There is a running theme that MBA's destroy value. One recent post referred to them as "MBA Monkeys". There was a recent study that said MBA's underperformed non-MBA's.
Some of the methodologies taught in business school probably stunt creativity and put focus on the wrong things. These methodologies were supposedly tested in the business world and are built into a teaching curriculum, but turns out these methodologies weren't so great after all ... unfortunately they are now codified.
That said, do I think MBA's destroy value? I know some do, but more often than not I think these people would have destroyed value even without their MBA's.
Thursday, March 23, 2006
Friday, March 17, 2006
Plotting a course for Software
How do most people navigate a boat? They plot a direct course to their destination and motor away. This works for short trips, but for longer journeys you will end up hundreds of miles off course. Why? Because wind, current, seas & pirates can have more influence than your motor. A boat operates in a system in which its own capabilities only influence its movement, not dictate it.
Forecasting into the future is a lot like navigating a boat. Probably 90% of the forecasts I read are written by people who believe that their product or idea is self contained and will dictate its own movement. Most of the predictions I have read about Open Source, SOA and SaaS are of this variety - they will likely be wrong.
I don't have the perfect software prediction to offer, but I know what it would look like. It would recognize the inertia of current ways of doing business. It would identify the possible impact of different environmental factors. Most importantly, it wouldn't treat itself as a self contained entity. Separately, you can talk about Open Source as a movement to produce non proprietary software, SOA as a way to extend capability and SaaS as a novel distribution method. Personally, I think that software's future won't be dictated by how these key trends act independently, but how they converge into some kind of megatrend to influence the landscape. Any company that isn't considering this convergence is likely to end up a long way from its intended destination.
Thursday, March 09, 2006
Software as a Service - Attacking Enterprise clients from the LOB perspective?
Certain corporate needs become so large and fungible that their management is moved to centralized functions and away from the lines of business. IT (along with Real Estate, Legal and Human Resources) falls in this bucket. The result is scale and scope benefits around IT, but LOB's sometimes don't get their needs met. As an LOB, it is sometimes impossible to get the specific IT functionality you need.
For all the talk of whether SaaS will reach some glass ceiling beyond which it won't be a viable alternative for companies of a certain size, I wonder whether companies like Salesforce.com are actually targeting enterprise clients from a different angle: LOB's over IT. The anecdotal stories I hear of LOB's making purchases either with or without implicit IT approval is growing. I don't think companies like Salesforce would ever ignore the IT department, but they can approach LOB's which other Enterprise Software Companies might find difficult.
If you look at IT spend, I would have to imagine that the LOB potential could be significant considering how much money the typical LOB has for special projects. Success would assume they have offerings and pricing attractive to LOB's, but I assume Salesforce is considering this when it builds out its Appexchange.
Salesforce's marketing & sales budget (interesting to note this is how they state it, not in the traditional order - sales and marketing) was close to 55% of revenues for 2005. Seems high and I wonder how much of this was spent on collateral, webinars, etc directed at LOB's.
For all the talk of whether SaaS will reach some glass ceiling beyond which it won't be a viable alternative for companies of a certain size, I wonder whether companies like Salesforce.com are actually targeting enterprise clients from a different angle: LOB's over IT. The anecdotal stories I hear of LOB's making purchases either with or without implicit IT approval is growing. I don't think companies like Salesforce would ever ignore the IT department, but they can approach LOB's which other Enterprise Software Companies might find difficult.
If you look at IT spend, I would have to imagine that the LOB potential could be significant considering how much money the typical LOB has for special projects. Success would assume they have offerings and pricing attractive to LOB's, but I assume Salesforce is considering this when it builds out its Appexchange.
Salesforce's marketing & sales budget (interesting to note this is how they state it, not in the traditional order - sales and marketing) was close to 55% of revenues for 2005. Seems high and I wonder how much of this was spent on collateral, webinars, etc directed at LOB's.
