Tag Archives: strategy

HMV summary of posts on Interacter

A post on the Interacter blog last week, proved incredibly timely in criticising HMVs Blue Cross marketing campaign.

Three days later, HMV went into administration.

The article itself is excellent, but the comments (of which I have contributed several) provide some interesting reflection points of the wider implications of HMVs failure. Go to the original blog to see all the comments.

Here are my posts together in one place. 

Post 1

If you were designing a new music retailer business how close would this be to what HMV is like today? … answer: NOTHING LIKE HMV!!! And herein lies the problem. The core issue it isn’t simply struggling with clicks and mortar integration, the problem is more fundamental than that. HMV has wholeheartedly missed fundamental market shifts in retail design, experience shopping, online/offline business models and dynamic pricing – and a last ditch sales promotion will not fix this.

Some examples of what I personally experience:

– No or limited ability to actually listen to the music in the shop (unforgivable) – heck I could walk into Apple next door and listen to music on Youtube, but not in a music store!
– Out of date design – largely unchanged in 20 years (even more)
– No search functionality – how can I quickly find whether an album is in stock?
– No download/custom burn functionality in store
– Poor quality furniture/displays – zero interaction of furniture
– Broken electronics displays for headphones and speakers … some work, some don’t. No one is ever there to help, offer advice or actually ‘sell’.
– Zero online/offline integration – heck after 25 years of me spending great amounts of money in there you have NO IDEA who I am. Small retailers that I buy from online nail this with my first purchase from them. Even small new local shops incentivise my business and capture my contact details to send me offers!
– Generic layouts with no limited input from staff (I agree that the employees could be a huge asset, but this is never going to happen when they are stuck behind tills rather than out there helping customers). This is a very simple change that could be made. I have some great experiences with staff and used to enjoy talking about new releases and limited editions that they had secured from local record reps, but not in recent years. Why does your badge not tell me what you like – or know about? I’d introduce badges so I can find the dance guy, the sci-fi bloke, the rock chick – who can help me???
– Unpleasant shopping experience. My kids dislike the shop – they find it cramped often noisy and hard to navigate – this says more about the future viability than I could. To them it is simply not relevant. Anything that they want is downloadable from a number of sources (including free listens/views on Youtube) – they can listen to clips, see videos and download to a device of their choice if they want to keep it. In many cases, they don’t – so streaming from Youtube is enough. If they want a video – the default is online, not HMV.

I am not sure HMV can be saved. That is because the business model that HMV has today is dying. It is arguably dead as no new business could ever get funding for a business that was even close to HMV in concept. If I went to a bank with the HMV business model they would think I was mad. It didn’t have to be this way – HMV could have evolved. It didn’t. HMV could have downsized, reinvented itself and became THE social space on the high street. It didn’t. And on that point … did no one in HMV notice that Starbucks? or Costa or Nero … or any of the successful independent stores?

The Blue Cross sale has one purpose – increase short term cash flow to pay creditors threatening to cut supply. It isn’t necessarily the wrong thing to do, but it is not a plan that will help it survive. It is likely to simply extend the inevitable, but only by weeks.

I agree with several comments so far that the timeframe of 10 months looks optimistic. If HMVs Christmas results didn’t make the grade, then it will not be allowed three more quarters to continue – given that Christmas is its busiest period. Early January will see vouchers being redeemed and children’s pennies buying new games for their Xboxes, but this will not continue at this rate until Easter. February and March are going to be a brutal for lots of businesses and I don’t see HMV escaping this.

The financial structure of HMV (high debt, low margins and falling profits) may mean that the only viable strategy is the one that they have (keep as much cash as you can coming in). I have posted my solution to the problem previously on this site, so go look for this if you want to see my thoughts on the solution, but this may not be feasible anymore.

Can HMV be saved? The theoretical answer is yes. But the logic that supports that is that until it is formally dead/bankrupt, it is alive and if alive it can be saved. But then until yesterday the same logic applied to Jessops.

What would I do if this was my problem?

1) Figure out how long the business can survive. Close at least 50% of the stores to extend this period to buy time to remodel, redesign and relaunch.
2) Change the exec team and the marketing team and replace with someone who actually cares and understand retail experiences and can see what is possible. Invite design agencies to collaborate on a results reward basis (and pay well).
3) Rapidly relaunch a smaller number of concept stores to demonstrate viability to investors and customers. Rapidly iterate/improve/innovate by rewarding and empowering local managers – then roll out as quickly as possible.

Chance of this happening? Pretty much nil judging by what has happened over the last ten years

Good luck HMV. I wish you well. If anyone has any unused gift cards though, I’d quickly redeem them.

