IT: Better to be effective or aligned?

In my last blog entry promised to discuss a second piece from the MIT Sloan Review. In many ways I find Avoiding the IT Alignment piece more interesting than the Rettig piece I discussed last time. The Rettig piece was a good argument but it wasn’t clear what you did next, it was insightful without being immediately useful. The second is piece is insightful and has some immediate application – the authors suggest some but I’ll add some of my own below.

Perhaps one reason why this piece is more immediately useful is that the authors (David Shpilberg, Steve Berez, Rudy Puryear and Sachin Shah) are all consultants with Bain therefore they have something to sell, consultancy. Rush out now and hire your Bain consultant! Sorry, I shouldn’t be so negative. Let me give yo a run down of the article and then draw some conclusions of my own.

The article is based on the authors’ experience and a large(ish) survey. You can argue with the underpinnings of the article but I’m quite happy to give it credibility. Like the Rettig piece they are concerned with internal IT projects rather than products for sale (my main area of interest and experience.)

From this survey they are able to divide companies into four categories – a nice 2×2 matrix based on whether a company has effective (or ineffective) IT and whether the IT is aligned with business strategy (or pursuing its own.) These four categories are:

IT Enabled Growth: These companies have highly effective IT groups who are closely aligned to the business. This is what we all want. These guys are doing it. Unfortunately only 7% of companies fall into this category. The benefit to these companies is 35% sales growth over 3 years. Pretty impressive. Perhaps surprisingly these companies spend 6% less on IT than average. So, going it right also means doing it more cheaply.

Maintenance zone: These the basket cases, IT is not aligned with the business and it is not effective. Unfortunately this accounts for 74% of all companies, really depressing. Because this is the bulk of all companies it is perhaps unsurprising that the IT spend in these companies is the average, and their 3 year sales is just slightly below average at -2%.

They are the two opposite, and perhaps we expect that. A few companies maximise value from IT but most don’t. The next two are more interesting:

Alignment trap: this is the combination the authors find most interesting. This occurs when IT operations are aligned to the business (i.e. they are doing what the business wants) but they are not effective. Only 11% of companies fall into this zone – together with the first category this means only 18% of companies actually have IT and the business aligned, quite shocking. These companies spend 13% more than average on IT but the annual growth in sales is 14% below average, a pretty poor showing really.

Such companies are doing the right thing but they are doing it badly. From the figures given this seems to be the worst category to be in, highest costs and lowest sales growth compared to average. Think about that for a minute. These companies have it half right, IT is aligned with the business but they are not effective. These companies would be return better results if they gave up on business alignment and joined the 74% in the maintenance zone.

I would suspect these companies actually make it difficult for IT people to do the right thing. They probably have plenty of processes in place to make sure they don’t do the wrong thing but doing stop people from doing very much at all. My guess is that managers in these companies don’t understand IT and are trying to run IT the same way they would run any other department. Consequently the IT people can’t do their job.

Finally we come to Well Oiled IT: this is the category I find most interesting. These companies are doing IT well, they spend 15% less than average on IT but see 11% higher sales. Only 8% of all companies fall into this group, if we add that to the 7% of companies in the IT enabled growth category we see that only 15% of companies, less than 1 in 7 actually have effective IT.

Statistically, well oiled IT companies are similar to the growth companies but less so, they have significantly lower sales growth but spend even less on IT. Possibly these companies are focusing too much on cost – my bet is they don’t have effective business analysts and product managers in place.

Now for the authors’ advice: they tell companies to focus first on operations not alignment. If companies (and remember most start in the basket case maintenance zone) focus first on alignment they are likely to end up in the alignment trap, where things are worse. Therefore, seek first to make your IT effective then to make it aligned.

I like this advice, but like so man things in the IT world the devil is in the detail. So what do the writers recommend?

Keep it simple – we all agree in principle but we all get caught out; trouble is IT tends to get more and more complicated, battling complexity is a constant fight
‘Right size’ – which is a bit vague but basically they say outsource somethings, keep some things in house but do it consciously and intelligently
End-to-end accountability – IT managers need the resources to do the job but they have to keep talking to the business, and the business needs to talk to IT

All this advice is sound and it makes for a good starting point.

