Sustainable Competitive Advantage

I have been privileged in my career to have worked for some interesting corporations and although 20 years apart my time at Dell and Amstrad have some striking similarities. In both cases they gained significant market share. This was achieved in part due to a business model that provided a substantial cost advantage over their major competitors.

 

Selling or marketing a product that is noticeably lower in price usually fuels great growth and market success. The challenge is sustainability when the market conditions change. Both organisations controlled expenses ruthlessly to maximise shareholder value.

 

Amstrad came unstuck because of quality issues with its flagship computer range, it hadn’t anticipated poor component quality nor was it ready to manage the market crisis that caused. Shortening product lifecycles as processors and other components leapt in performance also undermined their mass production business model favouring just in time manufacturing techniques used by the market newcomer Dell.

 

Today Dell’s market share is very substantial, but recent growth has faltered. Have customers recognised that price and specification aren’t the only factors to consider? Do customers see any benefit in higher specifications? Have prices fallen by so much that the actual cash difference (rather than a percentage saving) is minimal and not worth sacrificing for great service? Has the competition strengthened that much? It is probably all of these factors and more besides.

 

In both examples did they invest in preparation for market change? I don’t think so.

Get your ducks in a row

I couldn’t agree more with Seth, if you get a large organisation not normally noted for its alignment across divisions, territories and other man made internal barriers to focus on one message or story then the effect is really remarkable. It is especially rewarding and motivating for all participants when the organisation is recovering from a crisis.

In my own experience at Xerox when the business was recovering from a financial crisis in 2001 there were a couple of pan European programs in the printer business (called Extreme and Golden Dragon) that really united the sales teams and channel partners and subsequently drove performance.

Then when I joined Dell I was asked during my induction what stood out compared to previous organisations I had worked for, high on my shortlist was total and complete alignment from Michael down to the cleaners everyone new what had to be done and said etc. This can of course have drawbacks for creative employees but still I believe it is a key reason for Dell’s remarkable success over the last few years (despite anxious quarters of late).

Fundamentals

On Hugh MacLeod's blog Gapingvoid.com - "The Hughtrain" is really something to believe in. A remarkable work on the meaning of life and while he's onto big subjects he delves into brands, creativity and communications as well.

His post finishes up with a great explanation on the logic behind corporate blogging and an amazingly simple description of corporate - customer comunications.

Introducing "The Porous Membrane":

1. In Cluetrain parlance, we say "markets are conversations". So the diagram above represents your market, or "The Conversation". That is demarkated by the outer circle "y".

2. There is a smaller, inner circle "x".

3. So the entire market, the "conversation" is separated into two distinct parts, the inner area "A" and the outer area "B".

4. Area "A" represents your company, the people supplying the market. We call that "The Internal Conversation".

5. Area "B" represents the people in the market who are not making, but buying. Otherwise know as the customers. We call that "The External Conversation".

6. So each market from a corporate point of view has an internal and external conversation. What separates the two is a membrane, otherwise known as "x".

7. Every company's membrane is different, and controlled by a host of different technical and cultural factors.

8. Ideally, you want A and B to be identical as possible, or at least, in sync. The things that A is passionate about, B should also be passionate about. This we call "alignment". A good example would be Apple. The people at Apple think the iPod is cool, and so do their customers. They are aligned.

9. When A and B are no longer aligned is when the company starts getting into trouble. When A starts saying their gizmo is great and B is telling everybody it sucks, then you have serious misalignment.

10. So how do you keep misalignment from happening?

11. The answer lies in "x", the membrane that separates A from B. The more porous the membrane, the easier it is for conversations between A and B, the internal and external, to happen. The easier for the conversations on both side of membrane "x" to adjust to the other, to become like the other.

12. And nothing, and I do mean nothing, pokes holes in the membrane better than blogs. You want porous? You got porous. Blogs punch holes in membranes like like it was Swiss cheese.

13. The more porous your membrane ("x"), the easier it is for the internal conversation to inform and align with the external conversation, and vice versa.

14. Not to mention it makes misalignment, if it happens, a lot easier to repair.

15. Of course this begs the question, why have a membrane "x" at all? Why bother with such a hierarchy? But that's another story.

[AFTERTHOUGHT:] And yes, this works with internal blogs as well, poking holes in the membranes that separate people within a corporate culture; aligning "the conversation" internally etc. The other advantage of internal blogging is that it organises conversation into a long-term manageable form. Two people sharing ideas via blogs is a lot more permanent, viral and useful for the company than two people sharing the same information over by the water cooler.

[AFTERTHOUGHT:] Poking holes in membranes subverts hierarchies. Avast, ye scurvies etc.

Many thanks Hugh for a fabulous combination of humour, art and business fundamentals.

Don't Forget

Three of my favorite tips for corporate survival:
1. Corporate life is like a big Ferris wheel, remember when you are at the top enjoying yourself not to crap on those beneath you.
2. Before trying to shoot the alligators in the swamp, find the time to drain it first.
3. Your first loss is probably your best one. (Don't prevaricate in a crisis)

Is Short the New Long?

Thinking about long term job security it seems to me that a pipeline of short term jobs or range of part time contracts are the answer. Several people have told me that these days the average tenure for a CMO is around 18 months. During that employed period there’s no time to think about what happens next and then you get left with the feeling why didn’t I think more about myself, the truth is you were flat out 100% committed to the corporation.

The refreshing honesty about short term contract work means that your relationship with your paymaster is all up-front, they expect you to consider your own future (which is not necessarily with them) and the focus is on the deliverables and getting the job done not on a phoney one way commitment to the corporation.

Another key benefit is you’re above the politics; you can generally punch above your weight with senior management because they perceive you differently, more as an expert or professional than just an employee where they have to manage your expectations.

