Monday, December 26, 2011

Skimming : Good to Great

Good to Great: Why Some Companies Make the Leap... and Others Don't

Good is the enemy of great

  • It is important to understand that we developed all of the concepts in this book by making empirical deductions directly from the data. We did not begin this projectwith theory to test or prove. We sought to build a theory from the ground up, derived directly from the evidence. (p.10)
  • We all have a strength or two in life, and I suppose mine is the ability to take a lump of unorganized information, see patterns, and extract order from the mess - to go from chaos to concept. (p.11)
  • In an ironic twist, I now see Good to Great not as a sequel to Built to Last, but as more of a prequel. This book is about how to turn a good organization into one that produces sustained great results. Built to Last is about how you take a company with great results and turn it into an enduring great company of iconic stature. (p.14)
  • I like to think of our work as a search for timeless principles-the enduring physics of great organizations-that will remain true and relevant no matter how the worldchanges around us. Yes, the specific application will change (the engineering), but certain immutable laws of organized human performance (the physics) will endure. (p.15)
  • That good is the enemy of great is not just a business problem. It is a human problem. If we have cracked the code on the question of good to great, we should have something of value to any type of organization. (p.16)

Level 5 Leadership

  • In retirement, Smith reflected on his exceptional performance, saying simply, "I never stopped trying to become qualified for the job." (p.20)
  • Darwin Smith stands as a classic example of what we came to call a Level 5 leader-an individual who blends extreme personal humility with intense professional will. We found leaders of this type at the helm of every good-to-great company during the transition era. (p.21)
  • It wasn't just false modesty. Those who worked with or wrote about the good-to-great leaders continually used words like quiet, humble, modest, reserved, shy, gracious, mild-mannered, self-effacing, understated, did not believe his own clippings; and so forth. (p.27)
  • It is very important to grasp that Level 5 leadership is not just about humility and modesty. It is equally about ferocious resolve, an almost stoic determination to do whatever needs to be done to make the company great. (p.30)
  • Level 5 leaders are fanatically driven, infected with an incurable need to produce results. They will sell the mills or fire their brother, if that's what it takes to make the company great. (p.30)
  • Then we began to notice a contrasting pattern in the comparison executives: They credited substantial blame to bad luck, frequently bemoaning the difficulties of the environment they faced. (p.34)
  • Level 5 leaders look out the window to apportion credits to factors outside themselves when things goes well (and if they cannot find specific person or event to give credit to, they credit good luck). At the same time, they look to the mirror to apportion responsibility, never blaming bad luck when things go poorly. (p.35)

First who ... then what

  • The executives who ignited the transformations from good to great did not first figure out where to drive the bus and then get people to take it there. No, they first got the right people on the bus (and the wrong people off the bus) and then figured out where to drive it. (p.41)
  • The good-to-great leaders understood three simple truths. if you begin with "who," rather than "what," you can more easily adapt to a changing world. if you have the right people on the bus, the problem of how to motivate and manage people largely goes away. if you have the wrong people, it doesn't matter whether you discover the right direction; you still won't have a great company. (p.42)
  • Dick Cooley and David Maxwell both exemplified a classic Level 5 style when they said, "I don't know where we should take this company, but I do know that if I start with the right people, ask them the right questions, and engage them in vigorous debate, we will find a way to make this company great." (p.45)
  • Their moral code requires building excellence for its own sake, and you're no more likely to change that with a compensation package than you're likely to affect whether they breathe. (p.50)
  • The Nucor system did not aim to turn lazy people into hard workers, but to create an environment where hardworking people would thrive and lazy workers would either jump or get thrown right off the bus. (p.51)
  • Practical Discipline #1: When in doubt, don't hire-keep looking. (p.54)
  • Practical Discipline #2: When you know you need to make a people change, act. (p.56)
  • Practical Discipline #3: Put your best people on your biggest opportunities, not your biggest problems. (p.58)
  • Adherence to the idea of "first who" might be the closest link between a great company and a great life. For no matter what we achieve, if we don't spend the vast majority of our time with people we love and respect, we cannot possibly have a great life. But if we spend the vast majority of our time with people we love and respect-people we really enjoy being on the bus with and who will never disappoint us- then we will almost certainly have a great life, no matter where the bus goes. The people we interviewed from the good-to-great companies clearly loved what they did, largely because they loved who they did it with. (p.62)

