In 1996, Andrew S. Grove published a book called “Only the Paranoid Survive”. At that time he was also the CEO of Intel, the world’s largest microchip manufacturer. Mr. Grove coined this term to describe what he calls a Strategic Inflection Point. This is how he defines it (and I am paraphrasing):
“Strategic inflection points are full-scale changes in the way business is conducted, so that simply adopting new technology or fighting the competition as you used to may be insufficient. They build up force so insidiously that you may have a hard time even putting a finger on what has changed, yet you know that something has. Let’s not mince words: A strategic inflection point can be deadly when unattended to. Companies that begin a decline as a result of its changes rarely recover their previous greatness.”
“But strategic inflection points do not always lead to disaster. When the way business is being conducted changes, it creates opportunities for players who are adept at operating in the new way. This can apply to newcomers or to incumbents, for whom a strategic inflection point may mean an opportunity for a new period of growth.”
In other words, they occur where the old strategic approach dissolves and is replaced by the new. I believe there are two outside strategic forces that can and will fundamentally change our business:
– The new economic landscape: The recession we are fighting uphill to overcome has as much to do with markets becoming more efficient as it does with the mortgage and banking crisis. If you look at the macro components of our changing economic environment, a large contributing factor to this is the reality that getting things done has become incredibly more efficient through the use of the internet and offshore labor.
Keith sent me a Wall Street Journal article that states “the financial crisis has accelerated the commoditization of more and more markets.†No longer are just blue collar jobs going overseas, but white collar and IT related jobs are too. You simply don’t have to hire someone locally to get a formulaic task completed. By “formulaic” I mean: here’s the script, follow it – if you have any questions, ask me. Winners in the new economy are what Seth Godin calls Linchpins. These individuals are creators, innovators, problem solvers, leaders (by example) and exemplary sales people. High value organizations need linchpins and rainmakers; not cogs in a wheel, not followers of a map, not order takers, not delegaters and not closed minded technicians.
Attitude alone can make someone a linchpin. The convenience store clerk that smiles at every customer who comes in, keeps the place clean and wishes them a good day as they leave is a linchpin, even at minimum wage. Why? Because they add value to a commodity and are creating a memorable experience for the customer. This is where the opportunity lies. We want Exuma to be a place where linchpins – value creators – can cultivate and grow.
– The commoditization of software: The value of software is being driven to ZERO. Software companies that base a large portion of their profits on license fees are in trouble (whether they know it or not). Two key drivers are at play here creating a perfect storm scenario: The internet and the widespread growth of open-source software. Many companies are beginning to realize that their cash cows are no longer sacred and are finding ways to cash in on ancillary products and services.
Google is a great example. It seems like everyday, Google releases a new web-based application that costs you the user nothing to enjoy. From e-mails to images to desktop publishing and virtual maps, Google gives all of this away, including storage space and bandwidth on their massive infrastructure all from the revenues they make on advertising. Creative, subtle and necessary advertising for basically any company that wants an online presence. The days of Microsoft charging what ever they want for Office is coming to an end. Not only is Google Docs a threat to them, but so are open source technologies like Open Office which rivals MS Office and its FREE!
The opportunity here is that people don’t buy software they buy solutions. Businesses users don’t buy software because it was built on the latest technology or has cool graphics. They buy software based on the promise that it will make their lives better. Providing our customers with high value solutions is the key to taking advantage of this opportunity to create value for our customers.
We can look at these trends as the beginning of the end for Exuma as we know it OR we can capitalize on them. Realizing we are at strategic inflection point in the growth of our business, we can use them to catapult us to new heights. I personally have never been more excited and enthusiastic about our strategic direction, because we can take advantage of these two dynamics to create real value for our customers.
There has been a lot of talk about our migration to the RV industry and the rationale for doing so. Last night we just got one step closer to realizing this goal by formalizing our alliance with Advanced Dealer Solutions (ADS). We have identified the RV industry as one that is ripe for real solutions – not just software and empty promises. We have done a good job over the years to provide real value to our clients by focusing heavily on consulting, training and support. Due to the trends of the commoditization of software, we’ve been reducing our software fees, but raising our consulting and training rates.  ADS provides us with a strategic competitive advantage over other suppliers in both the marine and RV markets. They have many years of experience working with or for another dominant software provider in the market. We see an opportunity to provide a complete solution that goes beyond the dealer management system and truly adds value to a dealership.
