Getting rid of the middleman.

About technology, business & management issues..

Surely you have purchased an item online through your computer. Just as you have probably bought a plane ticket or an entrance for the next concert of your favorite artist. It is valid to believe that most Internet sales are composed of small items or products with little value per se.

But perhaps you´ve  been a little more risky and decided to buy a laptop online. Surely the name that has come to you is that of Dell. Why would you buy a highly specialized product, like a laptop, at Dell´s? What if you better go to some of the stores selling electronic equipment in the shopping mall closer to you ?

The advantage of Dell, which is the basis of his success as a company selling computers, is that it can provide products of good quality at a relatively affordable price  rather than buying the same computer through a retailer. The secret? as simple as the strategy in the Dell supply chain: got rid of the dealers or brokers of their products, which causes the product to be charged an extra fee on the sale price you normally would  on the shelves of stores specializing in electronics.

In theory this is very simple: after you enter the Dell website you can choose from one of the models offered by the company or literally create and order to build your own computer based on the requirements that you need. Once done, you go to pay your computer via your credit card and  it immediately sends an order to Dell's manufacturing sites worldwide. Your computer is built, shipped and delivered through a courier company within days at the door of you house.
This approach in the supply chain has allowed Dell to reduce its inventory times to a minimum of three days. Usually the electronic equipment industry handles inventory up to 35 days. The savings resulting from efficient management of supply chain coupled with the elimination of distribution channels (retailers) is reflected in a considerable decrease in the price of Dell computers compared to their competitors.

This business model has been somewhat taken by various companies in various industries. The owners of car manufacturers like Ford or GM have modified their distribution channel of cars and often dispense with traditional distributors, even without going beyond the financial service which they provided via commercial banks to offer their own financing facility. One could argue that this has not necessarily led to a substantial decrease in the price of cars per se but it has led to an increased generation of options for people who are thinking about getting a car. Options that only 15 years ago were unthinkable.

Other companies like Cemex started selling their products such as cement or concrete through its stores named Construrama. Same approach taken by some large franchise chains (Alsea, Pharmacy Savings, Mc Donald's) that have created a scheme where otherwise control their outlets franchisee without using  a third party to deliver and distribute their products ,that extra saving cost´s reflected in the selling price plus the advantages of direct control of the business.

No doubt the idea of ​​Michael Dell to cut out the middleman was difficult and took time to develop. Obviously it is impossible in many businesses to eliminate traditional channels of distribution that, I would say that 90% of cases, do not add any value to the end customer.

If you can develop a strategy where somehow you can eliminate the middlemen in the supply chain it will definitely generate a competitive advantage in your company which is very difficult if not impossible, to surpass even by your most fierce competitors.

www.clarensyst.com.mx

The power behind the customer experience

About technology, business & management issues..

  The same phrases are repeated ad nauseum: "You cannot continue to operate the business as  your father  does or your grandfather did in his  time, things have changed" or the favorite of many so-called "experts": "you need to innovate your business" .

 Surely it is the concept of "innovation" the most hackneyed in the world of management for several decades, but today more than ever the question is relevant: How to differentiate my product from the competition? How to avoid price war with other suppliers?

One of the best ideas that has been executed, consistently, for many of the most successful companies in their industries (starting with Amazon to Wal-Mart) has to do with creating the concept behind the product or service. According to the academics and scholars  examples of companies like Apple or Starbucks are evident:

a)  You need to create a concept that differentiate and add value to the customer's mind (often it is the ego or status). Starbucks makes it great: you sell a $ 5 coffee in which you have no problem in buying, but would not be paying over a dollar if you took a coffee (same product!) right out from  seven eleven. That is, the product packaging, the friendly staff, the comfort of Starbucks and the local design (blend of  stronger colors with other pastel tone) makes you psychologically prepared to pay a price to 400 % larger than a coffee at any establishment around the corner.

b) This also happens with Apple, possibly an iPod does not add real tangible value to your life (unless you try to spend an enjoyable time listening to music) but you cannot resist the urge to buy the product: its elegance , aesthetic design and ease of handling makes you not hesitate to pay more than $ 100 for the latest version. We would not even discuss the case of Ipads or Iphones whose prices are quite prohibitive for many people but the latter have not prevented them from erupt and dominate the market for tablets and smartphones.

