Fallacy of Composition
It's daybreak. The sun's rays climb thru Old Ironside's
rigging in Boston Harbor. A dog barks in Southie; a rooster
crows in Hopkinton; and everywhere dumpsters are packed with
shredded evidence of yesterdays State of the Art computer
program listings. A new day is dawning. And before it is
finished, some companies will experience the joy of winning
and others, the despair of losing in the contest of software
The Joy of Winning has a way of obscuring the facts.
When things go "right" ...they go unquestioned for the most
part. That's because everyone is happy. However, the pain
of losing --- physical, emotional, economical --- is quite
different because of the very nature of pain, itself. Pain
signals that things aren't going right or didn't go right.
And there are but a few alternatives.....
One can  grin and bear it;  remove themselves
completely from the offending agent; or  attempt to change
it. In some situations there are no options. Ecomonic pain
is one of these.
Grinning and bearing economic pain makes so little sense
that even the IRS has a rule book that says if you lose money
more often that 60% of the time (3 of 5 years), you leave
yourself suspect of not playing for an economic goal but that
of a hobby. And if the "SERVICE" won't get you, your
investors will. As opposed to the wheels of criminal justice
which grind slowly and finely, those of economic justice
grind like an garbage disposal --- violently and quickly.
Many in personal computing marketing have already discovered
Secondly, removing oneself completely from economic pain
is either voluntary or involuntary. Either one steps out of
harm's way .... or creditors push one aside so that they may
salvage what they can. Many in personal computing marketing
have also discovered this "option".
Finally, we come to change as a means to relieve
economic pain. Many in personal computing marketing [the
survivors] are discovering this true option by adapting
their micro hardware/software marketing approach from
personal computing to business computing. Unfortunately for
some, adaptation will not in itself assure success for reason
mentioned further on.
Too much had transpired over the last few years for this
article to convey but a scant synopsis for a reference point.
At this point, it is senseless to point fingers in attempts
to identify the agents of pain in the personal computer
industry. Rash investors, unrealistic authors,
unsophisticated franchise owners, get rich quick
profiteers, and others all have contributed to an industry in
need of change.
Until the micro retail merchants took over computing,
most talk of margins in data processing concerned report
layouts --- left and right. Under the crusade cry of "all
things must change", the computer store front was born;
margins, push money, cooperative advertising became the
vernacular; disjointed software tools of all types flooded
the market; and a form of computer selling took over a
tentative hold that was doomed to fail.
As we enter 1985, distribution channels have been
opened, dredged and closed. Retailers have been leapfrogged
by distributors who in turn have been vaulted by vendors
going direct. Horizontal software tools have already
solidified market positions to the extent that over 90% of a
leading independents software sales revenue is generated by
only eight titles.... even though over 350 titles may be sold
in a given month. (On this subject trade discussions about
consolidation seem a bit behind the reality).
Yet, from the rubble O-N-E key fact remains.
No one has revised downward the estimates for software
sales by 1990 - $9 billion or whatever. And being about
halfway there, it's profitable to ponder who are going to be
the vendors providing that growth --- much of which will
surely be derived from the foundations [or vestages] of the
current micro market.
DOWN TO BUSINESS
Personally, I like my gin straight and computer
marketing on a business to business basis. Because what
makes business to business computer sales so viable is
expertise - not only in knowing a market opportunity, but
fulfilling that opportunity with true solutions and servicing
that solution to assure the obtainment of the benefits sought
and bought. Consequently, I heartly support those in micro
computer marketing who are attempting to change marketing
modes from personal computing to business. There are some
serious obstacles, however, a few which I wish to point out.
At the retail level the forced metamorphosis is on;
corporate sales staffs are being formed as less than 10% of
the business in now attributable to walk ins. The retail
store is becoming much more like a branch sales office which
brings new problems. Most sell similar hardware and those
that don't are obtaining it at such an alarming rate via
authorized dealers as to create "the grey market". Longer
lead times before closing may require a different type sales
personnel --- far more accustomed to different compensation
plans, working styles and hours. If its axiomatic to
entrepreneurs "that" you never entrust the critical success
factors to someone else, then it's just as true in the
business to business sales environment that you don't entrust
your livelihood to those who can't handle it. Developing
your good salesforce will be easy. Cash flow will suffer
during this transition.
The rush is on for selling into vertical markets,
markets being considered to be one of the like kind such as
pharmacies, or in the corporate area human resource
management systems. As a result, knowledge of horizontal
packages such as PFS File/Write/Report/Graph and Lotus 1-2-3
has to be expanded to include knowledge of specific
industries. Additionally, vertical packages come in a
variety of complexities ranging from standard packages
"dressed up" [i.e merely positioned differently] to subject
matter expertly designed systems capable of handling the
nuances of a particular industry.
Vertical packages have been smoldering on the back
burner for a couple of years. However, generally, reference
to them was again in terms of bigger margins. Be warned that
if that's the only reason for considering verticals, we can
expect many more shoe stores where computer stores currently
exist. Good vertical packages for XT's cost more than the
hardware and can soar above $20,000!! That sets prospect
service and expertise expection very high, because verticals
are success and support sensitive markets - not price.
If we apply the old market wisdom that any market can be
shared up to three major vendors then we know the downside
number of successful companies will be 3 X the total number
of sic codes. But because of the service requirement
regional preference due to a qualified computed sales support
organization will greatly increase that number.
Vertical markets are target markets. Most prospects all
want to find a better way to run their business; and most all
are sensitive to competitive pressures. Building an
awareness and interest in an offering is quick and simple ...
Garnering the preference and purchase becomes the challenge.
And it is my contention that preference ultimately distills
down to service ... for service gets happy customers who
in turn get more users. Functionality is also important, but
here the key is flexibility either provided through
mix/match/or modify - another important element of service.
Verticals aren't always simple, but can require a
comprehensive knowledge of technology and the application of
a solution. A requirement could look like this.... 4 XTs
tied together with a local area network running a human
resource department of a division tied to the corporations
mainframe via a micro to mainframe link ... this repeated in
10 subsidiaries or divisions. This could be a $250,000 sale.
A FINAL WORD OF CAUTION: IN ENTERING THE WORLD OF
VERTICALS, ONE ENTERS THE WORLD OF EXPERIENCED MINI AND
MAINFRAME O.E.M.s WHO HAVE BEEN PLAYING THE TRADE FOR
SIXTEEN YEARS. IF ONE'S THINKING IS THAT THE COMPETITION
WILL COME FROM THE STOREFRONT DOWN THE STREET, BEWARE. IT
MORE PROBABLY WILL COME FROM THESE HEAVILY EXPERIENCED
VETERANS OF SOLUTIONS MARKETING WHO HAVE LONG STANDING
THE LAST WORD
No, I really never did like the way retailing took over
the computing industry.
No, I really never did understand how $ X95 became the
standard price for software. And
No, I really never did think that computing marketing
would "work" this way.
Having lived through chlorophyl, lemon-fresh, maxi this
'n that and the Doug Flutie hype, I am happy also to see that
personal computing is now being sold on a business to
business basis --- even if the business is owned personally.