Can vs. Should
By Robert Gelinas
© 2009. All Rights Reserved
Features, functions, and technical capabilities may be the product of ingenious imagination, technical brilliance, and visionary insight – but have no tangible value at all, leaving top buyer decision-makers looking askance after an enthusiastic presentation, asking, “So what?”
The 23:50 Dilemma
Many years ago, I sat through a presentation by a Sales Rep from a Telecom company. At the time, I was a network architect with a multi-million dollar annual budget to spend. The Telecom Rep was giving a rousing pitch about their new high-speed digital line they wanted us to buy. Mind you, this was in the days before the Internet, when most enterprise data networks were connected via dedicated circuitry.
Amid the hundreds of data circuits we had circumnavigating the world, we had one particular dedicated data line that went from our Texas headquarters to a backup data center in Colorado. Our major database and file backups each night took between eight and ten hours to transmit over our “old and slow” existing data line.
The Telecom Rep boasted that his new high-speed digital line, a line that would cost about ten times that of our existing line, could transfer all of our data “IN ONLY TEN MINUTES!”
Wow. Everyone in the room was impressed. That was an order of magnitude faster. They could do in ten minutes what we currently took ten hours to do. That sure sounded like progress.
I raised my hand and asked, “So what, pray tell, do we do with this dedicated application data line the other twenty-three hours and fifty minutes of the day?”
Telecom Rep’s face went pale and he didn’t have an answer.
He could have said many things, such as our ability to use that line in conjunction with multiplexing and switch technology to eliminate many other circuits and potentially enjoy a net savings, or to add new applications such as video-conferencing, etc. But he didn’t. His pitch was simply “faster is better” and in his mind that’s all we apparently needed to know.
Yet, our “old and slow” eight to ten our file transfer each night worked just fine. There are twenty-four hours in each day, and the fact that the existing process used between a third and half of them wasn’t problematic. The job got done every day. And paying ten times the cost for it to get done in a faction of the time didn’t yield any net new benefit. Nothing else would be accomplished. So what was the point?
Needless to say, Telecom Rep didn’t make a sale that day.
The Hybrid Disaster
With all the “green” hype about the urgent need for people to all run out and buy hybrid cars, industry statistics have shown them to be a business disaster. Toyota’s Priius is by far the best selling hybrid car thus far– it’s just a shame Toyota says that they lose money on every unit sold. There’s a killer business strategy for ‘ya! “But don’t worry, Boss! We’ll make it up in volume!”
I also read recently that if you went out and bought a new Priius, the money you’d save in gas would only take you something like over 100 years to break even for the purchase. Again, so what’s the point? You honestly think you’re saving the environment? If so, look up the study that showed that it takes more energy to build a Priius than it does to build a Hummer. And then there’s those nasty batteries to consider, and their disposal, etc.
The point here is that some technologies don’t really solve the problems they are alleged to solve, and other technologies simply don’t solve any problems at all.
A Solution Looking for a Problem
Probably the most common business blunder made by many technology companies is to develop an idea purely based on the ability to do so, or to do something “new and different” with no associated idea of an actual commercial market for the manifestation of that idea. Unfortunately, that kind of thinking is usually the precursor for the “If we build it, they will come” business strategy faux pas.
Remember the cliché, “Find your niche and fill it.”? It’s twin in the technology world is, “Find a real business problem that technology can solve, and solve it.”
Sadly, this occurs far less frequently than it should. And it is the primary source of consternation for technology marketing professionals confronted with a company who sincerely wishes to grow, but who has a very difficult time putting their finger on why it is exactly that their product or service is special, unique, or even exists. Thus begins the process of “Reverse Engineered Marketing.”
Reverse Engineering Marketing is the creative and imaginative storytelling exercise of starting at the end of the story, with a defined product or service, and then conjuring up one or more viable business scenarios that could have led to that point. It’s a lot like playing Jeopardy where they give you the answer and you have to come up with the original question.
Contestant: I’ll take Healthcare Mystery and Miracles for $500, Alex.
Moderator: Viagra
Contestant: What failed blood pressure medication was found in during field trials to be a cure for Erectile Dysfunction?
Unfortunately, in many cases, a common conclusion may reveal that there is no unique business problem out there that a particular product or service was originally designed to address, rather it is but one of many common “me too” products or services that mimic the commodity offerings of large, established competitors.
Therefore, with the lack of any unique value proposition, and in recognition of the fact that rarely can be found any markets that are truly being underserved, the resulting business decisions for those kind of offerings tend to be more driven by low price competition and “big megaphone” saturation marketing for acquisition of mindshare – which, incidentally, yield some of the worst ROI for overall Cost of Sales (COS).