Post 2

We agree that the staff are a HUGE potential asset. I’d love to see more innovation in how they are utilised in the stores. They are a massive potential differentiator over other sellers. I’d love to see managers given small marketing budgets to innovate and attract customers and freedom to respond to local tastes and events. Neither of these cost a great deal of money. In fact a strategic shift to better engage customers, and be ‘the music and video experts’, could cost very very little. The big strategic mistake HMV is making is going into a low cost price war when it is carrying huge debt – but I assume this is for cashflow reasons so excusable as long as alternatives are being developed. All of the other companies listed tried this approach too. Price reductions reduce margins and sets the expectation with customers of always expecting a big discount. If this can be sustained, then fine – but lets not forget supermarkets sell CDs and DVDs too and they have deep pockets to win price battles. Low cost pricing is ONLY viable as a strategy if your costs are lower then your competitors (not your prices). Whilst HMV clearly negotiates well – I’d expect cost of good to not be significantly different to what Tesco or Amazon pay.

As for the cost of expenditure on refits and new designs. As it stands HMV is on borrowed time in terms of its concept and viability as a high street store. My argument was reinvent or face irrelevance. Having one or two next generation stores (assuming that they were successful and generated increased profit and customer sat would give investors the confidence to support a longer term strategy of investment and future development.

As for change coming … I’m still waiting. Most of the changes I listed in the earlier post as missing have been available for many, many years and I’ve yet to see them in any HMV stores. I wish HMV well, but the graveyard of high street names is only going to grow in 2013.

Post 3

Matthew – you are right but they are still competition and cannot be ignored. You may not like the practices of either, but the strategy needs to account for these. Every CD/DVD Tesco/Amazon sells is one that HMV does not. Tesco focuses on the best sellers – but that is where the volume is – which is all Tesco cares about – always 80:20. The tax issue (which I agree is wrong) is irrelevant in terms of survival strategy for HMV. It should lobby about this), but to customers it mostly doesn’t matter. Just for interest (as HMV has a sale on), so I thought I would check 10 random online prices (5 best sellers from 2012 and 5 random albums including Jarre, Michael Jackson, Jack Johnson and a couple of compilations.

Results: HMV matches 1 album from Amazon on price. 3 are separated by penny (Amazon does the .99 pricing whereas HMV rounds up) … but 4 are more expensive by at least at £2, with the largest differential being £5.01. 2 are priced within £1. On 9/10 HMV is more expensive.

Total difference: £14.30 – absolutely not scientific, but interesting nonetheless.

I don’t care about the colours – I care about the strategy. This is the issue for me. HMV has to be a destination store – with tight online/offline integration.

Post 4.

Showrooming is simply a sales failure. Forget the online aspect, it is a failure to engage and sell.

Allow me to explain …

So the problem is this.

1) Customers are interested in a product.
2) They visit a local retailer to see/touch/try on the product
3) They go home and order this online from another retailer

And the problem is the online retailer?

NO, NO, NO.

The problem is the shop. They had a customer wanting and willing to potentially make a purchase and they let the customer walk out of the store without converting that sale. This is a fail of salesmanship. Price may have been a key determinant in the customer choice, and this needs to be addressed [solution – offer better value, and avoid losing on price], but did the local shop engage the customer? Did they explain the advantages they offer over the online retailer? Did they differentiate themselves and show why they are the best choice to buy from? In almost all cases the answer is no.

Retail shops need to move from being ‘passive’, whereby a customer walks in looks and around and maybe buys to ‘active’ sellers. This means that shops engage with customers BEFORE, DURING AND AFTER the visit. It is an ongoing engagement.

– BEFORE by sharing offers, announcements, advice, new stock.
– DURING by understanding needs and being an A+ service company
– AFTER by thanking customers, offering come back deals and trying their best to stop the online purchase and convert this to a local one.

In most cases, none of these stages happen in the shop. But the online retailer does this through targeted advertising and display, through emails, Twitter engagement and dynamic website content management.

When retailers think active, every customer matters. Every interaction matters. Service IS everything. Price matters, but successful hotels know that only winning on price is a way to lose customers. The solution to showrooming invoves all aspects of retail – price is there, but also is display, service, and most importantly retail experience.

If you are a retailer – there is one simple way to start understanding this …

Imagine that 80% of your existing customers are never going to walk in your shop again … ever

AND

And of those who do come in 80% will not buy anything.

What would you do?

How would you fix these two issues?

Now do them, because a majority of potential customers are not visiting you and of those that do, most are not spending with you.

I’m not saying this is easy – but the default outcome – what will happen without change -is business failure. The good news is that many small retailers are reinventing themselves and becoming successful small GLOBAL businesses.

I can see a book here somewhere …

Post 5.

This is particularly bad for the 4000 staff, but also for other high street stores, who are going to find trading increasingly difficult as confidence in the high street business model wanes.

