Entrepreneurship - Start with a conviction

I have interacted with entrepreneurs in many areas - most of them own a business, few of them are corporate entrepreneurs. Most of these entrepreneurs were successful - in terms of getting a ROI higher than bank deposits. But I could see very few leaders in their market category. To illustrate this, let me take up a simple example of a food court. In any food court, there will be multiple food vendors - but there will be few dominant players, many of them will be successful & profitable and there will be a few who are struggling to keep their shops open.

The story is the same in all the sectors, in all places (with a few exceptions of monopoly markets). Take for example of Internet Search engine business: There is one leader - Google, few successful players - Microsoft, Yahoo & few strugglers - Ask.com, cuil.com etc.
In my observation of things, I found few simple truths. Winners have a stronger conviction to be the best in the market place, Winners follow the customer & winners focus on ROI. The ones that can do all the three will be the market leader.

I have seen few entrepreneurs who started with a very strong conviction of being the very best in the market & have steadyfast held that conviction. Many entrepreneurs often start with the notion that "the market opportunity is big and I am here to make a few bucks" or "Let us release this product in the market and see how customers react/adapt to it." or "We need to counter the competition else we are doomed".

When it comes to product positioning - I have seen entrepreneurs behave differently. Very few of them start with a customer centric mindset and are determined to understand customer requirements and deliver for it. But a vast majority start with saying "Here's what I think the customer wants." While few others start with saying "This is my product offering - let the customer adapt to it."

Pricing is a key differentiator between the winners & losers. Winners price the product to the value it provides to the customer & then builds a business model around that selling price, while survivors price the product based on margins, while losers have got the value proposition all worng.

In the end when results are seen the differences between the winners and the rest is clear.

Closing Thoughts

Entrepreneurs who start with a strong conviction to be the best in the market, follow the customer requirements, and deliver value to the customer (without comprmising on ROI) will emerge as the winner.

Product Management Strategies - Reva Electric Car

Recently Reva Electric Car Company announced a joint ventire with GM to make electric cars. Under the plan GM will sell all electric version of Chervolet Spark in India & abroad. Under this agreement, Reva will provide the electric systems & GM will provide the automotive platform and market the cars through GM sales network of dealers.

If everything goes through as per plan - i.e., gets approval from GM headquaters in the US, then this will be a very significant victory for Reva Electric company. Though Reva electric cars have been around in Bangalore for last 10 years ( and my wife happens to own one), Reva has seen limited success in Indian markets. This tie-up with GM will give a major boost to Reva in terms of customer acceptance for its technology.
The current agreement sounds like a fair agreement between GM & Reva, but in the immediate term Reva emerges as the biggest winner. An endorsement from GM will propel Reva into the minds & hearts of potential customers who will no longer question Reva's technology & viability, instead people will now look forward to buying cars made by Reva.
Thirsty and odd years ago, IBM made a similar endorsment on Personal Computers - by releasing IBM PC running on Microsoft DOS, and that decision was the turning point in Microsoft's history, the entire world woke up that day and took notice of Microsoft & personal computers.
Can Reva do the same in the automotive world? Can GM take Reva's electric motor technology global? Only time can answer to such questions. But in the mean time, I just want to applaud the product strategy of Reva electric car. It was a brilliant move to associate with a bankrupt GM. GM's troubles in the US market will prevent it from taking full advantage of electric car technologies, and in all likely hood GM will fail to develop its own electric car technology that is suited for emerging markets - thus providing a clear road for Reva to cruise ahead.

Branding Enterprise Software

Every thing that is sold & bought has a name - there are no exceptions. Few of those names become brands only when the name can raise above the product it represents and becomes the key for the customer to remember the product. If the customer can only remember the product and not the name of that product, then the product becomes a commodity and there is no brand name.

In the world of enterprise software, a lot of the products are unique or highly specialized - yet many of them do not have a brand name - the product has name but the name has not become a brand name. There are thousands of such products which just have a name but the names have not elevated to the status of a brand name.

Branding a product goes way beyond naming the product. A Brand represents a promise to the customer, a vision of the producer (manufacturer), belief & perceptions of the customer, mission for the employees and the very soul of the organization. In short a brand has strong implications on every person who comes in contact with the product: Customers, employees & owners.

In the consumer products world, everyone understands the importance of branding - but the same level of priority/importance is missing in enterprise software world. To illustrate this point, here is a pop quiz: "Can you name ten enterprise software brands?" (Name the product and not the company). As you are reading this blog, I am sure that you would have found some difficulty in naming ten product brands. I tried this pop quiz in my company & most engineers who are developing enterprise software failed to come up with five names. (worse still, many could not name five products from the business group they were working for).