Wednesday, March 08, 2006
It's Classified: we could tell you, but then you would realize it's useless
I take some ribbing now and then for what is perceived as an overzealous focus on security. It probably stems from prior experience where I had to label every paragraph in a document as "top secret", "secret", "confidential", "for official use only", "unclassified" or "not for release". Don't ask my why we actually needed six classification categories.
When I moved onto the business world a bunch of years back, I always thought it would be easier to get information. Was I wrong. As a strategy consultant it was always very difficult to get information from client companies. Talking to friends, its just as hard or even harder within companies. I bet people spend 30% of their time trying to get information, often-times to find out that it's useless.
I think people classify things for four reasons. One, because it deserves it - maybe true for 15% of information. Two, because it's the default mode - no one ever got fired for classifying information. Three, because it validates people's work - if it's classified it must be good. Four, because some people look out for their own self-interest by "owning" information as a power card.
The answer? New ways of thinking and working. Our team has been working to adopt and spread social media tools recently. One example is internal wiki's. They have been great for 360 degree information awareness because they tend to remove the default mode of classifying information.
When I moved onto the business world a bunch of years back, I always thought it would be easier to get information. Was I wrong. As a strategy consultant it was always very difficult to get information from client companies. Talking to friends, its just as hard or even harder within companies. I bet people spend 30% of their time trying to get information, often-times to find out that it's useless.
I think people classify things for four reasons. One, because it deserves it - maybe true for 15% of information. Two, because it's the default mode - no one ever got fired for classifying information. Three, because it validates people's work - if it's classified it must be good. Four, because some people look out for their own self-interest by "owning" information as a power card.
The answer? New ways of thinking and working. Our team has been working to adopt and spread social media tools recently. One example is internal wiki's. They have been great for 360 degree information awareness because they tend to remove the default mode of classifying information.
Tuesday, March 07, 2006
What you can learn by looking at "the other" 84% of software functionality
At IDC's Directions Conference last week, a presenter stated that customers use ~16% of application functionality. I can't find the source for the number, but directionally it seems plausible. If true, 84% of application functionality sits idle. Sometimes simple facts can put a lot of things into perspective.
1) Companies can do a few things very well (in fact 16% of things) and still retain customers. That is probably why there are 23K+ software companies in the US.
2) If you want to find the innovators in the industry, R&D spend is likely not a good indicator because a portion of it is focused on the unused 84%. For innovators, find the companies with the best market facing product management groups.
3) Good Product Management isn't being effectively utilized in much of the software industry. If it was, how would the other 84% even get built?
4) Customer demand for a la carte pricing is driven by their desire not to pay for the 84%.
5) The market is responding through a host of innovations that let customers choose only those features it wants ... Sale Force's appexchange, SOA, Open source, etc. Note that these aren't functionality innovations, but ecosystem and distribution innovations.
At the heart, this issue is about innovation. I think a lot of software companies think they drive innovation; that is what they think the other 84% of functionality is - unused innovation. In some cases they might be right and a big payoff ensues. But for the most part, responding to market needs is safer than trying to drive breakthrough innovation. The balancing act between the two is a key leadership function and one that companies continue to struggle with. Jeff Nolan has some thoughts on that here.
1) Companies can do a few things very well (in fact 16% of things) and still retain customers. That is probably why there are 23K+ software companies in the US.
2) If you want to find the innovators in the industry, R&D spend is likely not a good indicator because a portion of it is focused on the unused 84%. For innovators, find the companies with the best market facing product management groups.
3) Good Product Management isn't being effectively utilized in much of the software industry. If it was, how would the other 84% even get built?
4) Customer demand for a la carte pricing is driven by their desire not to pay for the 84%.
5) The market is responding through a host of innovations that let customers choose only those features it wants ... Sale Force's appexchange, SOA, Open source, etc. Note that these aren't functionality innovations, but ecosystem and distribution innovations.