Confront the brutal facts

  • If you start with an honest and diligent effort to determine the truth of the situation, the right decisions often become self-evident. Not always, of course, but often. And even if all decisions do not become self-evident, one thing is certain: You absolutely cannot make a series of good decisions without first confronting the brutal facts. (p.70)
  • But the evidence from a slew of respectable articles written at the time suggests that Ash turned a blind eye to any reality inconsistent with his own vision of the world. (p.71)
  • If you have the right people on the bus, they will be self-motivated. The real question then becomes: How do you manage in such a way as not to de-motivate people? And one of the single most de-motivating actions you can take is to hold out false hopes, soon to be swept away by events. (p.74)
  • Like Wurtzel, leaders in each of the good-to-great transitions operated with a somewhat Socratic style. Furthermore, they used questions for one and only one reason: to gain understanding. (p.75)
  • Like Nucor, all the good-to-great companies had a penchant for intense dialogue. Phrases like "loud debate", "heated discussions", and "healthy conflict" pepperedthe articles and interivew transcripts from all the companies. They didn't use discussion as a sham process to let people "have their say" so that they could "buy in" to a predetermined decission. The process were more like a heated scientific debate, with people enganged in a search for the best answers. (p.77)
  • Another long pause, and more walking. Then he turned to me and said, "This is a very important lesson. You must never confuse faith that you will prevail in the end- which you can never afford to lose-with the discipline to confront the most brutal facts of your current reality, whatever they might be." (p.85)
  • The good-to-great leaders were able to strip away so much noise and clutter and just focus on the few things that would have the greatest impact. They were able to do so in large part because they operated from both sides of the Stockdale Paradox, never letting one side overshadow the other. (p.87)

The Hedgehog Concept

  • Hedgehog, on the other hand, simplify a complex world into a single organizing idea, a basic principle that unifies and guides everything. It doesn't matter how complex the world, a hedgehog reduces all challenges and dilemma to simple - indeed almost simplistic - hedgehog ideas. For a hedgehog, anything that doest not somehow relate to the hedgehog idea holds no relevance. (p.91)
  • More precisely, a Hedgehog Concept is a simple, crystalline concept that flows fiom deep understanding about the intersection of the following three circles
    1. What you can be the best in the world a t (and, equally important, what you cannot be the best in the world at).
    2. What drives your economic engine.
    3. What you are deeply passionate about.
  • Every company would like to be the best at something, but few actually understand-with piercing insight and egoless clarity-what they actually have the potential to be the best at and, just as important, what they cannot be the best at. And it is this distinction that stands as one of the primary contrasts between the good-to-great companies and the comparison companies. (p.98)
  • Clearly, a Hedgehog Concept is not the same as a core competence. You can have competence at something but not necessarily have the potential to be the best in the world at it. (p.100)
  • Think about it in terms of the following question: I f you could pick one and only one ratio-profit per x (or, in the sociul sector, cash flow per x)-to systematically increase over time, what x would have the greatest and most sustainable impact on your economic engine? We learned that this single question leads to profound insight into the inner workings of an organization's economics. (p.104)
  • You can't manufacture passion or "motivate" people to feel passionate. You can only discover what ignites your passion and the passions of those around you. (p.109)
  • This doesn't mean, however, that you have to be passionate about the mechanics of the business per se (although you might be). The passion circle can be focused equally on what the company stands for. For example, the Fannie Mae people were not passionate about the mechanical process of packaging mortgages into market securities. But they were terrifically motivated by the whole idea of helping people of all classes, backgrounds, and races realize the American dream of owning their home. (p.110)
  • Like scientific insight, a Hedgehog Concept simplifies a complex world and makes decisions much easier. But while it has crystalline clarity and elegant simplicity once you have it, getting the concept can be devilishly difficult and takes time. Recognize that getting a Hedgehog Concept is an inherently iterative process, not an event. (p.114)

A Culture of Discipline

  • He understood that the purpose of bureaucracy is to compensate for incompetence and lack of discipline-a problem that largely goes away if you have the right people in the first place. (p.121)
  • Avoid bureaucracy and hierarchy and instead create a culture of discipline. When you put these two complementary forces together-a culture of discipline with an ethic of entrepreneurship-you get a magical alchemy of superior performance and sustained results. (p.121)
  • On the one hand, Abbott recruited entrepreneurial leaders and gave them freedom to determine the best path to achieving their objectives. O n the other hand, individuals had to commit fully to the Abbott system and were held rigorously accountable for their objectives. They had freedom, but freedom within a framework. (p.123)
  • The good-to-great companies built a consistent system with clear constraints, but they also gave people freedom and responsibility within the framework of that system. The hired self-disciplined people who didn't need to be managed, and then managed the system, not the people. (p.125)
  • Indeed, discipline by itself will not produce great results. We find plenty of organizations in history that had tremendous discipline and that marched right into disaster, with precision and in nicely formed lines. No, the point is to first get self-disciplined people who engage in very rigorous thinking, who then take disciplined action within the framework of a consistent system designed around the Hedgehog Concept. (p.126)
  • The point is that rinsing his cottage cheese was simply one more small step that he believed would make him just that much better, one more small step added to all the other small steps to create a consistent program of superdiscipline. (p.127)
  • Yes, discipline is essential for great results, but disciplined action without disciplined understanding of the three circles cannot produce sustained great results. (p.133)