So now some thoughts of my own.

First this survey supports what I’ve found in practice: most IT operations are basket cases. Few companies can do IT well. In product companies there is natural selection by market forces. If the company is too bad they will (eventually) fail and go out of business. Where IT is a service to the business failure can continue almost indefinitely. Unfortunately this means that at least 85% of people in corporate IT departments will work in failing teams.

Second I now understand why Agile development works so well in many organizations even though it is not aligned with the business. Simply it doesn’t have too. If adopting Agile development moves an organization from maintenance zone a little toward well oiled then it doesn’t matter that it is not aligned with the business. Just improving effectiveness will deliver benefits.

Third, business must take more of an interest in IT. IT can make itself more effective but to become aligned the business needs to understand and get involved with IT – back to the point I was making about the Rettig article and last year about companies that understand IT.

On the whole I find this article good news, it helps me chart a cause for improvement. I see a three stage plan for any failing IT department:
1. Apply well known techniques from the Agile toolkit: this will boost your effectiveness immediately
2. Learn what is special about your environment so you can tailor the Agile techniques and find some of your own. This will further enhance your effectiveness.
3. Continue you learning to bring about business alignment. Often this is going to be a case of removing the old perceptions about how IT departments operate (e.g. Requirements: a dialogue not a document). It also means educating managers and IT staff, and it means creating the roles of product manager and business analyst to facilitate it all.

With 93% of companies failing one way or another there is plenty of work to do.

Now if we loop back to the Rettig article on ERP. Is it any surprise that ERP deployment fails? Only 15% of companies are capable of implementing it effectively, and of these less than half will align it to the business. Of all ERP deployments we can only expect 7% to come close to fulfilling their promises.

An often heard dictum in management concerns the difference between ‘doing the right thing’ and ‘doing it right’. If this article is right, when it comes to IT then it is better to ‘do it right’ than ‘do the right thing.’ Only if you can ‘do it right’ should you even start to think about ‘doing the right thing.’ Operations over strategy. Implementation over design.

 

Blue White Red – a simple Agile process

 

My article from last months ACCU Overload is now on my website. This piece describes a simple Agile process which I have used successfully. I don’t claim it introduces anything new or radical. I don’t even claim originality, it derives from SCRUM and XP. All I claim is it worked for me, my teams and has been used in multiple organizations.

What I think is important about Blue White Red is that is shows how you can start to roll-your-own Agile-like process. Start simple with what works for you.

Read the full piece here.

 

New website

 

A blog is a website but it is not a website. It is a website in the sense that it is a destination on the web but the contents of a blog are by their nature different to a website. Years before I started this blog I set up my own personal website, www.allankelly.net. With the creation of this blog I have neglected my website and it has become old and dated.

So it is with great pleasure I announce the rebirth of allankelly.net. I’ve used a new (Mac) package to create a new website which is mainly an archive of my writing projects. Here you will find over five years of articles from ACCU Overload, patterns from seven or more conference, presentations from conferences and elsewhere, and various other stuff.

For the moment I’m keeping my company website, softwarestrategy.co.uk separate. I’ll be looking at this in future and may merge the two. After all, three websites is probably enough for anyone.

 

No ADSL and my Mac – a reminder of how it used to be

The last two and a bit weeks have been hard: our broadband ADSL failed over two weeks ago. We’ve had a little intermittent service but not much to speak of. Lots of calls to the provider and them in turn with BT.

In my opinion BT are still a big bad monopoly. Turns out they only provide ADSL on a ‘best effort’ basis. No service level agreements. Anything they need to do takes 48 or 72 hours. Most of the delay has been my ISP arguing with BT and me waiting for BT to do something.

I know realise how dependent we are on broadband. Even our fridge started to run out of food because we usually buy our groceries on line and have them delivered.

Interestingly while a lot of my neighbours have wireless access all the networks are now secured. That is a change in the last year.