But what happens if my company does not have a new product? What if you only offer a service that fails to differentiate from the rest?

The business gurus have the solution for the latter:  to prevent your service from commoditization, do not enter the price war and  just turn your business into a Starbucks coffee and not a seven eleven kind of coffee. To do this you develop your business and its  processes to achieve a perfect customer experience .There is no better example of this experience that anyone found on Amazon:

a) From its website, well designed with a nice and simple interface lets you know for sure how to find your products and how to proceed with the purchase of them.

b) The implementation of the concept of "one click" effectively professing by the  people of Amazon. With the fewest number of clicks in your browser should be able to find, order and pay for the purchase of your products.


c) An excellent after sales service. An almost immediate attention of the people in charge of following up on your claims for products that have not reached its destination and return of your money, almost immediately, if  you are not satisfied with the service offered by the company.

In the end, it is not surprising that Amazon is self declared the company "that focuses more on customer service around the world." Just awesome. If you have a service that integrates some of these  same concepts then you`ll hit the jackpot.

www.clarensyst.com.mx

The Long Tail

About technology, business & management issues..

  Much has been said about the concept of The Long Tail, which was widely popularized by  technologist Chris Anderson in his best seller "The Long Tail: why the future of business is selling less of more". The term and its concepts quickly made everyone's mouth, from academics to marketing gurus.However, there are many wrong  ideas and interpretations of the concept put forward by Anderson some years ago:

A) While the idea of ​​"The Long Tail" is handled as an abstract concept is actually supported by statistical theory of the normal distribution. Anyone who has taken a basic course in probability and statistics knows that the theory was created many decades ago. If anything, Anderson contributed to an interpretation of it but he cannot be considered the inventor of it.

B) While the management framework used by Anderson in his book has much to do with retailing in digital markets (Amazon, Netflix) the same concepts applies to many other services from consumer products to financial services focusing on low- income niche markets that have historically been ignored by commercial banks.


C) The term refers only to that there are many digital consumer goods which do not constitute higher turnover per se, but if we accumulate all of these unavailable goods,  thus we can create a world of customers who do not have ease of getting these products (think of a b-side of a CD of your favorite artist or that lost Muppet´s film video from 1987) so long creates a whole market for these "lost" or "hidden" goods.

This is contrary to what many people think in the sense that "The Long Tail" refers to products sold in mass or  that have a large base of demand from its customers. In any case, they are talking about a traditional business model:  quite the opposite of the Long Tail.

D) Although the theory has been proven historically successful in many cases and technology companies within the retail industry, it still has its detractors especially in the academic world in business schools around the world.

In the coming years will have a clearer picture of the influence of this statistical  and business models on their viability in the application of other business areas which are invariably not digital.

www.clarensyst.com.mx

Failed Idea, Failed Business..

About technology, business & management issues..

 One Saturday afternoon three years ago chatting with a friend who has always been restless and had started at a young age many  fast-food related businesses with moderate success. During the meeting he was talking about his new idea: a chain of laundries where people from lower socio-economic status, those who did not have the facility to have a washing machine at home, could go weekly to wash their clothes.

In the description of his business, my friend had already displayed several important points: the laundry would be located in several central points of the city, where the movement of people was important especially during the weekends. They would also be located near shopping centers and universities, the idea of ​​hundreds of students desperately searching for a place to wash the clothes particularly appealed my friend.

So far, it sounds like a viable idea: serve a market of low-income that was convinced to go, on a regular basis, to a public laundry center. There seemed not to be an idea out of the ordinary or the ticket to become the next millionaire in the country but as a business painting noble enough to be happy. The problem arose when my friend began to describe what the point of sale should include: rest rooms, where you could wait to wash your clothes, a snack bar where people could eat and drink a soda or a coffee and, of course, wireless high speed internet for people to have as entertainment while they waited.