Some thoughts:

1) Whilst the ultimate responsibility lies with HMV’s management – and particularly its retail strategists, others including councils and high street property companies play a part too. Councils need to recognise the importance of the high street, to the viability of a whole town or city and stop introducing measures to keep shoppers out (punitive parking management, car unfriendly measures, and carte blanche for mini-supermarkets to kill diversity. Property companies need to better support companies unless they want all their shops to become charity rentals. Retail forums need to represent all retailers – not just those with deep pockets able to participate.

2) Change or die. This maxim is taught to business studies students, but as they progress to senior roles, they increasingly fear change. HMV ‘was’ THE music shop, full of passionate people who cared about music. Have a look at the comments in this Peston article – http://www.bbc.co.uk/news/business-21023602 Comment after comment stating what everyone knew, but HMV seemed immune to believe. As for the tattooshttp://www.guardian.co.uk/business/shortcuts/2012/oct/24/hmv-banning-tattoos-staff-wont-increase-sales – this tells me everything I need to know about HMV and understanding culture. WRONG.

3) You can argue about online trends, competitors advantages, operating conditions all you want. You can decry Amazon’s tax behaviour, criticise Tesco and it is all a waste of time and energy. Instead of this – recognise reality and FIGHT. Stop moaning – start battling and divert your energies to winning customers, one by one. A previous comment highlighted Zappos – excellent idea. Forget the metrics, forget the statistics. You either provide great service and put the customer first or don’t. Guess which one has the best track record of surviving over the long term.

So what bright ideas would I propose to reinvigorate HMV, to make it viable?

Just one … don’t let anyone over 25 be involved in this!!!! Consult, involve, engage young people. Let those under 25 tell you what they want. Understand this and you have a half decent chance of keeping the company alive.

Post 6.

My point was that the core concept of HMV was increasingly failing to be relevant to the largest section of music buying market. For ANY high street store (or increasingly any store) to be viable it has to be a destination that attracts the target market to shop there. With HMV this is much wider than the u25 demographic, but designing a future that doesn’t cater to their needs would be highly ill advised. Example … young people increasingly have tattoos. Do they find tattoos offensive? Does it reduce their willingness to shop and spend money there, or does in demonstrate cultural diversity, encourage discussion and engagement in conversation and thereby support the shop – and thereby sales?

The tattoos decision MAY have been relevant for an over 50s shopper, but was this decision the right one, or misjudged? I do not like Hollister as a store, but I’m not meant to. It is a destination store for my 12 year old daughter not me – she wants to go – I just tag along at a distance and fund the purchases. Would HMV have a future as a series of smaller niche stores, focusing on depth knowledge and being a cool place that over 25s hated? I don’t know – not without the research and data. What I do know is that banality fails every time.

Your last point about retail agility it spot on. Both at a national, AND local level.

Post 7.

It will be interesting to see what happens. None of the media companies will want to see HMV disappear as this gives Amazon and increased power to demand reduced prices and therefore reduce record company profits. The larger media companies may be willing to extend supplies and amend terms, but this does not change the fact that the core HMV business is not attractive to customers – it is this that needs the change. Unless the HMV store/business model is reimagined/updated, my expectation would be the same happening again in a couple of years.

Post 8.

A reality check for the High Street:

1) According to Verdict, the retail research group, the internet will account for about £1 in every £8 spent in the UK this year. (Source:FT). That means 7/8 of spend is NOT spent online (although this varies between goods sold). Given the relatively low cost of setting up an internet shop (many small shops have successful online businesses), there is no excuse. That means you a shop + online business has ALL of the potential market to play for … GLOBALLY. Online businesses have 1/8 of it. If you are not selling, don’t blame the shift to internet.

2) Retail vacancies are at an all time high (Source: LDC). This excludes charity shops, which are often temporarily disguising available properties. This is bad news for everyone (inc. shoppers, councils, property owners). It does though present an opportunity to negotiate and re-negotiate hard on costs and lease lengths. If the deal is wrong, leave it. If a costs are killing a business – deal with these before it is too late.

3) This is not going to get any easier. Whether we move into recession (for the 3rd time in recent years) doesn’t significantly matter, because the underlying economic environment is going to stay challenging for a few years yet [this may be the new normal for some time to come]. Businesses need to start by asking themselves one question – and make sure that they have a good answer:

– Why would prospective customers choose to buy from us?

You can add another ten or one hundred follow up questions, but this is the starting one. What is your value proposition? Why is it better than your competitors? Who says so? How do you know? How do you measure it?

HMV is the first, but will not be the last. Act now to make sure it isn’t you next.

Post 9.