To make things worse I have no modem on my Mac. When I was buying it I thought ‘when do I ever use a modem?’ And talking of my Mac….

It is nearly two months now since I switch to a Mac. I’m still glad I made the move but I’ll admit there are a few things about the Mac which are annoying me – lack of short cut keys is probably the most obvious.

The Mac is simpler to use but a lot of this simplicity comes because you simply can’t do the things you can with a PC. The Mac makes a lot of assumptions about how you want to work. That makes it simpler but when there is something you don’t like it is hard to avoid. For example, I’d really like a bigger mouse pointer but I can’t find any option to change the size of the icon.

My productivity has definitely fallen. This is largely because I have to learn, or re-learn software applications. It is also because I have to hunt down software to use. I’ve had to give up BlogJet so I had to find another piece of blogging software. After looking around the net I chose MacJournal. Its good enough but it does blogging as a secondary function. It is really journal software. The people who made BlogJet have now produced a Mac product but this too seems aimed at those keeping a journal.

I tried to avoid this problem in part by buying Microsoft Office for Mac. But it turns out the Mac version is quite different to the PC version so I’m having to relearn a lot of it. I used to use Visio on the PC but there is no Visio on the Mac so I’ve had to spend time looking for a Mac equivalent.

So I’ve been evaluating OmniGraffle and ConceptDraw. Both lack the extensive sencils of Visio and some features but both have other features. Annoyingly neither integrates to Word very well. I can’t insert a picture the way I can on a PC, and if I export a graphic picture it tends to appear blurred in Word – at least when I print it out. If I want a good image I have to use Apple PICT format which apparently is an old Apple format. Seems Microsoft haven’t updated Word.

Which is why being on the Mac feels like going back 5 or 10 years. I’ll probably buy OmniGraffle quite soon but in the mean time I keep getting e-mails from OmniGraffle and ConceptDraw making me offers and asking my views. I mentioned the integration and graphics issues to Omni Group who surprisingly replied in person. That’s how I know the image and integration problems are Microsoft and Apple issues.

And while I’m talking about Mac software I should mention RapidWeaver from RealMacSoftware. This is replacing my old copy of DreamWeaver and CityDesk.

I could solve some problems – like the image problem – by dumping Office. Apple actually have a word processor of their own, Pages – although I didn’t realise it was a word process for six weeks. But Pages doesn’t integrate with Endnote the software I use for tracking references. So you solve one problem and get another.

Perhaps the reason this all feels like going backwards is because I have to find and learn new software. With only a couple of exceptions I haven’t done this for most of the last 10 years. The other reason is because I’m finding a whole new software ecosystem.

But actually all this gives me hope.

In the Mac world Office does not dominate. Microsoft doesn’t supply everything and there are many small software companies carving out their own niche. Pages may be trying to compete with Word head on but MacJournal and BlogJet prove that there is a living to be made from producing niche specific word processes. Just when I thought word processes were a commodity I find they are not.

That all gives me hope for the future – and makes me wonder if I’m missing a niche somewhere.

 

BlogJet is back – version 2

About a month ago I lamented the fact that I changed to the New Blogger system.  Most of all I missed BlogJet the blogging tool I’ve been using for most of the last year.  Well there is a new version of BlogJet, version 2.  My last couple of blog entries have been with BlogJet and I’m glad to get it back, I’ll probably pay the license fee when the trial comes to an end.

 

I had a few problems getting BlogJet 2.0 to work with New Blogger.  I had to download a hot fix (version 2.0.0.7) and re-create my account with BlogJet rather than import the old one but now it works fine.

 

BlogJet 2.0 also has some other improvements I’ll explore over time.  For the moment I’m glad there are more short cut keys.  Unfortunately it doesn’t do spell-as-you-type yet but you can spell check before you publish.

 

Two funny (odd) things….

 

Here is Blogger.  Blogging exists because it makes creating web pages an order of magnitude easier than writing HTML and uploading it.  In making it even easier blog tools change the content of the pages and the environment they exist in.

