Seed the market

In my Introduction to Tech Strategy post, I mentioned that one of the most important aspects of the technology industry is the importance of ecosystem linkages. There are several ways to think about ecosystem linkages. The main linkages I mentioned in my previous post was influence over technology standards. But, there is another very important ecosystem effect for technology companies to think about: encouraging demand.

For Microsoft to be successful, for instance, they must make sure that consumers and businesses are buying new and more powerful computers. For Google to be successful, they must make sure that people are actively using the internet to find information. For Cisco to be successful, they must make sure that people are actively downloading and sharing information over networks.

Is it any wonder, then, that Microsoft develops business software (e.g. Microsoft Office) and games? Or that Google has pushed hard to encourage more widespread internet use by developing an easy-to-use web browser and two internet-centric operating systems (Android and ChromeOS)? Or that Cisco entered the set top box business (to encourage more network traffic) by acquiring Scientific Atlanta and is pushing for companies to adopt web conferencing systems (which consume a lot of networking capacity) like WebEx?

These examples hopefully illustrate that for leading tech companies, it is not sufficient just to develop a good product. It is also important that you move to make sure that customers will continue to demand your product, and a lot more of it.

This is something that Dogbert understands intuitively as this comic strip points out:

To be a leading executive recruiter, its not sufficient just to find great executives – you have to make sure there is demand for new executives. No wonder Dogbert is such a successful CEO. He grasps business strategy like no other.

Surviving a consultant’s axe

Gawker, who seems to really hate McKinsey and other management consulting firms, recently put out a “Complete McKinsey Survival Guide” in response to McKinsey recently being retained by magazine publisher Conde Nast where they lay out a couple of interesting thoughts on how to survive a consultant’s downsizing tendencies including:

“Suck Up—Kiss ass, Kiss ass, Kiss ass. "Suck up to your own superiors, and their superiors, and theirs." It’s just that simple. A brown nose could give you a minute edge on your fellow layoff-eligibles.

Practice Subtle Backstabbing—You don’t want to be seen as a desperate bastard ready to sell out any and all of your colleagues to save your own job (even though you are). You just want to plant the seed. Take it from someone who’s been there: " Don’t talk shit about individuals, talk shit about DIVISIONS in a passive-aggressive way. Saying things like: ‘Those fellows that work in [blank] division are really nice guys, but I’ve worked here for five years and I still don’t know what they do’ is a winner." Corporate espionage at its finest, ladies and gentlemen.”

And they even made a suggestion that you practice some form of sexual quid pro quo as a means to escape the hatchet…

Suffice to say, the read was entertaining, albeit a little ridiculous with some of the suggestions, but this consultant was left with three main thoughts:

1. A consulting firm is not necessarily there to fire people. Yes, that is what they are often called on to do because many firms are staffed very inefficiently (too many people in some divisions, too many managers with no reports in other divisions, too many layers of management/bureaucracy), but management consulting firms are oftentimes brought in to do other things like:
• Business strategy – what markets or market strategies should the company or business unit pursue
• Supply chain strategy – how can a business reduce its cost structure by re-negotiating its contracts with suppliers
• Workforce re-deployment – how can a business re-organize its salesforce (not necessarily downsize) to optimize its results (e.g. move X people from West coast to Europe, etc)
• Operations support – how can a business optimize its decision-making process (e.g. how many people need to approve a decision before its made) or operations (e.g. how can I make a factory process work more smoothly)
2. It probably doesn’t really matter what you do. Any consulting firm worth their salt (i.e. any firm that has offices worldwide) will come to their final recommendation based on objective fact-finding and analysis where they poll many experts both from within the company and externally. It is relatively unlikely that Gawker’s suggestions that you subtly backstab another division or suck up to the consultants will change any of that, unless you are a masterful liar (and in that case, you should run your own business ) or have an amazing ability to prove the value of your division or group in such a way that even your senior management and external experts cannot.
3. You should see if you can join the joint-working sessions. Although this won’t change the outcome, regardless of if you’re going to be canned or not, it probably makes sense to join the consulting firm-internal team joint working group if you can, if only to help raise your awareness about (a) how senior managers think and rationalize large business decisions, something with which can help your career, and (b) come up with a sensible way for how to spin whatever decision the consulting firm comes up with.

At the end of the day, the purpose of the consulting firm is to figure out what’s best for their client. If you are a part of that solution, you have nothing to worry about. And if you weren’t part of that, then you probably shouldn’t have been working there to begin with and are better off finding a job where you are part of their winning strategy.

(Image credit)

iGoogle Comics

Am I sad that I’m not able to go to this year’s Comic Con like I was able to last year? Yes.