The dominos continue to fall as Blockbuster follow HMV.
http://www.bbc.co.uk/news/business-21047652

A much clearer case of online media killing the business than HMV, but a compelling retail destination … no. As the core business is profitable according to BBC News, there is a good chance of saving many stores, but without a viable business model, long term prospects are far from secure.

Could a checklist be companies at risk be developed?

Some early thoughts …

1) Does Amazon sell your product?
2) Does Tesco sell your product?
3) Can I buy your product digitally and download it?
4) Are your monthly physical visitor numbers decreasing?
5) Is your online business separate to your core business?
6) Is the purchase functional to fulfil a clear task (as opposed to emotionally driven)?

If the majority of answers are ‘yes’ then be afraid and start to think hard about how your future.

Any other ideas?

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Learning lessons from HMV

The collapse of the High Street continues as HMV enters administration this week with the potential loss of over 4000 jobs.

Unfortunately, this was a failure that was absolutely predictable.  There were no shortage of signs – from the first profit warning in early 2011 ago, subsequent profit warnings, and finally the drop in sales to below £1bn in mid-2012. The final closure this week is the inevitable result of failure to respond to pressures on the business.

The problems didn’t start though in 2010 with the profit warning. They started in 2003 with the launch of iTunes. Music services were available before then, but when Apple moves, companies should be taking notice. Even when Apple became the most popular music vendor in the US in 2008 HMV had not committed to a digital future. By 2010 when Apple was the worlds largest music vendor, the point of no return had surely been reached.

As a former fan and big spender in HMV I have watched the demise with a combination of amazement and anger.

Amazement that HMV fails to make any change in its operations that is visible to me (as a customer), and anger as it is clear where this will end – in the demise of a once great British company and the loss of many jobs.

Failing to adapt was never going to be a viable strategy. Yet, this is the one strategy that I, as a customer saw HMV adopt, the ‘head in the sand strategy’. Core problems in the business and operating model were simply not addressed, despite these being repeatedly raised by analysts and their own staff to senior management over many years. Philip Beaching gives a very readable account of this, clearly describing the hubris and sheer ignorance of wider market shifts at the senior levels in HMV.

And then the inevitable happens …

A long list of causes is cited: internet shopping, supermarkets, pricing strategy, High Street costs, digital downloads … and so on.

And yes, each of these is a valid contributing factor to the problems that HMV faced, but the core issue lies not outside the company, but within.

The core problem was an unwillingness to change; it was sheer arrogance. Arrogance that HMV was immune to market changes and was assured a future.

Wrong. It wasn’t.

No company is. Every company is at risk. Constantly. Failing to respond to changing markets and evolving customer demand sows the seeds of your own failure. It is simply a matter of time for the seeds to germinate.

Adapt or die. Simplistic, but true.

This is nothing new. Good to Great by Jim Collins does an excellent job of explaining why companies fail, but despite these lessons many executives in failing companies still fail to act. Only when put into administration are hard decisions taken. Often these decisions are the same ones that done 3 or so years ago would have helped the company survive.

So where do business leaders go to learn these lessons?

Going back further to economist Joseph Schumpter’s ‘Creative Destruction’ in the 1950s we find useful lessons for managers. Continuing back through Hegel, Marx and beyond we find the same lessons with the same outcomes for those who ignore change. Look at many empires and civilisation failures and the same lessons apply.

So how do we prevent this?

How do we build companies that can evolve and adapt?

How do we develop leaders who can keep companies alive?

The starting point has to be with the education of those responsible for companies, that is executives – the business leaders – those intelligent few trusted with steering the corporate ship and keeping it away from the rocks of administration and bankruptcy.

But is this happening?

It appears to me that a fascination with complex financial engineering, operations efficiency and supply chain management is giving us leaders able to manage the minutiae of business, but unable to recognise the disruptive forces that threaten the viability of the organisation? We are managing the stocking of the wine cellar, but failing to notice the ship is heading for the rocks.

Instead of seeking professional business leaders obsessed with micro managing market performance, we should be looking for passionate explorers with a good understanding of history – able to spot the rocks and storms that threaten the ships very survival.

HMV is the first High Street casualty of 2013, but it will not be the last.

I hope the one positive outcome of the HMV debacle is the recognition that many High Street companies need to quickly change direction. You can argue against the rocks, you can shout they they shouldn’t be there, but fail to change direction and they will sink you.

The Emperors New Clothes are still being made

Can I humbly give Product Managers a quick piece of advice?

STOP LYING!

Stop lying about what your product can do for me if you know it doesn’t do it.

Just tell me the truth.

Instead of telling me it can do something it can’t, or something it can do, but does badly, instead pick something that I really care about and do this brilliantly. If you don’t know what that thing is, talk to me. Watch my life, understand me, heck – ask me. Professor Keith Goffin and Dr Chris Van Der Hoven from Cranfield University offer some techniques in their article that discusses why products fail.

