leadership
IoT and Vendor Lock-in
I was researching an idea last weekend and stumbled across something unexpected. My view on IoT has been that it provides a framework for a rich ecosystem of hardware and software products and their use. That flexibility and extensibility foster innovation, which in turn leads to greater use and adoption of the best products. It was quite a surprise to discover that IoT was being used to do just the opposite.
My initial find was a YouTube video about “Tractor Hacking” that lets farmers make their own repairs. That seemed like an odd video to appear in my search results, but it made sense about halfway through. The video discusses not having access to software, replacement components not working because they aren’t registered to that tractor’s serial number, and the only alternative being costly transportation of the equipment to a Dealership to have a costly component installed.
I initially thought there had to be more to the story, as I found it hard to believe that a major vendor in any industry would intentionally do something like this. That led me to an article from nearly two years earlier that contained the following:
“IoT to completely transform their business model” and
“John Deere was looking for ways to change their business model and extend their products and service offering, allowing for a more constant flow of revenue from a single customer. The IoT allows them to do just that.”
That article closed with the assertion:
“Moreover, only allowing John Deere products access to the ecosystem creates a buyer lock-in for the farmers. Once they own John Deere equipment and make use of their services, it will be very expensive to switch to another supplier, thus strengthening John Deere’s strategic position.”
While any technology – especially platforms – has the potential for vendor lock-in, the majority of vendors offer some form of openness, such as:
- Supporting open standards, APIs, and processes that support some degree of portability and third-party product access.
- Providing simple ways to unload your data in at least one of several commonly used non-proprietary formats.
Some buyers may deliberately implement systems that support non-standard technology and extensions because they believe the long-term benefits of a tightly coupled system outweigh the risks of being locked into a vendor’s proprietary stack. But there are almost always several competitive options available; always consider all viable alternatives.
Less technology-savvy buyers may never even consider asking questions like this when purchasing. Even technologically savvy people may fail to consider IoT as a key component of everyday tools and services – thus failing to recognize the implications of a closed system relative to their purchase.
It will be interesting to see whether deliberate business strategies like these change because of competitive pressure, social pressure, or legislation over the coming years. In the meantime, the principle of caveat emptor may be truer than ever in this age of connected everything and the Internet of Things.
The Value Created by a Strong Team
I participated in an amazing team-building exercise as a Board Member for the Children’s Hospital Foundation of Wisconsin. We were heading down a path that would lead to a decision on whether to invest $150M in a new addition. The CEO at the time, Jon Vice, wisely determined that each committee needed strong teams to thoroughly vet the idea from every possible perspective.
The process started with being given a book to read (“Now, Discover Your Strengths” by Marcus Buckingham & Donald O. Clifton, Ph.D.) and then completing the “StrengthsFinder” assessment using a code provided in the book. The goal was to understand gaps in perception (how you view yourself vs. how others view you) so you could better understand your strengths and weaknesses. Then, teams were created with people having complementary skills to help eliminate weaknesses from the overall team perspective. The results were impressive.
Over my career, I have been involved in many team-building exercises and events – some of which provided useful insights. However, most failed to combine the findings meaningfully, provide useful context, or offer actionable recommendations. Key areas that were consistently omitted were Organizational Culture, Organizational Politics, and Leadership. Those three areas significantly impact value creation vis-à-vis team effectiveness and commitment.
When I ran my consulting company, we had a small core team of business and technology consultants and leveraged subcontractors and an outsourcing company to take on more concurrent projects, as well as larger, more complex ones. This approach worked for three reasons:
- We had developed a High-Performance Culture that was based on:
- Purpose: A common vision of success, understanding why that mattered, and understanding how that was defined and measured.
- Ownership: Taking responsibility for something and being accountable for the outcome. This included responsibility for the extended team of contractors. Standardized procedures helped ensure consistency and make it easier for each person to accept responsibility for “their team.”
- Trust: Everyone understood that to be effective and responsive, they needed to trust and support each other and trust each other’s judgment. If there was a concern, we focused on context and process improvements to understand what happened and implement changes based on lessons learned. We avoided personal attacks for the good of the entire team.
- Empowerment: Everyone understood that decision-making involves risk, while also recognizing that delaying an important decision could be costly and create more risk. Therefore, each member was responsible for making good decisions as needed and communicating changes to the rest of the team.
- Clear and Open Communication: The team was very transparent and honest. When an issue came up, they tried to resolve it with that person first, then escalated if they couldn’t reach an agreement and decided to seek the team’s consensus. Everything was out in the open and done in a constructive, collaborative spirit.