Thankfully, Google, in its infinite wisdom, must have sensed my sorrow and not only decorated their home page with a Google-ified version of DC’s Justice League, but they released a whole suite of Comics related themes for their iGoogle portal (which coincidentally is my home page)! (Thanks to my friend C.K. of Pizza Diavola fame for the pointer)

My personal favorites thus far (no, I haven’t yet decided which to pick yet) would be:

• Fables – a series that I absolutely adore from Bill Willingham; the premise is a “what if the characters from the fables we all know and love (like the Big Bad Wolf, Snow White, Prince Charming, etc) were real and have been living among us for hundreds of years?” Mix in a little sex, violence, and magic, and you get something which is moving, exciting, and very funny all in one.
• Dilbert – I link to enough Dilbert comics that this needs no explanation.
• Batman Reborn – What happens when you take a very talented writer like Grant Morrison who comes up with an amazing way to actually *kill* Batman, and then you get his old partner, the first Robin Richard Grayson, to replace him?
• Blackest Night – DC’s latest mega comic book event, and something I’ve been looking forward to reading for two years.
• Iron Man – I like the comic, loved the movie, and like the aesthetic in this theme.
• Peanuts – Who doesn’t love Snoopy?
• Vertigo – The DC imprint behind Fables, Neil Gaiman’s famous Sandman series, 100 Bullets, and more.

Nerdy Cow

Put this in the “if you are nerdy, you will enjoy this” category. Nerdy cows go “mu”:

Courtesy of JXZ (Image Credit)

Tech strategy 101

Working on tech strategy for 18 months ingrains a thing or two in your head about strategy for tech companies, so I thought I’d lay out, in one blog post (which may itself turn into a series) the major lessons I’ve learned about how strategy in the technology sector works.

To understand that, it’s important to first understand what makes technology special? From that perspective, there are three main things which drive tech strategy:

1. Low cost of innovation – Technology companies need to be innovative to be successful, duh. But, the challenge with handling tech strategy is not innovation but that innovation in technology is cheap. Your product can be as easily outdone by a giant with billions of dollars like Google as it can be outdone by a couple of bright guys in a garage who still live with their parents.
2. Moore’s Law – When most technologists think of Moore’s Law, they think of its academic consequences (mainly that chip technology doubles every two years). This is true (and has been for over 50 years), but the strategic consequence of Moore’s Law can be summed up in six words: “Tomorrow will be better, faster, cheaper.” Can you think of any other industry which has so quickly and consistently increased quality while lowering cost?
3. Ecosystem linkages – No technology company stands alone. They are all inter-related and inter-dependent. Facebook may be a giant in the Web world, but it’s success depends on a wide range of relationships: it depends on browser makers adhering to web standards, on Facebook application developers wanting to use the Facebook platform, on hardware providers selling the right hardware to let Facebook handle the millions of users who want to use it, on CDNs/telecom companies providing the right level of network connectivity, on internet advertising standards, etc. This complex web of relationships is referred to by many in the industry as the ecosystem. A technology company must learn to understand and shape its ecosystem in order to succeed.

Put it all together, what does it all mean? Four things:

I. Only the paranoid survive
This phrase, popularized by ex-Intel CEO Andy Grove, is very apt for describing the tech industry. The low cost of innovation means that your competition could come from anywhere: well-established companies, medium-sized companies, hot new startups, enterprising university students, or a legion of open source developers. The importance of ecosystem linkages means that your profitability is dependent not only on what’s going on with your competitors, but also about the broader ecosystem. If you’re Microsoft, you don’t only have to think about what competitors like Apple and Linux are doing, you also need to think about the health of the overall PC market, about how to connect your software to new smartphones, and many other ecosystem concerns which affect your profitability. And the power of Moore’s Law means that new products need to be rolled out quickly, as old products rapidly turn into antiques from the advance of technology. The result of all of this is that only the technology companies which are constantly fearful of emerging threats will succeed.

II. To win big, you need to change the rules
The need to be constantly innovative (Moore’s Law and low cost of innovation) and the importance of ecosystem linkages favors large, incumbent companies, because they have the resources/manpower to invest in marketing, support, and R&D and they are the ones with the existing ecosystem relationships. As a result, the only way for a little startup to win big, or for a large company to attack another large company is to change the rules of competition. For Apple, to win in a smartphone market dominated by Nokia and RIM required changing the rules of the “traditional” smartphone competition by:

• Building a new type of user-interface driven by accelerometer and touchscreen unlike anything seen before
• Designing in a smartphone web browser actually comparable to what you’d expect on a PC as opposed to a pale imitation
• Building an application store to help establish a new definition of smartphone – one that runs a wide range of software rather than one that runs only software from the carrier/phone manufacturer
• Bringing the competition back to Apple’s home turf of making complete hardware and software solutions which tie together well, rather than just competing on one or the other