When you think you have found it, ask me, if you have solved a problem I have, or met an undiscovered need that I didn’t know about, I will get pretty excited about it. However raw, if the idea and concept is good, then you will quickly know because I will want it NOW!!!

I will want to buy it.

I will want to know when it is available and what it costs.

A quick test for this … write down in 10 words what it is.

Real words, not marketing’ese. Simple words.

Core functions first, state the blindingly obvious.

Think about the most basic way that you can sell the idea and the product.

If you cannot do this, then go back and refine it, keep looking, keep searching. Don’t pick that last thing that was moderately interesting and build that, look for the problem I have, or the thing I want to achieve.

It you think you have found something, make it as real as you can. Build a prototype, a mockup so I can start to imagine this in the real world, in my life. This doesn’t have to be a polished machined prototype, a cardboard mockup today is better than a polished prototype in 6 months. Whatever you have, communicate the story of what it does. Storyboards, wireframes, mockups, prototypes – whatever you need to show the idea as live as possible, as real as you can, do that.

Then iterate and make it better. And better. And better.

Set a timeframe, a quality bar, and a budget, then iterate until you pass this. You will have to deal with these trade offs, but that is what a Product Managers life is about. It is all about compromise. Product success comes from making the right judgement about the balance.

If you do this well, when you come to launch, you can tell me the truth.

You don’t need to lie.

You can tell me with confidence what your product does, and why I should care.

If you have done your job well, I will want to buy the product or service.

And I will.

It is that simple.

Of course, if you lie to me, I will find out.

I will tell others that you lie.

I won’t buy from you again.

And neither will others.

Your choice.

You can try and sell the Emperors New Clothes, but you will be found out, and after that no one will trust you again.

… and no one will buy anything from you, because they cannot trust you.

So the next time you go into that product planning meeting, that product marketing review, tell the truth.

You can lie, but you will be found out.

How to win against Apple, think small not big

How do you beat Apple?

Product Manager Test

A quick test for would-be Product Managers faced with developing a product to beat Apple:

Insert the missing word:

If we made our product _______ we could beat Apple‘.

  • faster
  • cheaper
  • smaller
  • bigger
  • lighter
or any other feature you can pick …
If only we could find that one chink in Apple’s armour, that one thing that we could do better, then we could win‘.
There is only one problem with this approach.
It doesn’t work.
To understand why, we need to look go back to a business truism.
>> You can’t be hip and cool if you’re just like everyone else.

Agreed, this is business 101, because if you are like everyone else your product is not differentiated and you can only demand commodity prices. There are whole books on this subject, but the basic premise holds.

But Apple is not like everyone else. 

Everyone else is like Apple. Or at least trying to be.

Apple sets the standard in whole range of areas. 

  • The benchmark for a tablet is the iPad, not any of the 100+ replicas
  • The iPhone is the standard that new smartphones are compared to
  • Macbook product engineering quality is unmatched by any competitor
  • ….
And this is not just about the physical product …
  • Apple stores have the highest revenue per square foot of any retailer
  • No technology company comes close to understanding the unboxing experience
  • The integration of iTunes and content is unsurpassed by any rival service
Apple didn’t just build a better mousetrap, it redefined catching mice.
Yes, the mousetrap is better, but it is much more than that.

Apple changed the game.

It innovated (in a whole range of areas, not just the device, but the manufacturing as well), protected its intellectual property and established tightly integrated (and hard to copy) value chains. The iPhone and iPad are clear leaders in terms of revenue and profit by a long way over competitors. This revenue then provides a virtuous circle to continue R&D investment and innovate in areas competitors cannot afford (e.g. manufacturing and engineering) – not to mention out-market competitors. This success then brings its own network effects outside of Apple.

It takes time to get this right, but when this flywheel gets spinning, you have a very effective money making machine.

On top of this, Apple have high levels of customer satisfaction, unrivalled loyalty and a world leading brand that attracts a price premium that no few competitors have been able to match.

Not bad, but this took a long time to get right. The success you see today comes from years of iterative improvement and learning.

This didn’t all happen on day 1.

The stores are a recent addition. The genius bar was not a success initially. Early products were often too expensive to achieve mass adoption, and some like the Newton were market failures. What you see now in Apple is the culmination of many years of effort, and continual improvement. This combines into a ecosystem that to many competitors seems unbeatable.

So Apple are unbeatable?

In the short term, this is incredibly challenging, but over the medium and long term business history shows us that the chance of Apple retaining its current position is not great. That is not to say that Apple may not grow, and become even bigger (with some analysts predicting $1000 Apple shares), but competitors will certainly be able to compete in some areas.