All this points to a simple fact that branding in the world of enterprise software has a long way to go and there is tremendous competitive advantage to be gained by being the first to brand a product in a particular market segment.

Why brand Enterprise Software?

The most common reason for companies not to brand their product is: We are the only players in this segment or we are in the top three vendors in this segment or we are the market leaders in this segment. Other common statement is "Customers who buy Enterprise software do not buy the product based on the name, the real purchase decision is made on in depth analysis of the product functionality Vs requirements... etc."

I agree that every customer will do their due diligence before buying the product, but product branding goes beyond the customer's buying decision. Branding a product is lot more important than just influencing the buying decision.

Branding an enterprise software or any Business-to-business products has an impact on the buying decision. Research has shown that the purchase decisions have direct impact on human emotions. People who have suffered brain damage to their emotion controlling areas were not capable of making decisions. In an another study done by Waldemar Pfoerstch for IBM, it was found that conservative IT decision makers consistently identified emotional brand attributes as determining factors during a purchase. Of course the product has to meet all the performance criteria. So when people have to choose between products that met all the rational criteria, the emotional factors were pivotal for the purchase decisions.

Branding a product is therefore essential to gain competitive advantage.

Branding Triangle

Product Branding has serious emotional impact on a wide range of people - employees, customers, and collaborators ( suppliers, partners, etc.)



Branding triangle is a visual representation of the impact of branding on various stakeholders. Branding has a powerful impact on all the stakeholders. Let is examine the impact of branding on each of the stake holders.

Customers

Customers are essential for any business. When customers buy a product, the emotions which the brand invokes plays a crucial role in the purchase process. To understand the impact of branding, one needs to understand the buying process. In the B2B world, there are three types of buying situations:

1. Straight Re-buy


2. Modified Re-buy


3. First time purchase

Straight Re-buy:
This is the most common and accounts for more than 50% of the customer expenses on enterprise software. Companies routinely buy additional licenses, renew license agreements, pay annual maintenance fees etc. Here the customer's emotional involvement is low and the customer is satisfied with the product and wishes to continue buying & using the product.
If the customer is buying a branded product - say Oracle Database or SAP R/3 or Microsoft Office or Adobe Acrobat Professional, then the customer/buyer internally builds a relationship with the vendor with each purchase. The relationship is purely emotional in the minds of the buyer - and the buyer feels good for using/recommending/buying into the well known brand.
If the buyer/customer/user is experiencing a positive emotion during the purchase- i.e. feeling good about it, then the company's effort to brand the product is paying off. With a stronger brand name, vendors can extract a little premium in terms of price.

Modified Re-Buy:

In case of modified re-buy, the customer still has a strong need for the product/service but the customer would like to explore other alternatives. In short the customer is not fully satisfied with the current offerings and is looking for a change - either change in the vendor or change in the prices.

In a modified re-buy situation, having a strong brand name helps in a big way. Company can retain the customer by changing the pricing or payment options or offering add-ons at a lower price. In the world of enterprise software, the actual selling price differs greatly from the list price. So offering a discount in the selling price or offering a waive off on the annual maintenance fees or offering additional products at a discount can be done effectively without affecting the brand value as the terms of the sale are usually confidential.

In case the customer is looking to replace a non-branded product, then strong brands have a distinct upper hand as the stronger brand name can help the key decision makers minds and thus influence the sale. In the world of enterprise software, this is very common especially when it comes to cutting edge technologies. Often times a startup would have developed a new product and would won several customers, and then a major player would enter the same market with their offerings which is backed by a big brand name. So in case of a modified re-buy, the bigger brand wins. For example, take the world of Network operating systems. Novell Netware was the original inventor and market leader, but when Microsoft entered the race with Windows NT, Netware lost its market share rapidly. Another example is that of WindRiver systems - maker of RTOS (Real Time Operating Systems). Wind River was the early innovator and market leader in RTOS, but as embedded Linux gained popularity, Wind River lost out - and was eventually acquired by Intel.

First Time purchase:

World of business is ever changing and there is always a new need to be met. Company starts out with requirement gathering/analysis and comes up with a wish list. Vendors will now have to match their product/service against the wish list. In such situations, the product which meets all the requirements has the upper hand. But in reality it will not be possible to meet all the requirements, so under such situation, the customer is facing uncertainty and is running a risk.

In such cases, having a strong brand name helps. Customers are often more comfortable dealing with established vendors - particularly if they already have a business relationship in place. So having a strong brand name will help in pushing a sale. Also is possible to influence the customer requirement analysis such that the situation is favorable to the big brand vendor.