Apple’s iPhone not only provided a tidy profit for Apple, it completely took RIM, which had been betting on taking its enterprise features into the consumer smartphone market, and Nokia, which had been betting on its services strategy, by surprise. Now, Nokia and every other phone manufacturer is desperately trying to compete in a game designed by Apple – no wonder Nokia recently forecasted that it expected its market share to continue to drop.
But it’s not just Apple that does this. Some large companies like Microsoft and Cisco are masters at this game, routinely disrupting new markets with products and services which tie back to their other product offerings – forcing incumbents to compete not only with a new product, but with an entire “platform”. Small up-and-comers can also play this game. MySQL is a great example of a startup which turned the database market on its head by providing access to its software and source code for free (to encourage adoption) in return for a chance to sell services.

III. Be a good ecosystem citizen
Successful tech companies cannot solely focus on their specific markets and product lines. The importance of ecosystem linkages forces tech companies to look outward.

• They must influence industry standards, oftentimes working with their competitors (case in point: look at the corporate membership in the Khronos Group which controls the OpenGL graphics standard), to make sure their products are supported by the broader industry.
• They oftentimes have to give away technology and services for free to encourage the ecosystem to work with them. Even mighty Microsoft, who’s CEO had once called Linux “a cancer”, has had to open source 20,000 lines of operating system code in an attempt to increase the attractiveness of the Microsoft server platform to Linux technology. Is anyone surprised that Google and Nokia have open sourced the software for their Android and Symbian mobile phone operating systems and have gone to great lengths to make it easy for software developers to design software for them?
• They have to work collaboratively with a wide range of partners and providers. Intel and Microsoft work actively with PC manufacturers to help with marketing and product targeting. Mobile phone chip manufacturers invest millions in helping mobile phone makers and mobile software developers build phones with their chip technology. Even “simple” activities like outsourcing manufacturing requires a strong partnership in order to get things done properly.
• The largest of companies (e.g. Cisco, Intel, Qualcomm, etc) takes this whole influence thing a whole step further by creating corporate venture groups to invest in startups, oftentimes for the purpose of influencing the ecosystem in their favor.

The technology company that chooses not to play nice with the rest of the ecosystem will rapidly find itself alone and unprofitable.

IV. Never stop overachieving
There are many ways to screw up in the technology industry. You might not be paranoid enough and watch as a new competitor or Moore’s Law eats away at your profits. You might not present a compelling enough product and watch as your partners and the industry as a whole shuns your product. But the terrifying thing is that this is true regardless of how well you were doing a few months ago — it could just as easily happen to a market leader as a market follower (i.e. Polaroid watching its profits disappear when digital cameras entered the scene).
As a result, it’s important for every technology company to keep their eye on the ball in two key areas, so as to reduce the chance of misstep and increase the chance that you recover when you eventually do:

• Stay lean – I am amazed at how many observers of the technology industry (most often the marketing types) seem to think that things like keeping costs low, setting up a good IT system, and maintaining a nimble yet deliberate decision process are unimportant as long as you have an innovative design or technology. This is very short-sighted especially when you consider how easy it is for a company to take a wrong step. Only the lean and nimble companies will survive the inevitable hard times, and, in good times, it is the lean and nimble companies which can afford to cut prices and offer more services better than their competitors.
• Invest in innovation – At the end of the day, technology is about innovation, and the companies which consistently grow and turn a profit are the ones who invest in that. If your engineers and scientists aren’t getting the resources it needs, no amount of marketing or “business development” will save you from oblivion. And, if your engineers/scientists are cranking out top notch research and development, then even if you make a mistake, there’s a decent chance you’ll be ready to bounce right back.

Obviously, each of these four “conclusions” needs to be fleshed out further with details and concrete analyses before they can be truly called a “strategy”. But, I think they are a very useful framework for understanding how to make a tech company successful (although they don’t give any magic answers), and any exec who doesn’t understand these will eventually learn them the hard way.
(Image credit – chess) (Image credit – iphone vs blackberry) (Image credit – plant)

Maybe $100 isn’t so cheap after all

Anthony and I are in the business of bidding $100 for companies/divisions that we think we can turn around. But, despite our convictions, we are well aware of the skepticism out there.

“But, Ben, isn’t $100 far too cheap?”

I have to admit the doubts did get to me, but no longer. Apparently, large, recognizable magazine business are bought for far less! From the Financial Times (courtesy of my Bench Press partner Eric):

The $1 for which OpenGate bought TV Guide “is probably the kind of deal that would be obtainable for Business Week”, Mr Phillips said. Another banker said: “I think they’ll end up giving it away.”

