In order to be more successful, instead of protecting today’s business, leaders should think of methods to destroy their own business or risk becoming irrelevant in the new age of hyper competition.
This strategy is also better known as ‘disruptive innovation’ where a new product\service creates an entirely new market and at the same time disrupts one or more existing markets. I am sure we have all witnessed this form of innovation one way or the other, be it in the case of email replacing postal mails, Apple’s iPod creating a new music service putting music retailers out of business, or smaller compact cars cannibalizing sales or bigger sedan and SUV cars.
The traditional approach to ensuring business success is to chug along with the same business model that worked (especially one that has produced results for many years) and ‘milking’ it to its core until a better innovation comes along. Either that, or erect enough barriers of entry so that any new competition will take some time before they catch up.
Sometimes the competition comes out from nowhere (just like when the car companies not expecting a technology company to be its main competitor in electric cars) but at other times, it’s so clear that employees can even see the writing on the wall but we have to wonder why is there no action taken or is the management just too blind to see it?
I can’t speak for all cases but in my experience it is either due to complacency, or perhaps being too arrogant of one’s leadership position. Hey, if companies like Microsoft can make fun of Apple when the iPhone came out and treated it as nothing more than a fad, then the rest of us can very well make the same mistake too, right? (Do take a look at the video link if you haven’t seen it before, I promise it’s very amusing J)
Looking back on my previous experience of running a company in which our fate was tied to the vendor, the same thing happened when we were competing with Salesforce.com. One particular case about app store stood out prominently, namely Salesforce launching an app store (named AppExchange) for its CRM product. Back in 2007, the Oracle resellers on the ground were all reporting back to Oracle that AppExchange was a threat and there were a lot of functionality which was native to Salesforce but only available as a 3rd party add-on in the Oracle CRM On Demand ecosystem. Saleforce’s 3rd party add-ons could be easily searched through AppExchange and customers were asking where was Oracle’s equivalent? Our feedback was downplayed because the deal sizes were too insignificant even though the same scenario had been repeating itself numerous times.
Besides, what could go wrong? Oracle CRM (Siebel back then), was going great! They were still closing million dollar deals, the brand was still well known as the #1 CRM software, and how does it matter losing a couple of ‘small’ deals. App Store? Come on that’s for consumers! Who would want to buy something off them when it’s not even endorsed by Salesforce? Forget about it, it’s just a software listing directory, the trend will go away.
Well it turns out that a lot mattered. A few years later when the iPhones and iPods became the norm, consumers were well adapted to the App Store concept, if you couldn’t find something that was available; you could just browse the App Store to find something that fulfilled your need. And in my opinion, that was what resonated well with Salesforce customers and prospects because enterprise software will never fit 100% of your requirements out of the box, and traditionally they either have to customize it or have a 3rd-party add on provided. This uncertainty created doubt with our potential customers, they would be asking questions like what’s the cost like? How long will it take for you to develop it? Will you be maintaining it in the future? Who are your customers for this add-on?
The Salesforce AppExchange platform eliminated most (not all) of those questions and it definitely made their sales process a lot easier. Although they may not plan to buy anything from the AppExchange platform, the comfort factor was there knowing it was available and if the software didn’t have the functionality they could just search for it and install it. They could even read reviews of the software and search all the available options even if they are not a customer!
Contrast this to the customer experience for Oracle CRM On Demand, what if the functionality we need is not there? It’s either the reseller offering to customize the functionality, or it is up to the Oracle rep to find out another reseller which has performed a similar work before and connecting these two resellers to work out a proposal for the end-customer. The problem with this approach is the sole reliance on the Oracle rep’s knowledge and contacts, it is limited! Whereas in the Salesforce AppExchange platform, all the add-on apps which matches the customer’s requirements from the partners globally are listed, the same platform can be used by Salesforce’s customers, resellers and even the internal Salesforce staff.
When the trend caught on, Oracle finally responded by putting it on the roadmap in 2011! But till date, there has still been no announcement and it seems that all focus has shifted to the Oracle Fusion platform instead. Of course, I guess it makes sense to focus on the next generation platform but my point here is about Salesforce disrupting the business model by introducing the app store, and today Oracle still has not caught up in this area while most of the major players like Google, Box and others feature an app store.
So the next time you strategize, give some thought about how your business can be destroyed, it may actually prove to be quite a good brain-storming technique and future-proofing exercise.
P.S : In today’s hyper competitive landscape with neck breaking speed of innovation, customers have too much choices and technological advancements have made it much harder to protect the current business that you have. If you are interested to learn more, following are examples where protecting their own business merely meant delaying the inevitable and worst still losing everything to a new competitor:-
- Car companies like GM, Toyota and Honda all saw the electric car as the future and sought to develop one which would sell well. But currently when this post is published, a company from Silicon Valley named Tesla which had no prior experience in the automotive industry came out with not only the electric car technology but producing a sports car powered by the same technology. Tesla had to overcome legislation barriers, distribution challenges and the fact that all the car companies started RnD much earlier. Now, most of the car companies are opting to license the technology from Tesla.
- Prominent handset companies Nokia, Motorola and Blackberry ceded their leadership position to Apple despite having a majority market share and existing telco partnerships. Apple wasn’t even producing phones before year 2007 and everyone belittled Apple for the first attempt on the iPhone, but today Apple is the most profitable smartphone company.
- Staying true to my passion in software, consider Siebel which used to be the world’s leader in CRM software, only to be overtaken within years by Salesforce.com with a cheaper and faster delivery model via the Internet.
- For those who are well acquainted with technology, you would remember that today’s mighty Apple company once held the majority PC market share in the 1980s, but only to be overtaken by Windows and its IBM PC-clones.