Marketing Memos

Investor’s Business Daily had an interesting report from ABI Research showing that now, and through 2014, iPhones and gPhones will dominate the smart phone application platform market. Combined they will own about 60% of the market in the out years, with all other competitors in the ‘other’ category.

That includes Microsoft.

Bookmark to:

It has been a bad week for brands, and it is only Tuesday.

Between Tiger Woods’ early morning mishap and certain global warming scientists being exposed as frauds, we have seen two well established brands bite bullets. Nobody believes that Tiger Woods was out for a 2AM joyride and happened to lose control of his car while leaving his driveway. His squeaky clean image is tarnished, and though not debilitating to his multi-million dollar income, his personal brand will not carry him as smoothly as before.

Certain scientists lost much more when email and computer modeling code was hijacked and disclosed to the public. In less than three days the word “climategate” – which had not previously existed – has 13.4 million references in Google whereas “global climate change” and a mere 0.5 million. Those emails and comments in source code show that “scientific consensus” never existed, was straggled at birth (i.e., the peer-review stage), and that Al Gore’s Nobel Prize might be recalled (I made that last one up, just to goad Gore’s goat and make Al nervous). These scientists have no future career though they may have future cellmates. The brand of “concensus science” no longer exists and the brand of “global climate change” is now negative.

Brands are interesting abstractions. The concept of a brand is simple, and Silicon Strategies Marketing articulated it best when we wrote:

Branding is making the market think and feel what you want it to about you and your products.

The hard part of branding is making up your mind about what the market should think and feel. The harder part is making it stick. Companies fail at branding because they do not know or properly delegate the three roles of brand management:

• It is marketing’s job to define the corporate brand, though it typically happens accidentally and largely based on founder’s biases.
• It is the CEO’s job to make everyone in an organization aware of what the corporate brand is and why it is important.
• It is every employee’s job to live the brand.

When marketing clearly defines and documents the desired brand, it becomes easier to communicate. People will parrot anything that they instinctively agree with. Employees will ape a corporate brand if they know what it is and it is not abjectly inaccurate. But none of this happens if marketing fails to define it with precision and reduce it to a simple, repeatable concept.

Even CEOs need help. Often the CEO sets the brand based on the boldness of his leadership. Take Larry Ellison and Oracle. Their brand image in the technology market place is not pretty, but it is effective. Larry set the brand early and reinforced it vigorously. Call it what you like – “evil empire”, “death star”, “the matrix” are all common Silicon Valley pseudonyms for Oracle, even among Oracle employees. But the brand is consistent and if nothing else oozes strength.

The point is that the CEO must carry the ball to the employees every day of their working life. When Bill and Dave drafted the HP Way, they established an enduring brand (that temporarily succumbed to a succubus). The HP Way was a simple set of rules for employee behavior that in turn created the HP brand. Bill and Dave did their job and marketing’s job too.

Employees, when given simple and clear branding, will live it. Circuit City – back when it was a healthy and growing concern – had a brand based on customer service, and that brand was broadcast throughout the company and in the house organ. So clear was the message that one newsletter article told of a Circuit City deliveryman who hauled an upright freezer a mile down the road to the customer’s house after his truck broke down. He was not going to let the Circuit City brand fail that customer.

In the technology biz, brands are largely left to rot. Tech companies have the misfortune of being founded by technologists, who view the world as a rules-based logic engine. They often believe that features and benefits drive every decision, and they could not be more wrong. Even iron cast CIOs have emotional functions that need to be nurtured during a sales cycle. Since part of selling is having a clear, believable and beneficial brand, your brand will make or break sales.

Let me give you an example. I was chatting with an old techie buddy of mine who mentioned putting in an order for 100 new X64 servers the day before, and that he ordered from HP. I asked him why HP and he said he simply believed they made the best hardware available. I probed a bit more and discovered that he had not read one comparison report nor did he have a lot of experience with IBM, Dell or any other vendor. HP’s brand made the sale.

If you are a CEO and you cannot repeat your internal band statement, give us a call. It is never too late to get this right because eventually your competitors will.

Bookmark to:

There is hidden meaning to Silicon Strategies Marketing’s chess board metaphor.

Sure, chess is a universal emblem for strategy, because you cannot win the game unless you think strategically – or unless you are IBM and build a computer that simply grinds through all possible moves in order to predict all possible outcomes of every game. The hidden aspect of chess is that it is played on a board divided into conquerable places, and the goal it to dominate space by taking it one piece at a time.

In other words, segmentation.