Nope, definitely not too cheap anymore. After all, Dogbert has shown an uncanny ability to land deals worth far less than $100!

Sorry, BusinessWeek, are you feeling that sinking feeling?

(Image credit)

My Hobby

It’s not just Dilbert who makes fun of forecasting, XKCD is into it as well:

I wouldn’t call it a hobby, though. More like a day job that involves doing what is effectively described above, but making slightly more reasonable assumptions .

Fractions — my only weakness

No, they’re not my weakness. But apparently they are in Truro, MA, where a town which seems to have skimped on its basic math finds themselves besieged by fractions (HT: Neil Saunders’ Friendfeed):

In a vote of 136 to 70, voters passed a new time limit on how quickly a cottage colony, cabin colony, motel or hotel can be converted to condominiums. The new limit requires that those properties be in operation for three years before being converted to condominiums.

The exact count of the vote — 136 to 70 —had town officials hitting their calculators yesterday. The zoning measure needed a two-thirds vote to pass. A calculation by town accountant Trudy Brazil indicated that 136 votes are two-thirds of 206 total votes, said Town Clerk Cynthia Slade.

Brazil said she used the calculation of .66 multiplied by 206 to obtain the number.

But using .6666 — a more accurate version of two-thirds — the affirmative vote needed to be 137 instead of 136, according to an anonymous caller to town hall and to the Times.

Slade said that she called several of her colleagues to see how they calculate a two-thirds vote, and the answer varied widely. In Provincetown, Town Clerk Doug Johnstone uses .66. But Johnstone said he’d never had a close vote where it might matter.

A Day Late

… but no less heartfelt. I want to wish my lovely girlfriend, Sophia, a very happy (belated, as it was on the 7th of July) birthday.

Yes, she usually conks out when I talk.

(Image credit: my good friend Shang of Shang Chen photograpy)

The Never-Ending Battle

Just as Superman sometimes refers to his battle for justice as “the Never-Ending Battle,” I refer to my annual battle with the hordes of ants who seem to use my house as a summer vacation spot as my own personal never ending battle.

My enemy: ants. Hordes of them. They infest my backyard, my home, and any other source of food they stumble upon. They number in the thousands, and their hive mind makes them as formidable as a well-programmed computer adversary. Physically obstruct one entry point? They will find another. Use poison? They will learn to take paths which are more difficult to attack.

No matter how clean we try to keep the house, they seem to be drawn to anything that even remotely smells or tastes like food. Shampoo. Soap. Toothpaste. Wet/damp areas. They are so voracious that spiders that thought they could “profit” by positioning their webs near ant trails have disappeared within 1-2 days of appearing as the ants destroy even them.

And in case you think my problem is amusing, laugh while you can, for this problem is one for all people, as it seems that a number of Argentine ant colonies around the world all happen to be part of one massive super-colony who’s size “is paralleled only be human society” (via BBC)

Argentine ants living in vast numbers across Europe, the US and Japan belong to the same inter-related colony, and will refuse to fight one another.

The colony may be the largest of its type ever known for any insect species, and could rival humans in the scale of its world domination.

In Europe, one vast colony of Argentine ants is thought to stretch for 6,000km (3,700 miles) along the Mediterranean coast, while another in the US, known as the "Californian large", extends over 900km (560 miles) along the coast of California. A third huge colony exists on the west coast of Japan.

Whenever ants from the main European and Californian super-colonies and those from the largest colony in Japan came into contact, they acted as if they were old friends.

These ants rubbed antennae with one another and never became aggressive or tried to avoid one another.

In short, they acted as if they all belonged to the same colony, despite living on different continents separated by vast oceans.

And according to Wikipedia:

The ants are ranked among the world’s 100 worst animal invaders. In its introduced range, the Argentine ant often displaces most or all native ants. This can, in turn, imperil other species in the ecosystem, such as native plants that depend on native ants for seed dispersal, or lizards that depend on native ants for food. For example, the recent severe decline in coastal horned lizards in southern California is closely tied to Argentine ants displacing native ant species on which the lizards feed.

Argentine ants also cause problems in agricultural areas by protecting plant pests, such as aphids and scale insects, from predators and parasitoids. In return for this protection, the ants receive a sweet excretion, known as "honeydew". Thus, when Argentine ants invade an agricultural area, the population densities of these plant parasites increase, and so too does the damage they cause to crops.

Do you think you can kill them easily? Don’t bet on it:

Argentine ant colonies almost invariably have many reproductive queens, as many as eight for every 1,000 workers, so eliminating a single queen does not stop the colony’s ability to breed. When they invade a kitchen, it is not uncommon to see two or three queens foraging along with the workers.

Well, on the bright side, at least I know I’m not the only one who has to deal with this…

(Image credit – Superman)(Image credit – ants)