Category: Management

Inc suggests that businesses should not try and compete on price alone, and provides a few alternatives:

Carve out a niche. If you “own” a market, you have more room to set prices. If there are 100 mechanics in your city, you’ll face constant price competition. But if you’re the only mechanic specializing in Volvos, you’ll face much less price pressure.

Work smarter, not cheaper. Let’s face it, a lot of your competition is just plain dumb. So, improve profits through innovative practices. Southwest Airlines, for instance, saved money by using plastic, re-usable boarding passes instead of paper passes, and they were the first to use electronic ticketing. Southwest maximizes profits from their planes by getting them back in the air an average of 20 minutes after landing, instead of the 2-3 hours of other airlines. By being smarter, Southwest became the most consistently profitable airline in the industry.

Focus on value, not price. Value is a term used to mean the combination of price and quality. When you shop for a winter coat, you may be willing to pay higher prices to get quality that will last many years. Likewise, a client may be willing to pay a higher price for your printing services if you can deliver the job faster with fewer errors than your competition. Excellence and service are competitive advantages that let you justify higher prices.

Target the right customers. Not all customers are willing to pay more even for better quality. So make certain you aim your marketing efforts at customers who will respond to the differences you offer and can pay a slightly higher price for that value.

Build loyalty to you, not your price. Even if you use special pricing (discounts, introductory offers, sales) to initially attract customers, immediately go to work developing a relationship that keeps customers coming back when the price goes up.

Some good advice there – we are too caught up on the “affordability” theme. Maybe we need to think a little beyond that.

Eric Sink has an excellent article on the importance of learning in shaping our careers.

In basic calculus we learned that the first derivative of a function is the “rate of change” of the value of that function with respect to another variable. In the case of your career, the other variable is time. The basic equation for a developer career looks like this:

C = G + LT

C is Cluefulness. It is defined as an overall measure of your capabilities, expertise, wisdom and knowledge in the field of software development. It is the measure of how valuable you are to an employer. It is the measure of how successful your career is. When you graph your career, C is on the vertical axis.

G is Gifting. It is defined as the amount of natural cluefulness you were given “at the factory”. For each individual, G is a constant, but it definitely varies from person to person.

L is Learning. It is defined as the rate at which you gain (or lose) cluefulness over time.

T is Time. It is on the horizontal axis of your career graph.

As you can see above, your career success is determined by three variables, only one of which you can control:

You obviously can’t control T. Time marches forward mercilessly at the same rate for everyone.

You also can’t control G. The truth is that some people are just naturally smarter than you are, and that’s the way it is. But G is not the sole determiner of your success. I have known some truly gifted programmers with lame careers, and I have also known some less-gifted folks who have become extremely successful.

You can make choices which affect the value of L. In fact, you do make choices which affect the value of L, every day, whether you know it or not.

To which I would add, that a weblog can play a key role in furthering learning. When you read, think and blog it – adding your comments and creating a personal knowledge base. My formula: Learning = Reading + Thinking + Blogging.

We worry about Microsoft’s clout in the tech world. Take a look at Walmart. Charles Stein writes in the Boston Globe:

With almost $250 billion in annual sales, Wal-Mart accounts for 6 percent of all US retail sales and 2 percent of the gross domestic product. If you want to know what’s going on with the American economy, Wal-Mart is the place to look. The growing trade deficit? Wal-Mart imports $12 billion worth of goods from China, about 10 percent of the US total.

For Wal-Mart, success begets more success. The company’s low prices boost sales volume, which in turn, allows Wal-Mart to drive costs still lower. It’s a virtuous cycle others can’t match. “The value Wal-Mart can deliver can be extended to an almost infinite number of businesses,” said Eric Almquist, a senior partner with Lippincott Mercer, a consulting firm. That is already happening in groceries. It took Wal-Mart a few years to learn the ropes, say analysts, but today it can duplicate the quality of most supermarkets while offering shoppers bigger bargains. “It is shocking to see how much they have improved,” said Maureen Depp, an analyst with State Street Research.

The McKinsey Quarterly has an interesting article which differentiates between the two, suggesting that “companies can earn higher margins or increased revenues by selling integrated offeringsif they dont merely bundle their products.”

