Customer Focus, Innovative Structure Prep EMC for Success
- 09 May, 2014 22:36
EMC World is an event unlike most others; the analyst track is mostly Q&A and one-on-ones, offering a level of engagement you don't see from other firms. I maintain that EMC is the only truly customer-focused vendor in its segment - or, for that matter and with the exception of AMD, in the technology segment altogether. Most large tech firms focus on engineering.
This makes EMC a unique beast - and it also leads to decisions and organizational structures that are also unique. For instance, there's a lot of speculation that EMC will eventually launch an effort like Amazon Web Services and/or drop Cisco in the VCE partnership and replace it with Lenovo for servers.
The arguments for both are compelling - but if you understand EMC, they are also unlikely unless EMC changes its current focus and executive team, which is also unlikely.
Focus on Customer Needs, You Won't Build the Next Zune
There are several types of tech companies, but some are much more common than others.
Marketing-focused firms (Steve Jobs' Apple) are very rare, sales-focused firms typically don't survive (though Larry Ellison's Oracle is an exception), competitor-focused firms (Steve Ballmer's Microsoft) often appear lost and, though financial analysts love operations-focused firms (Mark Hurd's HP or Tim Cook's Apple), they eventually require a turnaround.
Meanwhile, engineering-centric firms such as IBM and Google are so common because the industry is up to its armpits with engineers circling the wagons and talking to each other about features and advancements once their firms has matured. This has an advantage, as engineering-focused companies tend to innovate and are more likely to create market-shifting products. However, such firms are also likely to create features and products customers don't want and add complexity they don't need.
A customer focus, common in small companies, is generally lost in big ones. Ballmer once told me it was virtually impossible because the massive number of customers became noise. With analytics, though, this is changing. EMC is the first customer-focused company of its scale I've ever seen, often flipping between a customer and engineering focus as necessary.
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Sales, marketing, finance, engineering and customer relationships drive all companies in some way. EMC is no different - though it focuses on fixing known customer problems. It tends to offer less complex products and pricing, to engage with customers' businesses, to step between customers and a problem, regardless of the source.
An engineering-driven company, focusing primarily on products and their features, is far more likely to get frustrated with a customer and move around it. Google's phones and tablets, Microsoft Zune and Surface, and IBM's move into cloud services all indicate an engineering-first mentality.
EMC Won't Become a Cloud Service Provider Because It Wouldn't Make Sense
Let's look at the cloud service provider decision. An engineering company would see the tendency for companies such as Amazon, Google and Facebook to build their own products as a product problem to solve. Thus IBM is licensing its processor technology to Google and going into the cloud services business. Its fix is to buy or build a competing product to address the threat.
A customer-driven company, however, sees this as a customer satisfaction problem: We must not be building the right product, or else the customer would be buying it. Thus EMC is building a platform it thinks will appeal to, not compete with, companies such as Amazon. Neither strategy is inherently wrong, and both remain consistent with each firm's focus. Both paths require the firms to learn the new business, to change organizational structure and product make-up, and to make a major acquisition to get to market timely.
The engineering approach means getting a competitive product to market and then remaining competitive in what's likely a new market segment. The customer approach means finding or creating something cloud services providers find interesting and then creating demand in what's now a "not invented here" environment. Once successful, the customer-focused company has a lasting advantage: The ability to leverage a variety of sales partners. The tech-focused company, on the other hand, will have to staff up to fulfill this requirement - and that typically means hiring out of the established firms.
Success generally depends on the customer set. If it's the same, then creating a competing product may bring more long-term success because the vendor can better control the outcome. When going after government business like the CIA, the IBM approach should be more successful. If you go after end users, where AWS has historic success, then the EMC approach makes sense. Its solution leaves a working sales process in place - and EMC's strength isn't consumer-facing services.
EMC won't become an AWS-like cloud services provider because it's against its model. From the standpoint of EMC's approach to the problem, it doesn't make sense.
One part of this does require additional attention. To succeed, both approaches must re-architect hardware and software to address the reason Web services firms didn't buy the solution. EMC's approach forces that up front, while engineering-focused firms tend to force fit what didn't sell into their solution. This seems like an easy fix, since the vendor defined the solution, but this can reduce substantially the competitiveness of the resulting effort. In effect, the easy fix often seems to be to just go into the business, but this often turns out to be more difficult path, as it puts off the hard decisions.
EMC Won't Violate VCE Contracts, Either
I've saved the second question until now because it's simpler: There won't be a Lenovo Vblock because it would violate the agreement that founded VCE. Contractually, the converged infrastructure firm can't do it - and with its customer focus, breaking this contract isn't an option.
This points to the magic of EMC. The firm surrounds itself with a variety of unique and creative constructs - including VCE and Pivotal, along with its federated partners, RSA and VMware - and it's aggressive in measuring executives with the Net Promoter score to ensure a unique customer focus. I continue to believe that this customer focus makes EMC and its federated partners unique, and it gets to the core of both what kind of decisions it's likely to make and why its customer loyalty scores stay so high. (VMware alone topped Temkin Group's tech vendor NPS benchmarks for 2013.)
The unique structures surrounding EMC are part of the magic and may allow the firm to avoid the outcome of the major industry change we're going through. Typically the firms that dominate prior to a change aren't there when the change is complete. The combination of EMC's customer focus and its unique structure may be its strongest defense against this outcome. This makes the firm fascinating to watch.
Rob Enderle is president and principal analyst of the Enderle Group. Previously, he was the Senior Research Fellow for Forrester Research and the Giga Information Group. Prior to that he worked for IBM and held positions in Internal Audit, Competitive Analysis, Marketing, Finance and Security. Currently, Enderle writes on emerging technology, security and Linux for a variety of publications and appears on national news TV shows that include CNBC, FOX, Bloomberg and NPR.
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