Rethink your business strategy

Perfect your products before you succumb to the "expand or die" philosophy of business in uncertain times

I can't speak for the rest of the world, but in the U.S., the overriding business philosophy of companies both large and small is expand or wither away and die.

For retail outlets, this means building more and more stores until, like Starbucks in Seattle, there are two across the street from each other. For high-tech companies, it takes the form of reaching beyond one's area of expertise. Anyone still own a Dell TV or a Toshiba server? How about driving around town in a car made by TaTa? I would buy an HP printer in a heartbeat but not an HP camera.

Another classic example was Heinz, which spent millions in advertising to get into the soup business. The result of all that advertising? Sales of Campbell's soup increased dramatically.

[ Further IT advice for uncertain times can be found in InfoWorld's top tech resolutions for 2009. ]

Companies never seem to learn their lesson. Perhaps it is hubris. Knowing others failed before them doesn't phase some companies in the least, because they believe they know better.

By the way, the opposite of this expand-or-die philosophy is to improve, perfect, and capture your market. In other words, offer products far superior to anyone else's and you will own the market.

Unfortunately, many companies learn too late that respect for products in one field does not extend to another.

The latest to succumb may be Cisco, which this week announced it will enter the consumer-electronics business, specifically digital stereo systems. Wi-Fi is one thing; stereo systems quite another.

And then there's HP, which wants to be your data warehouse provider. More of the same sad news.

Granted, HP in data warehousing is less of a stretch than Cisco stereos.

HP has the iron to do it. But if the folks at HP think the backbone of the data warehousing business is hardware, they are already on the wrong track.

HP did, however, buy strategic business expertise when it acquired EDS. And this is what is really needed to sell data warehousing, which is much more about strategy than operations. What HP has to do is learn to turn hunks of metal and pieces of crystal into a services rather than a hardware sale. After that, they will still have to convince cash-strapped enterprises to invest millions of dollars in products and services from the new kid on the block in an uncertain economic climate.

HP's competition -- Teradata, Oracle, IBM, and Microsoft -- is already stiff. And if it isn't careful, HP's hard-sell pitch to its largest hardware customers might just convince them that they need data warehousing -- a need they may wish to fulfill by buying a data warehousing solution from Teradata, Oracle, IBM, or Microsoft.

Yes, HP, the mistake Heinz made has legs, and like it or not, you may not be any smarter than Heinz was.

As for Cisco's New Year's resolution to build your digital entertainment system, my suggestion for Cisco is to stick to its plumbing. As I've often said, I don't have an MBA -- I don't even have an MA, having failed the French exam to prove proficiency in a second language, a long, sad story -- but I have watched the consumer market for 25 years, and I know that in consumer electronics, brand is everything.

Like the old real-estate axiom "location, location, location," in consumer electronics, it is "brand name, brand name, brand name." Yes, we have a more sophisticated audience than we did even five years ago. But most non-techies who are familiar with Cisco are so because somebody told them to buy Cisco stock. "What do they do?" a prospective buyer might ask the savvy friend advising them. "Oh, they make all the stuff for the Internet and for networking. You can't miss."

And for the most part, you couldn't. But nobody has to ask, What does Sony do? I would guess nine out of 10 people on the street, even Jay Leno's Jay Walkers, could answer that one. I wouldn't try the name Cisco on Jay Walkers, that's for sure.

Whatever Cisco spends on advertising dollars now, it would probably have to increase tenfold, or twentyfold even, to become a blip on the list of names recognized in most households. Even more to become a household name consumers would feel comfortable buying stereos from.

Far be it from me to offer advice to HP and Cisco. Rather, I offer advice to other companies with similar strategies in mind.

Markets are global, and once the current economic climate settles, there will be an even larger demand for the product lines you already offer, from India, China, and Indonesia, as well as the nations of Africa and the Middle East.

If you can polish your reputation in the areas where you are currently strongest, you should have enough business to keep your company growing for at least another generation or two. Not only will you be successful, but your business customers will have better, more reliable products with which to work.

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