The Changing World: Part 6 – Competing with Free

When a low (or zero) cost competitor enters a marketplace, existing companies get worried. This is especially true in smaller, high technology industries where those existing companies can charge high prices on products like unique sensors, complex measurement solutions, or product specific consulting services. These small markets have high barriers to entry so it can take decades for competitors to appear and win market share, but when they do, watch out, the competitive landscape can shift rapidly. Once a few large customers switch successfully, it becomes easier and easier to convince others. Quality, loyalty, and long sales cycles are like a finger in the dike, the problem must be addressed immediately before the dam breaks, but how?

A recent article from KISSmetrics, “How to Retain Your Customers in an Age of Free SaaS” explores an extreme example in the Software as a Service industry (SaaS). They describe the worst case where competitors are giving away free products. There are many examples of this in massive industries. Apple does it with OS X and IOS, so how does Microsoft compete? Google does it with Gmail, Photos, Calendar, Drive, Maps, Android, etc., so how does Apple compete? Facebook does it with… well, they do it with something since industry experts seem to think that Facebook is one reason that Google’s growth has stalled.

Today, no industry is immune. If you are successful and you are not in this situation now, there is a good chance you will be in the near future. I have seen companies that had a 50 year dominant market position lose it to aggressive competitors. The KISSmetrics article makes some excellent points right after the vague initial suggestion of “restrategize.” First, re-marketing is a good start. There is always a group of buyers who just care about cost so provide an entry level product (something decent, not “crippleware“), but shift focus to areas the low cost competitor(s) can’t or won’t address like quality, reputation, reliability, stability, capability, versatility, ruggedness, warranties, training, support, etc.

Second, spend time with key customers and actually listen to them. Shockingly, they will tell you what is valuable to them. Why do I pay more for Apple’s products and pay at all for Google’s Apps for Business? Because these solutions make me more productive. There is a definite cost associated with the effort required to utilize a “low cost” $699 Windows PC, an Android phone, or free business apps. Apple and Google both listen to customers (in the larger sense), implement the best of this input, and then effectively market these solutions.

Finally, regularly remind your customers why your solutions provide more value through both your sales and marketing efforts. 90% of the time white papers, application notes, case studies, marketing materials, and consistent sales training go a long way to maintaining a healthy customer relationship. Once in a while, going head to head with the competition is required. As BGR reports, even Apple has started doing this with their recent “Hardware and Software” campaign directly pointing out the advantage of making both iDevices and IOS. BGR rightfully points out that it is risky to mention a competitor directly, but occasionally it is necessary. So if you are still milking that cash cow, you might want to take action now, it’s no fun being stuck on the fence.

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The Changing World: Part 5 – The Gordian Knot of Organizational Issues

During my MBA, the Organizational Effectiveness course turned out to be one of the two most useful courses of the program (the other being Strategy). Why? Because most clients I talk to are hyper aware of external issues. They constantly are looking outside their companies to meet competitive threats and gain a competitive advantage, but nine times out of ten, internal factors are the more significant barriers to success. These factors include poor customer service, lack of sales training, ineffective marketing, draconian software licensing systems, and product / service issues in general.

Big companies that should know better are no exception to the rule. I thought Microsoft would change after Steve Ballmer left, but it hasn’t changed that much. There will be SEVEN versions of Windows 10 and articles have been written like “How To Tell Which One Is For You.” To be fair, Windows for individuals, large companies, and phones should probably be different versions, but what’s up with all the “Here’s how to get Windows 10 for free…” articles. This is confusing, messy and people will feel cheated even before the OS is released in late July.

On the opposite end of the spectrum, T-Mobile gets articles like “How Much Do I Love T-Mobile? You Don’t Want to Know.” This was written by Ryan Holiday, an expert in the marketing field who typically gets paid big bucks to write about companies. My favorite quote:

T-Mobile has no idea I wrote this article. I don’t care if you switch or not. In fact, I think I actually own shares in AT&T (it pays a good dividend). But it is a case worth looking at. Because a mediocre company was able to become a great one, without changing all that much.

So, assuming your product doesn’t suck, reserve time during your regular business reviews to evaluate and improve your “organizational effectiveness.” It’s maybe the only thing you have complete control over that can make a major improvement to your customer satisfaction and your bottom line. As an added bonus, you might find that customers like you enough to help you with your marketing efforts… for free. Wouldn’t that solve some knotty problems?

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Monthly Recap: A Brilliant Idea for a Changing World

Phoenix is a good biking city. It has lots of bike lanes, is mostly flat, and there are many things to see and do within biking distance (at least in our part of town). So I decided to buy a bike. The problem was that I hadn’t owned a bike for over 20 years and cycling had changed a LOT. Then I came across a bicycle “startup” company called Brilliant Bicycles and took a chance buying their first product two months before it was even released.

Why did I take a chance on an unknown like Brilliant? Interestingly, the story relates to the posts from this month:

First, this was not strictly a technical sale, but I did go through “the buyer’s process” and realized that I wanted a quality product, but didn’t want all the hype that went along with the major manufacturers. Brilliant’s “story” is based around this concept.

They also provided excellent marketing videos to convey the intangible aspects of their high quality products: simple designs, ethical labor, clean / safe working conditions, and excellent support. As an example, I did have to use their support when I had a problem with the shifter on the bicycle. They responded to my emails quickly with suggestions. When they didn’t work, I received a call from the Director of Manufacturing. He has a personal interest in customers’ experiences so I ended up talking to him and learning some fascinating things about the business at the same time he helped me fix the problem. He definitely has a mastery of the art of conversation. He even offered to pay a local bike shop to fix the problem, no questions asked, but his candidness and belief in his product made me believe that I could fix it, which I did.