Technology Accelerators

  • In every good-to-great case, we found technological sophistication. However, it was never technology per se, but the pioneering application of carefully selected technologies. Every good-to-great company became a pioneer in the application of technology, but the technologies themselves varied greatly. (p.148)
  • This brings us to the central point of the chapter. When used right, technology becomes an accelerator of momentum, not a creator of it. The good-to-great companies never began their transitions with pioneering technology, for the simple reason that you cannot make good use of technology until you know which technologies are relevant. And which are those ? Those - and only those - that link directly to the three intersecting circles of Hedgehog Concept. (p.152)
  • One Nucor executive summed up, "Twenty percent of our success is the new technology that we embrace . . . [but] eighty percent of our success is in the culture of our company." (p.156)
  • Those who built the good-to-great companies weren't motivated by fear. They weren't driven by fear of what they didn't understand. They weren't driven by fear of looking like a chump. They weren't driven by fear of watching others hit it big while they didn't. They weren't driven by the fear of being hammered by the competition. (p.160)
  • No technology can make you Level 5. No technology can turn the wrong people into the right people. No technology can instill the discipline to confront brutal facts of reality, nor can it instill unwavering faith. No technology can supplant the need for deep understanding of the three circles and the translation of that understanding into a simple Hedgehog Concept. No technology can create a culture of discipline. (p.161)

The Flywheel and the doom

  • But what does it look like from the chicken's point of view? It's a completely different story. While the world ignored this dormant-looking egg, the chicken was evolving, growing, developing, incubating. From the chicken's point of view, cracking the egg is simply one more step in a long chain of steps leading up to that moment- a big step, to be sure, but hardly the radical, single-step transformation it looks like to those watching from outside the egg. (p.168)
  • Like the Wooden dynasty, lasting transformations from good to great follow a general pattern of buildup followed by breakthrough. In some cases, the buildup-to-breakthrough stage takes a long time, in other cases, a shorter time. (p.172)
  • "We presented what we were doing in such a way that people saw our accomplishments," said Herring. "We tried to bring our plans to successful conclusion step by step, so that the mass of people would gain confidence from the successes, not just the words." (p.176)
  • When people begin to feel the magic of momentum- when they begin to see tangible results, when they can feel the flywheel beginning to build speed-that's when the bulk of people line up to throw their shoulders against the wheel and push. (p.178)
  • Why did the good-to-great companies have substantially higher success rate with acquisitions, especially major acquisitions ? The key to their success was that their big acquisitions generaly took place after development of the Hedgehog Concept and after the flywheel had built significant momentum. They used acquisitions as an accelerator of flywheel momentum, not a creator of it. (p.180)
  • Ultimately, to reach breakthrough means having the discipline to make a series of good decisions consistent with your Hedgehog Concept-disciplined action, following from disciplined people who exercise disciplined thought. That's it. That's the essence of the breakthrough process. (p.184)

From Good to Great to Built to Last

  • It didn't really matter what the company made in the very early days, as long as it made a technical contribution and would enable Hewlett and Packard to build a company together and with other like-minded people. It was the ultimate "first who . . . then what" start-up. (p.192)
  • Hewlett and Packard exemplify a key "extra dimension ' that helped elevate their company to the elite status of an enduring great company, a vital dimension for making the transition from good to great to built to last. That extra dimension is a guiding philosophy or a "core ideology," which consists of core values and a core purpose (reason for being beyond just making money). (p.194)
  • The point is not what core values you have, but that you have core values at all, that you know what they are, that you build them explicitly into the organization, and that you preserve them over time. (p.195)
  • I like to think of Good to Great as providing the core ideas for getting a flywheel turning from buildup through breakthrough, while Built to Last outlines the core ideas for keeping a flywheel accelerating long into the future and elevating a company to iconic stature (p.197)
  • In Built to Last, we identified BHAGs as a key way to stimulate progress while preserving the core. A BHAG (pronounced bee-hag, short for "Big Hairy Audacious Goal") is a huge and daunting goal-like a big mountain to climb. It is clear, compelling, and people "get it" right away. A BHAG serves as a unifying focal point of effort, galvanizing people and creating team spirit as people strive toward a finish line.  (p.202)
  • The three circle and BHAG framework provides one powerful example of how the ideas from the two studies link together, and I'd like to offer it here as a practical tool for creating this link within your own organization. (p.204)

Thursday, December 15, 2011

Skimming : Concepts in Enterprise Resource Planning

Concepts in Enterprise Resource Planning

Business Functions and Business Processes

  • Most companies have four main functional areas of operation: Marketing and Sales (M/S), Supply Chain Management (SCM), Accounting and Finance (A/F), and Human Resources (HR). (p.2)
  • Recently, managers have begun to think in terms of business processes rather than business functions. Recall that a business process is a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer. ... Thinking in terms of business processes helps managers to look at their organization from the customer’s perspective. (p.3)
  • Sharing data effectively and efficiently between and within functional areas leads to more efficient business processes. Information systems can be designed so that functional areas share data. These systems are called integrated information systems. (p.4)

