Monthly Archives: January 2014

Is Salesforce / Siebel a Classic Disruption Case?

Like many others, I have often used Salesforce / Siebel as a classic example of Innovator’s Dilemma style disruption.  Several months ago, in response to this article about Host Analytics, I received a friendly note from former Siebel exec and now venture capitalist Bruce Cleveland saying roughly:  “nice PR piece, but the Salesforce / Siebel disruption story is a misconception.”

So I was happy the other day to see that Bruce wrote up his thoughts in a Fortune article, Lessons from the Death of a Tech Giant.  In addition, he posted some supplemental thoughts in a blog post Siebel vs. Salesforce:  Lessons from the Death of  a Tech Giant.

Since the premise for the article was Bruce gathering his thoughts for a guest-lecture at INSEAD, I thought — rather than weighing in with my own commentary — I’d ask a series of study guide style questions that MBA students pondering this example should consider:

  • What is disruption?  Given Bruce’s statement of the case, do you view Siebel as a victim or disruptive innovation or a weakening macro environment?
  • Are the effects of disruptive innovation on the disruptee always felt directly or are they indirect?  (e.g., directly might mean losing specific deals as opposed to indirect where a general stall occurs)
  • What does it feel like to be an executive at a disruptee?  Do you necessarily know you are being disrupted?  How could you separate out what whether you are stalling due to the macro environment or a disruptive innovator?
  • What should you do when you are being disrupted?  (Remember the definition of “dilemma” — two options and both are bad.)
  • While not in the article, according to friends I have who worked at Siebel, management could be quoted in this timeframe as saying “Now is the time to be more Siebel than we’ve ever been” (as opposed to emulating Salesforce).  Comment.
  • What should Siebel have done differently?  Was the over-reliance on call center revenue making them highly exposed to a downturn in a few verticals?  How could they have diversified using either SFA or analytics as the backbone?
  • What should Siebel have done about the low-end disruption from Salesforce?  Recall that in 2003 Siebel launched Siebel CRM On Demand as an attempted blocking strategy in the mid-market and acquired UpShot as a blocker for SMB.  How could Siebel have leveraged these assets to achieve a better outcome?
  • To what extent should external environment variables be factored in or out when analyzing disruption?  Are they truly external or an integral part of the situation?
  • To what extent do you believe that Oracle’s acquisition of Siebel left Salesforce unopposed for 8 years?  To what extent was that true in the other categories in which Oracle made large acquisitions (e.g., HCM, middleware)?
  • After hearing both sides of the argument, to what extent do you believe the reality of the case is “Salesforce David slaying Siebel Goliath” versus “Siebel getting caught over-exposed to a macro downturn, selling to Oracle and giving the CRM market to Salesforce?”   In effect, “they didn’t kill us; we killed ourselves.”

I deliberately will offer no answers here.  As an old friend of mine says, “there are three sides to every story:  yours, mine, and what really happened.”  Real learning happens when you try understand all three.

10 Things Never To Do at a Business Dinner

Business travelers spent $260B in 2012 with food services being the #1 source of expense.  Salespeople love dinners with customers and prospects. Marketers love networking dinners.  We have customer advisory board dinners, pre-board dinners, awards dinners, relationship-building dinners, team dinners, customer appreciation dinners, partner summit dinners, project completion dinners, analyst dinners, investor dinners, … the list goes on and on.

Because business dinners can be so powerful, I am a huge fan of them as a marketing tool.  However, I’ve also been a part of many “dining accidents” over the years — the most infamous being the “white burgundy and stone crab incident” at Estiatorio Milos — almost invariably due to a combination of lack of focus on the business goals of the meal, lack of pragmatism, and lack of adaptation to changing circumstances.

As a result of these experiences, I have composed this list of 10 things never to do at a business dinner.

10.  Lack clear goals.  Whether we’re organizing a 1-1 meal for the CEO and a key customer or a 56-person customer appreciation dinner, everyone on the team should understand the goals for the meal.  Every member of the team should understand why they are there and what they are supposed to do.

9.  Eat in a noisy restaurant.  A universal purpose of a business dinner is for people to get know each other.  That is not going to happen when it’s loud, especially if your guests are a bit older.  Some restaurants are just incredibly noisy (e.g., Wolfgang’s on Park Avenue with a parabolic tile ceiling).  Sometimes private rooms can be quite loud as well, especially if they are not really cut off from the main room.  Avoid live music at all costs.  Avoid low ceilings.  Beware converted bank vaults and train stations.  I’ve seen more business dinners die on this hill than any other.  Fun or hip doesn’t matter if people can’t hear each other.

8.  Have tables bigger than 8.  If people are going to get acquainted, they need both a quiet environment and a table small enough so everyone can hear everyone else.  One friend has a rule that if you want one conversation at a table, then you should limit table size to six.   I think you can go up to 8, provided your team members know there is supposed to be one conversation.  Avoid rectangular tables which greatly limit the number of people with whom one can speak.

