“In a time of drastic change it is the learners who inherit the future. The learned usually find themselves equipped to live in a world that no longer exists.”
Eric Hoffer quotes (American Writer, 1902-1983)
In a software company with mature and aging products, selling into competitive and saturated markets where new unit growth is restricted to partnering and integrations, the once heralded flag ship applications, the cash cows, can become anchors to growth. These companies also become favorable targets for venture captial firms and competitive acquisitions who value the cash flow of an existing customer base but also understand the weight of the legacy technology. They understand that the investment needed to rewrite or otherwise reinvent the cash cows in modern technologies is out of the reach of the companies financial capabilities, to survive they have to sell.
The pace of technological change increases with time, and the time between a technology being deprecated and then unsupported is becoming too short for slow moving companies to respond effectively. Software companies that have not incrementally invested to keep their products up to date may find themselves isolated on an island at high tide, with the bridge washed out and no where to go.
In addition, technology refresh projects are difficult to justify, frequently there are no visible differences between the old technology and the new and they seldomly generate any new revenue, so all you are left with is cost. Justifications that are sound and tangible only to the engineers, such as upgrading a vendors technology because it will be unsupported by the end of the year, fall on deaf ears.
Cash cows can become anchors when the industry trends dictate that an application be capable of some capability that is only available in a modern technology. Software as a Service (SAS) or Service Oriented Architectures (SOA) is an example. In a saturated market, where new units are flat, partnerships become the focus of the business development activity.
When the partners products have been developed in modern technologies, which is usually the case for innovations that happen around the cash cow as it sits stale in an continually growing and changing market, the proposal for integrating is based on modern technologies and practices. To have the cash cow act as a service or engine in an overall workflow or solution may be impossible since the cash cow has been written in a closed architecture. There are no integration API's, there is a proprietary data model, the business model, ui and controling logic are coupled to each other, the application is an island. So the partner will most likely walk away. New business development activities become useless as there are partners interested but none of them are interested in a clunky integration.
Now the cash cow is an anchor, the weight of neglect and outdated technology and architecture prevent it from evolving into new markets and opportunities. The company finds itself ill equipped to live in the new world, with it's cash cow still perfectly equipped to dominate in a world that no longer exists.
Showing posts with label strategy. Show all posts
Showing posts with label strategy. Show all posts
Thursday, October 25, 2007
Tuesday, October 2, 2007
Icebergs in the Water
Big ships in general turn very slowly. Changes in direction can be imperceptible when sampled in the short term. An inability to change directions quickly would seem to dictate a need for far sighted vision to avoid collisions. But business history is littered with the downfall of large successful organizations that lacked the far sighted vision to makeup for their inability to change direction in a competitive landscape. But even the clearest vision of the path ahead can be misleading as the Titanic discovered on it's fateful voyage. Iceberg's in the water require the ability to change direction quickly to avoid what cannot be seen, to avoid what cannot be anticipated.
As a CTO I have been fortunate to work in a multitude of organizations, small start ups that went on to become medium sized businesses before completing an IPO to grow even further, and large enterprise organizations where stability was favored over growth. There is a correlation between organization size and the ability to execute and absorb change and the level of risk that is acceptable in any new venture proposal that responds to change. In general the larger the organization the slower it is to change direction and the higher the aversion to risk. I say in general because there are always exceptions, Microsoft and it's response to the Internet comes to mind as an exception to this rule. It's important in my job to understand these dynamics in order to successfully propose and execute changes in direction and manage to an acceptable level of risk in the process. In larger organizations venture activities generally take two forms:
As a CTO I have been fortunate to work in a multitude of organizations, small start ups that went on to become medium sized businesses before completing an IPO to grow even further, and large enterprise organizations where stability was favored over growth. There is a correlation between organization size and the ability to execute and absorb change and the level of risk that is acceptable in any new venture proposal that responds to change. In general the larger the organization the slower it is to change direction and the higher the aversion to risk. I say in general because there are always exceptions, Microsoft and it's response to the Internet comes to mind as an exception to this rule. It's important in my job to understand these dynamics in order to successfully propose and execute changes in direction and manage to an acceptable level of risk in the process. In larger organizations venture activities generally take two forms:
- Business Case
The most common form is putting together a business case for a venture.