People who were not a good fit would quickly wash out, so our core team consisted of trusted experts. A friendly competition helped raise the bar for the entire team, but when needed, the other team members became a safety net for each other.
We were all focused on the same goal, and everyone realized the only way to succeed was to work together. Win or lose, we did it together. The strength of our team created tremendous value – internally and for our customers that we sustained for several years. That value included innovation, higher levels of productivity and profitability, and an extremely high success rate.
This approach can work at any level but is most effective when it starts at the top. When employees see their company leaders behaving this way, it provides a model and sets expectations for everyone under them. If there is dysfunction within an organization, it often starts at the top – by promoting or accepting behaviors that do not benefit the whole of the organization. With a strong and positive organizational culture, the value of strong teams is multiplied and becomes an incredible competitive advantage.
Commentary on an HBR article about Start-ups & Entrepreneurship
A friend posted this article on LinkedIn.com. Because of character limits for comments, I decided to post my response here. Below is a link to the article referenced: https://hbr.org/2019/07/building-a-startup-that-will-last
The article is interesting, but emphasizing “second and third acts” assumes that the start-up will successfully navigate the first act. Even with addressing what the author views as key points, this is still a very big assumption. The reasons for Longevity and Success are far more complex and multi-dimensional, but it highlights some of the more important areas of focus.
Long-term success requires several things: The right combination of having a unique goal that has the potential to make a big impact (think “No software” from Salesforce.com); Innovative ideas to achieve that goal; A diverse team to build the product (a mix of visionaries, insightful “translators,” technical experts, designers, planners, adept doers, etc.); Very good sales/business development/marketing to describe a better way of doing things and converting that to new business; and ultimately a management team focused on sustainable and scalable growth.
The point about the need to “Articulate a value framework oriented toward societal impact, not just financial achievement” seems superficial and too tactical.
First, most new technologies have unintended consequences. Social Media is a recent example, but Genetic Editing and AI are two areas that are likely to provide more examples over the next decade. Not every societal impact will be positive, and having a negative impact could very well lead to the untimely demise of that company.
Second, the two ideas (societal impact and financial achievement) are not mutually exclusive. When I owned my consulting company, we aimed to fund $1M of medical research to find a cure for Arthritis. We allocated half of our net profits to this goal. Every employee was on board with this because there was a tangible example of why it mattered (my daughter). We invested $500K and helped launch a few careers for some brilliant MD/Ph. Ds, and at least one national protocol came out of their research.
Mission and Vision are important to a company, yet many fail to view this as anything more than a marketing effort. Those companies fail to realize that this is as much about motivating and inspiring employees as it is about grabbing a prospective customer’s attention. These should be inspirational and aspirational, such as the “BHAG” (Big Hairy Audacious Goals) Collins and Porras wrote about 25 years ago.
Regarding Endurance and the assertion that “…the best businesses are intrinsically aligned with the long-term interests of society,” my take is slightly different. The best businesses look for trends and opportunities in an ever-changing global competitive landscape instead of looking to their competitors and trying to ride on their coattails. Companies with a culture of fostering innovation as a way to learn and grow (Amazon and Google are two great examples) can find that intersection of “good business” and “positive societal impact.” It is much more complex than a simple one-dimensional outlook.
But it was a good article to help reframe ideas and assumptions around growth.
One Successful Approach for Managing Innovation
When I owned a consulting company, we viewed innovation as an imperative. It was the main driver of differentiation, credibility, and opportunity. We had an innovation budget, solicited ideas from the team, and evaluated those ideas quarterly.
Almost as important to me was that this was fun. It allowed everyone on the team to suggest ideas and participate in the process. That was meaningful and supported the collaborative, high-performance culture that had developed. The team was inspired and empowered to make a difference, and that led to an ever-increasing sense of ownership for each employee.
The team also had a vested interest in having the process work, as quarterly bonuses were paid based on their contributions to the company’s profitability. There was a direct cause-and-effect correlation with tangible benefits for every team member.
We developed the following 10 questions to qualify & quantify the potential of new ideas:
- What will this new thing do?
- Be very detailed, as this was used to create a shared vision of success based on the presented idea.
- What problem(s) does this solve, and how so?
- This seems obvious, but selling this new product will be an uphill challenge if you are not solving a problem (such as “lack of organic expansion”) or addressing an immediate pain point.
- What type of organizations have those problems and why?