Hearing all this I remembered what had once read in an article written by C. M. Christensen (The innovator `s dilemma) where he talked about the" failed ideas " that will eventually produce" failed businesses ". In his narrative the author exemplified in a different context, it is worth noting, as entrepreneurs and business managers include their personal preferences, prejudices, preconceived ideas and aspirations in the products and services they wish to offer. In the case of my friend wishes were obvious but probably would not fit with the reality of the market:

a) Sought to provide a wireless internet service high speed in a country like Mexico, where thanks to monopolies, the internet penetration in the country barely reaches 30% of the total population. While the service could be appealing to niche market as students it was really irrelevant to the people who had to walk or take public transportation to go and wash their clothes weekly. This goes without saying that most likely these people  do not have a laptop computer and, just as students, their budget is so small that they could not pay a higher price which include the Internet service.

b) The idea of ​​the snack bar is clearly a subconscious desire of my friend,  he thinks about the customer experience was the same as if he was to use a weekly laundry service, so the place would have an air-conditioned atmosphere  where he could connect his laptop and surf while sipping a cappuccino in the snack bar and wait for his clothes. There could be nothing further from reality.

c) At present it is clear those ideas would get my friend is to consider an increase in  the initial investment needed to bootstrap the business and at the same time would increase the cost of the service to pay for all the extras  services (snack bar, internet , air-conditioned space), which could put his business at disadvantage compared to his current and future competitors.

Christensen mentioned that the main mistake of managers and entrepreneurs is that they still rely on their hidden desires, believing that the world needs to see and what they want. The key, according to the academic, is to get rid of all market research, focus groups and really engage in actual field research. Try to identify the drivers of the market you´re going to lead.

It's time to leave the office and have a clear idea of ​​the reality you face.

www.clarensyst.com.mx

Do you sell houses?

About technology, business & management issues..

 In one of the last meetings with the sales team of a low cost- social housing project we were discussing the effectiveness of advertising and marketing efforts made by the company. The result was unsatisfactory: there was really no indications that our  media efforts were helping us to attract people and there was even less information about what tools were effective in order to close sales.

The sales team, made up of several middle-aged women, had been doing a great work in the field for awhile: they did not expect sales efforts to reach customers, unlike applied a variety of "guerilla marketing" strategies themselves going to the cruises, markets and convenience stores, implemented information delivery stands, contacted middle managers who were working at the banks and lending institutions and they had enough contacts to be able to access government offices and canteens in companies. The result was impressive: it was a vending machine.

This resulted in a couple of important insights:

a) That the field work and traditional marketing is still essential when selling your products. In an age where digital advertising has taken a lot of strength, traditional marketing critics predicted the latter's death in a matter of time: They could not be more wrong.

In a market as affordable housing (social interest) in Mexico, where the Internet service penetration in the population is very low (almost nonexistent) digital marketing does not work: no one buys a house of 200 thousand because because they saw it announced in a page on Facebook or it was found through a search on Google. The property market in Mexico is far from finding a mechanism in which the marketing and advertising to be truly effective (even in higher socioeconomic levels). Buying a home is an important part (in most cases the only) of household wealth. Therefore the effort and the sales strategy is still a 90% emotional.

b)  When talking to the vendors and see their field work as I am aware that they have transformed their operating model. Looking for clients who do not understand that they are entitled to a housing loan through Infonavit (the Mexican agency that supports the acquisition of the property), who have enough empathy and ability to communicate in the educational level of their customers (often low) and are able to explain, in simple terms, financial concepts and credit and payment terms that often people from middle school and higher education lever find extremely difficult to understand them fully.

The latter allow sellers to offer services tailored to the clients . As a result they surely find a credit scheme that fits your own needs.

As salespeople said: "We are  not dedicated to selling houses, we sell opportunities." That was right: they do not sell homes, they  sell financial products and services, the houses are only the means to do it.
www.clarensyst.com.mx

Innovating again

About technology, business & management issues..

In the past 15 years the term "innovation" has been a constant in the vocabulary of entrepreneurs, business consultants and academics from business schools. However, the term is somehow misunderstood by entrepreneurs of small and medium companies, it is logical: it rather sounds like one of those business practices that apply only to big business.