Let's say you work for a media company that is very slow to change, in fact in the last 2 years they have come to the conclusion that they have to come up with a strategy for the Internet. Most of their content is currently delivered in print or online in text formats. You have market data showing that 75% of your customer base will retire in the next 10 years to be replaced by prospects (hopefully to be customers as well) coming from the XY Generation. These prospects have a very different relationship to technology, they live and breathe it, and they are accustomed to information being delivered in multimedia formats. What is needed here is a new venture to move the companies products to the next generation technology. This will be a significant investment and involve many touch entrenched and slow to change members of the organization. This fits the business case profile, where a positive ROI will have to be demonstrated to many stakeholders in the organization. You should expect the business case process to take some time.
First the appropriate business case has to be developed, than the decision makers / stake holders have to be identified. The value proposition, or the specific highlighted value proposition, may change depending on the stake holder(s) audience.
Second the funding source needs to be identified. Even though the stake holders have been identified, or perhaps there is an Investment Committee that serves as the stake holders, the funding source may be a different set of people. In large organizations the funding source isn't necessarily an account sitting at the bank with a stack of cash in it, it may be a business unit whose investment in the venture comes at the expense of the bottom line, with the organization as a whole sanctioning the investment by relieving the requirements for budgeted profit contributions. A prototype and market verification is usually required, especially in risk averse organizations. This will necessarily be a limited, fraction of the final investment but will drive risks associated with the venture to the lowest level possible.
Finally, attention should be given to budget cycles. Large organizations rarely take on unbudgeted investments during the year, waiting instead until the next budget cycle to include them. This could mean failure for ventures relying on time to market and sales windows with defined calendar cycles. Even though the prototype and market verification are a resounding success and prospects are beating down your door with preorders, if you are out of the budget cycle you may have to wait until next year to request the funds. During the funding of the prototype it's always good practice to request an earmark in the budget for the full funding should the market react positively to the prototype. - Skunkworks
This from Wikipedia - Skunkworks is a term used in engineering and technical fields to describe a group within an organization given a high degree of autonomy and unhampered by bureaucracy, tasked with working on advanced or secret projects.
Or alternatively a skunkworks is a team that works on a project in a way that maybe outside the rules and maybe under the radar of management, they do it by leveraging their expertise to achieve success for the company for which they work. A good example of a skunkworks that had a huge impact on a large organization can be found in an excerpt from the book Inside Out , a book written by and for Microsoft employees that highlights the products, people and culture that transformed Bill Gates' and Paul Allen's vision for personal computing into reality. In this excerpt titled ""I Found a Cool Little Problem That I Just Couldn't Resist Solving", David Weise, Project Leader, Microsoft Research recounts the skunkworks project that led to the ground breaking introduction of Windows Protected Mode. As he puts it "...putting Windows into protect mode was more of a personal project. Hey, it was Bill and Steve's company, and if they had wanted a protect-mode Windows, they'd have asked for it. But they didn't. My scheme was to get it running, then tell Steve, and if he wanted to kill it, he would."
Skunkworks projects don't necessarily circumvent all of the bureaucracy that causes large organizations to change direction so slowly, but it does jump start the process and acts as a catalyst for change, moving the ball much farther down the field than if the venture were proposed in the business case approach.
"When you are finished changing, your finished", Benjamin Franklin
Thursday, September 20, 2007
It's All About Good People
“The growth and development of people is the highest calling of leadership.”
Harvey S. Firestone (American industrialist founder of the Firestone Tire & Rubber Co.,1868-1938)
Software companies, especially start-ups and fast growing companies, depend on good people to keep them going and growing. It's always amazed me how many good people are attracted to these companies. It may be that the 'nine to fivers' see too much risk or too much work to seek out employment in these organizations. The individuals attracted to these companies are eager, energized to compete and win, to work for growth and reward, these are the conquerors, the winners who see the promise of a small organization with no where to go but up. More importantly they see the American Dream at work in these companies, a way to share in the rewards that come with growth if you work hard to contribute to that growth.
"Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws."
- Plato (427-347 B.C.)
Good people know how to act (they don't need a 'code of ethics' stamped to their forehead), they know respect for each individual is critical to team work, and they know debates/arguments are healthy among individuals that respect each other. Good people are worth training in those areas in which they lack experience or education, and it is critical you enable them to train others in those areas in which they have experience or education.