7.  Bring too many people.  One advantage of clear goals is that they help in deciding the guest list.  If the goal is to recognize the hard work of a 24-person team, great:  go get 3 tables of 8.  If the goal is for the CEO to build a relationship with another CEO, then either hold a 1-1 dinner or a 2-2, where each CEO brings a lieutenant.  But don’t say you’re having a CEO relationship dinner and bring your sales VP, sales director, account manager, and CFL rep.  It ends up like dating with an audience.  Don’t invite people just because they are in town — you can easily unbalance a dinner by bringing 9 of us and 3 of them, turning it into a multi-conversation, intra-company event to which a few customers are invited.  When in doubt, say no.

6.  Mis-level the crowd.  I think the most important part of networking dinners is that each participant feels like he/she gets value from meeting every other participant.  So if you’re hosting a 16-person CMO dinner, make sure the invitations are non-transferable so you can say “no” when several CMOs want to send their advertising or PR directors at the last minute.  While your PR director may enjoy having dinner with a bunch of CMOs, it’s unlikely to work in reverse.  The worst case is when two CMOs show up and are surrounded by 14 PR directors:  your intended target ends up feeling out-of-place.  It is far better to have 6 CMOs when you were hoping for 16 than it is to have 6 CMOs and 10 PR directors.  Burn that into your brain.  Tattoo it to your wrist.  Don’t not prioritize filling up seats at the cost of mis-levelling the dinner and destroying the event concept.  You can build on a great 6-person CMO event in the future.  You are dead when you host a mis-leveled event.

5.  Leave seating to chance.  Since we’re investing peoples’ valuable time (and probably $100 to $200 per head) in the event, we shouldn’t leave anything to chance.  For larger events, use place cards.  For smaller events, pre-brief the team on who to direct where.  It’s a disaster, for example, when at a square table, you place the two people you want talking next to each other, instead of across.  Make sure it doesn’t happen.  (And if it does, change it per rule 2 below.)

4.  Take more than 2 hours. Business dinners are business.  If you want to add a social part, go the bar afterwards for drinks.  It’s very awkward to leave a business dinner in progress and someone could  end up missing their train and getting in trouble with a spouse, because they expected a business dinner and you ran a lingering social event that took 3.5 hours.  In general, the more senior the invitee, the more likely the dinner is “just another calendar slot” as opposed to a social opportunity.  So when having dinner for 4-6 people at a restaurant (and I’m not in Europe), I tell the waiter in advance that my goal is to be done in two hours and that we want to have two courses and possibly dessert — no shared calamari pre-appetizer, no extra-salad (i.e., salad plus appetizer) shoved in as they love to do at Morton’s.  Just an appetizer per person, a main course, and when the time comes, a decision about dessert.  If things start to go too slowly, have some pre-appointed to leave the table, speak to the waiter discretely and say “get it moving.”  On dessert, if asked first, my answer is, “no thanks, just an espresso.”  If the customer  subsequently orders then I can always join in afterwards. Overall, by respecting your guest’s time, you increase the odds they will say yes the next time you invite them out.

3.  Order very expensive wine.  Here are a few things that can go wrong when you do:  [1] the wine is bad and you end up distracted with the whole rejection and re-tasting process, [2] the attendee is subject to a company policy where he/she has to pay his part of the meal (e.g., government, journalists) so you backfire screw them on their expense report, [3] people love it and you drink three bottles, tripling an expensive proposition, [4] you look pretentious, [5] your company looks wasteful and poorly controlled, [5] your three employees drink it but the customer subsequently announces he doesn’t drink wine and you end up treating the crew and not your customer.  When I lived in France, our classiest sales VP had a simple rule: order Sancerre.  It’s neither too cheap, nor too expensive.  It comes in dry, aromatic white (sauvignon blanc), mild-bodied red, and even rosé (both pinot noir based) so most people will like it.  I’ll demo the Sancerre principle on the wine list from the tony Village Pub, one of the best restaurants in Silicon Valley, where a Corton-Charlemagne will set you back $400 and a Kistler single-vineyard chardonnay $250.  The Sancerre weighs in about $130.

2.  Not roll with the punches.  Entertaining is always full of surprises and you need to roll with them.  We once arrived at The Triomphe in NYC only to find ourselves literally surrounded by a loud, drunken, office Holiday Party.  On arriving, we knew we were dead, so we dispatched a team member to find a quieter spot and did about 3 blocks away.  If a snowstorm wipes out 30% of your attendees, you better eliminate some tables and redo your place settings.  The key thing to remember in rolling with the punches is how to preserve the original goals of the meal.  Twice, I’ve been in cases where 4-5 employees had gathered at a very expensive restaurant (e.g., Morimoto) waiting for a group from a customer who never showed up.  In this case, rolling with the punches should mean eating somewhere else because the company shouldn’t be dropping Morimoto-style dollars on a basic mid-week traveling dinner.

1.  Order the tasting menu.  There are four problems with tasting menus:  they are expensive, they take the whole table hostage because they are ordered on an all-or-nothing basis, they take a long time to serve, and they don’t fill you up. The thing I hate most about tasting menu is not the first check — the $900 check for 4 — it’s the second check, the one for $100 for sliders and wings at the sports bar afterwards.  I am so opposed to tasting menus on business dinners that I actually try to avoid restaurants that offer them; I try to reduce the odds to zero that one person, typically a new employee, will provoke the chain reaction that results in the whole table ordering one.  I’ll do a tasting menu at a business dinner only if we are a small group of known foodies who will order the wine pairings, take three and a half hours on the meal, greatly enjoy it, and not run to McDonald’s right after.  Otherwise, stay away.