This opens the door to ask how to apply the concept of innovation in SMEs? How can I differentiate my product or my business from the rest? How to compete effectively with few (or no) resources? The idea of ​​innovation’s got a conceptual logic connotation to my knowledge. Although the great management gurus try to rationalize it , actually it goes through a review of concepts that have their foundations in a simple logic. Among them are:

a) How to solve the problems of my clients in a straightforward and easy way? How do I help them to improve their annual sales by 10%? How do they reduce operating costs by almost 20%? Logically, any customer will be willing to pay you anything if your service or product allows you to accomplish this. No brainer.

b) How do I define the market to which address?  Should I try to create a generic product or should I try to specialize in solving the problems and needs of a niche market? This point is not so obvious to most people: the appeal of creating a service / product for "everyone" is always very tricky, where few companies throughout history have done it. As a matter of fact is way more profitable  to exploit a specific market niche and  once achieved then it would be feasible to venture other markets.


c) How to reinvent my product or service to make it more attractive? Will I create something that the market is looking forward but has not been invented yet? The first question regarding the current trend is to grant a "service" to your client holistically. It is not only delivering a product, you have to help understand how it will facilitate your customer’s life or business, how else  they can use it so you have to show them the money they invest in your product is money well spent.

For years companies have tried to ignore the customer service in all these aspects. To date it is evident that any business that wants to grow needs to see itself as an integrated service. Regarding the second question, the answer is even simpler: unless you're Apple, there is no company in the world right now that creates markets for their products out of nowhere. It is the only one who has been able to do at least in a massive and successful scheme. Better focus your business efforts to reinvent your concept, to differentiate from the competition and become more attractive to your market.

Finally, all these ideas will be developed to better work in an environment of easy  streamline decision- making and to promote team building among the different area within small business (production, finance, marketing). The cooperation and understanding between all areas of business will be the key to the transition from a traditional business model to a model where the company becomes a dynamic entity, evolving and constantly innovating.

www.clarensyst.com.mx

Financing & venture capital.

About technology, business & management issues..

A few weeks ago, while reading the newspaper I noticed an article in the business section. Constantly these items appear, with due intention, to promote the financing of small and medium enterprises through government and venture capital (VC) of Mexican investors and some foreign investment funds.

The article talked about the Mexican government's efforts to try to encourage small entrepreneurs and mentioned the millions of pesos provided by the funds. Of course, it never mentioned the results of such programs or its mechanisms to access this capital. It is not necessary: ​​it surely requires a lengthy bureaucratic process, as well as connections with the officials who manage and make decisions in these bodies.

On the other hand , there were the venture capital investors where, in his clear love of  this country, decide that they need to create and develop the corporate culture amongst Mexicans and invite entrepreneurs to submit their  businesses ideas, as any beauty pageant , to assess whether it was "worth" taking into account to invest in them. Of course the amount contributed was a joke considering the slice of the business  VC´s owners would get in return for its "contribution."

What surprises me is that some people actually get to create great business ideas, but by one or more reasons are not willing to take a leap of faith required to develop their businesses. I remember reading about a young mechanical engineer who had developed software that would help the auto manufacturing lines to properly combine the colors of the pieces. The software would have allowed to save up many man- hours and reach even higher levels of efficiency. She had a booth of its business, had created a logo, website, business cards and brochures of her product presentation. It also had a video tutorial explaining in a very concrete way what was her idea about and how the software would help manufacturing companies.

Her big problem?  She needed some investors to put up around $ 85.000 pesos to develop the sales  strategy (already had some potential customers) of the product. As I read the latter  I could not believe she had  such a brilliant idea that apparently was able to capture a market of millions of dollars and yet had been unable to get that amount of money and was hoping some private investors snatched a significant amount of their business in exchange for an amount that, being honest, means nothing if compared with the potential profits of her business idea.

As you read this I got the idea that perhaps the main problem is that within the corporate culture in this country is  all about copying schemes operating in other developed countries where venture capital is abundant and where entrepreneurs believe that only by having a brilliant idea, surely someone else will come and provide the funding.

The problem with this scheme is that it does not apply in Mexico. Unfortunately for the entrepreneurs there is either the government or private initiative the ones who would finance business ideas. So what's the solution? In my opinion it would first try to bootstrap your business so you do not have to waste time accountable to anyone, nor will be subject to attempts to tell you how to run your own business. Surely this young have a way to get those $ 85.000 pesos, perhaps with the good old-uncle who lives in another city, the mother who has the money under the mattress or just looking to finance with your own suppliers.

But I am sure that if  she develop a viable idea to turn it into a profitable business, getting the capital should be the least of her problems.
www.clarensyst.com.mx

Real Estate Development in Mexico: the decline of innovation.