In the world of Enterprise software, companies such as IBM, HP, EMC, Oracle can influence the customer's requirement to be favorable to them and in cases where there are major gaps between the customer requirements and the product offerings, the vendor can offer consulting or professional services to fill in the gaps in the product functionality.

Handling the Buying Center

Strong brand names can help the vendor go beyond the product capabilities. Purchase decisions are often vetted by senior executives who run a "Buying Center". A buying center is a team of people who manage the buying process. Typical buying center consists of the following players: Initiators, Users, Influencers, Gate keepers, Decision makers or approvers, & Buyers.
The buying center consists of so many players who may not have full understanding of the product - but if the product has a reputed brand name, they are unlikely to dig in deep and investigate the product before buying. People in the buying center are not the power users and therefore can be easily influenced by the brand name.

A pop quiz: If you were to make a choice of buying Opsware or Voyance Control - and you are aware that both the products are more or less equal, which one will you choose?

I am sure that this will be a tough question to answer - for any person who is not familiar with network management systems. So if I were to rephrase the question as:If you were to make a choice of buying HP OpenView Opsware or Voyance Control - and you are aware that both the products are more or less equal, which one will you choose?

Now, you can clearly see the advantage of having a strong brand name. HP being a leader in computer industry and OpenView being a market leader in Network Management Software, the decision would be lot more easier for any person who is not familiar with network management systems.

Partners

In the B2B world no single product can exist without having a need for adjoining product to provide the complete solution. Often times to win in the market place it is vital to have good and strong partners. The company's ability to attract a strong partner is greatly influenced by the brand name.

Enterprise software product companies need distributors, Value added resellers, channel partners, system integrators etc. While there are well established players in each category of partners, getting them to sign-up with you company will not be easy unless you have a significant market share or a strong brand name.

Just as an example, Microsoft is calling for third party development partners for its Dynamics ERP tools. If the word goes out that Microsoft is looking for partners, then there will be a huge list of companies eagerly waiting to partner with Microsoft - and that gives Microsoft an upper hand in choosing the right kind of business partners. On the other hand if Ramco systems were to call for partners for its ERP solution, the list of willing businesses will be very small.

Now just think that if you are a small company developing a niche software - then what is the possibility of getting companies such as IBM Global services or Accenture or EDS to partner with you? This partnership will be very tough to start off with - unless you have an established brand name like EMC or Cisco or Brocade.

Employees

Branding has a huge impact on employees. The product brand messaging has several deep impacts for employees. The brand message often serves as aspirational value for employees - has several benefits:

1) Employees understand what the brand stands for? and What it promises?
2) Employees connect with the brand and then help deliver on the brand promise.
3) Employees choose to work for company as they believe in the brand & its value.
4) Employees who believe in the brand value will become brand ambassadors & promote the brand.
5) Employee brand ambassadors will attract other high quality talent into the organization.
Winning brands consistently win two crucial moments of truth:

The first moment of truth occurs when customers buy the product after having evaluated all other offerings of the competition. The second moment occurs when they use the product and the brand and feel the product has delivered as promised in the brand messaging.

Employees play a big role in delivering on the brand promise. Therefore branding to employees is critical to ensure that employees understand what the brand stands for & what it promises. Only when employees understand the brand promise, they will work towards fulfilling the promise to the customer. Once employees fully believe in the brand promise and deliver on it, employees will feel a sense of belonging with the company - this in turn increases their work dedication & loyalty.

Once employees start delivering on the brand promise, they tend to act like brand ambassadors - promoting the brand in all possible channels/occasions. Such employees also market the brand and the company to their friends/contacts and help in attracting high quality talent into the organization as well.

If employees do not understand what the brand stands for or what it promises, then it will have adverse effect on the brand & the product. If employees do not understand the brand message, they do now know what they are working for and that will eventually lead to bad customer experience - which will erode brand value.

For example, SAP R/3 has built a great brand name within the SAP AG organization - and almost every SAP employee I have met could not resist talking about their great product, but I cannot say the same for employees from several other ERP companies. The same can be said about Intel (where I once worked). Intel employees are one of the strongest supporters of Intel brand and they take pride in their products.

Closing Thoughts

Branding is essential for all products - be it consumer products or enterprise products. While the needs of branding consumer products are well understood and practiced, the branding of enterprise products are often neglected - this is more so in enterprise software segments where products are positioned as solutions to customer's needs. Enterprise software companies tend to spend a great deal of time & energy to sell a solution and ignore the branding aspects.