Good people don't wait for the ball to hit them in the head to know it needs to be picked up. Good people don't meander around with the ball and put it down somewhere and forget abou tit. Good people not only pick up the ball and run with it, they go find the ball.
One of my business career mentor's once told me "you don't have to like the people you work with, it's not a marriage, it's a business relationship". I have found that good people almost always are people who will confide in you and you will feel comfortable confiding in them, good people are friendly people.
Good people stand on their own, they are defined by their achievements and level of effort. They don't stand on other people's shoulders without proper credit to those who lift them up.
Good people are hard to find, and hard to keep if you are not of the same ilk. Good people are not attracted by mediocre managers, the only situation in which you will find good people working for mediocre managers is when mediocre managers inherit good people as a result of a poorly designed reorganization or as a result of blatant cronyism.
To better describe what good people are all about I have included an eulogy for a good person that has impacted my business career, he sadly passed away from a brain tumor, prematurely ending his life and contribution to the human experience. I hope that through my expression of respect for this good person there may be found a definition of what a good person is.
A mentor in my life, James "Jim" Petersen, founder of Best Programs Inc. Jim established Best Software in 1982 with the goal of developing business software solutions that would capitalise on the power of the emerging PC. Under his direction, the company grew from a start up to a leading provider of corporate resource management solutions. Today more than 50,000 businesses throughout the world are using Best Software's products to better manage their people, assets and planning.
A publicly traded company with annual sales approaching $100 million, Best Software was typically first to market with innovative, business application software solutions distributed through a variety of sales channels. In March 2000, Sage Software acquired Best Software for approximately $445 million in cash. I was Chief Technology Officer for Best Software.
Jim was a good person, better than most, but he new that good people were the secret to success in business, and he knew that respecting, mentoring and growing good people was "the highest calling of leadership".
My eulogy to Jim:
It’s both an honor and a great challenge to be asked to speak about Jim Petersen today. It’s an honor because Jim was such an important figure in my life. To me he was a mentor, a courageous leader, a gentleman, and a friend. It’s a challenge because its difficult to summarize Jim’s impact on my life, it happened on so many different levels.
Jim had a special kind of charisma that attracted extra-ordinary people to him, people of high character and impeccable integrity like himself. If you look around you these are the people that fill this room, the people you don’t know would probably become your fast and good friends given the opportunity to know them. I know this first hand, because I fell in love with and married one, my wife Sarah, we met at Best in its very early days, and our mutual friend was Jim.
Jim was one of those rare leaders loved by those he led, and his presence was always embraced in a great deal of respect. His genuine concern and respect for the teams of people that worked long hard hours to deliver on his vision, fostered a level of effort that went far beyond the norm. He was a good listener, an honest broker and always went the extra mile to ease the strains of working in a start up. He didn’t have to do many of the kind things he did, but it made all the difference to a young team of people working late into the night.
Jim was a tough leader. He was always dealing with the plague of start ups that expenses always rise to meet revenues. He made tough choices but he was always fair. He didn’t hesitate to let you feel the heavy responsibility that comes with great opportunity.
You would never find Jim on the sidelines he was always in the game. Jim had a contagious energy about him, he bounced on the balls of his feet when he walked around the office, you could gauge his excitement level by the height of his bounce. When there was a success he didn’t stop at a pat on the back. His face would light up, he would break out in a smile, and sometimes he would clench his fist in a victory sign, if he had a football he would spike it. We all shared in Jim’s vision for the company that he freely shared with us, and we all climbed the mountain because he was always up ahead of us challenging and cheering us on.
Jim was a master at encouragement. Many times late at night Jim would show up and sit down with the team and set the efforts at hand into an almost glorious context of a much larger goal that impacted not only the company, but sometimes he made it seem like we were changing the world.
From Jim’s soap box a simple tax preparation program became something that would change thousands of peoples lives helping parents to send their kids to school with their tax refunds, a payroll program made it possible for people to pay their bills and feed their families, and a fixed assets application enabled companies to grow and create new jobs for the unemployed. Granted at times it was a stretch, it was effective and encouraged the team to succeed so others could succeed. For young people trying to make their mark and do something important, this was very powerful stuff.