About technology, business & management issues..

After working exclusively for over a decade in real estate development projects in Mexico, I realize that  the Mexican industry is obsolete regarding its business practices and has the same phobia for change and innovation within the industry itself.

In most companies, if not all, are the same old practices of doing business that have led them to stagnate and make sure victims of changes in global economy. Some of these features are:

a) Exaggerated claims that these companies are at a stage to professionalize its operations, when in fact the same drivers of these changes (probably from the general direction of the business) are micro managing the business, with the same practices of the eighties where there is no empowerment to their junior managers.

 Change and professionalism never reach the company, no matter how much effort you make, as it is a mere simulation, consciously or subconsciously the "leaders" do not want change because they are fascinated with the messianic model of leadership and direction that has worked well so far.

b) Little or no professional investors participating in these projects. If we speak the truth, wealth in Mexico has been inherited, but not produced and how much the new rich businessmen have emerged only through partnerships with government officials and corrupt governments. Mexico has no business meritocracy, not a single person who has accumulated wealth in the first generation before the 38 years is to be considered self-made. If someone has a fortune before the 40's because simply inherited it and not created by itself.

This entails that Mexico is full of old-school investors, people above 50 years dedicated to investing in companies or businesses but who are accustomed to an eternal process of accountability for their investments.

The real estate business becomes, instead of a professional scheme where the investor provides the resources and monitors run through regular meetings and executive reports, the performance of their investments, awaiting the return of their capital and performance (with the risk that this implies), in a simulation where personal attention and political treatment of social events have been losing business focus: in Mexico, investors have to have them distracted by an eternal party and the social contract.

c) A general aversion to the implementation of technology in business processes. Why? Because that would mean transparency and order. It would  mean to try to run a true Project management, label  an accurate and transparent use of resources by investors, would also mean to prepare sales reports and indicators that were not manipulated or biased at all.

 But the worst tragedy of all would be that at last have clear policies and rules, would empower employees in making decisions processes which would result in better performance within the company.

But something tells me that the real estate industry does not want that. As one person told me long ago: "Why change a model that for decades has worked out that way?". I was mute.www.clarensyst.com.mx

Business Technology: The myth behind profitability.

About technology, business & management issues..

 A few months ago media announced the addition of LinkedIn, the social network focused on sharing information between users with professional backgrounds, to the stock market in the United States. The announcement, for various reasons and situations, revived  the eternal debate about the viability of business models (or lack thereof) in technology companies.

Many critics, especially after the crisis of the "dot.com bubble" continue to insist that companies in this industry remain creating business models which are not sustainable in the long term. Among other reasons, they blame the venture capitalists (VC's) for providing tons of money into these companies that have not even proven that their products or services may be successful in the marketplace. This has caused many people wonder what´s the real value of companies with millions of users such as Google or Facebook. This coupled with that for years with investors speculating that these companies can achieve in the medium to long term, causing a long period of time before they receive a single dollar in revenue.

The story tells of companies like Google that had impressive headquarters, hundreds of employees, millions of dollars in investment for years but did not record a single dollar in revenue. All this while developing a business model that would allow him to make a profit through (initially) a clever advertising scheme paid by its customers.

The same debate is on Facebook. Apart from breaking into the social networking world with a platform that allows users to exchange information, communicate with people, etc.,  it also has provided a platform for people exposed to the world, show their interests, life daily, feelings and ideas. There is no more powerful marketing tool : to play with people's feelings. However, if you put all that aside, what is the real value that Facebook provides a person who invests considerable resources in a company which to date has not been incorporated into the stock market? Many critics claim that the database that contains millions of user data from Google and Facebook is the true value. What they could not do  to many others with this information. How much is it worth?

Recently , writer Antoni Piqué reflected on  the magazine Expansion about  the legacy of Steve Jobs. Like many other thinkers of technology he emphasizes that Apple's true legacy is to have created and shown the world that a technology company could develop a business model capable of providing a service / product that the masses are willing to pay a relatively high price for them. Pique himself ponders that this legacy is mainly powerful today where the industry meets many open-source fans that while innovation has driven the industry, they also tend to adopt dogmatic positions, particularly in the areas of profitability of selling technology services.

