throwing the word “cloud” around like it’s going out of style (which it inevitably will, only to be supplanted by a new term in it’s place).
This bouncing back and forth between two or three fixed points leads to a second behavior that is a much larger problem, specifically the religious zealot.
Over the past couple decades we’ve become more aware of high-performance athletes hiring sports psychologists to help them visualize their success. I don’t golf very often (with predictable results) so I’ve concocted a story for my golf friends that I’m spending all of my non-golf time visualizing my eventual success. However, despite spending time visualizing my long tee shots splitting the fairway, or my soft approach shots settling quietly near the cup, my actual game is, shall we say, something short of my vision. How to bridge the gap?
Innovation is an act of creation, but to borrow a concept from Stephen Covey’s Seven Habits book, any act of execution – a product introduction, a management effort, a new business process – is inherently a second act, with the first occurring in the imagination.
Some time ago I was working for a privately-funded technology company that had been negotiating with an industry behemoth to establish a strategic partnership. When I got involved, the negotations had dragged on well past my company’s expectations and the legal bills were through the roof. Worse, the initial euphoria about the idea of the partnership had waned on both sides.
One of the first things I did when I got involved was to write a faux press release that I circulated internally among the key stakeholders that purported to announce the partnership to the industry, and invited comment. Given how little time it took for us to agree on what a perfect (but realistic) press release looked like, along with supporting quotes, it turned out to be a great use of time, and helped bridge our own visualization gap in the following ways:
I’m on my way home from a speaking engagement at the BAI Payments Connect Conference. I spoke on the Business Case of Mobile Photo Bill Pay (where you can enroll a biller into your bank bill payment service, or pay the bill itself, simply by snapping a picture of the bill with your mobile device). Joining me was the executive responsible for digital channels at BBVA Compass Bank, an innovative bank headquartered in the southeast and owned by Spanish banking giant BBVA. A couple observations that might be interesting to those of you who might not be in the payments world:
- A research project testing the preferences of the millenials (basically 18-33 year olds) found that banks were at the top of the list for perceived threat of disruption. Specifically, 73% of the respondents stated that they would be “more excited” about a new offering in financial services from Google, Amazon, Apple, Paypal, or Square than they would from a nationwide bank. See other millennial perceptions on the right from the same report.
- Get this: In the past 30 days, more Americans paid a bill using their mobile device than smoked a cigarette. I don’t know why, but that statistic really tells us something about how the world is changing, however I must point out that after my time in Las Vegas I suspect most of the smokers are currently walking around inside casinos.
- We will be seeing a big battle as banks and billers duke it out to get your attention so that you pay your bills through them instead of the other guy. Watch for innovative technologies and applications to be offered by both to win your affection. I wrote about this on our corporate blog here.
Last week, I participated in two panel discussions at the All Payments conference which was tragically held at the the exact same hotel/casino as this week’s show, leading me to observe that the only thing worse than going to Las Vegas two weeks in a row is to go two weeks in a row and stay in the same place. One of the panels was on partnerships in the technology space (something I’ve written on a few times in this blog, such as here and here). Key points:
Recently I wrote here about a deal I was involved in between a private technology company I had joined and a multi-national behemoth (I’ll call them Goliath), and some steps I took to get a deal that had gone off track, back on track.
In that post, I wrote “Certainly not everything about that deal went the way we planned”. This post will be about one important thing that I didn’t get right in the deal.
When two parties are working on some sort of partnership – a reseller relationship, an OEM agreement, whatever – both are seeking to reduce their risk. In this case – a white label/OEM deal – we wanted to make sure there were some minimums associated with each deal Goliath would sign on our joint service. We therefore spent a lot of time negotiating the minimums that Goliath would pay us each time they did a deal.
Our mistake was that, despite our attempts, we weren’t successful in establishing controls to make sure Goliath themselves would produce.
As it turned out, Goliath wasn’t able to sell much of anything, and since they didn’t owe us any overall minimums we – not they – felt the pain of their failure.
