Unreasonable thoughts

Playing by the rules

Paul — Tue, 10 Nov 2009 01:47:08 +0000

Every industry has an unspoken set of rules that govern how you operate, compete and play. By rules I’m not talking about the legal structures we operate under or collusion. I mean the mutually arrived at sort of symbiotic rule set that allows everyone to co-exist and eek out a profit.

These rules get reinforced by the industry over time by a process which I think is best described as collective thought. Basically all the players have the same information, probably the same people moving between companies, and eventually they all seem to think the same. Something to the affect of ..“We make money from X, so don’t do Y or we’ve ruined our own market…”

All this is fine if all the combatants are playing the same game. But just recognise that in doing this you are probably leaving profit on the table, you are also horribly exposed when someone enters your game and starts playing by different rules.

Google is one of the great rule breakers. They didn’t play by the advertising industry rules, neither did they play be the desktop application rules, they aren’t playing by the Telco voice rules, Rupert Murdoch thinks they aren’t playing by the media rules.

So the question is, what rules do you adhere to in your industry? How could you exploit these? Perhaps even more importantly, how could you be exploited?

Proprietary or open standards� where economics and philosophy collide

Paul — Tue, 03 Nov 2009 00:46:38 +0000

There has been a fair amount of commentary within the cloud community about standards. The view is that for cloud to really take off we need vast interconnectedness, and the lack of standards, is somehow holding us back. Possibly…

Thinking about cloud computing from a developers point of view, this absolutely resonates. But if you think about if from both a buyer and a provider view point…then I think that vertically integrated, proprietary systems are exactly what we need…in some cases.

Those cases being where the current cloud offering is not quite good enough in the customers eyes. That is, there is a functionality or reliability gap between the current offerings and what the majority of customers want (this changes by customer).

You could argue (which I am) that recent outages like the ones at Sidekick and Google create a perception in customers minds that the cloud isn’t quite there yet. Its "not good enough".

Because of this, I think cloud providers need to be using proprietary technology that is vertically integrated. By doing this the provider can control what happens along the whole system, which will address the reliability or functionality gap to some degree. This is good for the provider because in the market you have an advantage against the competition and hence win customers. It also allows you to find the elements that are still causing the 'gap' and incrementally address those. I think the poster child of this approach is Salesforce.com. In terms of cloud providers, they are top of mind (to me at least) for reliability and functionality.

Now before I get flamed as a heretic, there is absolutely a time and place for an open, standards based modular approach. To me these traits become important when you stop being able to win the competitive game based on functionality or reliability. When those things become table stakes and customers are demanding ever more customised offerings, then you need flexibility, creativity and speed. You can’t do this using proprietary vertically integrated systems. You can’t be nimble enough, creative enough, customised enough and of course relevant enough with a monolithic approach. In this world, open standards are absolutely required. Just look at the struggle Telco’s are going through as they try to remain relevant.

Because this is a question of timing, there is bound to be tension about this issue. Its exacerbated because ‘cloud’ is so broad, some parts of it are way more advanced and probably should be moving to a modular approach, others not so much. To me, if you can step aside from the philosophical argument and instead focus on the customer requirement (make it good enough) and how you can compete (ie make money) from cloud the debate looses its heat.

Doing the hard stuff.

Paul — Tue, 20 Oct 2009 22:06:49 +0000

Jim Donovan post today highlighted the worlds top 50 business thinkers. The thing that struck me about this list is how many of the folks there are responsible for creating the theory of business growth, or for delivering it. Why do they get this acknowledgement and respect? To me, its because these people do the hard stuff.

Growth is far harder to achieve than most of us are willing to accept. There is a bunch of research that highlights that the perennial growth story for any company is fiction. For example, Creative Destruction by Forster & Kaplan highlights that most companies not only fail to grow, but only a small percentage (16%) actually survive !

Stop and think about that…. for 84% of you out there working. You are in companies that are dead men walking.

Got me thinking about my own experience. You might have noticed, I’m a growth guy, I’ve even been called ‘Mr Disruption’ by some folks. Others think of me as a destroyer of value, god knows what they call me.

What I do is hard, I’m constantly fighting the machine to get things done.

There is an almost religious battle going on. When I talk about disruptive innovation , the incumbent minded folks hear creative destruction. I look forward and see opportunity, they look backwards and try to pinpoint the death knell (like the internet). Ultimately I advocate that we need to grow, they counter it saying we need to cut costs.

Heads up people. Cutting costs is the easy thing to do, giving a considered ‘no’ to new opportunity is simpler than taking it on.

Well here’s the rub, look at the stats from Foster and Kaplan (there are more**). If you are focusing on doing the easy stuff, something else becomes easy. Predicting the future of your company.

** Profit from the Core, Zook and Allen.

Blue Ocean Strategy, Kim and Mauborgne;

Good to Great, Collins

Stall points

The 'what' is easy, try taking on the 'how' and 'why'

Paul — Wed, 07 Oct 2009 20:57:25 +0000

I'm a veracious reader of blogs, perhaps not like a Robert Scoble , but nearly everyday I'm looking for tit-bits of knowledge. More often that not this follows a process of eliminating noise and zeroing in on a few blogs a day, maybe 2 from hundreds.

Thinking about what makes me focus on those two blogs in that day, they fall primarily into the 'what' category, and ever so rarely the 'how'.

'What' blogs tell me stuff, IBM taking on Amazon for instance. Interesting but with out a lot of context.

The 'how' blogs are much more useful. By learning from those who have gone before I don't have to make the same mistakes. Blogs like Ben Kepes and Phil Wainewright's on Ariba's journey through disruption provide huge insight for people.

The third pillar of knowledge is the 'why'. As a strategist I hold tenaciously to the belief (knowing sometimes i'm dreaming) that companies do things for a reason. Understanding those reasons is critical to decoding what is going on.

These three facets form the pillars of knowledge, and to my way of thinking, they increase in value as you move down that list.

So my challenge to you all out there, if you are going to take the time to blog, provide your readers with value. Get past the what, move into the how and why....

PS - I set out to make this a 'how' and 'why' post.... did you find more value in it?

Parallel thought in action

Paul — Thu, 01 Oct 2009 20:23:05 +0000

Should have patented my post "Not everything will go into the cloud, BUT everything will be affected by it"

Nick Carr is saying the exact thing "Not everything will move into the cloud, but the cloud will move into everything."

PS i really like the comment by Charles on Nick's post "There is no cloud. There is only a finger pointing at the cloud. To see the cloud, it is necessary to see beyond one's finger." appeals to the martial artist in me..

What business are you in?

Paul — Tue, 29 Sep 2009 21:50:50 +0000

Sounds like a simple question, everyone should be able to answer that right? But ask yourself, do you really know what you do for your customers? What value do you provide them so that they will pay you money?

If you can come up with a statement that answers that question, ruthlessly appraise it. Is that REALLY what your customers are after?

If you work for an SaaS accounting provider, the answer could be "We offer software so customers can keep their accounts"

or it could be "We help customers keep score with their business" or "We help customers manage their cashflows"

The examples in the second paragraph describe what customers actually do. Because of this, the focus is more precise from the provider end, and more relevant from a customer end.

The IT industry is guilty en masse of forgetting this. We think its all about the technology, as if this is somehow important to the customer .

SIs depend on IT complexity, building their businesses around tying together heterogeneous ...IT systems (infrastructure, applications, etc.) so that they work together

The customer actually doesn't want an IT system, they want an outcome. They want a system to know if their business is winning or loosing (accounting), to keep in contact with each other (email, telephony), to provide their customers with information on where their delivery is (track n trace, RFID)...

If you get this philosophy clear within your business, you will start talking customer speak, making more relevant products and find whole markets willing to listen. Untill you do, you are committing marketing malpractice,

When in hole, stop digging!!

Paul — Wed, 16 Sep 2009 01:53:08 +0000

I use this little maxim all the time, usually for personal reasons (i’m in trouble with my wife). What continually staggers me is how little the logic of it is applied by businesses and business people. There are plenty of variants. ..

"Stop going to the same well"

"What got us here won’t get us there"

"It’s time to change the game"

They all mean the same thing. What you are doing isn’t getting you anywhere so why bother? Try doing something new.

As employers & shareholders we see cases of massive fraud like Madoff & Allen Stanford and wonder how it happened. Well at its simplest, they did something illegal & either didn’t get caught (Madoff) or it didn’t work out. Whatever, the point being that they kept right on doing it, continuing to dig themselves into a bigger hole.

Unfortunately this behaviour isn’t limited to a few renegades, it is evident in its legal form too. It’s called ‘Current mode of Operation’ & it exists in way to many companies & I’m willing to bet it is a far greater scam than anything any one person could achieve.

Many companies still believe that the things that once made them successful will help them deal with the future.

It’s a myth. Stop perpetuating it, stop wasting time resources and money on repeating what has become an obsolete business model (after all, if things were going so well why are you doing something new??) Instead have a genuine crack at doing something new. New isn’t just the end thing, it’s the END to END thing….

If you are struggling to change your business, look at the WAY you are trying to make it do this. Dollars to doughnuts you are applying the processes, technology & mindsets used to solve OLD problems to solving the NEW problem. That is to say, you are still digging. . .

Not everything will go into the cloud, BUT everything will be affected by it

Paul — Fri, 04 Sep 2009 03:10:07 +0000

I came up with that one liner for a presentation I had to do today, it resonated because of its accuracy.

Cloud computing is disruptive, it causes transformation within businesses and whole industry sectors. It impact won't just be limited to geeks and the IT department.

Think what telephony did for the world and how it changed.

What the internet did to us all

What mobility is doing.

Cloud computing will have that kind of profound impact.

You need to figure out how it will change your customers and suppliers, what you do as a company, your job.

The impact of governement on cloud computing

Paul — Wed, 05 Aug 2009 23:19:17 +0000

If this story about Microsoft moving their Azure (cloud computing) platform from one US state to another for tax reasons is true, there has never been a starker reminder of the role of government policy will play in Cloud computings future.

Tax breaks, privacy laws, lobby groups protecting everything from jobs, industry sectors, to legacy industry (internet music anyone?) , Intellectual property and of course national security will all play a role in cloud computings future.

Have no doubt about it, this will lead to fragmentation, regulation and regionalisation of cloud computing....

The internet, the great business facilitator.

Paul — Wed, 05 Aug 2009 22:53:55 +0000

I’ve just read a fascinating article by Tom Foremski called “ The internet devalues everything it touches”. It raises some great thought provoking points, it’s also slightly off base.

Let me explain. The internet is what it is, a massive and cheap to use platform that connects together many millions or billions of users. The value destruction component isn’t a function of the internet, it’s a function of how people are using it to disrupt entrenched business models.

If you look at the examples mentioned by Tom, they all relate to some form of distribution efficiency. The simple fact of the matter is that for digital assets, the internet is more efficient at moving stuff around than roads, rail, shipping or retail stores. The take away is, that if you are involved in traditional distribution and the asset you move can be digitised, you are in trouble. You will be disrupted.

I think it is important to note that it doesn’t have to be value destroying, check out what Amazon has done to the book value chain. Sure they’ve brought down the price, but more importantly they’ve removed stages in the value chain and absorbed their contribution while eliminating their cost. In effect they’ve made book retail more profitable, and because they did it, they took a larger piece of that profit…nice work if you can pull it off.

Amazon knows what its business is about

“The Business of Delivering Stuff
Amazon is a master of the supply chain”

That’s why they got into Kindle. The digitisation of print, combined with the (nearly) free distribution of the internet is in fact the perfect business model. It so grossly simplifies the distribution of the asset, that the profit pool expands even though the revenue might contract.

There are other examples of this in action. Many look like companies buying up companies to create vertically integrated solutions, but I think it is more about optimising distribution COSTS.

Level 3 bought the Content Distribution business of Savvis, which on the face of it looks like a vertical play. But when you look at who Level 3 already service (Youtube in particular), this looks less and less like a growth play and more like a play to optimise (content) distribution and its associated cost. I suspect that Level 3’s business case would have stacked up on the cost out alone and discounted any upsell!

Google today announced its intent to buy On2. Why? Well in the Youtube value chain Adobe flash became a cost liability (both in terms of licensing and processor). Google already has the massive distribution of the internet going on, so what do they do? They vertically integrate by acquiring an asset to streamline out some cost. The internet didn’t destroy that value, all it did was facilitate distribution. Google can choose to absorb the cost as profit or pass it through.

The media companies will probably disagree with the above example, but then their historical value was in distribution wasn’t it?

To me this is just disruption in action, in this case the internet is the facilitator of the low cost business model.