Market segmentation is like chess in that chasing the wrong segment with the wrong piece is a catastrophe in the making. Many chess strategies work like great market segmentation strategies, by taking the space/segment next to the one you already own and have well defended.

Like SalesForce.com is doing.

SalesForce started life with the right strategy, namely attack just one issue and dominate the field. CRM (the software solution, not the corporate philosophy) was ripe for the taking because it was always somewhat detected from other centralized applications. This allowed SalesForce to worm its way into enterprises. Now that they dominate the outsourced CRM industry, the only way for them to grow is to find another segment. Since they campaign against licensed software installed behind corporate firewalls, their segment strategy has to evolve outside of traditional CRM.

The question: what is an adjacent segment?

Next to selling to a customer, supporting a customer is key to any business. Fail at either and you die and painful fiscal death. Thus SalesForce has picked customer service – which is an extended function of managing the relationship with customers (CRM) as their next conquest. Stated more simply than Marc Benioff did – because his marketing team is chasing ‘cloud’ buzz – SalesForce now offers knowledge bases, community support and a Twitter tie-in.

Benioff was right in guessing outsourced support systems might be the next billion dollar opportunity. More to the point, support is the fraternal twin to sales. Both are linked directly to the customer and are interrelated. It is easier for SalesForce to extend their current offering into a compatible or dependant segment than to enter a completely new market (for example, Benioff would have been bonkers to launch an ERP offering or the next MMOG). It is also a more successful strategy because people involved in the current segment have connections to people in the new segment.

A key aspect of segmentation strategy is to choose segments in which customers talk to one another. Sales people talk to support people and need feedback from support databases (log a problem ticket for a customer and your account manager had better know about it). Thus SalesForce.com’s “Service Cloud” – a lousy name because it confuses the customer – is a good segment move not only for its adjacent proximity to sales and CRM, but because communications channels between SalesForce’s existing customers and Service Cloud’s target customers exist and are active.

Now, if we could just get Marc Benioff to show a little excitement.

Bookmark to:

If you want to suffocate your competitors, wrap the market with a set of tentacles and squeeze.

Like VMWare.

With the introduction of vSphere, VMWare initiated a strategy for the next evolution of IT infrastructure management, namely the cloud. At product launch VMWare showed it already paid attention to a whole product strategy. By engineering APIs and other bolt-in points, partnering software vendors could complete the cloud whole product definition. For example, VMWare is not a security software vendor and never should be. But virus and intrusion protection are on ITs worry list. So VMWare had to facilitate cloud-ready options for security. They designed their product so other vendors could become part of VMWare’s whole product definition.

Whole products are one aspect of dominating markets. The other essential elements to inviting FTC scrutiny include establishing partnerships with the top players in target segments and convincing the media that the race is over.

Whole product, whole ecosystem, whole mindshare.

Let’s put ourselves into the buyer’s cubicle for a moment. When evaluating any products – especially in new markets for complex technologies – you worry about three things: will it do everything I need, does it work with other stuff I use, and will the primary vendor have the strength to support me?

Whole product, whole ecosystem, whole mindshare.

VMWare’s whole product angle we covered, but it is worth noting that vendors are gleefully announcing participation. Via VMWorld, we see CA offering current and future software support within the vSphere framework. IBM, BMC and a long string of second tier players made announcements as well. No other virtualization or cloud management vendor has shown partner participation as broad or as deep. None of this is accidental. VMWare designed vSphere so others could profit by participating, and in doing so attracted said participation.

The media was perhaps the easiest to encourage due in no small part to the utter lack of competitive threat from Microsoft and Citrix, the only other virtualization solution with bucks and traction. Reporters live to “tell interesting stories” (that, by the way, is a copyrighted phrase, so be sure to cite Silicon Strategies Marketing if you repeat it). In the trade press, interesting stories mainly revolve around hot new concepts or who is flexing the most muscle. Since VMWare had established a cloud-focused whole product and was showing runaway strength for whole ecosystem, the press pretty much had to tell their story, the unwritten headline being “VMWare has taken the early and impenetrable lead in cloud management.”

Whole product, whole ecosystem, whole mindshare.

In short, with malice and forethought, VMWare wrapped tentacles around the market. The squeezing has begun. Red Hat almost did this in the early part of this century, but made one fatal mistake which Silicon Strategies Marketing capitalized upon while running SuSE Linux’s marketing strategy. Red Hat failed to think ahead. Part of our strategy for SuSE was to have them talking about the next item on the CxO’s forward planning list while Red Hat was talking about the previous one. While Red Hat was babbling to bitheads about Linux being cheaper, SuSE was chatting with CIOs about Linux leading to skill set consolidation. When Red Hat was touting a more efficient kernel, SuSE was talking to CIOs about strategic partnerships with IBM and Oracle. SuSE may still be #2, but can you name the “also ran” Linux distro vendors in 2001?