Not every company has to sell solutionsmany successful businesses offer products, services, or bundles of either or bothbut companies intent on selling them must recognize that their economics, and thus their managerial imperatives, differ from those of product bundles. In the absence of such an understanding, vendors might invest in packaging a pseudosolution that competitors can disaggregate and bid against. The crucial first step is therefore to understand what a solution is and how it differs from products or bundles of products.

In the broadest sense, a solution is a combination of products and services that creates value beyond the sum of its parts. In practice, solutions are usually born when a vendor can meld a certain level of expertise with proprietary intellectual propertya method, a product, or an amalgam of the twoto handle a problem for a customer or to help it complete a step in its business. More specifically, it is the level of customization and integration that sets solutions above products or services or bundles of products and services. These two elementscustomization and integrationare more than just the glue that holds the package together: the way the elements are integrated and the extent of the customization define the added value for buyers and earn the added financial benefits for sellers.

Kuro5hin has a fascinating and detailed discussion on Sun: “Sun began the 1990s in an unenviable position. Back then, Sun was mainly a manufacturer of Unix workstations for scientific and technical computing. This market was both crowded, and widely expected to decline as workstation users migrated away from Unix to cheaper commodity machines. It’s surprising, therefore, that within 5 years Sun would be catapulted to become the most successful company in the enterprise computing space, multiplying its value by 30 times, and surpassing its formerly much larger rivals like HP. It’s also surprising that, within a few more years, Sun would decline just as rapidly as it had risen. How could a middling manufacturer of workstations so rapidly become the darling of IT, only then to become the orphan stepchild?”

So, will Sun rise again? The author’s conclusion (to which I broadly agree):

The three factors underlying Sun’s prevoius ascent are permanently gone. The tech economy won’t likely boom again like it did in the late 1990s; Sun’s competitors won’t likely try to kill off their own platforms; and Intel and Microsoft won’t likely release entirely novel, untested versions of NT or Itanium. So, a repeat of the ascent similar to the one in the late 1990s is unlikely.

Furthermore, it’s unlikely that Sun’s low-end boxes will be able to compete on price/performance with the offerings from research-lean organizations like Dell. And it’s unlikely that Sun’s high-end boxes will be able to compete with offerings from massive, well-funded, technologically sophisticated companies like IBM and HP.

These facts have led some industry watchers to predict that in the long term, Sun is doomed. But if there’s any lesson to be learned from Sun’s history, it’s this: extrapolating from current trends is not a good way of predicting the future. Sun is a master of pulling tricks out of its hat. Sun has been written off before, and it prevailed.

John Robb points to a post by Jim McGee on the need to shift the focus from “managing knowledge to coaching knowledge workers”:

The fatal flaw in thinking in terms of knowledge management is in adopting the perspective of the organization as the relevant beneficiary. Discussions of knowledge management start from the premise that the organization is not realizing full value from the knowledge of its employees. While likely true, this fails to address the much more important question from a knowledge worker’s perspective of “what’s in it for me?”. It attempts to squeeze the knowledge management problem into an industrial framework eliminating that which makes the deliverables of knowledge work most valuable–their uniqueness, their variability. This industrial, standardizing, perspective provokes suspicion and both overt and covert resistance. It also starts a cycle of controls, incentives, rewards, and punishments to elicit what once were natural behaviors.

Suppose, instead, that we turn our attention from the problems of the organization to the problems of the individual knowledge worker. What happens? What problems do we set out to solve and where might this lead us?

This approach also leads you to a strategy of coaching knowledge workers toward improving their ability to perform, instead of training them to a set standard of performance. In this respect, knowledge workers are more like world class athletes than either assembly line workers or artists. There are building block skills and techniques that can be developed and the external perspective of a coach can help improve both. But it’s the individual knowledge worker who deploys the skills and techniques to create a unique result.

Shrikant Patil writes about Bennis and leadership:

Warren Bennis argues that trust and openness are key to success. He believes that groups and organizations function effectively in an open atmosphere, where people are willing and able to trust each other. He studies people who became leaders and their emergence from the ordinary mass of employees and managers. From this he defined “leadership as the capacity to create a compelling vision, and to translate into action and sustain it”.

A successful leader needs to create a vision and communicate it down successfully to all employees. This in turn requires management of the self, an understanding of one’s own skills and abilities so as to be most effective in preaching the vision.

Final quality, a leader needs to generate and maintain trust, “the emotional glue that binds leaders and followers together”. To create trust, leaders must be consistent and believable. They should be publicly seen as accepting challenges and taking responsibility.