 

And then along comes a tool like BlogJet and makes blogging even easier!

 

Second, Blogging sites like Blogger are great examples of software as a service, and how easier tools delivered online are superior to installed software.  But then here is BlogJet, a classic install on Windows application that makes things even better!

 

So maybe, in a couple of years after we’ve all moved to SaaS and replaced Microsoft Word with Writely and Outlook with Google Calendar and GMail well rediscover software installed on a PC.

So I’ve subscribed to a Serious Business Journal…

I read a lot but I don’t read everything, there are some things I positively don’t read and there are some that I just can’t find time for.  Although I read the Economist and FT regularly (and yes they do often seem to overlap – but that’s a different blog entry) I’ve felt for a while that I should be reading a more thoughtful business journal, something slightly academic in fact.

While there are many academic business journals most of them are unreadable – unless you have serious need to read them, in other words: you are in academia.  Probably the only time most business people read these journals is when (like me) they are studying for an MBA.  I finished my course thinking “I should keep reading on the journals” but, they are difficult to get hold of, expensive, and largely unreadable.

There are a couple of exceptions, most notably the Harvard Business Review (HBR).  This places itself somewhere between an academic journal and a thoughtful business magazine.  Compared to other academic business journals this decidedly easy reading.  However, if what I hear is true, while the HBR has a high circulation figure most copies go unread.  In other words, people subscribe to be seen to read the HBR – OK, they may simply find they don’t have the time but then why renew the subscription?

Maybe I’m being cynical but I just can’t bring myself to subscribe to HBR.  I think its probably some form of reverse-snobbery.  Still, I felt I should subscribe to some serious journal….

During my MBA I also took a liking to the California Management Review.  Once in while I’ve wondered over to their website and thought about subscribing, but then I see the price, I remember its more academic that the HBR and … well I don’t.

Then there is the Sloan Management Review, or as it is now know the MIT Sloan Management Review (SMR).  As with the other two I sometimes thought about subscribing but couldn’t see when I’d get the time to read, couldn’t justify the costs and wondered if it would be too academic.  Still, as with the other two I’ve bought the odd download from their website in the last couple of years.

And so it was that SMR used the oldest marketing trick in the book – and thats the Book of Readers Digest marketing.  A flattering letter, the offer of a free copy and a discount price.

The free copy turned up last month and I was pleasantly surprised.  Of the 15 or so pieces in this issue (Winter 2006 which means last January) there are only a few that interest me enough to read them.  But I found those I did read very interesting and it reminded me that many ideas appear first in these journals.  Such pieces are usually fresher and shorter than the books on similar subjects.

So I gave in.  I’ve spent the $125 to subscribe for a year.  Why did I finally do it?  Well, four factors really.

  • I think I’ll learn some new stuff, it will expose me to things I might not see otherwise.
  • The dollar is weak at the moment so it is cheap and a low risk – even if the discount price turned out to be not so discount.
  • SMR is quarterly, so I have three months to read each copy.
  • I can now get all the kudos of reading a serious management journal while being able to look down on those who read the mass-market HBR.

How will I know if the journal is worth reading in future?  Well I could use the Dr Dobbs test…

I’ve long had a theory that if your sitting on the Tube and you see someone reading Dr Dobbs then you should immediately hire them.  If someone is interested enough to read Dobbs they are going to be a good programmer.

The theory doesn’t hold the Economist or HBR.  They may be good journals but they are too common (you’d hire too many people) and they don’t set the threshold not high enough to make the reader an instant hire.

Now, lets see what I think about SMR readers in a years time…

More notes on the ACCU conference

At the risk of boring you, my dear reader, I’d like to make a few more comments on presentations at the ACCU conference. Those of you who read this blog for the musings on change and product management might like to skip this entry, its for the guys who design programs.

Nico Josuttis is an ACCU conference regular, he is probably best know for his book The C++ Standard Library but (incredible) that was over 6 years ago now. Like the rest of us he’s moved on a bit. These days he’s more of a software architect so it was fitting his main presentation was on Service Oriented Architecture – SOA.

