The value of "Free"

My son would most likely be an engineer.  He's already shown a number of traits that leads me to that conclusion:  For his age, he's very advanced in math and science; He loves building things; He loves being recognized for his work; etc.  And yes, there's another trait: He loves things that are "free".  He would spend $10 to get a $5 thing for free!!

To a lot of people, acquiring something for free is in itself a reward worth more than the thing itself.  People most often associate a higher value for something that's "free".  But this it true as long as it's tangible - i.e. it's a "thing".

On the other hand, if you offer your opinion for free, it is taken as just that ....  Many years ago, I learned that doing pro-bono consulting as way to get engaged with a client and then grow it into a consulting contract later just doesn't work.  A consulting contract would only happen if the client sees value in your services.  Once you've offered it for free, the value perception of the service is almost entirely washed out and hence it's almost impossible to recreate it to a point that it's worth paying for.

Lesson learned: Always combine your pro-bono consulting with a free "thing"!  Make sure there is a deliverable at the end where your value is captured.  If it's a report or presentation, deliver it in a nicely bound printed on good quality paper.  If it's something that required a lot of time and heavy thinking, make it large and heavy.  In either case, present it with a big final bang (invite board members, make several copies, etc.).

Once your have the free "thing" delivered, it's much easier to move to the contract negotiation.

"Confidentiality is Overrated!"

OK.  This one's a bit controversial, and I don't necessarily subscribe to it. But.... someone whom I respect greatly as a high tech executive made that statement in a coffee conversation last week, and I thought I'd be interesting to share his point of view.

His point was simply that engineering mentality in any high tech industry has such a strong sense of NIH (Not Invented Here) that even if you present them your IP (patent), they won't use the IP since they believe can do it better themselves and that the IP is "of no real value".

I know from personal experience (having worked in an IP company once) that an engineer's first reaction to an IP is that "it's no good" and her IP is just much more relevant.  In fact in one case, I remember the engineering team I was dealing with didn't want to sign the Non-Disclosure Agreement (NDA) since they didn't want to even see the IP to avoid contamination as they were sure they were going to invent something "better".

As it turns out, the value of IP, just like anything else, is in the eye of the beholder.  So if the engineer might think the IP is irrelevant, his management might think otherwise and see it as extremely relevant since it could provide them a economic advantage or at least a leveled playing field.

Confidentiality might be overrated (in a hyper-practical view) but also in the same hyper-practical view, it never hurts to have one (e.g. NDA) in place to remove all possible future issues.

Easing the Sales vs. Marketing Tension

Presenting to the board of directors, when I was VP of marketing at Calypto, I once mentioned how the product we were spec'ing was to be sold and how straightforward the value proposition and the sales process would be once it's developed and in the market (By the way, that product is now the biggest piece in Calypto's current revenue stream).  Right after my presentation, one of the more senior board members commented that once again there goes a marketer talking about how easy the sales process would be!

There is always tension between sales and marketing, but at that time I didn't realize what he was really saying.

I recently read a blog by Seth Godin which I'm paraphrasing: in a complex sales process (for example a B2B sales model) for every 10 people on the customer side, there are 8 that are there just to stall.  Their role is to keep vendors away from the main decision maker.  The remaining two persons include a nay-sayer whose job is to just say no if the offering is not to be purchased, and the actual decision maker who will give the final go-ahead.

A sales manager's job is to usher the sales process all the way from the first phone call, through the 8  stallers and the nay-sayer, to the decision maker and the close.  At the same time, a marketer's view of value proposition is most often only effective in working with the nay-sayer or the decision maker.  Valid or not, a sales manager always believes that she can come up with the value-proposition messaging on her own when she's ready to work with the nay-sayer and the decision maker.  What sales managers really need is help in dealing with the stallers - sales managers find it boring, time consuming, and it tends to be more detail oriented than they like it.  And as you can imagine most of the sales cycle is spent dealing with stallers.

What marketing managers fail to come up with proactively is tactics and campaigns to assist the sales managers with stallers and better yet speed up the process of dealing with them.  These tactics are after-thoughts and are mostly developed reactively as a response to customers stalling tactics.  The lack of these proactive measures to deal with stallers seeds the marketing vs. sales tension as sales views that as marketing's failure to deliver, while marketing's focus is on creating the feature/benefit and value-proposition collateral.  Furthermore, many marketing managers believe dealing with the stallers is really "sales' job", and hence sales' request for help in managing the stallers is viewed as sales' failure to deliver.

