High-Tech Author Moore Sketches Blueprint For Innovation
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.Over time, a customer's business will move from one model to the next, which means that solution providers must continually invest in the next model and be willing to drop their current model so they don't get swept away, Moore added.
The third framework for innovation success is innovating to ensure that one's offering is categorically different from those of the competition. Differentiation doesn't come from being best-in-class, which only keeps the solution provider in the same class as the competition, or from new marketing and new products, Moore said. "If those innovations are not aligned with your own strategies, you lose focus and make it easy for competitors to keep up with you," he said.
The best strategy is to focus on one innovation vector that differentiates your business and then continually invest in it, Moore said. "Gradually get out of your product set until you are at the point where your competitors will not be able to follow your model. Follow that vector until differentiation."
Greg Knieriemen, vice president of marketing at Chi, a Cleveland-based solution provider, said Moore's presentation helped him identify where his company's business fits in terms of innovation. "But I'm not going to say here where our business fits," he said.
Knieriemen said he can apply Moore's characteristics of innovation to what Chi has done to innovate, including its migration from product sales to solution sales and shift from broad solutions to vertical solutions.
"With this information, I can constantly evaluate our solution sets and our verticals and see how well we focus on them," Knieriemen said. "It's something we do now, but not by intention."