In thinking about what to say today, I came to the realization that Jim’s greatest gift to me was opportunity, the opportunity to participate, to work hard and to succeed. There isn’t a greater gift. It’s a difficult gift to repay…in fact, the only way to repay it may be best described by the words so aptly placed in today’s program, you have to pay it forward. Jim was an entrepreneur and a visionary, a dreamer, a believer in the impossible, and his place in history is firmly with that elite group of entrepreneurs that have fostered and made the American Dream possible for so many. Jim’s life was like the American Dream, it was a tide that lifted all ships, and how fortunate were we to be lifted up by the life of Jim Petersen.
For a good article on the traits of good people for startups see "The Blue-Chip Blues" by Jeff Dennis.
Harvey S. Firestone (American industrialist founder of the Firestone Tire & Rubber Co.,1868-1938)
Software companies, especially start-ups and fast growing companies, depend on good people to keep them going and growing. It's always amazed me how many good people are attracted to these companies. It may be that the 'nine to fivers' see too much risk or too much work to seek out employment in these organizations. The individuals attracted to these companies are eager, energized to compete and win, to work for growth and reward, these are the conquerors, the winners who see the promise of a small organization with no where to go but up. More importantly they see the American Dream at work in these companies, a way to share in the rewards that come with growth if you work hard to contribute to that growth.
"Good people do not need laws to tell them to act responsibly, while bad people will find a way around the laws."
- Plato (427-347 B.C.)
Good people know how to act (they don't need a 'code of ethics' stamped to their forehead), they know respect for each individual is critical to team work, and they know debates/arguments are healthy among individuals that respect each other. Good people are worth training in those areas in which they lack experience or education, and it is critical you enable them to train others in those areas in which they have experience or education.
Good people don't wait for the ball to hit them in the head to know it needs to be picked up. Good people don't meander around with the ball and put it down somewhere and forget abou tit. Good people not only pick up the ball and run with it, they go find the ball.
One of my business career mentor's once told me "you don't have to like the people you work with, it's not a marriage, it's a business relationship". I have found that good people almost always are people who will confide in you and you will feel comfortable confiding in them, good people are friendly people.
Good people stand on their own, they are defined by their achievements and level of effort. They don't stand on other people's shoulders without proper credit to those who lift them up.
"If I have seen further it is by standing on the shoulders of giants."
Isaac Newton, Letter to Robert Hooke, February 5, 1675
Good people don't covet or steel others achievements. They don't scheme and plot, they are not political, they are simply good people.Isaac Newton, Letter to Robert Hooke, February 5, 1675
Good people are hard to find, and hard to keep if you are not of the same ilk. Good people are not attracted by mediocre managers, the only situation in which you will find good people working for mediocre managers is when mediocre managers inherit good people as a result of a poorly designed reorganization or as a result of blatant cronyism.
To better describe what good people are all about I have included an eulogy for a good person that has impacted my business career, he sadly passed away from a brain tumor, prematurely ending his life and contribution to the human experience. I hope that through my expression of respect for this good person there may be found a definition of what a good person is.
A mentor in my life, James "Jim" Petersen, founder of Best Programs Inc. Jim established Best Software in 1982 with the goal of developing business software solutions that would capitalise on the power of the emerging PC. Under his direction, the company grew from a start up to a leading provider of corporate resource management solutions. Today more than 50,000 businesses throughout the world are using Best Software's products to better manage their people, assets and planning.
A publicly traded company with annual sales approaching $100 million, Best Software was typically first to market with innovative, business application software solutions distributed through a variety of sales channels. In March 2000, Sage Software acquired Best Software for approximately $445 million in cash. I was Chief Technology Officer for Best Software.
Jim was a good person, better than most, but he new that good people were the secret to success in business, and he knew that respecting, mentoring and growing good people was "the highest calling of leadership".
My eulogy to Jim:
It’s both an honor and a great challenge to be asked to speak about Jim Petersen today. It’s an honor because Jim was such an important figure in my life. To me he was a mentor, a courageous leader, a gentleman, and a friend. It’s a challenge because its difficult to summarize Jim’s impact on my life, it happened on so many different levels.