At the heart, this issue is about innovation. I think a lot of software companies think they drive innovation; that is what they think the other 84% of functionality is - unused innovation. In some cases they might be right and a big payoff ensues. But for the most part, responding to market needs is safer than trying to drive breakthrough innovation. The balancing act between the two is a key leadership function and one that companies continue to struggle with. Jeff Nolan has some thoughts on that here.
Friday, March 03, 2006
Solving for the Open Source Variable
Digesting all the open source commentary over the last month has been like trying to solve a multivariate equation. It’s difficult to solve for x when everyone is talking about y, z & w …different frameworks, different assumptions and different variables. Because it was difficult to get a bearing, I’ve pieced together the following open source framework … feel free to fork it.
Open source is not a monolith. It’s a category definition for beliefs ranging anywhere from Stallman’s belief about open intellectual property to MySQL’s business model. As such, any discussion about open source is meaningless without context.
Open source doesn’t have one business model; it has many. At least four different models; Companies built around providing services to GPL companies, companies providing duel GPL and traditional licenses, companies open sourcing existing products as a loss leader, governments funding open source to sow system wide benefits. Probably more.
Open source is not a strategy. With the term thrown around so much, I always go back to Porter’s definition: “Strategy is the creation of a unique and valuable position, involving a different set of activities.” Open source is part of Porter’s “different set of activities”, not a strategy in and of itself
Open Source is an “activity” businesses can use to help monetize industry trends. Open source itself isn’t worth much. It has to be used against an existing trend. For example, if the trend is the importance of the SMB market, open source can be an activity that lowers your sales and marketing cost and makes this segment profitable. If the trend is platform development, than open source can be an activity you use to drive community and acceptance.
Open source has to be linked to revenue generation or costs reduction to be considered a legitimate “activity”. I don’t mean that revenue needs to be immediately booked. Perhaps you are laying the groundwork for 3-5 years down the road. Or perhaps open source is being used as a loss leader to get people to trade up to a traditional license. Regardless, you should be able to voice how open source activities will impact net income at some point down the road.
Open source activities can be co-opted. You don't need to use a strict definition of open source to realize benefits. You can co-opt those traits that are important or use some type of hybrid model. Microsoft is doing this with its shared source initiative.
Bottom line: Start from the trends in your industry and look at how open source can help you monetize them. Don't respond to the open source trend itself.
Open source is not a monolith. It’s a category definition for beliefs ranging anywhere from Stallman’s belief about open intellectual property to MySQL’s business model. As such, any discussion about open source is meaningless without context.
Open source doesn’t have one business model; it has many. At least four different models; Companies built around providing services to GPL companies, companies providing duel GPL and traditional licenses, companies open sourcing existing products as a loss leader, governments funding open source to sow system wide benefits. Probably more.
Open source is not a strategy. With the term thrown around so much, I always go back to Porter’s definition: “Strategy is the creation of a unique and valuable position, involving a different set of activities.” Open source is part of Porter’s “different set of activities”, not a strategy in and of itself
Open Source is an “activity” businesses can use to help monetize industry trends. Open source itself isn’t worth much. It has to be used against an existing trend. For example, if the trend is the importance of the SMB market, open source can be an activity that lowers your sales and marketing cost and makes this segment profitable. If the trend is platform development, than open source can be an activity you use to drive community and acceptance.
Open source has to be linked to revenue generation or costs reduction to be considered a legitimate “activity”. I don’t mean that revenue needs to be immediately booked. Perhaps you are laying the groundwork for 3-5 years down the road. Or perhaps open source is being used as a loss leader to get people to trade up to a traditional license. Regardless, you should be able to voice how open source activities will impact net income at some point down the road.
Open source activities can be co-opted. You don't need to use a strict definition of open source to realize benefits. You can co-opt those traits that are important or use some type of hybrid model. Microsoft is doing this with its shared source initiative.
Bottom line: Start from the trends in your industry and look at how open source can help you monetize them. Don't respond to the open source trend itself.
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