SOA is in fashions this year – along with last seasons MDA. The easy way to think about SOA is that is “doing it with SOAP” but there is more to it than that – for a start you need to add in a service bus. As with any good software architecture fashion it will increase flexibility, reduce development time, increase software reuse, reduce coupling, increase business value, reduce development costs and generally just fix the whole problem with software.

Well Nico discussed all these issues and more. He exposed it for what it is, a good idea with some advantages but not a cure all. You still have dependency problems, re-use isn’t automatic (far from it) and you can still make the same big mess you made without SOA.

What I really liked about Nico was that he was talking from experience, he had a hard case study he could draw lessons on and he has stories to tell. The audience often guessed the way the story would turn out before he got to the end – because, as I said, SOA suffers from the same problems as many other architecture fashions.

The slot before Nico was Klaus Marquardt who presented some of his software as medicine patterns. I’ve been familiar with Klaus’ ideas for a few years and I’d already ready several of the patterns he presented but this was the first time I felt I really understood the point he’s trying to make.

Klaus introduced several ideas about software illnesses – many of which were actually organizational illnesses. The two that stick with my most are palliative care for software and proactively wait. Let me explain.

Palliative care exists in medicine to deal with disease management and pain control when we can’t actually cure the disease. Klaus suggested that sometimes a similar situation exists in software – and I have to say I agree with him. Sometimes software gets into a mess and fixing it completely isn’t really an option – takes too long, costs too much, nobody really understands it, etc. – so we should consider what we can do to make it more manageable and reduce the pain we get from it.

The second idea that will stick with me is “Proactive wait.” In other words, sometimes you can’t do anything now, or perhaps the patient doesn’t want you to do anything, so you wait. You know your waiting, you may take some actions to prepare yourself while you wait but you don’t do anything until the patient is ready for you.

I think this is good advice and I intend to follow it were I can. I see two places were I can use the idea, first myself, sometimes I should wait. Rather than rushing in to fix something it might be better to wait until a better time or even until the pain is higher and the patient will accept your intervention.

To be honest I already do this at times but I had no term to describe it. Sometimes saying to someone “you don’t want to do that” is the wrong thing. They will perceive you as a busybody, a control-freak, a micro manager, or just a pain. Sometimes its better to let someone do it their way even if you know a better way, often they will learn a lesson – they may learn it the hard way but they will learn it better than you telling them.

(Of course if they are about to put their hand in the fire this is a bad time to apply this idea – only do it if nobody will be hurt.)

Second, and in someway this is an extension of what I’ve just said, it is better to wait for someone to ask for help than to give it without asking. It is better for someone to appreciate they need some help and ask for it than for you to start helping out – no matter how well intentioned you are.

Conclusion: timing can be important.

That’s almost it for my ACCU notes, normal service will be resumed soon.

Write a book or start a company? – Lessons for Product Managers and notes on VoIP, eBay and Skype

Some kind of normality has returned. The house move is done – although plenty to do on the new place we can live here quite normally. And my product at work is back to normal, actually that happened about a month ago but I don’t think I mentioned it here.

So, with a kind of normality returning I’m asking myself “what next?” I’m lacking a personal project now and I’m wondering what it should be. Two ideas keep coming up.

First idea is to write a book. A couple of years ago I started to outline a book that would piece together some of my Overload pieces with some of my MBA dissertation work to produce a book called something like “Re-learning software development” or “Knowledge, Learning and Change in Software Development” or even “Software Development in the 21st Century”

I started to put some flesh on the idea and even had a conversation with a publisher. She asked me the very product manager-like question “Why would someone buy this book?” “What problem will it solve?” I was kind of stuck for an answer, I could imagine a neat book but then why would someone actually buy it? I couldn’t answer that question and I eventually put the idea to one side.

The other idea that comes up again and again is that of starting a company. Being entrepreneurial. Again the question comes “Why would someone buy something from you company?” which is another way of saying “What would your company do?”

As a Product Manager I know the first starting point has to be “What problem will you solve?” All I have to do is think of a problem, an answer, and a means of putting the two together… easy really.