Jim had a special kind of charisma that attracted extra-ordinary people to him, people of high character and impeccable integrity like himself. If you look around you these are the people that fill this room, the people you don’t know would probably become your fast and good friends given the opportunity to know them. I know this first hand, because I fell in love with and married one, my wife Sarah, we met at Best in its very early days, and our mutual friend was Jim.
Jim was one of those rare leaders loved by those he led, and his presence was always embraced in a great deal of respect. His genuine concern and respect for the teams of people that worked long hard hours to deliver on his vision, fostered a level of effort that went far beyond the norm. He was a good listener, an honest broker and always went the extra mile to ease the strains of working in a start up. He didn’t have to do many of the kind things he did, but it made all the difference to a young team of people working late into the night.
Jim was a tough leader. He was always dealing with the plague of start ups that expenses always rise to meet revenues. He made tough choices but he was always fair. He didn’t hesitate to let you feel the heavy responsibility that comes with great opportunity.
You would never find Jim on the sidelines he was always in the game. Jim had a contagious energy about him, he bounced on the balls of his feet when he walked around the office, you could gauge his excitement level by the height of his bounce. When there was a success he didn’t stop at a pat on the back. His face would light up, he would break out in a smile, and sometimes he would clench his fist in a victory sign, if he had a football he would spike it. We all shared in Jim’s vision for the company that he freely shared with us, and we all climbed the mountain because he was always up ahead of us challenging and cheering us on.
Jim was a master at encouragement. Many times late at night Jim would show up and sit down with the team and set the efforts at hand into an almost glorious context of a much larger goal that impacted not only the company, but sometimes he made it seem like we were changing the world.
From Jim’s soap box a simple tax preparation program became something that would change thousands of peoples lives helping parents to send their kids to school with their tax refunds, a payroll program made it possible for people to pay their bills and feed their families, and a fixed assets application enabled companies to grow and create new jobs for the unemployed. Granted at times it was a stretch, it was effective and encouraged the team to succeed so others could succeed. For young people trying to make their mark and do something important, this was very powerful stuff.
In thinking about what to say today, I came to the realization that Jim’s greatest gift to me was opportunity, the opportunity to participate, to work hard and to succeed. There isn’t a greater gift. It’s a difficult gift to repay…in fact, the only way to repay it may be best described by the words so aptly placed in today’s program, you have to pay it forward. Jim was an entrepreneur and a visionary, a dreamer, a believer in the impossible, and his place in history is firmly with that elite group of entrepreneurs that have fostered and made the American Dream possible for so many. Jim’s life was like the American Dream, it was a tide that lifted all ships, and how fortunate were we to be lifted up by the life of Jim Petersen.
For a good article on the traits of good people for startups see "The Blue-Chip Blues" by Jeff Dennis.
Tuesday, September 18, 2007
Strategy and Tactics
In a software company strategy provides a framework for work to happen. This is critical because "work happens" in software companies. New opportunities, features, bug fixes, partner integrations and opportunities, customer customizations, technology changes, new operating systems, all make work happen.
If you don't have a strategic framework within which to make decisions to prioritize or more importantly even consider engaging in work you will run into problems.
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”
Sun Tzu (Chinese General and Author, b.500 BC)
Without strategy at best you will make the right decision for the wrong reasons, at worse you will make the wrong decisions for the wrong reasons. The problem with both these results is that the decisions won't contribute to long term growth, they also won't add to the historical record of decisions upon which you can reflect to help make future decisions. They are as Sun Tzu puts it "the noise before defeat". Or as Thomas Carlyle said "Nothing is more terrible than activity without insight".
If you don't have a strategic framework within which to make decisions to prioritize or more importantly even consider engaging in work you will run into problems.
Strategy without tactics is the slowest route to victory. Tactics without strategy is the noise before defeat.”
Sun Tzu (Chinese General and Author, b.500 BC)
Without strategy at best you will make the right decision for the wrong reasons, at worse you will make the wrong decisions for the wrong reasons. The problem with both these results is that the decisions won't contribute to long term growth, they also won't add to the historical record of decisions upon which you can reflect to help make future decisions. They are as Sun Tzu puts it "the noise before defeat". Or as Thomas Carlyle said "Nothing is more terrible than activity without insight".
Subscribe to:
Posts (Atom)