Branding enterprise products has several benefits - apart from increasing sales. The company's ability to influence partners and employees is vital for success in the long term - and ignoring the product branding will relegate the product into a commodity - thus leading to lower profits and shareholder returns.

Brand management for enterprise software products and services represents a unique and effective opportunity for establishing enduring, competitive advantages.

Dealing with recession

The current economic recession in the US is into its third quarter and the effects are now being felt on the street - even in India. In the recent past, I have come across several "How to" books on dealing with recession or tough economic times, but the best lessons are the ones learnt on the ground. In this blog, I will describe one case study of a small business dealing with these tough economic times:

The case of Little Paramount Hotel

Little Paramount Hotel is a small restaurant located right next to my office. The office complex where I work is occupied by IBM, Cisco & EMC - all IT companies which are severely affected by the US recession. These companies have taken steps to deal with recession - mainly by pay cuts and layoffs. The impact of pay cuts and layoffs on the employees has been severe, and naturally employees reacted to the changed situation by cutting back on discretionary spending - which included eating out at restaurants.

Little Paramount's restaurant business got seriously affected and the number of customers visiting the restaurant for lunch dropped drastically. I guess that the loss in revenue for the restaurant was about 30%-40%, and the trickle down effect of the recession could now be seen in full force on the hotel employees as well.

Small businesses have an advantage in such tight situations - provided they have a cash hoard. In case of Little Paramount hotel, the owner reacted to the changed situation in a way - that is described in all the leading business books.

He first decided to invest in changing the interiors. This was a bold decision - given the prospect of lower revenues in the pipeline. The interiors of the restaurant was redone to give it a more modern look and it was designed to attract casual customers who might walk in. Little Paramount Hotel is located on a very busy road and opposite to a bus stand. The new interiors was designed to give the restaurant a new and a clean look - which is essential to attract any customer who might be walking around searching for food.

The next move by the owner of the restaurant was the real winner.

Little Paramount restaurant created a new value menu - a whole meal with prices ranging from Rs. 35 to Rs. 60 - as a standard offering. The food items in the new menu was not new to the restaurant. The old menu items were repackaged into value menu and was offered at a different price point. At these prices, the restaurant did not lower the price on the food, but it offered the same food in a fixed meal options instead of the earlier "al carte".

The impact of these steps was immediate. Little Paramount Hotel was once again a busy place at the lunch hour. The restaurant got back its customer base and the business is thriving. Although, I would guess that the total revenue for the hotel may not have reached its pre-recession peak, but the hotel stopped the slide in revenues and also managed to win back customers. Customers are now happy with the value meals, enjoy the new interiors and appreciate the fast service. I guess that in a few months, the hotel would have regained its earlier pre-ression revenue numbers and also show a modest growth. This is a classic example of how business should cope during tough economic times.

On the other hand, the IT companies I mentioned earlier - IBM, Cisco, & EMC are still reeling under recession, and stranger still, is that a small business is better able to cope with the recession and emerge from it stronger, while the big businesses are still struggling.

Lessons Learnt

Just by studying the experience of Little Paramount Hotel, one can learn some of the key aspects of dealing with recession. The lessons can be summarized as:

1. Recession is part of the business cycle, so be prepared for it. In good times save cash and maintain a healthy cash hoard. Little Paramount Hotel was able to invest in a recession mainly because of its cash reserves. This investment was vital for the recovery of the business and investments in the time of recession will help business to emerge stronger from the recession.

2. Invest and build your business during the recession. Recession affects all businesses - but the weaker ones will not be able to invest and thus when the economy recovers they will not be able to compete effectively. On the other hand, companies that invest during a recession will emerge stronger and will be more competitive when the recession ends. Another way to look at a recession is - A recession is a mechanism to weed out the weaker businesses.

3. Optimize every aspect of your operations for minimal cost structure. Cash is the king in all business - big or small. During the time of recession, it is prudent to revisit all aspects of the business operations and weed out inefficiencies and wastage's. Optimize the business operations to free up cash. Little Paramount Hotel optimized its menu to serve select items and faster turnaround of customers at the table - this means lower inventories, efficient kitchen operations and lesser man power requirements.

4. Repackage your product offerings to provide value to customers. Recessions do not come unannounced. There are always leading economic indicators of a possible recession, so one must keep an active watch for a possible recession. When a recession really sets in, customers tend to react to the changed economic landscape by changing their buying habits. Business leaders should closely observe the changes in buying behaviors and tailor the offerings to meet the new buying habits. In case of Little Paramount Hotel, menu was changed to accommodate a lower priced offerings - so that customers will still be able to reduce their expenses and still patronize the restaurant.

5. Do not lose your customer base. Customers are valuable assets to the business. Once a customer is lost during a recession - then the customer is lost of good. Given the cost of acquiring a new customer, it is always cheaper to retain an existing customer than acquiring a new customer. Therefore, it is essential to retain customers - even if it means less revenue during tough economic times. Eventually, the economy will improve and sales revenue will increase. There are no simple or straight forward way to retain customers - other than to provide greater value to customers. i.e, repackage/reprice/reposition your product during recessions so that you don't lose your existing customer base.

Closing Thoughts

Recessions are cyclical events in the business life cycle, therefore one needs to be prepared for a recession before it happens. Once in a recession, business leaders should act on the changed reality. There are no avoiding techniques in the long run. Acknowledge the recession and make organizational adjustments accordingly to deal with the new reality - and do it quickly. Develop a determination to win and work hard for it, and the business will emerge stronger from the recession.

Leadership - Improving Your Staff's Self-Confidence

A good leader is the one who has a high level of self confidence and has an infectious habit of raising self-confidence of this team. Only when the team is confident about its skills & talents, it can perform consistently at high levels.
Last week, I just took out my team for a lunch. The team lunch was a token on my appreciation of the hard work done by the team and the goals accomplished by this team. The team had achieved great progress last year in handling customer issues, and reduced the total number of outstanding customer issues by whopping 73% from January 2008 to Dec 2008. At this team lunch we celebrated the success & vowed to improve on the track record. The team spent sometime looking back at their own accomplishment and that builds their self-confidence. At that time, I made a point to write down a few pointers on how to motivate the team and keep up the self-confidence of the team.
Given today’s grim economic outlook and falling sales, it is very important to maintain a healthy dose of self-confidence. One need not be CXO level leader to really inspire; even a team leader can do miracles to the team morale and self-confidence. Raising self-confidence has several rewards to the individual, the leader & the team.

• Self-Confident people get more respect from everyone. This in turn increases team morale.
• Self-Confident people are prudent risk takers. Risk taking in crucial in the business world. While self-confident people tend to take reasonable risks and avoid excessive risks.
• Self-Confident people are decisive by nature. Once people have confidence in their skills & abilities, they can take quick decisions for themselves instead of dithering around.
• Self-Confident people take up new initiatives for the benefit of the team & the individual. People who are confident often will not wait for orders, instead they will take the initiative to do the right thing.

Having a team with high self-confidence levels is a great feeling, but the leader must be prudent to avoid over-confidence and arrogance. The leader must make people perceive their abilities accurately and then assign tasks/challenges that they can handle.

How to build Self-Confidence?

So how does one really build self-confidence in the team?
When a leader is assigned to a team, one of his first tasks is to know the capabilities of the team members accurately and then he must accept it as it stands. Take San Antonio Spurs as an example, the team has certain members who perform consistently above the rest – Tim Duncan & Tony Parker. But there are members of the team who can play in spurts: Manu Ginobili, Michael Finley, and then there are other good players but they are definitely not in the same league as Tim Duncan.

As a coach or the team leader, your first task is to know each team member’s capability and accept it as a base line. There may be scope for improving each individual performance, but that needs to be carefully worked on.

Accepting the person’s capability as is, sends the signal that the member is a part of the team and reassures him/her of their place in the team.

Each member needs some reassurance from time to time. Do not constantly compare one member against the other – this might bring a short term gain, but will eventually destroy the team chemistry.

Instead of criticizing, use praising for the good work done. Always use positive reinforcement approach. Praise good work instantly & in public. But criticize in private – good constructive criticism is always needed – but ensure that it is not personal and is done in private.

Good team sprit & confidence also needs appreciations. Individuals & the team must receive appreciation from leaders & others. It is the leaders responsibility to seek out appreciation from persons benefited by his team and ensure that the team & the individual gets the well deserved appreciation.

Once a team starts to perform, it must be constantly be encouraged to reach new heights. A constant encouragement is needed to sustain the morale and self-confidence. Typically, once a team or even a team member is made aware of his/their capabilities, they would like to improve on it. Therefore a leader should create adequate opportunities for the team/individual to improve. Ideally, one should come up with a development plan to help each individual improve and reach a new level. Such a constant encouragement to improve will do wonders to the team performance.

Closing Thoughts
Leaders play myriad roles, keeping up the morale & self-confidence is one of them. The team which keeps it head held high even during tough times is more likely to perform better than the rest. The process of building self-confidence is a very rewarding one, the process invariably also increases the self-confidence & morale of the leaders as well, so it is time well invested.