We probably didn’t fight hard enough because we let our optimism get the better of us. Why wouldn’t Goliath sell a bunch of deals for us? They were enormous. They were all over the world. We regularly saw their commercials when we watched TV at night. The fact that they would change the trajectory of our company was considered a given.
Except they didn’t.
I want to share with you a personal story. Since one of the companies I’m talking about is well known and this all actually happened, I won’t be naming names.
I joined a small, innovative company some years ago, and they were on the verge of closing a landmark deal with a huge company in their industry. When I say “huge company”, take my word that this company is a global brand and you likely have used its products.
Everyone needed this deal to happen in my new (small) company. The Board was eager for it. The venture capitalists saw its importance. The employees were eager for it to happen. There was just one problem, and it was a biggie: “deal fatigue” had set in.
Deal fatigue is when two groups negotiate so long, and make so little progress, that they lose sight as to why they liked each other in the first place. In our case, both parties had been locked in conference calls with expensive attorneys for multiple months, and when I joined the company and was asked to turn this around it was within days – perhaps hours – of completely and utterly imploding. It was ugly.
A few weeks later, we signed the deal and everyone was happy. Today I occasionally will cross paths with someone who was on one side or the other of that deal, and they’ll bring up how close it was to being irretrievably lost, and how the deal was “saved” in the nick of time. I want to boil down what we did, and why, in the event you see opportunities to improve your own strategic negotiations and partnerships. Readers who are familiar with Stephen Covey’s Seven Habits will see some of them at play here.
People are always looking to cut the “middle man”.
Answer: If your customers think of you that way. If you’re viewed as a “distributor” or an “integrator”, not a “manufacturer” or “product creator”.
The “middle man” is perceived to add no value. He takes merchandise in the back door, marks is up, and ships it out the front door.
Customers refer to the cost of a perceived middle man the following way: “Why should I have to pay his tax?”.
Consumers so want to “cut out the middle man” that Amazon revenues are now larger than the GDP of half the world’s countries. Jeff Bezos just bought the Washington Post. Not “Amazon bought the Washington Post”. Jeff Bezos did. (This also says something about the price of newspaper companies that are losing $50M per year, as The Post currently is).
There is huge room for the middle man, however.
In technology, old concepts continuously get new names which make them seem like new ideas. The “Cloud” used to be an “ASP” and before that, a “Service Bureau”.
The middle man was commonly referred to as a “VAR”, or Value-Added Reseller.
There are many opportunities to “add value” now, but it must be done so in practical, obvious ways.
- Analytics and data-related services are an example.
- Also compliance and risk management.
- So too is thought leadership and human factors.
There are many opportunities for “the middle man”, but when customers perceive him as a tax rather than a source of value (and their grading scales are very, very high) then he is viewed as a hanger-on, a redundant cost, and he will be a fish swimming in a restaurant tank.
Jeff Bezos has said that “your margin is my opportunity”. The market ruthlessly demands continuous improvement. Middle men have to improve faster than everyone else.
This past week I attended the Mobile World Congress in Barcelona, Spain. The show has quickly taken on gargantuan proportions, with approximately 70,000 attendees at this year’s event. From Islamabad to Tel Aviv, from San Francisco to Mumbai, from Shanghai to Sao Paulo, the mobile world is exploding. And as connectivity expands throughout our lives, from the cars we drive to the devices in our homes, the current number of mobile connections (6.8 billion, according to the GSMA) will quickly surpass the number of humans on the planet.
As I was talking with people at the event, I recalled a meeting I had roughly 15 years ago. I was working for a software company, and my company had entered into a strategic alliance with another large software company where the two companies would cooperate in the market and tell customers a unified story. Shortly after the deal had been struck, I had a meeting with one of my sales counterparts from the other company so we could agree on how we would jointly describe how our products and joint business value to customers.