VMWare is not doing a Red Hat. While their tentacles are just beginning to wrap fully around the market, and when Citrix and Microsoft feebly toss out press releases to annoy the media, VMWare started talking about the next steps. They brought forth solutions to fill open holes in the market – cloud management application suites and SMB freebes. vCenter was introduced to automate cloud application management, capacity planning, recovery, charge backs and a rack full of other common infrastructure management issues. They also offered-up VMWare Go to seed SMB markets, providing a fast, easy and free way for smaller organizations to begin virtualizing. In the long run this will secure market wide mindshare and cause anyone moving up the IT admin food chain to have brand preference and experience with VMWare technologies.

I wax on and on about this not because I own VMWare stock and have some insane scheme to bump up the price (I do own some shares, and would appreciate it if you bought tons of it yourself). I bring all this up because it is extremely rare to see a company define, organize and instantly dominate a new market. vSphere and its tentacles are so well orchestrated as to be scary. VMWare knows the opportunity ahead in cloud computing and made sure they secured the three things necessary to dominate their new market.

Whole product, whole ecosystem, whole mindshare.

Bookmark to:

When IBM tosses down 100,000,000 R&D dollars, we had all better pay attention.

IBM has discovered mobile, no doubt dumfounded by the runaway popularity of its media rival Apple. I am sure that Apple’s original 1984 poke at the then-failing IBM left a shoeprint on IBM’s corporate butt. With IT hardware commoditizing and the market for IT services being finite and more competative, it would be unsurprising if IBM was looking for where to grow next.

They may be as enamored by iPhones and Apple’s app store as a crazed public.

IBM has decided to invest $100M into mobile communications research over a five year period. Though Big Blue is focusing primarily on extending enterprise IT to handies, they are not imune to the notion of enabling B2C and C2C interaction as well. Apple has demonstrated that selling to the masses generates massive muhla.

Being an organization driven by numbers and other forms of common sence, IBM made note of two interesting datum. Foremost was that 83% of the humans roaming around the planet today do not have easy access to computers. However, these folks are being launched directly into the wireless age. IBM’s Institute for Business Value notes that mobile user headcounts will rise 191% before the end of 2011, before the next Congress has a chance to muck up the economy further than the current Congress appears ready to do.

At the end of that year a mere one billion homo sapiens will be texting one another, and in the process disproving the million monkey theory once and for all.

Think about a billion customers. If you could earn a penny from each of them, you would pocket $10M bucks. Do that every day and you would churn enough money to make even Obama blink. This explains why executives from America’s mobile carriers vigorously defended their text messaging pricing before Congress. A billion monekys may not text the complete works of Shakspear, but they will generate a wad of cash large enough to impress King Lear … or even Bill Gates.

Which is where SaaS comes in.

IDC claims that SaaS (at least in Asian markets, many parts of which skipped the industrial revolution and landed squarely in the Internet age) will grow at six times the rate of packaged software. The report lists recurring obvious statements about the low start-up cost of SaaS apps and other unsurprising factors. What it doesn’t note is the union of SaaS, cloud computing and mobile.

This is where some major gold will be unearthed.

It is a given that mobile handsets are computers and unified communications systems. People’s lives are now influenced by what they can or cannot do with a handset. As IBM notes and green-clad Iranians proved this week “…mobile telephony holds the future of communication and exchange of information.”

Yet there must be a back-end for most mobile apps. A server somewhere intermediates the exchange of everything and serves-up applications to handsets. Since mobile apps are like the Internet of two decades ago – so new that nobody knows what might be profitable – a lot of experimentation needs to occur. Apple’s app store was Steve Job’s way of letting a million minds experiment and prove which iPhone applications people really wanted and needed, and do so without investing Steve’s own R&D dollars.

The Rubber Duck iPhone app comes to mind.

SaaS on public clouds will be the defacto approach to creating public (and perhaps private) mobile applications. Low cost and flexibile scalability are necessary when introducing a new mobile application to a billion potential users. Vendors at the intersection of mobile and SaaS stand to profit handsomely. Anyone who can take the Force.com platform approach and dedicate it to mobile applications stands to earn the business of every soul searching for a way to profit from a billion mobile users.

Bookmark to: