High-Tech Author Moore Sketches Blueprint For Innovation

Choosing and sticking with the right business model will help VARs craft innovative solutions that meet customers' changing requirements, noted author Geoffrey Moore told solution providers Tuesday at CRN's Industry Hall of Fame ceremony in San Jose, Calif.

Globalization is bringing prices to virtually free of charge, so business survival depends on innovation, said Moore, whose books such as "Crossing the Chasm" and "Inside the Tornado: Strategies for Developing, Leveraging and Surviving Hypergrowth Markets" examine marketing strategies in the high-tech arena.

"The key is, how do I innovate and get paid for it?" Moore said.

Moore identified three frameworks that drive innovation: business architecture, business model evolution and innovation strategies.

Two key business architectures around which companies can innovate are complex systems, with their focus on the enterprise, and volume operations, which focuses on consumers, according to Moore.

In the complex systems space, companies tailor solutions to customer needs and group those solutions into sets of offerings for certain verticals. That requires VARs to use face-to-face marketing, high-touch persuasion sales tactics and consultation dialogues to succeed.

But the volume operations world starts with the technology, not the customer, Moore noted. Success in this area builds on a set of offerings based on the technology. It requires branding and promotion, rather than relationships, and uses a low-touch distribution sales model.

Success depends on choosing one architecture or the other, Moore said. "Every time we see the complex approach and the volume approach merge, it's a train wreck," he said. "Compaq and Digital? Crash. Train wreck."

However, the two architectures start overlapping over time as complex systems companies bring in lower-cost parts, and volume operations companies reap the benefit of those falling costs. That, in turn, pushes complex systems vendors to turn to new product offerings, resulting in a double cycle between complex systems and volume operations, Moore said.

It's important that solution providers resist the temptation to change architectures when one or the other is on the downswing, Moore said. "Don't envy the other person's model," he said. "Be happy. It's a part of life. Don't try curve-hopping."

The second framework for innovation success, understanding the business model evolution, requires that solution providers know where their solutions sit in the product maturity life cycle so they can bring a value-add to their customers, Moore said.

Moore identified a progression of six different business models that can impact the way solution providers interact with customers:

1. The Project Model: Solutions that are based on new technologies, or what Moore called "visionary" projects. "This is going where no man has gone before," he said. "This is 'Star Trek' stuff."

2. The Solution Model: Solutions tailored for a single vertical. The winning VARs are those who first come up with the solution, which brings other customers running and then turns them into customers for life, Moore said.

3. The Product Model: A volume-focused approach. Customers in this scenario don't necessarily want the whole solution but are seeking VARs to deliver the products, make them work and then leave, Moore said.

4. The System Model: Having a large footprint in a customer account. Moore said this model plays best for incumbent system vendors such as IBM, Sun Microsystems, Cisco Systems and EMC. They have very sticky relationships, since customers prefer not to change their suppliers.

5. The Transactions Model: Focuses on self-service. It depends on huge investments to automate the business. "It's where the logistical geniuses are," Moore said.

6. The Platform Model: Different products are tied together. This creates a platform for a customer's IT infrastructure, and then solution providers can innovate on that platform, Moore said.