ADS will help us increase our “bench strength” of linchpins and in many ways help us elevate our game in some areas: especially as it relates to RV industry knowledge, sales process, solution selling and competitive analysis.
The beauty of this model is that we will not enter the market as a “me too†product. With the ADS team we will be offering a DMS Support Option for both marine and RV dealers not using our products. This Support Option also includes transition services to either DockMaster or RVMaster. The great thing about RVMaster is it allows us to leverage the investments we’ve already made to produce our current product with little development effort. Many of our competitors who have products in multiple markets (e.g. marine, RV, powersports) utilize the same staff members to support the products across all industries. We don’t need a marine training staff and an RV training staff for instance. It’s fundamentally the same product. What we need is not only RV industry knowledge, but a new mindset, a new selling strategy and some new branding. These are the valuable resources ADS brings to the table.
Another aspect of the “rush to free” in software is the trend of moving client/server based systems to a hosted platform. We’ve been talking about this for quite some time, but we are now actively moving in that direction on a number of fronts. We are all pretty comfortable with the notion that DockMaster could be hosted if thin-client technology (MS Terminal Server or Citrix) is used. The problem is that’s an expensive proposition, because licensing fees for the thin-client technology is expensive. We would need to build that expense into our subscription pricing to make a profit. For the small handful of clients we’ve discussed this with, we have priced ourselves out of the market. Part of this is a weak selling strategy, but the other issue is the real expense burden given our current architecture.
To remedy this we are moving in a direction to eventually provide a web-enabled version of our product. This will take multiple years and we are going to do this pragmatically and with flexibility. We are in the process of converting DockMaster to VB.NET. This is the most critical and time consuming component. Regardless of wheather we move to a web-based platform, this step must be completed for various technical reasons. The next step in the migration is to ASP.NET which would give us a true web-based front-end. However do we continue supporting all of our products as they are today with the same set of functions? The answer is “no”. We don’t want to make the same mistake that was made when we went from text-based to Windows. We need to rethink a number of our functions and weigh it against the value perceived by our clients.
One area that’s been under scrutiny lately is our marina reservation system. To be competitive it needs lots of work. This is where Hercules Marine and our friends at Leisure Interactive come in. Leisure, along with marinas.com has formed a joint venture with us to offer Leisure’s campground reservation system to the marine market. We are the exclusive distributor of this web-based reservation system. Hercules Marine also has a powerful slip management system that replaces much of the functionality in our Reservations and Storage & Billing modules. The strategy is to have Hercules Marine ultimately replace these functions in DockMaster. This way we can focus on parts, service, sales and accounting. We will build an interface to Hercules via our web connector so that the two products work hand in hand. We are not abandoning our marina modules. We will be supporting them for many years to come. We may find that Hercules Marina only adds value to pure marina clients and is not applicable for full service marinas and boatyards. We won’t know until we start on-boarding customers.
Beyond RV, I see us expanding our web offerings in the marine space and beyond. The DB2Web technology that we’ve developed basically enables DockMaster and RVMaster to communicate with any web-based platform. Using this technology we will begin to offer features like web-based service requests that create WO estimates, online bill review/pay, online parts stores, web-based lead management, online boat/RV rentals. We don’t need a complete cloud-based version of DockMaster to do these things. We can give our customers direct access to their customers via the web with DockMaster as it is today.
I know this communication will lead to more discussion and questions. We are still working through the organization, reporting and responsibilities of our new partners. I will be sending out a communication next week with contact names, e-mail addresses, etc. But I am very excited about this new direction and the fact that we finally got it done. It took a long time to finalize because both ADS and Exuma are making a long term commitment to one another. Moving into a new industry, with a new product and some new team members is not an overnight event. Furthermore, like our marine customers, RV dealers are typically pragmatic and slow to adopt new/different technologies and solutions. But with our new strategic partner we have the opportunity to reach new heights.
Strategic inflection points can be caused by technological change but they are more than technological change. They can be caused by competitors but they are more than just competition. They are full-scale changes in the way business is conducted, so that simply adopting new technology or fighting the competition as you used to may be insufficient. They build up force so insidiously that you may have a hard time even putting a finger on what has changed, yet you know that something has. Let’s not mince words: A strategic inflection point can be deadly when unattended to. Companies that begin a decline as a result of its changes rarely recover their previous greatness.
But strategic inflection points do not always lead to disaster. When the way business is being conducted changes, it creates opportunities for players who are adept at operating in the new way. This can apply to newcomers or to incumbents, for whom a strategic inflection point may mean an opportunity for a new period of growth.