Great leaders have 3 common features: ambition, competence and integrity. All three are essential, else compromising on any will lead both, the leader and the organization into dangerous waters.

News.com has a McKinsey Quarterly article, which states that “product development is facing a fundamental challenge. Unfortunately, at the very moment when companies need to make better products more efficiently, previous performance innovations in product development have hit a plateau.” It suggests a new approach.

The key to the new approach is an entirely different way of making product development decisions. By improving the quality, timing and synthesis of product and process information throughout the development cycle, such companies have turned a linear and sequential process into a flexible one that reacts to information continually rather than at intervals and in batches.

A team that used an information-based approach began by creating three simultaneous work flows: one for the needs of customers and the design features of the product, a second for its cost and a third for its reliability. The three subteams communicated daily and assessed all of their findings every week. By organizing around the flow of information, the team looked at market research through a new lens and made an important discovery: Customers care most about the cost and reliability, not their throughput performance and other advanced features, as the team had previously assumed.

Instead of using a linear approach to collect information, make a decision and then base other decisions on the first one, information-based teams solve problems continually and combine their findings frequently. Like the medical device companys team, they work in a way that allows them to converge on the best solution. This style of work resembles the “daily-build” method that many software companies use: The code produced by individual programmers is compiled every day so that project leaders can test it for bugs and functions. Problems are reported immediately, and the team knows, on a daily basis, how close it is to its ultimate goal.

By gaining the ability to delay the point when product designs must be “frozen,” information-based teams keep their options open longer and can respond to changes in the market at later stages of the development process. Senior management imposes fewer constraints on these teams than on their conventional counterparts so that they can consider a broader set of solutions; concepts may take longer to develop, but the company ultimately saves time.

Barron’s writes that Warren Buffet’s magic touch means that his company’s best days lie ahead:

With a market value of $110 billion, Berkshire is the 16th largest company in the stock market…Investors’ biggest worry is over who will succeed Buffett, who turns 73 on Aug. 30 and who many consider the most irreplaceable CEO in the country. His extraordinary business and investment skills have produced a phenomenal 38-year record at Berkshire, during which its stock has risen 4,000-fold from around 18 a share…Buffett owns 31% of Berkshire and his stake is worth over $34 billion.

There’s something about Buffett that makes sellers want to part with their businesses for reasonable prices. A major reason: He takes a hands-off approach to acquired businesses and lets the prior managers stay on to call the shots. As Buffett notes in Berkshire’s annual report, he wants strong management in place at any company he considers buying. Berkshire doesn’t send its own executives to run acquisitions. In fact, its Omaha office employs just 16 people and Buffett draws a salary of just $100,000 annually. Berkshire holders are getting the services of the world’s greatest investor very cheaply. Buffett loves his job; he’s even said that he’d “pay to do it.”

Berkshire’s Class A shares, at about $72,000, are down slightly this year, despite the broad stock-market rally, and haven’t moved much since the end of 1998.

Berkshire holders can take comfort in the company’s financial strength and Buffett’s still-magical touch. Based on Berkshire’s growing earnings and book value, it’s entirely possible that the stock could approach $100,000 by the end of 2004.

Eric Sink has an excellent weblog for technologists who need to do marketing. In a recent post, he writes about how geeks make the assumption that everyone is like them and what can be done about it.

To reach mainstream customers, we sometimes need to ignore our own preferences and just do what the customers want. Non-geeks in marketing generally have no trouble with this. Once they decide what the market prefers, all they want to do is get that product into the customer’s hands. They don’t have strong opinions about technology, so they don’t have trouble separating customer preferences from their own.

Not so with us geeks. We care too much about technology. We chose software development careers because we love technology for its own sake. We fight amongst ourselves in religious battles that seem arcane and irrelevant to normal people. We debate vi against emacs, Linux against Windows, C# against Java, RSS against Atom. We have strong opinions and we make them visible to everyone around us.

And when we get involved in marketing, we can stumble over those opinions. We need to talk about what customers want, but our own preferences get in the way. We bring our technology prejudices and biases to the discussion, often without ever being aware of the problems they can cause.

So it’s important to learn how to set aside our own preferences when appropriate. However, we don’t want to also set aside the deep technology understanding we have. Those two things come together, like the two sides of a coin. The religious preferences are inseparable from the expertise. The former is an obstacle to marketing discussions, but the latter is a tremendous asset.