The Development of Enterprise Resource Planning Systems

  • Current ERP systems evolved as a result of three things (1) the advancement of hardware and software technology (computing power, memory, and communications) needed to support the system, (2) the development of a vision of integrated information systems, and (3) the reengineering of companies to shift from a functional focus to a business process focus. (p.19)
  • The concept of an integrated information system took shape on the factory floor. Manufacturing software developed during the 1960s and 1970s, evolving from simple inventory- tracking systems to material requirements planning (MRP) software. (p.20)
  • The functional business model illustrates the concept of silos of information, which limit the exchange of information between the lower operating levels. (p.22)
  • In a process-oriented company, the flow of information and management activity is “horizontal” across functions, in line with the flow of materials and products. This horizontal flow promotes flexibility and rapid decision making. (p.23)
  • Any large software implementation is challenging—and ERP systems are no exception. There are countless examples of large implementations failing, and it’s easy to understand why. Many different departments are involved, as are many users of the system, programmers, systems analysts, and other personnel. Without top management commitment, large projects are doomed to fail. (p.30)
  • ERP packages imply, by their design, a certain way of doing business, and they require users to follow that way of doing business. Some of a business’s operations, and some segments of its operations, might not be a good match with the constraints inherent in ERP. Therefore, it is imperative for a business to analyze its own business strategy, organization, culture, and operation before choosing an ERP approach. (p.34)
  • Sometimes, a company is not ready for ERP. In many cases, ERP implementation difficulties result when management does not fully understand its current business processes and cannot make implementation decisions in a timely manner. (p.35)
  • Usually, a bumpy rollout and low ROI are caused by people problems and misguided expectations, not computer malfunctions. ... Many ERP implementation experts stress the importance of proper education and training for both employees and managers. Most people will naturally resist changing the way they do their jobs. Many analysts have noted that active top management support is crucial for successful acceptance and implementation of such company-wide changes. (p.37)

Marketing Information Systems and Sales Order Process

  • When customers place an order, they usually ask for a delivery date. To get a shipping date, the in-office clerk must contact the warehouse supervisor and ask whether the customer’s order can be shipped from inventory, or whether shipping will be delayed until a future production run is delivered to the warehouse. (p.51)
  • Next, the clerk checks the customer’s credit status. ... The form goes to Accounting, where accountants perform the credit check and then return the credit-check form showing the customer’s credit limit. (p.51)
  • The program adjusts inventory level figures on a daily basis, using production records (showing what has been added to the warehouse), packing lists (showing what has been shipped from the warehouse), and any additional sources of data (such as shipping cases that have been opened to pull display boxes). Each month the warehouse staff conducts a physical inventory count to compare the actual inventory on hand with what the inventory records in the PC database show. (p.52)
  • In other situations, the customer may want a partial shipment consisting of whatever is on hand, with the rest shipped when it becomes available, which is known as a backorder. Or, the customer might prefer to take the goods on hand, cancel the balance of the order, and place a new order later. (p.52)
  • The Accounting department loads the data into the PC-based accounting program; then, clerks manually make adjustments for partial shipments and any other changes that have occurred during the order process. (p.53)
  • When the SAP ERP system is instructed to save a sales order, it performs inventory sourcing—that is, it carries out checks to ensure that the customer’s sales order can be delivered on the requested delivery date.
  • When the sales order is ready to be processed by the warehouse, a delivery document will be created with its own unique document number, which the system will link to the sales order document. Finally, when the bill (invoice) is prepared for the customer, the bill’s unique number (called the invoice number) will be created and related to all the other numbers associated with the sales order. (p.61)
  • With the goal of providing “a single face to the customer,” the basic principle behind CRM is that any employee in contact with the customer should have access to all information about past interactions with the customer. (p.65)

Production and Supply Chain Management Information System

  • The goal of production planning is to schedule production economically, so that the company can ship goods to customers by the promised delivery dates in the most cost- efficient manner. (p.78)
  • Production planners are employees who interact with the inventory system and the sales forecast to figure out how much to produce. They follow three important principles:
    • Work from a sales forecast and current inventory levels to create an “aggregate” (“combined”) production plan for all products. Aggregate production plans help to simplify the planning process in two ways: First, plans are made for groups of related products rather than for individual products. Second, the time increment used in planning is frequently a month or a quarter, while the production plans that will actually be executed operate on a daily or weekly basis. Aggregate plans should consider the available capacity in the facility.
    • Break down the aggregate plan into more specific production plans for individual products and smaller time intervals.
    • Use the production plan to determine raw material requirements.
  • One simple forecasting technique is to use a prior period’s sales and then adjust those figures for current conditions. (p.85)
  • A sales and operations plan is developed from a sales forecast and determines how Manufacturing can efficiently produce enough goods to meet projected sales. (p.86)
  • The demand management step of the production planning process links the sales and operations planning process with the detailed scheduling and materials requirements planning processes. The output of the demand management process is the master produc-tion schedule (MPS), which is the production plan for all finished goods. (p.95)
  • Materials requirements planning (MRP) is the process that determines the required quantity and timing of the production or purchase of subassemblies and raw materials needed to support the MPS. The MRP process answers the questions, “What quantities of raw materials should we order so we can meet that level of production?” and “When should these materials be ordered?” (p.96)
  • A key decision in detailed production scheduling is how long to make the production runs for each product. Longer production runs mean that fewer machine setups are required, reducing the production costs and increasing the effective capacity of the equipment. On the other hand, shorter production runs can be used to lower the inventory levels for finished products. Thus, the production run length requires a balance between setup costs and holding costs to minimize total costs to the company. (p.104)