The comment made to me in the board meeting was a wake up call to re-evaluate my team's (marketing) role in the entire sales process and hence complete the entire roll-out strategy with tactics that cover stallers, in addition to the nay-sayers and decision makers.

Caution: Comfort Zone!

I had an article published in EE Times last week (see "EDA 3.0 - So you're an EDA startup").  It was one of the most popular articles of the EDA DesignLine publication.  I have received personally over 30 emails not only commenting on the article, but including a number of startup executives (friends, clients, etc.) asking me what they're doing "wrong"!

I won't steal the article's thunder (Read it on your own), but to build on the article, my response to these inquiries has been that it is only fear that we need to be afraid of.  In my opinion, surviving the recession requires conquering your fears and making the right choices.  Unfortunately many business owners won't do either.

In the EDA space, except for Synopsys, Cadence, possibly Mentor Graphics, and a few companies (startup and midsize) who are cash flow positive, all other companies are burning cash and don't have a strong market to see themselves raising future venture rounds.  So, want it or not, fear sets in: the fear of running out of cash and having to close doors.  With fear, most people turn back to their comfort zone.  So EDA companies go back to their comfort zone and focus their efforts on technology development.  And yes, they need to bring in dollars, so they focus the sales team on growing the pipeline.  As a results more features are being developed and more prospect are not happy with the state of the "product" -- in other words, the technology-to-product gap widens, accelerating the burn-rates.  [For difference between "technology" and "product, see the article.]

What's needed is conquering the fears, understanding that the only way to consistently close sales opportunities is to develop "products" (not technology).  To do this, as hard as it seems, startups should stay away from their comfort zone and develop less technology, and focus their investment on the technology-to-product transition, only working with a few key strategic customers.  Only this would provide the fastest possible way to get to a selling product and a movement towards positive cash flow.

Feature-driven product marketing: A sure way to get frog-leaped!

In 199_ (and I'm not mentioning which year) I got my first product marketing job.  It was all I wanted to do after I got my MBA -- I wanted to drive the definition and completion of products.  I was coming in from an applications (sales) engineering position right into product marketing, which I thought would give me a good view on what customers needed and what the product had to look like -- and it did.  I started right away defining a feature list, prioritizing them, cost-analyzing them, getting customer feedback, drive the schedules, etc.  I quickly found out that product marketing is a thankless job: there are too many people to make happy (customers, R&D, sales, executives, partners, etc.) and there's no way to make them all happy; and you're constantly trying to connect all of the dots and pick up the loose ends.

During my first months of product marketing, one of the company's more experienced marketers, pulled me aside, as he was leaving the company, and told me not to sweat the "small stuff" like features, etc. and instead focus my thoughts and work on positioning and the overall vision of how the product is changing the industry.  That "lecture" didn't make any sense at all!  I had a lot of respect for him, so I did take note of what he said, but it really didn't change the way I went about product marketing at the time.

As a few years have passed by and I moved up through the ranks and eventually became a  executive, his comments began to make more and more sense.  In fact, I have come to the conclusion than feature-driven product marketing only sets your product for long-term failure.  It makes you focus on incremental change.  It is very surprising that a lot of my colleagues and consultant, and some that I have the ultimate respect for (example), still predominantly push a feature-driven approach to marketing.  I do realize that pitching a feature-driven approach works much better with less experienced CEOs and it is a better "consulting sell", but I'm not convinced if it's what really creates differentiation for their client companies.  I'd go back to what my old colleague told me -- product marketing provides a lot more value if focused on the overall positioning (i.e. how differently the product is solving the customer problem) and the long term vision of how it's bringing non-incremental value to the customer (technically and financially).

One way to drive this point is to highlight that if someone in the car industry polled customers in 1900's about how a car should look like, the customers would have all said they'd want a carriage with a horse that eats less and craps less.  [Excuse the French!]

Blog time! Just do it!