While technology companies represent unique business opportunities they should remember that at the end of the day  they are still  businesses and while some rules and trends may not apply to them, there is no way to provide high quality services to users if they do generate no profit for the company that develops them. In this there is no dogma to change the cruel reality of the market.



www.clarensyst.com.mx

Moneyball and the reality of numbers.

About technology, business & management issues..

 A couple of days ago I had the opportunity to see the Moneyball movie starring Brad Pitt (what a terrible actor !) based on the book by Michael Lewis, Moneyball: The art of winning an unfair game. The film tells the story of Billy Beane, baseball team manager of the Oakland Athletics. What they said less tells the story of  Beane's efforts to rebuild the team of the Oakland Athletics after the departure of several of its flagship players (including then-famous Jason Giambi). The limitations that Billy had been unimaginable, not to have a sufficient budget to attract decent players to the team and to compete against financially powerful  teams the Yankees or Red Sox.

The plot revolves around Billy Keane and with the help of a young man, then his assistant in the Management of the team, challenge the establishment in baseball and begin to try to assign value to players who were virtually discarded by other teams, baseball scouts. This new approach was based heavily on statistics, curiously in a sport ruled by numbers, which were not valued among people who made decisions on the team.Thus, Beane assembled a team full of veteran players whose careers debris and were closer to retirement but surprisingly gave a stir in the American League division that year.

 Of course all this was achieved with a payroll of no more than $ 45 million per year (when teams like New York spent more than four times that amount) but which players were squeezed the last drop of performance they had.

The film revolves around the inertia and resistance that Beane met on the way: criticism of the other managers who said that not all decisions on statistics could be but it also should be considered human and sporting items that impacted performance  of the players. At that point the critics were right on  (the same argument of the film confirms that fact on Giambi's brother situation) that Beane just thought that the incidence of these factors was overvalued and that did not allow managers and scouts to see that there were  a  of set attributes much more measurable and less subjective than age, socialization, susceptibility to injury and personal education issues.

Analyzing the film, the plot of it reminded me of some chapters of the book by Ken Auletta: Google The end of the world as we know it. This book tells some of the difficulties the founders of Google faced as they try to convince their customers that there was a real and tangible merely measure  of the performance of their spending on advertising and that this metric would help to diversify and focus the resources the best possible way and not fall into a waste.

The same Auletta tells how the old marketing lords opposed the intentions of measuring performance in advertising spending  that Google promoted, since it would imply that "the magic was over" and therefore there is no way to charge the customers the  "intangible- magic"  concept related to all marketing campaigns that  established companies offer to their customers.

At the end of the movie, Beane’s interview with the owner of the Red Sox who was impressed by the theories and the management of Beane in Oakland and  offered him the post of General Manager of the team. Within the conversation, the owner of the Red Sox to Beane explains the resistance of the baseball world to his ideas was understandable as everyone knows that  revolutionary new ideas are often not welcomed by the medium, as this means that several people lose their benefits, expertise and even their own jobs and therefore  he should not take it so personally.

 At the end Beane decides to reject the offer and decides to stay in Oakland (where he remains to date) but his theories are being applied in some way or another within the organization of baseball and other sports.

A clear example of how lack of resources results in innovation of the ideas of people.

Products vs. Services: the real issue.

About technology, business & management issues..

It was about quarter to midnight, James looked at his watch as the waiter approached a couple of imported beers to the table. I ordered a cream jar, the place was far from having the right atmosphere. James turned on his place and trouble to comment, "I worry a little about the competition in town because even If my product is quite relevant is not as if I've invented the wheel of financial factoring industry, it will not be long before competitors just copy my service and so any competitive advantage achieved is likely to vanish within months, "-Santiago settled without hiding the frustration on his face.

"I think the idea that a single successful product will make you a millionaire and  therefore you can feed your children and grandchildren for the rest of their lives is a naïve idea" -I said, "The world has changed a lot since then," I repeated it a couple of times.

"How could I maintain my competitive edge over other competitors?" He asked bluntly .- "I think the best idea is to offer your customers a premium through the service,". Santiago was spinning in place, it was obvious he did not understand or satisfy my claim.




"It's a very contested business strategy in technology companies. As discussed a few minutes ago, some market leaders dusrupt with their products and become the platform within its industry, virtually forcing (lock-in) customers to use their products, " I said. -"A bit like the case of Microsoft or SAP," confirmed Santiago.  Just nodded my head.