In a perfect world, your company should never be in this situation because your products/services were all designed based upon proper market research, and in-depth validation of a specific market need. But the world isn’t perfect, is it? So what do you do if you’re in this situation?
Go back to basics. You really only have one of four strategic marketing alternatives.
The Four Horsemen of the Metamorphosis
Obviously, if what you’re currently doing isn’t working, you need to do something different.
Now if you’re sales are virtually non-existent, and that’s because not only does no one want what you have to offer, but you also really don’t have any competition out there offering anything similar, that may be because what you have to offer is “New Coke”, or the “Edsel”, or some other complete dud that has no chance and never should have been developed in the first place. In that situation you need to go back the drawing board and start again – only this time, start with looking for a real problem to solve, not just something to make for creation’s sake.
On the other hand, if what you have to offer is legitimately viable as a product and/or service, as is evidenced by other competitors out there successfully selling something comparable and validating its need, then you must consider one of following four options.
The Superiority Strategy
Is your product or service already superior, or can it be made to be clearly superior, to the leading offerings in your particular market? And when we say “clearly superior,” we’re not talking about winning the race with a photo-finish by a nose, but rather a far and away Secretariat-esque 22-lengths clobbering the competition kind of “superior” offering, and doing so for a comparable expense by the buyer. The price comparability is important.
That is, it’s easy to argue that a Ferrari is a better car than a Chevy Cavalier, but you’d expect that from a million dollar car compared to a $20,000 car. But what if you could buy a Ferrari for $20K? Wouldn’t people line up for that? Of course. And if you can pull that kind of a value proposition off, this might be a viable path to clearly differentiate your offering and subsequently corner the market. However, in most cases, this simply isn’t a practical option due to underlying costs needed to demonstrate a significant magnitude of superiority.
The New Argument Strategy
This one can be actually the most effective, if you can accomplish it. This strategy involves redirecting your product/service either to a new target market (e.g. from hypertension to ED), or creating an entirely new rationale for its value to an existing target market (e.g. ground shale garage oil stain cleaner becomes Kitty Litter).
Another example: during the Router Wars of the mid 1990’s, the leading vendors were Cisco, Proteon, and Wellfleet. Their products were networking gear that provided data connectivity between computers. Period. It was hard to sell a router other than one of those three in those days, and in a short period of time, the latter two fell away and all there was left was Cisco.
I worked for a networking company at the time that offered, among many products, a router. In a router-to-router competition, Cisco was seen as the industry leader, and therefore the “safe” choice, and the lion’s share of the sales went to them. I had to come up with a new idea. That new idea came in the form of a special project we did for the federal government. They wanted a router that not only provided connectivity, but also “security” – literally encryption of the data stream. We made it for them as an enhancement to our existing product. They loved it. And then we realized what that could do for us in the commercial market.
Suddenly, the sales scenarios were no longer about just moving data from point A to point B, but it was then couched in terms of getting it there safely, securely, and privately. With this argument I was able to take a business unit from virtually nothing to over $50 million in revenue in less than two years.
So what can you do to refocus your offering with a new message to a new market segment, or to completely change the rationale of the argument to your existing targets? The answer to that question may be more than just a revamp of your story; it might mean changing the offering itself in a small way or a big way. But if you can do it, you might find an entirely new spurt of revenue momentum and market share.
The Viral Infection Strategy
This is actually a function of a “Divide and Conquer” approach. It’s used when you conclude that you are never going to get your target market to abandon their chosen #1 vendor. This is, outwardly, a function of “peaceful coexistence” with that vendor, seeking out a multi-vendor story, where you are positioned as complementary and actually synergistic to the incumbent.
However, once you are in the door and installed, then, inwardly, the strategy becomes to “infect from within,” demonstrating value, adding new capabilities over time, and eventually nudging the other vendor out of the spotlight. This is a much more long-term and patient strategy, but can be effective when the no compromise “them or us” proposition has failed.
The Delay Strategy
This strategy was perfected by IBM decades ago. This is used when the competition’s offering is clearly superior and you are about to lose. However, in the course of getting the bad news, you also are educated as to why the competition’s offer is seen as superior and you understand what yours is lacking. Thus, your counterpunch becomes: “Oh, we’re just about to announce not only all of those features you want, but also a few more besides that in about six months. You certainly don’t want to invest in a technology that’s going to be obsolete six months from now. It would be better to just delay your decision for a short time and get what you really need.”
And if they buy that pitch, then you have six months to add whatever bells and whistles you’re missing. The idea here in this strategy is that if you can’t win, then no one will. It’s a strategic retreat: Live to fight another day.