I didn't get a chance to write in my blog last week - I was just too busy.  There's a whole bunch of things I have lined up to blog about (so stay tuned) but since I'm guilty of ignoring my own blog, I thought it's maybe time to blog about blogging itself!

As it turns out, within a 24 hour period last week, I heard the response "... but I don't want to write about myself ..." as I was recommending my fellow consultants to go ahead and start a blog.  It was interesting to hear the same response from two different very accomplished business people, and it got me started thinking about their reaction.

Very often, when we talk about blogging and social media, people just think about the technology.  "Oh, I need to get on Facebook!",  "I must twitter", "Should I use Word Press or Blogger?", etc.  We all fail to see that these are just distribution channels.  No wonder there are so many "all about me" blogs out there - people just wanted to get a blog going and didn't consider their audience, their platform, etc. and so they started blogging about something they were very verse about (themselves).  And that's probably why the first reactions I got was "I don't want to write about myself", like that's all blogging is about!

Blogging happens to be a strong element of a larger branding campaign.  It doesn't matter if its a branding campaign for a Fortune 500 company or branding of an individual.  It's even bigger piece of the branding exercise if it's for an individual, a consultant, or a small company.  Blogging creates a voice, and it is nearly impossible to take on a thought leadership brand if the company (or individual) has no voice.  So, in that case, blogging is an essential part of establishing yourself as a thought leader.

Besides the "I don't want to write about myself comment", other common responses are "what if my position on something offends a client or prospect?" or "I don't want to give people a chance to comment negatively on my product or thought!".  Now, these are a more valid concerns.

However, blogging is about having a take, especially if you want to have a blog that is differentiated.  Having a take doesn't necessarily require stirring up controversy, but it does mean that you need to take a stance on something.  If your blog is "safe" it's most likely boring (unless it's a "how to" blog --- which then doesn't do much for the thought leadership brand).  And boring is not a good thing ..... bottom line: want it or not, having a take is a part of creating a position of thought leadership.

On the other response: if people have something to comment on negatively, what better place to have those comments aired than on your own blog? - where you have ample opportunity to respond, but even better where you have an chance to link to other pages with similar responses and comments, and increase your page rank!  The negative comments are getting blogged somewhere, at least if they happen on your own blog, you know about them and can keep them under control.  As a friend of mine said, if your teenagers are going to drink, they're better drinking in your own house with you around!

EDA & Semi: Time for Marketing 2.0!

The internet used to thought of as "cyberspace".  Being online simply meant being an anonymous consumer of information.  But that was then!  The internet of today is identity-centric and social.  Internet users create blogs, upload their information to social networking sites, share ideas and contents, and they do it from their computers, iPhones, cellphones, etc.  This is what I refer to as "worldwide web" moving to "social web".

There is a generational element to this as well: Web 2.0 (i.e. social web) is still hard to fathom for some baby boomers, but at the same time, there are larger and larger groups of baby boomers starting to post photos, opinions, etc. on the Facebook, for example.  They're beginning to see how social the internet can be.

People in (or using) Web 2.0 have already internalized what doesn't yet seem as a business practice by others.  Unfortunately maturing industries like EDA and semiconductor look at Web 2.0 as "social", and hence constantly raise the question "why do we want to socialize with our customers" or "why would our customers socialize amongst themselves?" -- They take the word "social" quite literally.

It's not necessarily common business wisdom to bring customer experience into aggregators (such as Digg, Yelp, Ning, Xuropa, even Facebook, etc.).  With these aggregators, even though things happen far away from a company's destination site, it's the engine of social discovery that generates astronomically more awareness than the destination site would ever create, and yes, it also generates huge volumes of traffic to the company's destination site.

A simple example: Netflix opened up their database through an API last October.  Through this API other companies (e.g. aggregators) can access titles, ratings, queues, etc. information from Netflix. By "socializing" the Netflix experience, Netflix now gets 20+M film ratings every single day.  Does it really matter where (which website) these titles are rated?!  It all benefits Netflix.

It's time for EDA and semiconductor companies to see how they can benefit from Business 2.0.  EDA and semiconductor technology is the most advanced ones and those industries solve the most difficult challenges on the technical side.  Yet, they have totally missed the boat on what other industries have already accepted as common business wisdom.  They need to "socialize" their user-experience, create awareness, and turn that into revenue.

