Strategy for software Dummies – part 5
The title for this series of posts is inspired by the extensive series of instructional/reference books, which serve as non-intimidating guides for readers new to the various topics covered, or for readers who need a solid brush up. The title doesn’t imply that software CEO’s are Dummies; only that there is a need for a new type of “strategy framework” that produces more than fluff and which can be completed in a very short time.
This post #5 explain how the ABC Company came to a decision on the 6 sources of growth.
A small recap from post#4.
The ABC company is an Independent Software Vendor planning to go global. They have asked a ValuePerform consultant to help them put an international Go-To-Market plan together. The ValuePerform consultant wants to know the current position of the ABC company before any work on future strategies commences. It turns out that the management team wildly disagree on the priorities for financial performance. The consultant explains why the priorities must be made and the CEO and VP of sales have agreed to make the final priorities.
The ABC company is in a difficult position. Their current product platform is now 14 years old and much has happened since the first launch 12 years ago. New competitors are entering the market with more updated technologies and increased competition is felt and recognized. The ABC company is not yet exposed to the competition in their domestic market, but when participating in international trade shows they can see what others have to offer. They are not alone in the market anymore.
A new product is in the pipeline based on up-to-date platforms, web-enabled and with an open API allowing for 3rd parties to add functionality to the core application. The functionality of the new platform is not yet at the same level as the old product, but with the API approach, the ABC company expect 3rd parties to make up for that. The ABC company do not have a tradition of working with 3rd parties, but this is going to change now.
The issue is that the new product is not compatible with the old product. Customers will have to migrate. All the customizations made in the old product will have to be rewritten for the new platform. Some of the customizations can be substituted with standard functionality in the new product, and some customers may even choose to change their internal processes to adapt to the new product.
The market does not know about the compatibility issue yet. The ABC company have kept a low profile in order to avoid customers from postponing their purchase decisions.
The CEO is one of the two founders of the ABC Company. He has been spearheading the sales effort since the first days and most of the current customers have been brought in by him. He realizes that the company must move into new international markets, but he is concerned with the timing. Moving into new markets will obviously require major investments and it is had to predict exactly how much and how long it will take. If these investments are made and the domestic market situation deteriorates the company may be left in a dangerous situation. He is extremely concerned with bringing a new product on the market and going international at the same time. He would prefer focusing on getting the new product introduced domestically and then going international in 2-3 years when the product has matured and gained some traction. In addition, his own language skills are poor and he feels inhibited when dealing with international contacts.
The VP Sales
The VP of Sales was hired 8 months ago to assume responsibility for all sales activities. He comes from a sales management position in the local subsidiary of a big multinational company. He has many years of experience with selling to enterprise customers and his business network includes most of the current customers of the ABC Company on the CIO level. Although he was recruited for his “international” experience he has never done any business outside the domestic market and his international network in limited to his previous company. He primarily took the job at the ABC Company because he was fed up with the politics of a big multinational company and wanted to be part of the top management team. He also wanted to get experience with international business from a top executive position.
Getting the priorities in place
The CEO and the VP of sales meet to get the priorities on the 6 sources of growth sorted out. As can be seen from the figure both the CEO and the VP of Sales see that cost reductions, asset optimization and the new product as having the lowest priority. They both agree that if they push the new product too hard they may motivate the current clients to consider alternative options with their competitors. They also agree that taking a brand new product to the international markets is a bad idea. The VP of sales has new customers as a second priority simply because that is a consequence of moving into a new market where all customers are new customers.
The VP of sales is making the point that if they do not move to the international markets now the window of opportunity may close. The competitors are active globally and will increase the barriers of entry month after month. They need to move now. He also emphasizes that he was recruited to lead this endeavour.
The CEO argues that the company is in a critical situation. He fears that they will lose against competitors in international markets with the old product. They need to get the new product accepted on the domestic market first. However, he realizes that international expansion is critical.
After a couple of hours of discussion, they agree to adopt the priorities of the VP of Sales, however, they also agree that the CEO is to take responsibility for domestic sales, while the VP of Sales will focus on developing the international markets.
Other posts in this series:
Post #1: Strategy? – oh no, not again!
Post #2: Introducing ValuePerform – a lean approach for strategy analysis and alignment
Post #3: The 6 sources for financial growth
Post #4: Why do management teams disagree?
Post #6: The Customer Value Proposition
Post #7: The Customer Value Proposition TODAY
Post #8: The Customer Value Proposition in the FUTURE
Post #9: The Market Situation
Post #10: ValuePerform and the 15 Management Areas
Post #11: What is important and what is not?
Post #12: How are we performing?
Post #13: Identifying the important and the urgent issues
Post #14: The Action Plan
Post #15: Why does misalignment occur?
Post #16: The price of management misalignment
Post #17: Avoiding invisible or suppressed misalignment
Post#18: The cost/benefit ratio of ensuring alignment