Although there is a significant additional challenge in keep the pipeline full, you get better at doing that as you become infinitely more aware of the market and your own skills.

Italian Bistro Engine

Picture the scene in a charming Italian bistro with plenty of great wine and tasty food.

There are 7 highly experienced marketers and agency owners (5 with silver hair and 2 far too young & trendy) trying to figure out what this revolution in customer communications will mean for their businesses.

I, one of the silver variety, had invited a select few together to figure out if we could / should work together to develop a joint proposition for business blogging and podcasting solutions.

After the best part of 5 hours and several bottles we decided that it would have been great to make a podcast out of our machinations as there was great entertainment value in some of the trains of thought (maybe next time!).

We did all agree on a few things:

(1) It’s not about the technology its all about a sea change in customer expectations, choice and empowerment – which has been enabled by these new technologies like RSS, blogs and podcasts etc.

(2) Most businesses haven’t started doing anything yet and there’s a real need to help companies develop and implement a new interactive communications strategy – but we need to get our skates on as the time for it is now. Although no where near mainstream yet, there is little doubt that the adoption levels have already crossed the chasm and are accelerating rapidly. Key market influencers are likely to be early adopters.

(3) Not all companies are ready to start these conversations – an open culture and/or a real business need are crucial to make a business act. They are likely to be market challengers or smaller / medium sized organisations with every thing to gain and nothing to loose.

(4) Company marketing teams and budgets are generally stretched with existing activities, our proposition should be complete, from education and analysis through to implementation. The costs are low relative to traditional marketing programs - its all down to the corporate commitment to really put the customer at the heart of the business.

(5) Organisations will need help and solutions in a number of areas:
- Assessing their opportunities and risks
- Developing the strategy – clarifying their needs and culture
- Deploying and integrating the tools into existing systems and processes
- Creating quality AV material – it’s all in the editing (especially for video podcasts)
- Training many more staff on how to communicate well:
- How to create good content - remarkable stories, passionate views etc.
- Are there any rules or taboo subjects
- How to remain open and honest yet not put your foot in it.

(6) There’s virtually no risk in giving it our best shot and we will all learn fast by diving in head first! Hopefully we might get recognised as being at the cutting edge of this revolution.

Who likes marketing anyway?

I thought it would be a great idea to start a Blog to find out what the “Blogosphere” was all about, nothing like diving in the deep end to find out how it all works.

 

Once in and up to my neck in reading, writing, links and feeds I started to notice a feeling that traditional marketers were disliked by customers – perhaps not as much as estate agents – but nevertheless a cool atmosphere. Perhaps I’m picking up on a few over amplified views in the blogging community, but it got me thinking – did I mind it or even deserve it.

 

Given the tools of the trade a traditional corporate marketer does his best to take a product or service (which hopefully they managed to get some input into at the research and development stage) and then they do what’s possible on a discretionary budget to get the messages to the target audience, hopefully generating some business and above all measuring the activity to justify the ROI and their job.

 

It seems to me that Blogging and the new interactive communication technologies provide marketers the chance to take the driving seat in businesses, but not by finding more ways to advertise efficiently or even smarter promotions, but by seizing the opportunity to handle the inbound communication channel that is indisputably from the customer. This customer mandate can then drive product or service innovation that really fulfils the market requirement and lessens the need to hard sell and promote the business.

 

This is nothing more than marketing basics but far too many marketers are wrapped up in budgets, ROI justifications, product launches etc. to even remember that their real role is to totally understand the market. How often in discretionary budget cut does research get the bullet first?

 

 

Apostrophe apology

It seems that getting ones apostrophe’s right is important to quite a few people, so I have added the one missing from my Blog title.

First time link

Not the first time I have recommended Seth Godin's blog and books but the first time I have set up a link - now that he's expecting you.

Beating Customer Expectations

You could be forgiven for thinking that my own expectation of Dell’s technical / warranty support would be on the low side (given my first post). Over the weekend my daughters 2 year old Inspiron went caput. A few frantic checks revealed the mother board had died and (not typically) I had purchased an extended 3 year warranty. So on Monday I telephoned the technical support centre in Bombay and spoke to Nisha. She was helpful and quickly realized I knew what the problem was and an engineer was arranged to visit us on Tuesday to replace the mother board.

I had a confirmation email in minutes and then on Tuesday morning a phone call from the engineer with an ETA. Later in the afternoon he updated the ETA due to traffic conditions, arrived and completed the job with super efficiency and politeness – winning a nice cup of tea. A few minutes after he left Nisha called to check everything had gone according to plan and then sent another email with references and contact info should I need any more help.
Two reasons for telling this story;

It’s great to tell a good story about Dell after starting with such a low expectation probably due to the fact that one normally hears about the problems rather than the successes.

It’s vital to set attainable customer expectations and manage them well to ensure a great experience. Beating customer expectations is generally more important than having the highest absolute standards (and not quite meeting them) when trying to create customer evangelists.

Seth Godin at Google

One of the best marketing presentations I’ve heard in a long time, make 40+ mins available.

Career Opportunities

I've always found that the best corporate career opportunities exist in companies in crisis, making a difference is what is required (job satisfaction for me) and promotions are always a possibility in a restructure however don't necessarily expect any bonus, and try and get a parachute in case it all goes wrong.

Second best are companies rapidly expanding, bonuses are a real benefit, but the workload is crazy - typically with no time for recognition and internal competition is fierce, promotion comes as the team grows - which can be painful waiting for.

That leaves corporations that are just chugging along, where I have found ingrained practices and politics rife, with little opportunity to make any impact and bonuses a hit or miss affair. I'll let you guess how I categorize my own career choices!

What I haven't tried until now is my own business or a pure start up. Here goes!