Connecting the Dots
The common thread in all of the previous four strategies is the necessity to have to modify, enhance or evolve what you have to offer, specifically to accommodate a new storyline that leads from a real problem to your solution as part of the Reverse Engineering Marketing exercise.
So if your offering is something you conjured to life because you could, not because you should, and that didn’t work out so well for you, then you need to seriously consider your own Reverse Engineering Marketing exercise – not just if you can, but because you should.
About the Author
Robert Gelinas is the President and CEO of JPE Inc. Consulting (www.jpeincconsulting.com). He has spent over 20 years in the IT industry as a senior executive and sales and marketing leader, having built many national and international Enterprise IT sales and marketing organizations. He has both an extensive Fortune 500 background as well as a wealth of successful Start-Up experience. He is also a published novelist, writer, publisher (www.archebooks.com) and frequent public speaker on both IT marketing and the writing and publishing industry.
An Outcome-Based Business Model
By Robert Gelinas
© 2009. All Rights Reserved
Outcome-Based Business Models synchronize vendor and client goals, eliminate adversarial dynamics, and create the best opportunity for a true “win/win.”
Allies Not Adversaries
When Ross Perot left EDS/GM and founded Perot Systems, one of the first market segments his new company sought to serve with IT Outsourcing services was the data center operations of State Governments. What was unique about his approach was that his pricing model wasn’t based upon traditional man-hour rates, headcount, flat project fees, etc. Instead, he simply asked to be paid as a percentage of the current operational cost savings he created with his services.
In effect, if Perot could reduce an organization’s existing IT operating costs by, say 30%, and he took a percentage of that, then the net savings was still a good deal for the client—with no “breakeven point” that had to be achieved at some theoretical point in the distant future before appreciating the savings, plus the cost of the operation was coming from existing budgets, and therefore already funded. Plus, the more Perot was able to save them, the more he made.
A scenario like this puts both the vendor and the client into a business model of mutually compatible and synergistic goals. The client values the tangible and desirable goal of lowering their costs/expenses, whereas the vendor believes their value proposition could genuinely result in major new operational efficiencies. But rather than the vendor telling the client that they have to pay X in order to receive benefit Y, i.e. direct cause and effect, in Perot’s case, instead they made X a factor of Y. If Y (benefit produced), then X (payment).
This logic effectively takes off the table the notion that the client could potentially end up paying X cost but maybe not receiving Y benefit as promised, essentially having to bear all the risk of the relationship and financial investment alone. But the synergy of this approach goes further, creating the opportunity that the vendor might even deliver results superior to Y, and thereby increase their own ROI (2X?), by virtue of the business model structured to be in the vendor’s best interests to do so. More value delivered to the client means the greater the vendor’s reward.
Fees for service as a percentage of savings isn’t the only example of this principle. In some instances, direct costs savings might not be a practical objective – e.g. where an incremental investment is what is required to achieve a greater business goal. That doesn’t mean that an Outcome Based Business Model is precluded.
For example, what if the goal for the client is to generate a specific revenue goal; or to achieve a certain degree of Gross Margin, Net Operating Income (NOI), Profitability, or Earnings Per Share (EPS); or perhaps to bring a deliverable product or service to market by a specific target deadline that gives the client a competitive advantage in their own market. What about an Annual Growth Rate (AGR) target? All of these goals can have a compensation component for the vendor who is able to make them happen.
Shared Risk
The obvious downside to the above thinking is that there exists the potential to shift virtually all of the risk of success over to the vendor, away from the client. If the proposition is purely – “We’ll guarantee your success, Mr. Client, and after we do, then you can pay us” – who wouldn’t want that deal?
Sure, there’s always the inherent risk of operational disruption arising from any significant change to an environment or process, but one would think that after some proper due diligence, if you are talking about a credible vendor relationship that you would consider using anyway, if all other considerations are equal, and the only difference is a pricing structure that puts all the performance obligations on the vendor with no advance financial risk to the client until the success has been achieved – that’s a very compelling business proposition.
To be clear: the extreme interpretation of this idea here is analogous to the home contractor who tells you that their labor and materials are free until the job is done, when you’re 100% happy, and then you pay. Unfortunately, the only vendors/contractors who offer such “deals” are those who are supremely confident in what their work will produce, the carrying cost of the job is not cost-prohibitive, and the risk of the client not being happy when done is highly unlikely.
This approach may be reasonable for small-scale endeavors. But what about large, enterprise-class undertakings that might be months or even years in scope, involving many fulltime personnel and resources, where the ability to defer vendor compensation to the very end isn’t a financially viable strategy? Is an Outcome-Based Business Model still an option?