Accounting in ERP Systems

  • Accounting activities can generally be classified as either financial accounting or managerial accounting. (p.118)
  • Common financial statements include balance sheets and income statements. A balance sheet is a good overview of a company’s financial health at a point in time . The income statement, or profit and loss (P&L) statement, shows the company’s sales, cost of sales, and the profit or loss for a period of time (typically a quarter or year). (p.119)
  • Managerial accounting deals with determining the costs and profitability of the company’s activities. While the information in a company’s balance sheet and income statement shows whether a firm is making an overall profit, the goal of managerial accounting is to provide managers with detailed information that allows them to determine the profitability of a particular product, sales region, or marketing campaign. (p.120)
  • A manufactured item’s cost has three elements: the cost of raw materials, the cost of labor employed directly in the production of the item, and all other costs, which are commonly called overhead. Overhead costs include factory utilities, general factory labor (such as custodians or security guards), managers’ salaries, storage, insurance, and other manufacturing-related costs. (p.128)
  • Materials and labor are often called direct costs because the constituent amounts of each in a finished product can be estimated fairly accurately. On the other hand, the overhead items, called indirect costs, are difficult to associate with a specific product or a batch of specific products. In other words, the cause-and-effect relationship between an overhead cost (such as the cost of heat and light) and making a particular product (NRG-A bars) is difficult to establish. (p.128)
  • Standard costs for a product are established by studying historical direct and indirect cost patterns in a company and taking into account the effects of current manufacturing changes. At the end of an accounting period, if actual costs differ from standard costs, adjustments to the accounts must be made to show the cost of inventory owned on the balance sheet and the cost of inventory sold on the income statement. (p.129)
  • The differences between actual costs and standard costs are called cost variances. Note that cost variances arise with both direct and indirect costs. These variances are calculated by comparing actual expenses for material, labor, utili-ties, rent, and so on, with predicted standard costs. (p.129)
  • A trend in inventory cost accounting is toward activity-based costing (ABC). In ABC, accountants identify activities associated with overhead cost generation, and then keep records on the costs and on the activities. The activities are viewed as causes (drivers) of the overhead costs (p.132)

ERP and Electronic Commerce

  • When a company receives an order through its Web site, the company should not merely file or print orders for later handling. The orders should be efficiently fed into the company’s marketing, manufacturing, shipping, and accounting systems—a series of steps sometimes called back-office processing. (p.215)
  • Recent studies on back-office systems concluded that an attractive Web site does not provide enough benefit on its own for an e-commerce business to stay afloat. The conventional back-office systems must be in place and operating correctly for the business to flourish. As with any kind of business, effective infrastructure is key for e-commerce success. (p.216)

Tuesday, November 29, 2011

Skimming : Exporting Software from Indonesia

The Electronic Journal of Information Systems in Developing Countries, Vol 13 (2003)

  • The Indonesian market mainly demands packaged software at a current volume of US$ 80.07 million in 2001. The fact that almost all standard software applications are available as pirated copies, makes a precise estimation of “demand”, expressed in US$ value impossible.
  • The only markets free from pirated software are those for customized products and for turn key solutions for larger enterprises such as Banks, Government Institutions and Industrial corporations.
  • The important factor here is that due to a lack of expertise within the customer’s organizations, the request for software comes through the help of International Business consultants. Many companies do not really identify the need for IT upgrades. Usually, the problems start at the business level. That is where consultants are called for help.
  • Today, without the active involvement of Habibie, BPPT remains a half empty 30 storey building in the middle of Jakarta’s business district, without any clearly defined role. The policy for software development is now being made within the Ministry of Trade and Industry.
  • Most local Software Companies are basically official or unofficial Microsoft implementers and they use Microsoft products up to the very limit of their competency. For instance, entire banking systems run on NT, knowing that NT is not exactly the most secure platform available.
  • The most prominent software developer in this field is Nomad Software Solutions which is made up by some 11 Irish nationals; all graduated IT specialists. The company specializes in software outsourcing with a focus on Java based applications. The company employs a self trained staff of 74 Indonesian University Graduates. The main reason for working in Indonesia is the favorable structure of cost for software programmers. At a third of the price of her Indian counterpart, the Indonesian software engineer produces excellent code, once trained intensively.
  • Another contender for successful software outsourcing in Indonesia is PT Sigma, which is the owner of Bali Camp. The company does most of its business crunching code for back-end systems for the financial sector (it also once developed an Indonesian spell checker for Microsoft).
  • Since Bandung (200 km away from Jakarta) is host to the largest number of IT Universities, the city has been chosen by the Government to start with the pilot project of a software center.
  • Another reason for choosing Bandung is the fact because of its proximity to a number of technical institutes, like the renowned Bandung Institute of Technology (ITB). The hope is that Bandung would become a world class IT center by 2025.