Of course my techie background has me approach it from another point of view “Gee, this is neat technology I could… maybe someone will pay money for it?”

At the moment there are two technologies out there that should inspire me. One is AJAX – which a key building block of Web 2.0. I see people building all sorts of stuff with AJAX but you still need to solve a problem.

Some people are resolving known problems with existing solutions. For example: office automation applications (Word, Excel, PowerPoint, etc.) This could work but you have to ask: Why will a Web 2.0 word processor be better than what is there at the moment? And given economic network-effects: Why would anyone change from the standard?

The second technology I see as big just now has a similar problem: Voice over IP. We have solved the voice communication problem, its called the telephone. Has been solved for about a hundred years, again there are network-effect economics to keep people with the traditional system yet you can cross link the two systems.

I’ve been thinking a lot about VoIP lately. Partly that is because I was reading Richard Edge’s blog and secondly because of a conversation I had with Craig Taverner a couple of weeks ago.

So far the big problem VoIP has solved is cost. It brings the price of telephone calls down. This is another point Product Manager should remember: its OK to solve a problem that has already been solved just so long as you change the solution in a superior way.

However, VoIP currently comes with another cost: inconvenience. Unless you have a PC, a broadband connection and a little bit of computer skills you can’t get it to work. Even if you do get it working to save the maximum amount of money you need the person on the other end to have a PC too. And then the two of you have to stay close to your PC.

Well, VoIP is going to get better still. Already there are routers that allow you to plug in regular handsets to the network. Like this one from LinkSys and Netgear are promising a phone that is loaded with Skype and talks to your Wifi router.

These kind of products will reduce the inconvenience of VoIP but I’m still wondering if that is enough.

The way I see it is that VoIP needs to offer something, some application, that we can’t do with regular phones. For example, although I’d played a little with Skype the thing that got me to use it a lot was the conference call facility.

Of course we’ve had conference calls on regular phones for years, but, on the whole they have been restricted to business because of the extra cost and need to set up an account. I use a traditional conference call system a lot in work but it entails dialling a lot of numbers.

With Skype I’ve been able to hold free conference calls with more people and it has been much much easier to set up.

Conference calls are an example of an application we run on top of voice connectivity. Other examples are voice mail, caller id, ring back and even faxing. Traditionally creating a new telephony application meant some experimentation plus access to telephone equipment – which tended to be complex stuff and only available to a few people in big companies.

To get your application out there was even more complicated. Telecoms companies are a traditional bunch, and for the application to be widely available it needs to run on multiple exchanges so you need agreed standards. Then you need to roll it out to a lot of exchanges so introduction was usually slow.

Now, with VoIP on Skype, Vonage, etc. you can write an application on top of the VoIP system much more eaily. More people have access to the technology and rollout means people installing the app on their PC.

Conclusion? We’re going to see more applications on voice based VoIP systems.

In fact I think we’ve already seen the first signs of this with the eBay takeover of Skype. Until now I couldn’t figure this deal out. Now it makes sense, eBay wants a sales application that integrates seamlessly with the eBay website. It also needs installed users to adopt the system and show the masses it works.

So there you go. I know the technology and I know the logic. I still don’t have a business idea. I still don’t have a problem to solve. Maybe I’ll have to go back to the book!

Who are you?

Its all too easy for a company to loose track of just what its customers want. Without customers your nothing. As a Product Manager this should be one of my top (if not the top) concerns. It should be the thing I’m thinking of when I go to work each day – what do my customers want?

As if I needed reminding of this there was an interesting interview in last weekends Financial Times with the founder of Boden – a niche mail order clothes retailer that is based a short distance from where I live in London. (Subscription only I’m afraid.)

Boden know who their customers are. They really know them. They know what style they like, why they buy mail order, who buys, their income and much more. There is a lot of competition in clothes retailing so this company would not exist if it didn’t know and understand its customer.

I wish I knew my customer half as well. It is difficult getting to know your customers but maybe I should redouble my efforts.

And that brings me to this blog. Who are my customers here? Who are you the readers?