- This was fundamental to understanding whether a fix was possible from a practical perspective, what value that fix might have for the target buyer, and how much market potential existed to scale this new offering.
- What other companies have created solutions or are working on solutions to this problem?
- The lack of competition today does not mean you are the first to attack this problem. Due diligence can help you avoid repeating others’ failures by learning from their lessons and avoiding similar pitfalls.
- Will this expand our existing business, or does it have the potential to open up a new market for us?
- Each answer has upsides and downsides, but breaking into a new market can take more time and be more difficult, time-consuming, and expensive.
- Is this Strategic, Tactical, or Opportunistic?
- An idea may fall into multiple categories. When the Sarbanes-Oxley (SOX) Act became law, we viewed a new service offering as a tactical means to protect our managed services business and an opportunistic means to acquire new customers and grow the business. While this is not true innovation, it was an offering that flowed from this defined process.
- What are the Cost, Time, and Skill estimates for developing a Minimally Viable Product (MVP) or Service?
- What are the Financial Projections for the first year?
- Cost to develop and go to market.
- Target selling price, factoring in early adopter discounts.
- Estimated Contribution Margin Ratio (for comparison with other ideas being considered).
- Break-even point.
- Would we be able to get an existing customer to pre-purchase this?
- A company willing to provide a PO committing to purchasing the MVP within a specific timeframe increased our confidence in the idea’s viability.
- What are the specific Critical Success Factors to be used for evaluation purposes?
- This lesson learned over time helped minimize emotional attachment to the idea or project and provided objective milestones for critical go/no-go decision-making.
This process was purposeful, agile, lean, and fairly aggressive. We believed it gave our company a competitive advantage over larger companies that tended to respond more slowly to new opportunities and smaller competitors that did not want to venture outside their wheelhouse.
With each project, we learned, became more efficient and effective, and made better investment decisions that positively impacted our success. We monitored progress on an ongoing basis relative to our defined success criteria and adjusted or sunset an offering if it stopped providing the required value.
The process was not perfect…
For example, we passed on some leading-edge ideas, such as a “Support Robot” in 2003, an interactive program that used a pseudo machine-learning algorithm. It would be trained using historical log files, tested quickly and safely in a representative pre-production environment, refined as needed, and ultimately validated and rolled out.
This automation could have been used with our existing managed services and Remote DBA customers to further mitigate the risk of unplanned outages. Most importantly, it would have provided leverage to take on new business without jeopardizing quality or adding staff – thereby increasing revenue and profit margin.
At the time, we believed this would be too difficult to sell to prospective customers (“pipe dream” and “snake oil” were some of the adjectives we envisioned), so it appeared to lack a few items required by the process. Live and learn.
In summary, a defined approach to something as important as business needs innovation to grow and prosper, as best demonstrated by market leaders like Amazon and Google (read the 10-K Annual Reports to better understand their competitive growth strategies, which are largely based on innovation).
Implementing this approach within a larger organization requires additional steps, such as securing buy-in from a variety of stakeholders and aligning with existing product roadmaps, but it remains key to scalable growth for most businesses.
Creating Customers for Life
The goal for any business, regardless of the products you sell or the services you provide, should be maintaining a satisfied customer base that is loyal to your business. The idea is to create a mutually beneficial relationship that motivates people to keep working with you, even when competitive products or incentives are available (e.g., those pushing for a “Corporate Standard” involving another product).
The best part is that this concept applies to all companies and all Product Life Cycle stages. Whether your company is on a rapid growth trajectory towards ‘Unicorn status,’ or your offerings are mature and viewed as ‘less exciting.’ The approach will also help if your products decline and you seek the ‘longest tail’ possible. At each phase, credible threats from competitors seek to grow by eroding your business.
Several years ago, I was responsible for two product lines in two major geographic regions (Americas and APAC/Japan). Our attrition rate (“churn”) was traditionally slightly below the industry average, and our net revenue rate (NRR), which reflects overall growth by factoring in churn, was around 100, indicating the business was flat. We began seeing an increase in churn and a corresponding decrease in organic growth. Both were indicators that something needed to change.
After discussing tactical approaches, our small leadership team agreed this was a strategic issue we needed to address. The result was an understanding that we needed to create ‘Customers for Life.’
Everyone agreed with the concept, but due to various differences (culture, who our customer was – end customer vs. channel partner, buying patterns, etc.), we agreed to try what was best for each of our regional businesses and share the results and lessons learned.