"The key here would be to design products for you clients that eventually will require the services of your staff. That is, you become an expert in the field of financial factoring to the extent that eventually  as your products  may not fulfill certain types of clients`needs so there it opens your chance of developing the area of ​​services within your company " -I said without stopping a second. -"I do not think there is a correlation between two things" - James said with an air of presumption while the waiter helped light a new cigar, the fourth of the night.

"I think the relationship´s more than clear: it is one way you can kill two birds with one stone: creating a competitive advantage by offering an extra service to your customers that your competitors do not offer and provide a source of extra income which profit margin is huge and not run the risk of becoming a commodity "- I responded candidly while I realized my beer glass was empty.

Santiago chided me quickly and without hesitation: "Commodity? , How could my product  become a commodity? if we are not talking about barrels of oil here! "- I say excruciating :"Think more on the concept of the commodity when you think about your product: the moment you add a sale price that will leave a very generous profit margin, the problem comes when the competition begins to generate and flood the market with relatively similar products, some will be offered at lower prices so that you run the risk of your customers fall into the game if you have several suppliers with the same type of product and THERE IS NO DIFFERENCE BETWEEN THEM OR ANY OF THESE PRODUCTS AND IF YOUR PRODUCT DOES NOT OFFER A VALUE- ADDED, then simply customers will choose the cheapest one "- I ended abruptly and without breathing.

Santiago is left wondering a few seconds, he tapped his cigar, expired and continued: "At this point you may have a point, the demand of the market that I run is highly elastic, as products are cheaper and offer the same features without doubt  clientes will go with the lower price. "- "Certainly," I said. "The only way to differentiate at this point is to create a way to give another type of service to your customers through your product, you could offer consulting, engineering, financial product development etc. ..., All of which adds value to your product and avoid your client sees you as a commodity. "




"Ever heard of the economic terms of scope? "-I asked with some impatience. James smiled and answered me with another question: "Are you hungry?, I think it's time for dinner."

Jobs: The design of ordinary things.

About technology, business & management issues..

Jobs: The design of ordinary things.

 With the recent death of Steve Jobs, co-founder and CEO until few weeks ago of Apple there has been  an avalanche of praise and recognition to his career, from perennial competitors,  academics, management gurus to, why not?, Housewives in love with their iPhones or the latest fashion fad: an ipad in its latest version.

Doing all this aside, and giving a real perspective on things  Jobs could be many things at once , from its scary and enigmatic personality, perfectly described in an unauthorized biography called Icon Steve Jobs: the second greatest act in history of business written by Jeffrey S. Young, to be a fully- recognized persona by the industry for being a leader who was really ahead of his time (think about it: when one is holding an iphone or  back in the 80's you had a Mac, you really felt "a few years ahead of the time" ). Certainly the most accurate adjective that could describe him would be the visionary Jobs.

Some scholars may argue that his management was a revolutionary approach, a born innovator who could envision and create a series of products for which there was no market. That is, the vision of Jobs fulfilled the climax of any academic: to create a market for your product virtually from scratch, creating a psychological demand for them thus, they can be sold at relatively high price, unlike other similar products. Some of these things are a reality but the truth is that Jobs was anything but a perfect manager: his colleagues remembered him as brash, egotistical and with very little tact. I guess it would be difficult to behave differently if you are only twenty -years old and people are constantly reminding you that you're a genius.

However, in my point of view the greatest contribution Jobs ever made, without neglecting the other achievements, are his contributions to design products. Heard the phrase long ago that Apple was not really a technology company but a design company, I think there's enough truth in this assertion. Simplicity in design, functionality, elegance and neatness with which Jobs wanted to integrate the hardware and software of his products is actually the emblem of Apple and that has been characterized since the creation of the PC's (Apple, mac) to their latest products.

This highlights especially with competitors who offer solutions  already-complicated with excessive graphics and confusing functionality. Jobs  was king in that particular department, I could understand perfectly the sense of aesthetics and that simplicity make products easier, pleasant to use and therefore to increase the desire to obtain them.