One the one hand it doesn’t matter. This blog is by me, largely for me. The writing of it is the valuable bit, I’m trying to make sense of the world around me.

But I do wonder about who my readers are. And occasionally you surprise me, a comment on the blog, or an unexpected reader emerges. So, what do I know about you?

Blogger has their stats switched off but I do have three sources of information on my readers:

    • Site meter gives me some basic stats on my readers

 

    • The picture of me in the top right comes from my website so I can see downloads there, and some of you go to my website after reading the blog

 

  • Conversations with people who read the blog

So what do I know?

You are mostly British, the second largest group of you comes from the US. Surprisingly Norway takes third place and although Norwegians are far behind American’s they are a long way ahead of everyone else.

Over 50% of you use Firefox. Either, this means that Firefox is taking market share generally from Internet Explorer (40% of you) or my readers are biased towards Open Source – my money is on the latter. (For the recond, I’m a Firefox user too – maybe I’m distorting the figures?)

Although this doesn’t extend to you OS, 92% of you use Microsoft Operating Systems, 4% of you are on Linux and just 2% on Mac OS X.

I know some of you read me via RSS but I don’t have any stats on such readers, it seems weekly visits can be anything from 40 to 360. Just what is a visit? Do search engines robots get countered? How long do you have to stay to count? And what do you do when two different counters give you widely different figures?

So, I have an idea about how many of you there are, and an idea of what technology you use but what do you like to read about?

To date I haven’t worked that out. Once or twice your comments have surprised me, things I thought nobody else would be interested in have had you logging you opinions. Guess that shows I need to work on knowing my readers. A job for a Product Manager!

Pricing on the internet and destroying your brand

Things are cheaper on the internet right? We all know this, no stores to rent, no shop windows to make up, no sales staff – and customers pay for delivery.

Well it seems not. According to a report in today’s FT Sony has lead a group of electronics firms (including Philips, Panasonic, Hitachi and Sharp) who have been charging internet retailers more for goods then high street retailers. Their rational is that high street firms help build “the brand proposition and purchasing experience.”

Purchasing experience? Have any of these people ever shopped at the likes of Dixon’s or Currys? Its a ghastly experience. And I don’t recall Best Buys being much better. There are shops I go to for a positive purchasing experience but I know I’m going to pay more.

If Sony and co want to reward retailers they should pay them a separate fee, one that is open and clear to all – the same way Intel do with their “Intel inside” promotion. What they are currently doing is just keeping prices high.

For Sony this comes on top of last weeks Rootkits revelation (see SysInternals for all the details) which resulted in them being branded SpyWare by non-other than Microsoft – full story on the BBC

Sony has enough problems at the moment – declining market share, declining profits, restructuring and redundancies. The new CEO Howard Stringer has enough to sort out without the company getting a bad name.

And that is it really, Sony used to be known for quality (e.g. Trinitron televisions), innovation (think Walkman), reliability – maybe a little more expensive than Sanyo or Sharp but worth the money. Now it isn’t the leader – in TV (that’s Samsung in flat panels) and Apple’s iPod has displaced the Walkman, its not the competitor it was.

The firm has tried moving into software – hence Sony Picture Entertainment and PlayStation Games – but that bet hasn’t yet paid off – so its still dependent on hardware where it has problems competing.

So, is there a connection between a declining market share and attempts to increases prices by the back door? Or putting their neo-virus software on our computers? One thing is for sure, customers certainly don’t want higher prices and don’t like their SpyWare.

Maybe there is a link, maybe as Sony struggles managers are trying covert tactics.

Will it work? Probably not but as these stories emerge it isn’t going to help the brand, in fact, the more Sony carry on like this the more damage they will do to their brand and reputation.

And I don’t think Howard Stringer really wants that. I’d guess the first he knew about these activities was when he read his morning paper. And I’d hazard a guess that he doesn’t like the idea. Trouble is, someone further down the tree is trying to optimise their little bit of it: prices up, piracy down – may it will work for a little while but it could damage the whole company.