Leads vs. Touches

I had lunch with a friend of mine last week - one of the best recruiters I know.  Obviously due to not many companies hiring, as effective as she is, she is not having an easy time getting paid for her services these days.  She was however bragging about a company that she's still working with.  When I asked her how that company is doing, she responded saying "well, they had a great CES."

I hear that all the time.  "We had a great CES" ... "We had a great DAC" ... "We had a great SEMI" ..... And I always wonder what that really means.  To me it's very comic because in none of these phrases the word "great" is defined, so no one is really wrong about the statement and it totally depends on their perspective and more importantly their (sometimes low) standards.

At the same time, I have heard a few VP's of sales quoted saying "there are two types of leads: my contacts, and useless ones!"  I actually found that statement more ludicrous than the "we had a great CES" statement [No wonder sales guys get such a bad rap!].  This statement is merely an attempt by some sales VP's to explain why they can't start sales engagements with people they don't already have a relationship with.  All a good sales guy needs to start an engagement is a phone number and phone.  Nevertheless, the industry is full of sales guys who constantly sell themselves based on their rolodex - and unfortunately the industry is also full of VC's who buy that [stuff].

What everyone seems to miss is something that I have been using in my consulting practice.  There is a difference between "leads" and "touches".  Most people who visit your stand at the trade shows are "touches".  "Leads" are those who 1) have understood your value proposition, and 2) would (at some point) fall in your target segment.  In consumer marketing, the difference between the two is rather small: value propositions are easier to understand, and based on demographics it's relatively simple to know when and how to approach the lead.  In high tech marketing, the difference between the two is so large that it could cause startups to fail or larger companies to totally miss the market.

Unfortunately most marketing executives measure the success of a trade show by the number of "touches".  Touches cannot be counted on as whether a target audience is grasping your value proposition and more importantly how it all translates into sales activity.  For the most part, the more gimmicky your stand is the more touches you'll have.  Touches just represents how many people came to the stand (for whatever reason).  It could even include a lot of your competitors.

The real challenge is knowing shortly after a trade show who the leads were.  This requires knowing every touch's profile, behavior, and experience.  If you knew someone who came to your stand was in the market for similar products, you'd immediately know that he or she is a lead.  This information is however not readily available till months after traditional trade shows.  So I personally believe the value of traditional trade shows gets diluted as more and more people (high quantity) attend them and as it becomes more and more difficult to know about the attendees (less quality).

What comes into picture is new technology.  With online communities and their trade shows, the profile, background, experience, (purchase) behavior of visitors is readily available.  These modern (online) trade shows also enable a wider reach, a 24/7 approach, and lower cost.  A good example of these online community and trade shows is Xuropa.  Xuropa has created a community of the individuals and companies in the electronic design ecosystem.  It also hosts many trade show style stands, suites, and labs for companies to offer a view into their technology - but the real difference is that companies can easily see who the visitors are and quickly qualify the right ones from a touch to a leads.

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"We had a great Xuropa" - people around the industry will soon be saying!

The Main Impedance to SaaS: One Just Doesn't Know What One Doesn't Know!

I can very well understand why Microsoft is not jumping on the SaaS bandwagon, but can't figure out why some other applications don't.  My only explanation is: They just don't get it.

Yes - Microsoft has been struggling to deal with SaaS and cloud computing.  Google has been pushing cloud computing, and a whole bunch of companies are now providing their software in a SaaS model.  You can even run TurboTax (Intuit) on a "cloud".  Microsoft's struggle happens to be because they would end up alienating their own franchise on Windows and Office.  They're seeing the trends and have had some offerings through SaaS, but it's a complex situation for them.  That - I get!

Someone suggested to me that I should be using stamps.com for its convenience.  So I went ahead and signed up on their website, put in my profile, my credit card number, etc.  I was then taken to a window to download their application.  That was the last thing I wanted to do, but since it does offer certain conveniences, I bit the bullet and moved forward.  The next thing I noticed was that an .exe file was being downloaded on my computer.  That's normally not a problem, but I happen to do most of my business on a Macintosh, and an .exe wouldn't do anything for me!  I looked all over the website for a Mac OS version of the application but didn't find one.  To cut the story short, I ended up canceling my account shortly after.  I'm not going to go into how/why I was being charged automatically for months for my membership - that's a whole different story - though it does go to shed some light on their concept about "user-experience". 