Yes.
When You’re Lost, Buy a Map
Embarking on a year-long or more, six- or seven-figure project, or multiple overlapping projects long-term, and doing so starting from scratch with a brand new third-party vendor, can appear to be a very risky proposition in terms of having any reasonable assurance of long-term success—regardless of how well-reputed or experienced a vendor is that you may be considering using. The vendor may do everything right themselves, but a client’s own organization may have idiosyncrasies and nuances that just don’t integrate well with outside parties that create stumbling blocks and potential risks.
Plus, as noted above, it might be completely unreasonable/unviable for any outside vendor to be willing to take on most or all of the financial risk of a major, long-term endeavor prior to the execution and production of all deliverables and results.
In all likelihood, the client has some idea of what they wish to achieve, even if the roadmap to achieving it working in concert with an outside party isn’t fully understood. The client may, indeed, have some idea of what it would take if they did it all themselves, hired and deployed all of their own resources, obtained all the requisite tools and implemented all the necessary best-practice processes, etc. But knowing those facts is what likely prompted the client to seek out third-party help in the first place – i.e. in an effort to reduce costs, accelerate time frames, and produce a stronger result. But the exact parameters of what it would take for a third party to achieve the client’s goals in terms of time and money and operational process are completely unknown. And even if these variables were fully known, i.e. coming in the form of a traditional bid, a budgetary figure and target deadline does nothing to mitigate any of those risks and concerns associated with assuring long-term success.
So how can this dilemma be resolved? Enter the expert Business Analyst.
All the pertinent variables in the “master equation” in terms of what needs to be accomplished and what it will take to do it successfully can be quantified. Moreover, the business drivers that served as the catalyst for initiating and approving the project(s) themselves can be identified and quantified – i.e. in terms of the goal of increasing revenues and/or productivity, producing better margins, lowering operating costs, generating higher EPS, etc. All of that data can then be synthesized into a Total Cost of Ownership (TCO) / Return on Investment (ROI) model.
That TCO/ROI Model can then serve as the foundation for an incremental Project Plan, broken down into phases/milestones, whereby “Success” can then be defined and quantified, not in terms of a single end result, but in terms of sequential achievements that a vendor can then potentially viably shoulder, taking on a measure of that risk and/or make an investment with sufficient confidence that their own operating costs are neither cost prohibitive nor is the outcome of the incremental deliverable uncertain.
For the client’s benefit, the production of this Gap Analysis, TCO/ROI Model, and Project(s) Development Roadmap is a relatively small investment in terms of both time and money – which is an investment that needs to be undertaken regardless of who ends up doing some or all of the work. That’s Key to understand.
Thus, the risk mitigation strategy becomes simple and clear:
1) A client should first invest in a Development Roadmap, predicated upon objective and highly quantitative Business Analysis within the context of Client Defined Business Objectives
2) The Roadmap then provides the Basis/Foundation for Incremental Win/Win Outcome-Based Business Model Transactions, with Shared Risk and Investment
3) Vendor Integration and Partnering can then be evaluated moving forward based upon Pilot/Test projects to establish effective communication and collaboration processes, and the trust and confidence necessary to proceed with the execution of the full Development Plan
The Best of All Worlds
Outcome-Based Business Models, with shared risk and investment, is the most financially advantageous and lowest risk scenario for a Client-Vendor relationship – for both parties. It is possible to enjoy such a business model, even in the context of large-scale business objectives if approached with the proper strategy and an incremental and evolutionary development process.
About the Author
Robert Gelinas is the President and CEO of JPE Inc. Consulting (www.jpeincconsulting.com). He has spent over 20 years in the IT industry as a senior executive and sales and marketing leader, having built many national and international Enterprise IT sales and marketing organizations. He has both an extensive Fortune 500 background as well as a wealth of successful Start-Up experience. He is also a published novelist, writer, publisher (www.archebooks.com) and frequent public speaker on both IT marketing and the writing and publishing industry.
Getting Published – The Ultimate Calling Card
By Robert Gelinas
© 2009. All Rights Reserved.
Successful Marketing is based on Credibility. There’s nothing that establishes your credibility better than being the author of a book that explains your expertise, value, capabilities and perspectives.
Imagine this scenario: A business executive (who is one of your top target prospects) receives a mysterious box or express mail envelope. There might be something important inside, so he/she opens it, and finds an attractive book with an intriguing title like: The Six Things All Executives Need to Know, or The Solution to the [something you know about] Problem. It’s written by you. It’s autographed and personalized for its recipient with a hand-written note which says, “I thought you might enjoy this.”