My approach focused on developing strong relationships that fostered collaboration and ultimately led to growth and success for both parties. The basic premise was simple:
- People tend to buy from people they like, respect, and trust. Become one of those people for your customers.
- Helping companies achieve better business outcomes leads to greater success for our customers and us.
How did we do it? It was a systematic process that my team used that included the following:
- Develop simple profiles for each customer (e.g., products used, date of first purchase, footprint size, usage and payment trends, industry).
- Estimate their overall impact based on product footprint size, annual spend with us, company size, engagement and interactions, and growth potential. Companies and organizations with the most at stake or the most to gain became our Tier 1 priority. These are the customers that we invested even more time and effort with.
- Make contact multiple times yearly, not just when you want money.
- These “out of cycle” contacts became very important for maintaining and growing the relationship.
- When issues or concerns came up, we often learned about them earlier and addressed them before renewal, which helped expedite the process.
- Ask questions about key initiatives, milestones, and concerns.
- We documented the responses, which helped seed following conversations and demonstrate a genuine interest in what they were doing.
- If we noticed changes in their industry or region, we asked about them and probed whether we could help.
- Follow-up!
- Lack of follow-through is the fastest way to lose your customer’s trust and respect. Being reliable and helpful increases your value.
- Request meetings to understand how they use our products and get a brief update on what our company has been doing.
- Face-to-face meetings are always preferred, as you tend to learn much more than in remote meetings.
- Learning more about their business, systems, goals, and challenges creates opportunities to add value and become more of a partner in that customer’s success.
- Ask “What would it look and feel like when you successfully overcame those challenges and achieved your goals?” and “What is a realistic timeframe for making that happen?” to get the customer emotionally focused on that better future state, and then look for ways to “Weave your value proposition into the fabric of their dreams and goals.“
- We looked at how they used our products and offered suggestions to do more, do something better or more efficiently, call out potential problems, and discuss best practices. Often, we had a technical expert follow up and provide an hour or two of free assistance to explore those suggestions. We invested in their ongoing success.
- Look for opportunities to congratulate them.
- It demonstrates that they are important enough that you are paying attention. Google Alerts made this easy.
- Regularly ask our customers if there is anything that we could do to help them.
- They would often reciprocate, leading to increased references and referrals.
- Helping our install base customers, even if it wasn’t directly related to our products, was good business.
- Continuous Improvement – Analyze the results and refine the process as needed.
Before the meeting, we would spend an hour or two researching the company, its history, and significant events for it and within its industry, and identify its top 2-3 competitors. My consulting background came in handy as I “looked between the lines” to better understand the situation as we planned the meeting, focusing on what we wanted to walk away with and what we wanted the customer to walk away with. Preparation matters.
As we met with our Customers and Channel Partners, we would explain what ‘Customer for Life’ meant to us and the potential benefits to them. Before the meeting, we would check whether we had (or they wanted) an NDA so they could speak freely and with confidence. Trust was important. The information disclosed helped us understand their situation, and we mapped it against other customers to identify actionable trends. Showing interest and understanding created credibility. Asking relevant questions helped conversations move to substantive issues faster. From there, we focused on specific points that would positively impact that customer.
Over the course of two years, my team and I helped our customers innovate by providing different perspectives and ideas, modernizing (e.g., moving to spatial analytics to get a more granular understanding of their own business, cloud-enabling their systems to increase responsiveness to their business and control costs), improving their systems and growing their businesses, and more. We became their trusted advisors and advocates within our company.
We also received feedback that helped us improve our products and a variety of processes – something that benefited all customers. Occasionally, we learned about problems they were having. We took ownership of the issue, brought in the right people, and helped the customer find a resolution. Collaboration and success created stronger relationships – especially with the largest customers and companies.
The results: Customer churn decreased by 50%, organic growth increased by slightly more than 20%, and NRR increased by over 5%. This program made a several-million-dollar positive impact with relatively little effort. We had achieved our objectives, improved our bottom line, and shared our lessons learned with the other two teams.
The concepts behind Strategic Account Management, Voice of the Customer, Customer Experience, Customer Loyalty, and Customer Success blended into a manageable, practical approach and delivered strong ROI. My biggest lesson learned was that adopting this mindset and creating a repeatable process should be started sooner rather than later – before problems arise.
Every day you are not creating your own ‘Customers for Life,’ there is a good chance that your competition is. Don’t let that happen to your business.
Where Ideas, Experiences, and Lessons Learned Intersect 