So can a company compete with Apple and win?

The short answer is yes, but think small and think agile.

You need to find one market in which you can beat Apple, one demographic/segment/scenario in which you can better meet the user needs than Apple. This is not about having one core feature that is better, but a range of features that are more attractive to the buyer than the Apple proposition. This is not just about the product, but the whole product experience.

Every product or service is a compromise. It has to be. It is a combination of trade-offs. Price vs. performance, power vs. portability, flexibility vs. usability and so on. What you need to do is find a particular group of customers where you can deliver a better combination of trade-offs for them. The end result needs to be a product or service that is more attractive than Apple. This doesn’t guarantee success, but if you do this you are better informed than the majority of technology vendors that release products to compete with Apple, but fail to differentiate in a way that users care about. More importantly, they too often focus solely on the product and not the experience, thereby missing potential areas in which they could innovate or lead.

Can you think of examples of products fall into the following categories?

  • New product is well received, but support is lousy and new customers quickly hear this and avoid the product.
  • Great sales and marketing cannot mask a product that doesn’t work as advertised.
  • Limited content or apps quickly discourage buyers who see a fail before the company does
There are loads of them, and not just from minor companies. Almost all tablets fall into this space.
World leading companies release products that are quickly judged failures, because they try and compete directly with Apple without understanding what makes Apple successful. Are you listening RIM?

It is surprising to see how many times companies make the same basic mistakes.

They continue to launch generic products to a mass market and have no success.

They launch products that miss key user features.

But there is a better way.

Instead of launching generic products to a mass market, launch GREAT experiences to a homogenous group of customers. Win these customers over, prove your product works, build your fanbase, and start the flywheel turning. The move to the next group, then the next one. However small the flywheel is, get it moving. This is always preferable to a large flywheel that will not move whatever you seem to do. However big your company is, launching a product head-on against a successful innovative market leader is rarely a smart move.

Better to smart small, win and grow.

Do not mistake starting small though with a lack of vision or ambition.

They are not the same. Your objective in launching a new product is to understand your customer needs and prove that you can meet these – both to yourself and your customers. You then improve and grow.  Your vision can be world domination, as it was with Facebook, but start small and prove that you can meet customer needs. Facebook started with students in Harvard. When it won the students there, it moved onto other Universities, then other educational establishments, then country wide, then worldwide. All along, improving, listening to customers and building on success. The focus was on adoption and market penetration. Facebook was never about 10% market share. It was always about winning in the market it wanted to play in.

5 Tips for world domination

  1. Know thy customer. Focus on the outcome that they want to achieve and the experience you deliver to enable this. Understand the whole journey. Don’t focus on excellence in one or two areas if this means other areas fail, focus on not having any major fail areas. If you don’t know these areas, spend time with your customers and understand them. Understand what their human wants and needs are. Focus on the need at this stage, then you can define the solution. HP was never going to be successful with its tablet that was priced similarly to the iPad. It wasn’t as good in key areas and in many areas was noticeably worse.
  2. Prioritise. First things first. Always. Don’t launch new features if existing bugs are losing you customers. Fix what needs fixing. Keep adding to the list, keep reviewing the prioritisation and don’t be afraid to change this. Never drop the quality bar. This was what Zappos did. Innovate the experience, never, ever drop the quality bar.
  3. Don’t over-engineer. Put in the required amount of effort and no more. You can iterate to improve later. Do what is needed, then go back to the priority list. Improve, improve, improve.
  4. Know why customers want to buy your product. Test this with them. Many will lie, so test again. Adoption is your key metric here. You need to care about how many of your prospective customers are using your product. It is not about absolute numbers, but penetration.
  5. Get the customer stories as quickly as you can. Nothing is as compelling for sales as customer success stories. Make these your priority from the start. When you talk about what your product, talk about what REAL customers actually did.

 

That should allow you to start the flywheel spinning. When you have this going, your challenge is to keep this going. Make the next steps logical and simple. No big jumps. From one University to the next, to the next. Pick adjoining markets, similar groups. Stick to the original strategy, no radical shifts. Continue to prioritise and check with customers about the satisfaction with the product. Then repeat.

How do you know when you are being successful

There is one acid test for success. The incumbent player will react to you. Whether this is a competitive reaction or an offer to buy you, you will elicit a response from them. At this point you are free to decide to continue or cash in, your call.

Apple’s iPhone Business Alone Is Now Bigger Than All Of Microsoft

If you are Steve Ballmer, the CEO of Microsoft and reading this headline you can:

… dismiss competitors, you can challenge analysts who predict tough times ahead.

… invest in new products at the same pace you always did [typically a 3 year product cycle].