The influence that the design of the products had on Steve's mind goes back to his youth. In an interview a few years ago, former Apple CEO John Scully (remembered as the man who fired Jobs away from Apple) says that all he really had in common with Jobs was a taste for design. In his case Scully was an expert on industrial design but remember clearly that from the beginning of Apple (when one could hardly imagine the graphical interfaces of today) Steve was really focused on providing the user with more aesthetic experience and functional features as possible to the products .

It's funny, now that everyone seems to think about Jobs and comment on his work and personal life. Few seem to recognize their contribution to the concept of aesthetics in technology. Steven Spielberg a few days ago  mentioned that he thought Steve Jobs was the Thomas A. Edison of our time. Other experts said that his wit was only comparable with that of Henry Ford. Without resorting to exaggeration I`d like to think  that Jobs's obsession with design and perfection makes him the Michelangelo of our time.

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Vertical or horizontal markets? .. The perfect approach

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James put out the cigar slowly while the other hand played with a glass of whiskey. We had met at their request to discuss the strategy in his business, a start-up factoring services as well as financial and business advisory. James was in a dilemma about which market to focus, whether it should integrate all efforts (and resources) of the business in a generic focus on several niche markets in various industries (pharmaceutical, medical, SMEs in general) or to venture into a more specific  (industry-related) approach and try to specialize and build expertise in a single market.




"Without doubt there have been companies that have managed to develop products and / or services that attack a wide range of clients in various industries or have started in a vertical segment (niche- specific) and then migrated to a horizontal market" I said. "But they have been the fewer. Surely the successful cases in Mexico can be counted on the fingers of one hand," I assured while I drank some cold beer that I had just been served. Santiago seemed restless, just shrugged.


I told James that the topic of conversation reminded me of the content posted in a book by American author Michael Cusumano (The Business of Software) in which the scholar, after decades of research and close collaboration with medium and large enterprises, had reached several interesting conclusions among which were:


- The companies that had managed to successfully migrate from a vertical to an horizontal market is because they had managed to acquire a significant competitive advantage (whether technological, financial, government). The obvious case is Microsoft, where competitive advantage is to have created a platform, in this case the Windows operating system, from a vertical (market for PC `s) to be the dominant entity  by means of a single product (Windows). This competitive advantage could never be surpassed by their rivals and allowed Microsoft  to offer and develop (migrating) products and services to a mainstream market.

That is why today Microsoft develops applications for business, educational, government as well as align those with its own infrastructure (servers, cloud computing) and recreational services (Hotmail, X-box, Messenger and Skype recently). A single dominant platform (Windows) successfully allowed the company to dominate or compete strongly on other markets. "The typical case in Mexico would be Telmex" I replied. At that time James burst out laughing and only commented: "That example is so obvious that is not even worth discussing."




- Another point of discussion, according to Cusumano, is the ability of a company to build a product or service capable of attracting a larger number of customers who come from a different background. "It's easy to think that a CRM app can be used by any company, whether it is dog-food provider or a shoe´s retailer" - I said. "But in Mexico would be difficult to adopt such approach if it is not designed to meet the specific needs of the industry itself," I added. "Logic would say that the tool would be useful for any company, considering that all companies perform sales efforts and manage a sales force, but if it is a true logic is not necessarily a correct one"- I ended it.






- In Mexico, most are very specific markets, partly due to a little professionalized culture in business, which have been developed empirically and not based on established processes as any basis for a particular industry. "I think the try to develop a service under a generic platform that aims to fulfill different needs under one single platform but the latter can drive you crazy and require enormous amounts of time and financial resources , and still you need to see the reaction and speed of market adoption (if it does happen!) "I explained quickly as I realize that the concern of Santiago increased.






"What would you do If you were in my position? "He asked with a hidden intent. "I think I´d first try to develop a specific service to an industry and see how it reacts: if you give advice and provide financial factoring to manufacture companies just focus on them, then try to identify the reason your customers value your service and then you could begin to analyze whether the model is replicable in another niche market such as the medical industry or insurance and thus I believe you can make small adjustments and successfully migrate to those markets "- I nodded.




"I think the temptation to try to do too much and try to be all things to everyone is very strong idea but I think you could  easily get lost walking down the path"I said, but not before finishing my beer.




Santiago turned his head slightly as he raised his right hand holding his glass of whiskey, now empty, while looking for any waiter at the place. "I think we need another drink," he mentioned it without remorse.


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