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Photo taken by David Stelzl

A couple of attendees emailed questions regarding competitive advantage…following Wednesday’s Cisco sponsored webinar.  I thought it might be helpful to address this here:

(Q) Why is Operational Efficiency or Risk Mitigation easier to sell than Competitive advantage?

First, it’s important to note, I did not say you can’t sell using competitive advantage as your value proposition, but rather, operational efficiency and risk mitigation are preferable; at least to the average sales person.  Here’s why…

Companies can use technology to compete, however this type of advantage is often short lived unless the company deploys some type of unique patented technology; something their competition can’t go out and buy tomorrow.  More often than not, technology driven competitive advantage is really an operational efficiency gained by the perfection or automation of some process.  So in the end, it’s really an operational efficiency sale, that in-part, delivers competitive advantage, in addition to delivering cost efficiencies (which their competition will either adopt or find another way to accomplish).  The technology sales person’s ability to foresee such an advantage in a complex manufacturing situation (for instance) is not so likely.  (Again, speaking of the average rep calling across many verticals).

True competitive advantages are seen when a larger company has more buying power, putting others out of business by squeezing their margins such as is the case with the Home Depot stores competing with smaller hardware stores.  Wal*Mart does this by putting highly efficient distribution processes in place that are unaffordable by the average mom and pop store in your local area.  While Wal*Mart may have some unique applications in place, their infrastructure isn’t really unique, just unaffordable to smaller companies.  The process itself is key, and unique as it is cost prohibitive to the smaller company.

Operational efficiency in itself may offer competitive advantage as seen above, and the seller can use this to gain momentum on the purchase, but the efficiency is more easily articulated by the seller.  To go down the competitive advantage road with technology sales may require a deep understanding of the vertical’s market pressures.  Perhaps if the sales person has come out of that industry, they’ll have success with this.

Competitive advantages not tied to operational efficiency, which stand alone as a true advantage that cannot be duplicated, may come in the form of location such as the best corner owned by McDonalds, exclusive distribution of a product, or patented technology such as the iPad and Mac OS.  These advantages are not easily matched.  Will Dell come out with a better laptop than Mac?  Probably not (in my opinion), however they certainly have a less expensive one.   Note how first to market has earned Apple 90% of the market on tablet computers!  This won’t be easy to steal.  This is hard to match when selling commodity goods which are largely over distributed in the VAR/Reseller world.

© 2011, David Stelzl

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Several people commented privately on yesterday’s blog post featuring the iPad…the writing is on the wall.  People like iPad, they like Apple, they like simple, mobile, easy to use, and the status of being an Apple user.  It’s cool to have an Apple…and as I attend sales  meetings and conferences as a speaker, those in the Apple club often let me know when they see me pulling out my MacBook Pro..,”You’re an Apple guy, huh?  Me too.”

On the other hand, those who resell technology at the SMB and consumer level are in trouble, even after Apple just finished selling 14 million units to individuals (and some companies).  Lack of innovation and a lack of Google thinking…The brick and mortar book stores and technology stores are in trouble.  Best Buy’s report in the Wall Street Journal was telling – their value proposition has to do with technical expertise, but apparently buyers are more concerned with price than the future need for service.

But there’s more here.  Apple, at least my Apple workstation and laptop require very little support.  When I bought my Dell laptop two years ago, it came with Vista.  Now there’s a support nightmare.  So much so that after two years I just couldn’t take it any more.  So I put it in the closet and bought a Mac.  Up, running, and no problems. I’ve never had a support call.  With the Dell/Windows systems, not only did the software not work, but I had multiple hardware problems as well.

If you look at high-tech resellers over the past few years, many have built their business on the assumption that profit could be made on support – supporting systems that don’t work, which in turn allows them to sell hardware at a discount.  What happens when someone like Apple starts producing something that does work?  Or they announce something so simple and inexpensive that the user will throw it away and buy a new one – online at a discount.  All of the sudden, the reseller’s new sales model begins to break down. Many of the resellers I know are making most of their profits on problems users shouldn’t be experiencing!  This is destined to fail.  Especially with companies like Apple gaining market share.

© 2011, David Stelzl

 

The Ipad – Here are some sound bites: (Source: Wall Street Journal)

1 year old

90% market share

14.8 million devices sold

9.5 Billion in revenue in one year!

200 Million Apple Accounts world wide

And a new version out this month while the competition is still scrambling to compete with the first  release.

Innovation is key.  At the 2011 RSA conference, one of the most interesting presentations came from the founder of Palo Alto, Nir Zuk.  He talked about innovation, and repeatedly asked his audience who was using what – brands of cell phones, operating systems, etc.  Through this interaction he showed that many of the technology leaders just aren’t innovating any more, and people are moving to new technology – following the innovators.  These companies that lack innovation stand to lose significant market share if they continue.  This is a wake up call…not just to those with an iPad look-a-like, but for Microsoft and anyone else with significant market share.  Companies that are innovating will win over time.  The problem is, many of these new innovations compete with the margins resellers have depended on!

Example:  How many resellers are still selling PCs to make a profit.  Perhaps yours doesn’t, but there are thousands of SMB focused resellers still in this game.  Will they start selling iPads?  Well, maybe, but that is not very strategic.  A $500 device, already set up with an operating system that doesn’t require a daily reboot to recover from the blue-screen isn’t going to make up for the loss.  And with other technologies commoditizing and companies like Google putting free tools online (Have you tried Google Apps?), the market is bound to change – expect resellers to be out of business within a year if they are waiting on the economy to pick up, hoping to be placed back into the business they drove two years ago.

Innovation for Apple means, new cool looking products that appeal to the new mobile generation.  But to the reseller and high-tech sales person, it means finding new ways to help clients innovate, automate, secure, and become efficient.  It means finding new areas to help companies with technology that puts them ahead of their competition and cuts cost out of their current IT program.  And it means helping them secure what they have before they lose everything.

© 2011, David Stelzl

When little gadgets like the iPad command greater attention than just about anything you sell, the technology business is in trouble.  That is, unless you have something greater than the product to vend.  It was bad enough that half the emails I was receiving said they were sent from the iphone (which we Verizon customers still don’t have), but now the other half are coming from the iPad!  Where are we headed?  I’m changing my signature to read, sent from my MacBook Pro, which supports more apps, has a bigger screen, and consumes more power! (Right about now I am loving the fact that I upgraded from Microsoft Windows earlier this year.)

The real issue of course, is that the product can’t be the center of attention.  If you you work for Apple, perhaps your real value is innovation.  If you are a reseller it must be intellectual capital.  If you work for just about any product company, you had better have some niche, or you’ll be what Geoffrey Moore once called the Chimps, always trying to steal market share from the Gorilla.  Or, perhaps you’ll learn the same lesson we all need to learn…that the message, the marketing, and the intellectual capital are more valuable than just about any product.  Certainly in the long run this is true.

© David Stelzl, 2010

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