Finally, Brilliant is a company that is developing and nurturing change in an industry dominated by large players. This TechCrunch article explains how Brilliant was founded by two Ex-VCs (venture capital people) with a vision to create a company to provide “an easy option for a normal person who just wants to ride to the park and has a budget in mind.”

The cycling world has some similarities to the niche technology world. It is dominated by bike shops who provide a wide range of value-added services in exchange for markups on the products they sell. There is certainly a place for them, but it looks like there is also a place for a “self service” option like Brilliant. The niche technology world is moving in the same direction in certain areas like Test and Measurement where companies like National Instruments are providing more and more advanced “self service” products sold directly through their website. Sales organizations and manufacturers’ representatives might want to review the value they are providing periodically in this changing environment. More on this topic in a future post!

As always, feel free to send ideas on topics of interest. Research interests, niche technology sales and marketing problems, training, and social media questions are all welcome suggestions.

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The Changing World: Part 4 – The Apple Watch and Nurturing Change

Ok, we did it, my wife and I bought Apple Watches. As I said in the last post of this series, sometimes it’s hard to understand the significance of an innovation without personally experiencing it. After a couple weeks with the Apple Watch, I noticed that it adds another dimension to the technology equation. It is not “must have” technology, but it does address several issues:

  • Notification stress: Low priority notifications can be turned off and a quick glance at your wrist shows important ones.
  • Phone interactions: How many times a day do you pick up your phone to check it? Since important notifications can be viewed at a glance (literally), my phone now stays in my pocket. For people without pockets, it saves digging in a purse or bag to look at the phone or answer a call.
  • The Health App: Though it has some problems, it works. I really do stand up at least 12 times a day now, even on super busy days. Being more aware of motion is one good first step to health.

Most technological developments are incremental: features added, bugs removed, etc., but once in awhile risky new ground needs to be broken. The Apple Watch is this type of development. It certainly has its problems. It is a bit slow, battery life is marginal, and there is a steep initial learning curve, but it became unobtrusive after a couple days. Now it feels weird to not wear it.

However, for niche technology companies, a failure in taking a big risk can jeopardize the entire company. One solution is by occasionally taking smaller, calculated risks. Instead of just updating an old product, use the opportunity to explore a new approach to solving a problem. Experimenting with Software as a Service (SaaS), Cloud Computing, distributed processing, and the Internet of Things (IoT) are all examples of calculated risks. Additional development resources can be allocated to the successful “experiments.”

A new idea is like a plant seedling, it needs to be nurtured and handled gently until it develops roots and can grow on its own. Organizationally, there are a variety of ways to achieve this such as protected development teams and “companies within companies.” Big examples include Amazon’s “Lab126” that develops the Kindle and Fire hardware or Microsoft Research that does research in areas ranging from Machine Learning to Computer Vision.

The next post in this series will dive a bit deeper into the organization issues involved in nurturing change. In the meantime, here is an unintended consequence of the Apple Watch, an epidemic of HWS (hairy wrist syndrome).

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Monthly Recap: Evolution Versus Revolution – More Thoughts on Change

This month marked the end of an era in Acoustics. Dr. Bruel worked right up to the end, celebrating his 100th birthday with over 100 people and attending the March meeting of the Danish Acoustical Society before passing on April 2nd, 2015. He celebrated his 100th birthday with a style and flair that was his trademark throughout his life. “A Great Acoustician is Quiet” is a short post about my personal experience with Dr. Bruel in 1995.

Dr. Bruel truly changed the world through acoustics by developing products ranging from the first commercially practical measurement microphones to advanced ultrasound machines and photo acoustic gas analyzers. During my early years as an instrumentation engineer working at a consulting company, I remember taking apart one of those gas analyzers. Coming from an electrical engineering background, I didn’t know anything about Bruel and Kjaer, but immediately realized that it was a work of art inside with beautifully designed circuit boards, pumps, tubing, and mechanical components. My first thought was either these people are geniuses or they are completely crazy. When I joined Bruel and Kjaer a couple years later, I found out they were a bit of both. One thing I learned during my 15+ years at Bruel and Kjaer was that change through evolution can be more powerful than so-called “market disruptors” which attempt to be more of a revolutionary change. Another company that changed the world was Lockheed Martin and the post, “Learning to Run a Company in One Afternoon,” provides a glimpse into the management philosophy behind the Skunkworks division that created breakthroughs such as the U-2 surveillance aircraft, the SR-71 Blackbird, and the stealth bomber.

Of course, today Apple is the primary example of evolutionary change. The post “The Changing World: Part 3 – Walking the Razor’s Edge of Change” uses the Apple Watch as an example of walking the razor’s edge of change. The watch is a major risk, but surprisingly many people in the high tech world see Apple as lagging behind the cutting edge of technology. Android phones have had NFC payments (Apple Pay) and the equivalent of the Apple Watch for years. However, these products have not gained popular acceptance. Google has even tried the revolutionary approach with Google Glass and the backlash was severe. People wearing Google Glass began to be called Glass-holes. An upcoming post will explore how it is possible for “the cutting edge” can be such a relative concept.

Other topics this month included DEWESoft’s excellent free training resource called “PRO Training,” the surprisingly popular “Creativity, John Cleese, and Taylor Swift,” and the hopefully humorous “Wardley’s Scale of Corporate Desperation.” If you are hearing “culture eats strategy for breakfast” around the office, you might want to polish your resume. Finally, as monthly recap bonus, National Instruments is in the middle of a webinar series on “Sensor Measurement Fundamentals.” Some of them sound like a marketing person reading from a script, but if you can live with that, the material itself is excellent.

As always, feel free to send ideas on topics of interest. Research interests, niche technology sales and marketing problems, training, and social media questions are all welcome suggestions for future posts.

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