… follow what has worked in the past confident that it will work in the end [and dismiss those who question this].

This is the strategy for Windows and Office, and it worked pretty well, but is showing signs of fading (words saturated and market should be ringing here).

This has been the strategy with Bing and Windows Mobile. Which isn’t working so well.

But as time progresses, the evidence starts to mount against you that your approach is not working.

The competitor sells more than you had hoped, their market share grows, but you maintain your long term view.

Then BLAM! a statistic arrives that hits like a bucket of ice-cold water being thrown over you.

That statistic is here.

“Apple’s iPhone Business Alone Is Now Bigger Than All Of Microsoft”

Steve, time to wake up and do something about this.

Time to rethink.

You can keep arguing … all the way to irrelevance, or you can start to tackle this seriously by aggressively accelerating timescales and focusing resources on the battles that you NEED to win, rather than a load that you want to win. Now is the time to prioritise and shift resources. Stop doing what you don’t need to. Win what you must.

The IT industry graveyard is littered with companies that argued against analysts and customers, saying it is a marketing problem – “that they just don’t get it“. Microsoft just fired a load of it marketing people. RIM is the latest company that has recently adopted this strategy.

But there is one problem … it doesn’t work.

Consumers and in particular phone buyers ARE generally well informed. They have friends, they can see kit. They play with the kit in stores.

Go to mobile phone stores, the Microsoft phones are there. They look pretty good, but next to them is an iPhone … and guess what people are buying. My son played with the Microsoft phone, he thought it was OK. Pretty good. Better than an iPhone? No. He is aged 7.

I’m not going to write a quick fix here; with three short steps, ten bullet points or an action plan of what should happen, because there is only one thing that you should start to do … start listening. Firstly to the people inside Microsoft, and secondly to your customers.

Not the senior career VPs and SVPs. Not the group presidents. All of these sold out their backbone years ago, or left. Listen to the new starters passionate about Microsoft. Listen to those who are trying to be heard. Listen to those who email you, write TechReady papers, and build demos. Listen to those in the labs, those who code their own apps, those who want to beat Apple with great products and innovation. There are a whole load of them, but recently their voice has been muted as they were worried about speaking out.

Give the permission to speak out. Get out of the office and go see people.

Then listen.

Then provide the resources for them to do it.

Not everything will work, but prototype fast, and kill even quicker.

Reward trying and pushing for big goals [tip: you don’t today, you fire them]

Listen to customers. Listen to small businesses, partners, analysts.

If the answer isn’t very quickly becoming clear, and very very obvious what steps are needed then you are the wrong guy to fix this, so appoint someone who can, and focus your efforts and helping them.

 

Learning from RIM – good operations cannot fix a lack of vision.

The debacle at RIM continues.

The list of problems over the last couple of years pretty much ticks every box possible on what could go wrong in a technology company:

– Service failures, botched new product releases, uninspiring product roadmaps, delays to critical updates …

And the corresponding impact of these:

– Falling sales, falling profits, missed targets and a collapse in share price.

After failing to address the problems, RIM has taken the bold move of appointing a new CEO, Thorsten Heins, to boldly lead the recovery of the company.

And the result?

The stock fell further.

The core reason being pretty simple – because RIM and the new CEO has not shown that it even acknowledges the problems that analysts see, let alone is taking actions to resolve these. It didn’t help that the CEO was previously in charge of innovation and handset development at RIM, two areas that RIM has clearly failed in over recent years.

This brilliant piece of analysis by Michael Mace from 2010 details the problems facing RIM. It correctly predicts happened in 2011.

It also shows why any CEO who fails to address the underlying problem the ‘death spiral’ is going to fail to stop the decline.

And this is why the analysts and commentators are hammering RIM …

….because you cannot solve a problem of a lack of vision by executing better on a failed strategy. 

If there is no vision, no innovation, no idea that excites customers, no roadmap to beat competitors, no thought on how to challenge Apple, to defend against Microsoft, then the only result is stalled growth, collapsing profits and ultimately company failure. As Michael Mace highlights, this is not a slow decline. It is not a smooth linear reduction, it is “like a sprinter running off the edge of a cliff“.

Heins is right that RIM needs to fix the problems in product development and engineering and his Siemens experience will be relevant for this, but  this alone is not enough. RIM needs an injection of energy, vision and innovation to convince customers why it deserves a place in the market as a major player, not a declining enterprise provider. RIM needs to show how it plans to compete against the platform ecosystems that Apple, Android, Nokia+Microsoft have. Today, this is absent.

Without a vision that shows that you understand your challenges and have a clear idea of how to address these, you are not going to give customers, carriers, analysts and partners the confidence to support your product. Without that confidence customers will not buy your products, carriers will not promote your product and developers will not build applications for your product. RIM needs a strong ecosystem, not just a new line of phones.

