Outside Innovation

Avoiding B2B One-Night Stands

We’ve all probably done this: a business that sells to business customers offers a special deal or promotion to attract new business or to liquidate inventory, and then is unable to convert those bargain hunters into loyal, repeat customers. For example, a restaurant supplies store offers a great bargain on coveted cookware, hoping to lure new customers and/or to sell additional products, but only the bargain hunters show up. Or an event organizer provides free or highly discounted booth space at an undersold trade show in order to make the trade show more appealing to business customers, and the organizer only succeeds in alienating his current exhibitors; not attracting new ones for the next event. Or a software firm offers unlimited use free software with a premium upgrade, but nobody opts for the upgrade.

Luring New Business Customers with Evaluation Kits. One of my favorite examples of offering “free samples” or “at cost samples” to B2B prospects was National Semiconductor’s evaluation kits and boards. When Phil Gibson was running Web marketing for National Semiconductor, he developed a very sophisticated software toolset, known as WEBENCH^®, which design engineers could use to design one-off evaluation units. (National Semiconductor was acquired by Texas Instruments—in part because of the value of these tools and this marketing approach.) National would then ship either a kit for the engineer to build the prototype board, or the company would assemble the one-off custom board and ship it out the next day—at close to cost.

Redundant Clouds; Next Gen Site Design

When Gmail went down for a couple of hours this week, I was annoyed but not distressed. As a small business owner, I rely on Google’s paid services for email and calendaring as well as on many of the company’s free services (e.g., Google Analytics).  Over the past three years, I have found Gmail to be as reliable and much less costly than our previous in-house, internally-hosted, and professionally maintained (by a full-time IT person) email system.

In monitoring my own calm reaction, I realized that I no longer rely on any single service to keep me online and in touch with the world. Like most of you, I have several email accounts on a variety of email services. I have messaging on my cellphone, Blackberry email and SMS, iTouch WiFi access, Internet phone service (free and paid), and both land line and cable Internet in my home/office and most of the places that I work from while travelling. I also use Facebook, Twitter, and other services to keep in touch with clients, family, and friends. Switching from one mode to the other isn’t really a problem. Not having the history or context available on my laptop or handheld IS a problem, so I’m quite conscious of making sure that I have access to my calendar and contacts (or someone to call or email who can access that info) in a pinch. I only begin to freak out when I am away from any source of Internet/Wireless connectivity. When I visit Uganda to work at the African Rural University, where connections are sparse and slow, I worry about missing something important. (But then I relax and realize that what I’m doing –working with smart young women who are changing people’s lives is MORE important than what I might be missing).

What I noticed in the chatter and punditry that surrounded the news of the recent 2-hour Gmail outage were three main threads of discussion:

1. What do you expect? It’s a cloud computing service. Don’t trust anything in the cloud!
2. What’s wrong with you guys? Don’t you use alternative emails (Facebook, AOL, Yahoo!) and alternative modes of communication (SMS, iPhone, Twitter)?
3. Big deal. It’s no worse than other email services and utility outages on services we have used.

Cloud Computing: Once Renegade, Now Sanctioned

My reaction to Microsoft’s announcement of its Azure cloud computing platform is: “Good, now it’s safe for corporate IT to embrace cloud computing.” You may be too young to remember when IBM announced its PC (1981). By doing so, IBM validated a customer-driven movement that was already well underway: PCs (of the Apple and TRS 80 and other varieties) were already being used as renegade computers by lead users. Business people were already bringing personal computers into the office or buying them with departmental budgets. They were doing spreadsheets, performing simple calculations, even typing their own memos.

In 1981, IBM ran around in front of this renegade customer parade, pulled together a “platform,” and declared it an industry standard. The PC revolution was legitimized. Cocktail party conversations among IT professionals and corporate execs shifted immediately from “we don’t take PCs seriously” to “we have a PC strategy.”

Microsoft’s Azure announcement will have the same effect. Corporate IT gate-keepers will now acknowledge that they need a “cloud computing strategy” for their applications and their data centers. Again, they’ll be running around in front of a parade that is already well in progress. Small business users, under-the-radar-renegades in enterprise departments, and IT project leads for fast track, low budget projects have been using cloud computing for two years. Microsoft’s validation will enable them to raise their heads, be smug, and show others how it’s done.

How to Design Your Products (and Business) to Be Customer-Adaptive

        Here’s an update on one of the companies featured in Outside Innovation. CohesiveFT is a software company. Their products are digital. But I believe that some of the patterns we’re seeing as customers create their own digital products hold up well for physical products or for hybrid physical/service products.
       
         In fact, I’m writing this post from St. Louis, the center of the Bio-Belt, where the products that are sold—seed for growing corn, soybeans, fruits, and vegetables—are designed and packaged in ways that are surprisingly similar to today’s hardware and software. As Monsanto's CIO, Mark Showers, explained to me, what’s going on in bio-agriculture is that there’s an increasing split between the hardware (the seed or germ plasm) and the software (the traits) of a plant. Advanced bio-technology has made it possible to optimize the traits at each layer of the seed stack (below ground/roots; ground-level/weeds and pests; above ground/leaves, flowers, fruit). In fact, today’s hybrids come in triple-stacks—soon there will be 4 to 6 stacks—of optimized traits. Farmers select the traits they need in their seeds based on the soil conditions, pest patterns, weather patterns, and their expectations of what the growing season will hold. (Then they hedge their bets through commodities trading where they make their real money!) While farmers don’t CONFIGURE the optimal seed traits at each layer today (that’s done in the lab and on the manufacturing farms), they do SELECT seeds with optimal traits at each layer for different sections of their farmland. It’s a very sophisticated and complex set of choices. Much of the value of the seed resides in the intellectual property involved in optimizing each layer of the stack for the precise conditions required and in the ability to mix and match these traits to meet the particular requirements of a particular strip of farmland in a given micro-climate. Companies license the intellectual property—the traits—to one another.