I couldn't figure out why a platform such as stamps.com which does have a large user-base would not go the SaaS route.  From the software development standpoint, a SaaS implementation would have almost the the same "backend" and perhaps even a slightly simpler "frontend".  From a business and market reach standpoint, a SaaS implementation would give them far greater access to users, and provides them with a better user-experience.  The only explanation that I could think of was:  Stamps.com just didn't know they could do it this way!!!

I have seen this situation in multiple examples and it all leads to not-knowing-better ("ignorance" is a stronger word than I would want to use).  Software development teams that are comfortable with desktop applications continue to recommend it to their users.   After all, if the only tool you have is a hammer, every problem in the world looks like a nail.

Need to revive the economy? Shift your focus to disruptive innovation!

In case you haven't heard, one of the companies that did well in 2008 was Rolls-Royce.  Yes, they did!  And yes, the same company who wasn't doing so well not so long ago.  What did they do differently?

What Rolls-Royce did was to focus back on their core competency - pursuing technical advances and keeping close with their airline customers.  To quote Winston Churchill who said would like to see finance "less proud and industry more content", this is another reminder that a lot of Silicon Valley companies must refocus back on technology, and not just offering more attractive "deals" to their customers instead.

The thought of refocusing technology then translates into focusing on disruptive innovation.  In his book, Innovator's Dilemma, Clayton Christensen (Harvard Business School) writes that sustaining innovation (the opposite of disruptive innovation) ends up providing more technology to the high end users than what they are willing to pay for.  When the disruptive innovation comes, it provides a new set of less demanding users with less technology but at a state of the art.  There are lots of examples for this (PC vs. iPhones, etc.).  To combat the disruptive innovation, companies with sustaining innovation resort to financial packages to incentivize the less demanding users to stay with the incumbent (sustaining) technology.  

I get the feeling that this has been occurring a lot in Silicon Valley.  Instead of focusing on real (disruptive) innovation, the focus has been on ways to innovate the purchase process.  I saw that first hand at Cadence where a new number of deal structures were used on a regular basis.  In my last quarters there, the sales account review meetings had a different air about them.  In those meetings, the room was filled by finance and legal personnel, rather than field or solution engineers.  More than 75% of the discussion in those meetings was on contract restructuring and revenue recognition rules, than technology and sales (i.e. actually selling something) strategy.

As we have it, Cadence is now refocusing on technology and innovation.  That is the right move.  The key question is how to stay away from the temptations of "financial innovation".

Time to Think About a Stimulus Co-Package

Recently, everywhere I look there is news and more news on how about the economy is doing.  I constantly read about layoff, company closings, etc.  And I hear about it in all sectors.  If someone doesn't by now know about what's going on, he or she probably just doesn't want to know.

The press is treating the economy just as it does with any other sensational news.  And I understand sensationalism:  Many times in my career, press was going out of their way to hail my company and at times me, myself, and couldn't stop reporting the great subjects.  Nevertheless, as soon as a bit of market momentum was lost, press was all over how bad we were doing - often making it sound like we won't be in business for more than a couple of weeks.  Yes, I have see the quick turn with my own eyes many times.  Needs to say, these negative stories about the companies (even when we were doing much better than OK), leads to loss of key employees and more importantly key customers as they just believe what the read, or at least what they read significantly affects their purchase decisions.

Negative news is destructively self-fulfilling.  It's no surprise that the announcement of layoffs everywhere, doesn't help but encourage companies to invest less in workforce, which leads to lack of productivity, and eventually to more cuts.

I am a big proponent of free press.  I am also a huge proponent of free market (and less/no intervention of government in business).  Nevertheless, I very well see the point of having a stimulus package and how it could help re-vitalize the economy.  At the same time, I believe, if the government is to interfere with free market, it would behoove us all if it could also drive some sort of "management" (and I use that term very carefully) on press.  I do realize that this is very dangerous, but I strongly believe as long as the sensationalism of news is out there, making a recovery would take longer than it could.  Bad news always sells better than good news.