Nobody wants to invest time, money and potentially their career on a failing company.

3 tasks for RIM’s new CEO

1) Hire 

Hire people who will tell you the hard truth, who will challenge failed logic and call out poor design. Hire people who will inspire, who are creative, who understand about platforms and ecosystems. Hire people who are passionate about life and technology. Great engineering matters and RIM could teach Apple a thing or two about network efficiency and battery life, but in design, usability and ultimately fun, Apple gives RIM and most phone makes a complete kicking. Get people who

2) Talk

Start to engage with the your customers – and listen to them. Not just the loyal ones. Not just the Blackberry die hards. Engage with the lost customers, the disenchanted, the disappointed. Measure customer satisfaction and make this a key metric across the company. Talk to carriers, partners, new businesses. Find others who will invest to build joint success. RIM cannot do this alone, whatever it thinks.

3) Focus

Implement the changes you need to make quickly. Get serious. Inject some energy into the company. Install a sense or urgency. Set aggressive timescales for change. Set achievable goals with short timescales. Embrace agile and lean. Learn quickly, change quickly.

One final point. You have less time than you think.

Apple, Android, Nokia+Microsoft are all chasing the same pound, dollar and euro that you are, and they are not going to make it easy for you to survive. Game on.

 

 

Slaying the sacred cows of cloud technology, one by one

Take any new technology and you will have two groups of passionately arguing about it:

1) The evangelists, who espouse the transformational value of the technology, who see its potential to enable new business models, new ways of working and great savings (there is always a cost element)

2) The pragmatists, who whilst they see some value in it and understand the technology, predict that the impact will be far less than the evangelists believe and the technology is nothing more than incrementally better than what we have today, and has been around for a while anyway

And the truth is that they are both right to some degree.

The reality is somewhere in the middle. new technology can transform business models, render market leaders powerless and enable new ways of working, but the time taken usually takes longer than predicted and when it does finally peak, has an impact often greater than even the evangelists predicted.

Amara’s law, “We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run“, again and again turns out to be true.

And ‘cloud‘ is no exception to this.

A plethora of startups, a deluge of new ‘cloud’ conferences, and a never ending cycle of press announcements show that whether this is truly disruptive or not, a lot of people see this as a way to make money.

But is this transformational or hype?

How do you know?

More seasoned watchers will look beyond the hype, to real evidence of change. They disregard the ‘placed’ PR stories and useless predictions about hypothetical market growth, what they do is ‘look for the slaying of the sacred cows‘. These are harder to find, but these are the signs by which we can make a true judgement.

The sacred cows are the points made by the pragmatists to counter the evangelists.

They are usually pretty consistent. 

  • It doesn’t scale
  • Only applicable to startups
  • Not suitable for Government
  • Doesn’t work with technology x, y, z
  • ABC company doesn’t use it
  • Analyst XYZ said not mainstream for 3/5/7 years …

and so on, but never forgetting …

  • It isn’t secure (always the bastion of the pragmatists defence)

In the early stages, the pragmatists will show most if not all scared cows to be in their favour

So, if you want to judge whether a technology is going to be disruptive, then look for the slaying of these sacred cows.

And in cloud, boy are we seeing those sacred cows slain:

  • Amazon knocked the scalability argument into touch (does your internal IT have greater scale than Amazon? No, I thought not)
  • The customer base of Salesforce.com blew apart the startup point
  • Cloud first by the US CIO made cloud the default choice

… and the list goes on.

[Interestingly, Vivek Kundra, the former CIO who advocated the benefits of cloud, has recently joined Salesforce.com as Executive VP of Emerging Markets. Smart move by Salesforce.com, not in the recruitment, but also in the role]

The latest announcement about BBVA, the Spanish Bank switching to Google apps, knocked a major hole in the pragmatists last defence of cloud.

So, if you were a pragmatist about cloud, now is the time to reconsider your position. When finance and government customers adopt a technology the security concerns may not have been completely answered, but are answerable.

The last bastion of the pragmatist is looking like a small sand bank that is quickly being surrounded by the incoming tide. 

This will not prevent CIOs holding onto their views, defending internal IT and arguing against cloud.

They are wasting their time.

Instead of defending their departments, they are undermining their future.

There are legitimate business areas that companies may want to keep in-house and private, but to apply this policy blindly across a company is not only wrong, but naive about the value that cloud can bring.

Either you will make the decision to investigate the value of cloud, or your board will.

With consumer cloud services leading enterprise cloud in adoption levels and service richness, it is a complacent CIO who assumes that his board members don’t understand the benefits in agility, price, and scale that cloud services can bring. The reason is because they are already likely to be using them personally.