As the meeting started I asked him to describe how he saw our joint solution being presented to the customer. He then, over the next 45 minutes, stood at the whiteboard and drew an elaborate picture that anyone in the technology industry has seen a million times. The picture started with a large box in the middle of the empty whiteboard (his company’s product), and then had a series of connections to other, smaller boxes (one of them, my company’s product), which in turn connected to other boxes, etc. After his extensive drawing and explanation, he sat down and said “that’s how we see the world”.
It was then my turn, but instead of taking a similar amount of time, I walked up the board, and with the eraser and marker simply switched the company names, sat back down, and said “that’s how we see the world”.
In addition to my version of the drawing being totally accurate from my company’s perspective, I personally thought the exchange was pretty amusing, although I remember that he didn’t.
Anyhow, many business partnership discussions start with some big circle or box in the middle of the whiteboard – I like to call it the sun – with numerous, lesser companies and components orbiting around it’s fixed and luminescent presence.
While I am not predicting immediate changes to our solar system (sorry, Pluto), I can say with certainty that the “hub and spoke” model of business partnerships is dead, and walking around Barcelona this week demonstrated to me again how true this is.
- Yesterday: Expensive infrastructure and time required to “turn on” new content. Today: Cloud services reduce barriers to entry.
- Yesterday: Complicated and expensive integration between content points. Today: Standards make it relatively easy to connect.
- Yesterday: Brand loyalty (JC Penney). Today: Simplicity & Cost (Amazon)
So here are some tips for how to win in this world…
- Involve a paying customer at the beginning. Too many business partnerships have customers represented during the planning period in spirit only. If you can’t get one customer to work on the idea, then it’s probably not worthy of significant effort anyway.
- Have an organizational bias toward action. This is very hard for companies of any size, where issues related to IP, costs, and resource allocation frequently kill innovation. But I am convinced that companies come up with plenty of good ideas, but kill those ideas by making it too hard for customers/partners to engage quickly. The smarter strategy is to get as many people using an imperfect solution as quickly as possible, gather data, report results to the industry, and watch the fast followers come to your door. You can have the pricing model baked by then.
- Remember that suns burn out. And it happens on internet time, not geologic time. To see one example of how an incoming CEO of one of these flaming-out suns addressed his own employees, read this famous “burning platform” memo from Stephen Elop at Nokia. If you believe everyone will continue to revolve around your market dominance, you’ll be disappointed, and if you base your strategy upon a single heat source, you’ll also be disappointed.
The mobile world of today is a web, not a solar system. Don’t get burned.
I was sitting in the hot sun one afternoon in the Kurdish region of Northern Iraq in 1991. I was a member of the US military, and along with the United Nations High Commissioner for Refugees (UNHCR) we were establishing a security zone and refugee camp for the Kurdish people who had been displaced from their homes following their unsuccessful uprising against Saddam Hussein and his Desert Storm-defeated Iraqi Army.
In the course of setting up the refugee camp, we established a central point where potable (drinkable) water could be drawn from a gigantic water blivet (if you’ve never seen one, imagine an enormous whoopee cushion). The Kurds would fill their jugs at the water point and haul the water back to their camp site. In the course of many thousands of people filling up water jugs at a central point, there was a fair amount of water run-off, which formed into little rivers in the dirt.
The Kurds – as they and their ancestors have done for millennia – dammed up some of the mini-rivers to form small pools that they used to wash their feet. This became a popular foot-washing hangout for the refugees.
All this was fine, until someone in from either the UNHCR or US military looked upon this with a developed-world mindset and declared it unsanitary, being so close to a water point.
Earlier this week I posted 3 lessons for leading teams during “boom” cycles. Unfortunately, sometimes what goes up, must come down.
Since pain can drive home lessons in a way that pleasure cannot, the lessons I’ve learned during bust cycles have been profound and lasting. The emotional toll on leaders and employees alike during a bust cycle is unrelenting, and having managed my way through two very painful busts in the technology space (2001, 2008) I pass along these observations which are based on painful experience.