The stimulus package will help the economy.  We now need a disciplined, non-sensationalist press "package"to reinvigorate the recovery itself.  I'm not suggesting to lie or suppress the bad news, I'm just asking not to blow things out of proportions.

When resumes show up at work ....

A couple of weeks ago, Eric Mangini, was fired as the head coach of New York Jets.  He was the same person who up to only a few weeks before was referred to Man-genius, for his smarts and how those smarts translated to how his teams performed on the field.  Within a week of his firing, he was hired as the new head coach of Cleveland Browns, as the Browns management was looking for someone with previous head coaching experience.  I find it very interesting that someone can go from genius, to no-longer-genius, to smart-and-experienced in a matter weeks.

What does all that have to with Silicon Valley??  A lot.  I have seen many CEO appointment done in the same way head coaches are fired and hired in NFL.  A few months ago I got a call from an executive recruiter (who had previously placed me as a VP of marketing) checking unsolicitated references on a couple of CEO candidates whom I knew.  Both of those candidates had previous CEO experience, and to be honest, not good ones.  I gave my fair and honest feedback to the recruiter, and then asked him if I could throw my name in the hat (just to check his reaction).  His answer was simple: The board has instructed me to only look for ex-CEO's (regardless of how ineffective they have been).  The recruiter had no stock in the company otherwise he wouldn't have chased either one of those candidates.

It's always been obvious to me that companies hire resumes - they don't hire people.  In this example, if the board cared to see who they were hiring, they would have never hired any of those CEOs.

That explains why some CEOs spend more time producing PR for themselves while at the job, than they companies they work for or the products they market.  I have often see more news about a company's CEO than their technology or products.  If you notice the track records for those CEOs, they are the ones who consistently ride one company to the next (bigger and better).  On the other hand, the CEO's who focus on their companies and their employees, end up staying there for long periods of time (sometimes their entire life) and keep growing the company through technology and products.

The lesson: It's not about what you do, what you deliver, or what you enable.  It's about what you're thought of possibly doing, delivering, or enabling.

When the truth becomes self-evident

There have been many ground-breaking ideas in business that have taken a long time, and a great deal of resistance before they eventually prevailed.  It's really hard to predict them or know early on which idea would end up as the one standing last.

I personally have the pleasure (or the scars) of being involved with two of these fundamental changes.  One of them was at a company called Numerical Technologies which was changing the nature of semiconductor manufacturing and adding a strong element of software to the existing ecosystem.  The need for this change was due to a fundamental shift that was taking place in the center of silicon lithography - which of course then everyone opposed.   What Numerical introduced is now the standard in semiconductor manufacturing.

The other fundamental change I was involved with was OpenAccess, and I was leading the effort at Cadence.  OpenAccess was an industrywide initiative whereby Cadence opened up it design database to the entire industry (even its competitors) to integrate onto.  It was a bold strategic move to bridge the gap with its main competition, Synopsys, whose database, while proprietary and closed, had a market share lead over Cadence.  Today, OpenAccess is the standard database for EDA companies and EDA users.  Even Synopsys is using (and publicly promoting) OpenAccess.

At the very time of my involvement in those changes, I had no idea they would be such success - I just had a feeling that they were the right thing .... and was betting on that the "truth" would eventually prevail.

That takes me to a quote by the nineteenth century German philosopher, Arthur Schopenhauer, who said "All truth passes through three stages.  First, it is ridiculed.  Second, it is violently opposed.  Third, it is accepted as being self-evident."

Going back to my own experiences, we (and I personally, in the case of OpenAccess) was ridiculed at first.  Then we faced very strong opposition, not only by competitors, but also by customers and users (yes, change is always hard).  And then, all of the sudden, pieces fell into place, and in both cases, the change was just accepted.

What does that teach us?  Should we just get behind any idea that is being ridiculed?  Probably not.  But I think what Schopenhauer says - especially how he says it - is quite relevant.  My experience combined with Schopenhauer's quote tells me to look for ideas that are being ridiculed while are also being violently opposed.  I am not interested in ridiculous ideas that just face some opposition - there's a lot of those.  But I'll look for those that are under duress.  To me that's the sign where I start to smell someone or something is really being threatened -- and that's what tells me the change or idea might be real - eventually.

After all, love and hate are radically related emotions.