The executive thinks, “Wow, that was thoughtful.”
Does the executive even need to read the book? Not necessarily. And certainly not right away, unless it really appeals to them. And if they do, that’s great. It does indeed contain a lot of helpful information. Most likely it gets set aside on their desk with the intention of “getting to it” at some point in the future. And there it may lay for a week or so.
However, what happens next is that a couple of days after its “confirmed” arrival you call them. You get their “gatekeeper” (administrative assistant) who is there to screen out any sales or marketing types from their boss. You simply say, “Hi, this is [your name]. I’m calling for [the executive]. I sent them a copy of my latest book last week, and I just wanted to make sure it arrived okay.”
The gatekeeper replies, excited to be speaking to a published author, “Oh, yes, it did! I’ll let him/her know you’re calling. Hold please.”
The executive answers. You introduce yourself. Your name sounds strangely familiar, but they can’t quite place it. Your name should sound familiar, since they’ve been glancing at it every now and then for a couple of days. They suddenly remember and pick up your book sitting there on their desk.
A cheerful voice replies, “How can I help you?”
See how easy that was?
Okay, I know, you’re saying, “Sure a cold call like that sounds easy. Just one problem. I haven’t written a book. I don’t know the first thing about how to write a book. And even if I did, getting published is nearly impossible.”
If you’re a novelist, your concern is valid. Getting traditionally published as a storyteller is nearly impossible if you’re not already famous for some other reason. Then again, there are always Vanity Presses that will publish anyone, but the finished products of most of them are…oh, how shall we say?…not that attractive.
So you have two challenges standing in the way of you employing this powerful marketing technique:
- Writing a Book
- Getting it Published
Solution to Problem #1: Hire a Ghost Writer. Collaborate on a text, let the writer turn it into something substantive and credible.
Solution to Problem #2: Hire a Commercial Publisher to publish your book. Don’t go to a Vanity Press, but a publisher who will produce a book of the same quality as those in any major bookstore and who can get it posted on Amazon.com and other online retail venues and in all the major retailer databases so it can be special ordered by any bookstore.
In addition to using it as a marketing tool, you can also take it with you to speaking engagements where you can sell it and make a extra money. Or you can give it away as a promo. Whatever you can think of.
It happens every day. You really don’t think all those politicians, celebrities, talking heads, TV and radio pundits, diet gurus, self-help mongers, detectives, criminals—and yes, even business leaders “Captains of Industry”—write all those books all by themselves, do you? Maybe a few do, but come on. You know better. So why can’t you do it, too, if perhaps only on a little smaller scale?
You: The Consultative Expert
Think about it: Most companies seek to apply a “consultative” approach to high-level selling. You know all too well that you don’t ever want to come across merely as a “bag carrying peddler,” which you also know will just get doors slammed in your face; rather, if you can, you’d prefer to position yourself as an “expert” in the area of your products and services with valuable insights and recommendations to offer.
What better way is there to create that impression of you as a consultative expert in your field and reinforce it, than by offering a physical artifact of your latest “major published work”? And that’s the reality of what we’re talking about here.
A book with your name on it can serve as a powerful marketing artifact.
Shouldn’t at least someone in your company, ideally someone who serves as your de facto spokesperson in Press Releases, at trade events, to analysts, etc. have an accolade behind their name that says, “…author of Title of Book”? And then, even if someone goes to Amazon and looks it up, why, sure enough, it’s there! If they actually read it and like, they may even recommend it to a friend, who can buy it online, or have their local bookstore order it. That might even result in some word-of-mouth referrals and leads.
Are you starting to see the power of this idea?
It’s very powerful because, culturally, we’ve all been trained to view “authors” as being in a class of unique achievement, which for the most part is true. Intuitively, everyone believes investing the time to write an entire book is hard to do, something that most people don’t possess the wherewithal to do. Therefore, those who have done it must be “special.” In the business world, especially in a sales and marketing context, that’s powerful.
“Okay,” you say, “but how do I find a good Ghost Writer and Commercial Publisher?”
Obviously, you simply need to find a marketing company who specializes in such services. You contact them and tell them what you need. Let them take it from there.
“Okay,” you say, with just a tinge of frustration in your voice, not knowing of any marketing companies who might specialize in Ghost Writing and Commercial Publishing, “How do I find one of those animals?”
Shameless Plug Alert: Email me. bob@jpeincconsulting.com. Let’s talk.
Seriously, if you have an interest in exploring a Calling Card Book project, please contact JPE Inc. Consulting www.jpeincconsulting.com for more information. We can make it happen for you.