Skimming : From Underdogs to Tigers

From Underdogs to Tigers: The Rise and Growth of the Software Industry in Brazil, China, India, Ireland, and Israel

The Indian Software Industries

  • The phenomenal success and growth of the Indian software industry is quite extraordinary when one considers that India is a very poor country with poor infrastructural investment (generally and in IT) and an illiteracy rate over 33 percent. (p.13)

Early Entry - pre-1984

  • The single most dramatic event of this period, however, was the departure of IBM in protest against the FERA rules, which required it to dilute its equity holding to 40 percent in 1977. The departure created an import substituting opportunity for domestic manufacturers of computers, and a demand for programmers that could write the proprietary software to run computers produced by domestic hardware firms. (p.22)
  • The exit of IBM also provided an opportunity for sales of (micro) computers by other foreign hardware manufacturers. Foreign companies such as Burroughs depended upon software programmers in India to write software conversion programs which could be used by non-Burroughs (mostly IBM) clients in order to switch to Burroughs computer systems. (p.22)
  • The big achievement of Indian firms operating in this period was that they developed the ability to compose a team of talented software programmers to deliver highly bespoke (technical) services on a variety of software systems to large foreign firms. Their relative specialization was porting data from one platform to another and maintaining legacy systems on old mainframe platforms. (p.23)

New Entry and Experimentation: 1985–91

  • Thus, the shift to networked computing in the West opened up a huge new source of demand for software services. These developments created a huge demand for software services in addition to the maintenance of legacy mainframe systems, the speciality of several Indian firms. There was demand for customized software that would allow firms to migrate from mainframe to networked systems and install and maintain enterprise resource systems. (p.24)
  • Indian firms, by now, had considerable experience working with the migration of data across different systems. Also, the increased credibility of Indian software professionals in the Western world created a positive externality that helped new entrants during this period. More importantly, it was in this period that foreign firms first realized the large cost advantage of employing Indian programmers. (p.24)

Imitative Entry and Financial Liberalization: 1992–99

  • The liberalization of financial flows from 1992 meant that foreign capital could move in relatively easily. This was particularly opportune for the Indian software industry. … The experience of COSL and TI had demonstrated that an Indian subsidiary of an MNC could operate as a low-cost outsourcing center for global software needs. … Therefore, software was first developed at the Indian subsidiary and then installed on-site by teams of Indian software professionals. (pl.26-27)
  • The dramatically decreasing cost of telecommunications access and its vast outreach due to the STPI scheme also meant that offshore operations came within the reach of smaller firms as well. Desai argues that offshore operations became popular as many firms switched to web-based delivery made possible by the STPI scheme. (p.27)
  • By the end of this period of unfettered demand, the Indian software industry had built both a general capability (for outsourced service delivery) and some firm-specific capabilities (in particular domains and software process management). (p.29)

Consolidation and Slowdown: 2000 Onwards

  • The slowdown in demand came on the heels of the dot com crash and the recession in the United States, the industry’s largest market. (p.30)
  • The outsourced business model required a certain organizational capability in human resource management and in software process management to ensure reliability of the service product.(p.33)

  • Firms responded in some measure by adopting procedural norms that would make their software development immune to such attrition. One of these was to rely heavily on documentation and another was to start using proprietary tools wherever possible. New organizational structures evolved in order to keep a mix of new and old employees as an informal deputizing system. (p.35)
  • The growing scale and offshore component of projects facilitated a careful splitting of tasks. Thus, in many offshore projects, process control allowed something like a ‘Babbage effect’ in the growing specialization of the industry in outsourced services. The best quality programmer could be used for suitable tasks while less able/experienced programmers could be assigned the lower-level tasks, each paid according to their productivity (p.35)
  • However, it is the winning combination of particular organizational capabilities and new business models that differentiate Indian software firms from other software providers in the global marketplace, allowing them to hold a fifth of the global market for custom software. (p.36)