I could add as “rule 0” don’t get drunk, but frankly I’ve not seen that rule broken terribly often at the business dinners I’ve attended.  More often, I see it broken at company events — which is a whole different blog post.

I hope you find these rules, and the thinking behind them, helpful to you in optimizing all your business dinners.

Bon Appétit!

Did You Just Make a Plan or a Budget?

Congratulations!  If your company is like most, you’ve recently finished a (hopefully) solid 2013 and, from an EPM perspective, completed your 2014 annual planning process. 

Before we get too excited, however, let’s ask one quick question:  did you just make a plan or a budget?  In business, we tend to use the terms “plan” and “budget” as synonyms. But are they?  Methinks strongly no.

A budget is a set of numbers that say how much each operating manager (above some level of seniority) is supposed to spend and/or sell in the coming fiscal year.  A budget is made by finance and owned by finance.  Budgets are often built by trending (i.e., if we want revenue to go up 30%, then to improve profitability, we want expenses to up by only 20%, so give every cost center 20% more than last year, spreading it across time periods in line with historical actuals).  Operating managers often perceive budgets as “falling from the sky” — i.e., targets are dropped on them without conversation which makes sense in some perverse way (if the whole thing is a giant trending exercise, then there really isn’t much to discuss anyway).  Because budgets are trended, they are often nothing more than “buckets of money” — i.e., marketing is going to spend 20% more than last year on analyst relations, but no one can tell you  — and the model certainly does not include — any line-items/details on how it is to be spent.  Finally, the seniority-line (mentioned above) is usually quite high in the organization with budgets; only the top functional managers may actually have budgets that they control.

Budgets aren’t evil.  We need them.  We need targets against which to hold people accountable.  We need to be able to forecast cashflows.  We need, if we’re public, to set revenue and EPS guidance for Wall Street.

But a budget is not a plan.

A plan is strategic.  It starts not with an expense trending exercise, but instead with the company’s position in the market and a strategy for improving it.  A high-level strategy is defined.  Concrete goals/objectives are identified that support the strategy (e.g., start a European operation and sign 3 distributors).  Revenue targets are negotiated, ideally rewarding managers not just for beating the targets (which encourages sand-bagging) but also against more objective and external measures (e.g., market share).  Expense targets are set not simply by trending, but also by challenging past expenses and adding the costs of new strategic projects (i.e., stop/continue/start analysis).  Budget ownership is pushed down the organization, ideally with every people-manager controlling his/her own budget.

Plans have linked-detail, not just buckets of money.  When planning, you say “what do we need to accomplish in analyst relations and what will that cost.”  When budgeting, you say “how would we spend an extra 20% in analyst relations.”

The biggest way to tell if you’ve made a plan or a budget is when it comes to cutting time.  Budgets are cut with broad, top-down, across-the-board cuts:  “look, everyone’s going to need to take 10% more expense out.”  Plans are cut by removing strategic objectives:  “it looks like we were premature in wanting to open Europe, so I want to see a version of the plan where everyone removes those costs.”

I’d argue that a good plan is more well thought out in every way.  Budgets just trend revenue.  Plans triangulate using multiple different models with sensitivity analysis.  Budgets have TBH1, TBH2, and TBH3 as new hires.  Plans have AE/NYC, AE/Boston, and AE/Denver.

In philosophy, budgets are done by pragmatists with a goal to get them done:  “it’s imperfect, but you can’t predict the future, and we need something finalized by 12/31.”  By contrast, plans are done by strategists in a true attempt to anticipate what can be anticipated about the future.

  • If you’re going to hire 3 sales teams, they are going to want leads.
  • If Q2 is usually a rough seasonal quarter, then it’s likely to be one again.
  • If you’re going to acquire 100 customers, you are going to need to grow your support team.
  • If you are going to launch a focus on pharma sales, then you will need to develop a pharma sales kit.
  • If you know a competitor’s strategy and the backgrounds of their executive team, you can anticipate many of their moves (e.g., when Oracle put bankers in charge of the company was it a big surprise that they moved heavily towards an M&A strategy).
  • If you know industry trends, you can anticipate competitor strategy (e.g., do you think Oracle and SAP will be investing big in cloud in 2014, how about Microsoft and mobile)

As John Naisbitt once said, “the most reliable way to predict the future is to try to understand the present.”

So, if you just made a budget, congratulations.  You are far better off than many companies who can’t even get that process completed.  But beware you’ve got an opportunity ahead of you to make a plan.  If you’ve made a plan, congratulations again.  While your plan may changes many times as you go forward, the process of planning itself has made your organization more ready than most to respond to those changes.  I’ll finish with my favorite quote on planning, by Dwight Eisenhower:

“In the process of preparing for battle I have always found that plans are useless, but planning is indispensable.”

And I don’t think Eisenhower would have considered trended buckets-of-money a plan.