The Irish Software Industry

  • Key to this turnaround, and also to the rise of the Irish software industry, was the implementation of a highly successful policy of foreign direct investment, which has resulted in Ireland becoming home to over 1,050 foreign companies, 46 percent of US origin. (p.42)
  • The origins of the IT industry in Ireland can be traced back to this time when the IDA made the decision to selectively target companies in potentially high-growth, high-tech sectors. This strategy resulted in a wave of foreign investment in the 1970s in electronics and computer hardware with Digital Equipment Corporation becoming the first company to establish a mini-computer manufacturing operation in Ireland in 1971 (p.43)
  • The success of the IDA in attracting both Microsoft and Lotus Development (now part of IBM) to Dublin in 1985 had a catalytic effect on the development of the Irish software industry. Both companies produce off-the-shelf products for mass markets and their Irish operations were initially responsible for the manufacturing and distribution of these products, including tasks such as duplicating disks, printing manuals, and assembling shrink- wrapped packages. (p.46)
  • Over time Ireland, unlike India, did not follow the trajectory of providing international software services, but rather developed a range of firms which sell software products in international niche markets in systems software and enterprise applications. (p.49)
  • Several Irish software companies started out by providing ‘bespoke’ or custom services to businesses, expanding this into consultancy kits and then products, which many then succeeded in exporting. (p.49)
  • Other Irish software companies came into existence either as a result of government initiatives or contracts (including spin-offs from state-owned entities) or when firms in other industries, such as telecommunications or computer hardware, spun off their software divisions. (p.50)
  • Several of Ireland’s most successful indigenous companies have their origins in the university environment. ...
    Ireland’s most successful indigenous software company, IONA Technologies can trace its roots to the EU Esprit grants for distributed computing research in the Computer Science Department of Trinity College, Dublin. (p.51)
  • The mid-1990s saw an upsurge in entrepreneurial start-ups many of whom are product oriented from the outset, focused on international markets, have obtained VC funding, and have the fortune to avail the managerial expertise of seasoned software industry veterans. (p.52)
  • Until 1990, indigenous firms were largely reliant on the provision of software services (mainly bespoke software development), but the mid-1990s, saw a major switch taking place from services to products, and from servicing the local market to exporting. (p.53)
  • As indigenous companies increasingly move toward product provision, they do so in niche (or vertical) markets. O’Malley and O’Gorman [6, p. 29] state that ‘indigenous producers of software products and services to a lesser extent, usually follow a strategy of specialization in market niches’. The reasons for this are twofold. First, this specialization implies firms can succeed without having to be very large, an important consideration given the limited size of the domestic market. Second, there can be relatively lower barriers associated with entering vertical markets, which often sees firms starting out by providing a custom-based product for a single customer and using this success to secure other customers in the same niche (often in Ireland or the United Kingdom), while at the same time developing their application into a generic product suitable for export. (p.57-58)
  • The Irish government did not set out with the express intention of developing an indigenous software industry, but they were highly successful in luring software MNCs and in generating the right input factors, notably overhauling the telecommunications system, creating a favorable business (tax) environment, and investing heavily in the national stock of human capital, particularly in science and technology disciplines. (p.67)

The Israeli Software Industry

  • Unlike the Indian software industry, the Israeli industry is product based and R&D intensive, with its four undisputed leaders—Amdocs, Comverse, Mercury Interactive, and Checkpoint Software Technologies—either inventing or leading their market niches. (p.72)
  • Indeed, software is just the latest manifestation of Israel’s comparative advantage in R&D. A comparative advantage that is evident when one compares Israel’s patents profile, one of the best proxies of industrial innovation, with other emerging countries. Not only Israeli organizations patent much more than their counterparts, but the quality of their patents and their scientific linkage is much higher (p.73)
  • Israel has always had strong academic involvement in industrial R&D (p.76)
  • The official history of IT and computing in Israel began before the creation of the Israeli state. In 1947, the advisory committee of the Applied Mathematics Department of the Weitzmann Institute (then known as the Seiff Institute), consisting of Albert Einstein, Hans Kramer, Robert Oppenheimer, John Von Neumann, and Abram Pais, recommended that the Institute build an electronic digital computer, making Israel the first state-to-be to commit itself to computing (p.79)
  • However, the rapid expansion of defense R&D and the rapid accumulation of IT skills by both university graduates and graduates of the military technological units created local demand for IT usage along with the knowledge base to supply it. (p.79)
  • All of these companies have been able to undertake large-scale R&D efforts due to R&D grants given by the Office of the Chief Scientist (OCS) of the Ministry of Trade and Industry (now Trade, Industry, and Employment) after the recognition of software as an industry in 1985. (p.80)
  • Israeli firms established during this period specialized in products that solved problems connected with IT usage. Therefore, it is not surprising that the original data security companies (for which Israel is world-renowned) were established at this time. (p.83)
  • As noted earlier, software is the latest manifestation of Israel’s comparative advantage in R&D. This comparative advantage lies in the high levels of skills and talent of Israeli scientists and engineers, and the relative paucity of other types of natural advantages, such as natural resources. (p.86)
  • But perhaps the most crucial decisions made in these years were the enactment of the R&D Law in 1984 and the recognition of software as an industrial sector in 1985. One of the main provisions of the R&D Law was that the OCS would not have a limited annual budget for its R&D grant scheme. Therefore, all legitimate and feasible proposals for R&D product-oriented projects would be sponsored. (p.89)

The Brazilian Software Industry

  • Lacking familiarity with English, a key export language, these large countries rely upon a strong local demand for the production of software through their economies’ commitment to Information and Communication Technologies (ICT). (p.103)
  • As suggested by Table 5.3 the leading activity in the software industry in Brazil is system integration, followed by processing services, and hardware and software support. (p.106)
  • Another important characteristic of the industry is the prevalence of government software firms among the major players. These government firms originated before the 1980s. (p.109)
  • In the decades preceding the 1990s, IT users, private and public sector alike, perceived software development as an essentially auxiliary activity performed in-house by IT-user organizations and hardware producers. That is, software production activity did not have either a corporate or an industrial identity and was mostly an afterthought, a marginal activity within firms. (p.111)
  • The Brazilian Payment System (SPB) is a particularly good example of how idiosyncratic local needs can spur the development of capabilities. In 1999, the Brazilian Central Bank decided that, by 2002, Brazil should have installed an advanced payment system in accordance with the most up-to-date Internet technology recommended by the Bank for International Settlements. (p.115)
  • Start-ups are a third area of interest in telecom in particular for cell phones. Demand for cell phones has grown at a double-digit rate over the past few years, reaching thirty-three million active phones by the end of 2002 and is expected to continue to grow in the future. (p.117)
  • Another area where the Brazilian government is a world leader is in the adoption of ‘free’ software such as Linux. At least eleven Brazilian cities have passed laws giving preference to or requiring the use of ‘software libre’ and a number of other municipalities, states, and the national government have considered similar legislation. (p.117)
  • The Brazilian government is very large, with sophisticated needs and requirements in terms of information processing. To meet these needs, the strategy has been to create public firms that supply software and IT services across states and sometimes across the entire country. These companies have a combined employment of over 10,000 and have developed a rich pool of competencies. This effort has made Brazil one of the leading countries in this area, with important flagship projects such as electronic voting and electronic tax declarations. (p.117)
  • Through the mid-1990s, Microsiga and Datasul, two of the largest Brazilian software firms, had the market to themselves. But liberalization attracted giants such as SAP and BAAN to the business opportunity the Brazilian market presented. While these global producers have quickly taken over the large software firm market (mostly from internal development, as this segment had never been the major target of local developers), the battle now is over ERP systems tailored to cater to medium-sized companies. (p.118)
  • Brazil is attracting the interest of leading Indian services firms such as Tata Consulting Services, which announced a joint venture with TBA, a local firm, to create a software development operation expected to grow to 3,000 professionals in five years. In early 2004, it was the first software firm in Brazil to receive CMM level 5 certification. (p.121)
  • Industry prospects changed when at least two conditions were established. One of these is the presence of lead domestic client sectors for software firms with demands close to those of leading international firms. These clients provide opportunities for learning and competence deepening similar to those found when exporting to foreign competitive firms. The examples of banking and telecom explored in Section 5 illustrate this dynamism. But the opportunity to learn is not always enough. The second required condition is the presence of competition and selection mechanisms, which induce successful firms to structure capabilities, while winnowing out firms that fail to learn. (p.122)
  • This focus of the software sector on the domestic market may also have important multiplying effects for Brazil. Recent studies at the company and country levels have shown that investment in information technology is positively related to corporate and national economic performance [48–50]. This is especially important for sectors that Kraemer and Dedrick [48] refer to as ‘production close to use’ sectors, where IT use is very close to or overlaps with production.

The Chineese Software Industry

  • China’s software firms can be loosely classified into two groups. The first, which includes many of China’s largest software firms, are systems integration (SI) firms. Systems integration involves large custom projects where the software firms provide a combination of hardware and software and services, including customized software. ...
    The second type of firm focuses primarily on product development, although for various reasons, also ended up doing SI and services. (p.133)
  • As with the Brazilian software industry, the Chinese software industry relies heavily on the huge market of users and domestic producers. The rapid and fairly diverse industrial growth of China has led to a large surge in domestic demand. (p.139)
  • In addition to having a direct influence on software R&D and the formation of software firms, the government was also deeply involved in how the hardware industry grew. This has ramifications for software firms in two ways. First, some of the larger hardware firms have developed software arms, or are combining software and hardware in systems integration activities. Second, some hardware manufacturers provide business to software firms, with needs for software (to run on their products) ranging from desktop applications to embedded software. (p.141)
  • In 1999, CASS designed its own Hopen embedded operating system, and has leveraged this to great effect in the electronics manufacturing sector.(p.142)
  • While government procurement in some product markets may have been more beneficial by way of getting some firms started, too much support may make them wholly dependent. Systems integrators that have relied too much on large government contracts may not be able to foster other customers, and so their growth may be limited in the future. (p.146)
  • Recently, the Hopen system was further developed as the NUWA project,21 in anticipation of the increasing market for embedded software. The NUWA project focuses on developing the NUWA-Hopen OS as a basic embedded software platform to work across a variety of information appliances. (p.151)
  • Since software is critical to their success, Huawei is making strategic investments in software, including a large development center with over 400 engineers in Bangalore. They set up shop in Bangalore as opposed to developing their software in China suggesting that in the medium term at least, Chinese software process capability, even in embedded applications, may not be as good as that of India’s. Our interviews with Huawei executives in Bangalore showed that they believed that India’s process capability was superior to China’s, even though the Chinese were more advanced in terms of telecoms domain knowledge and had at least as much knowledge of software theory. (p.151)
  • In 2000, the largest user of ERPs was the manufacturing industry, at 68.2 percent of the total ERP market, followed by the distribution, transportation, telecom, and health industries. (p.152)
  • Many enterprises value service more than anything else, and require ERP vendors to have strong customer support, something Chinese vendors are more prepared to do than multinationals, which would rather just sell a product with minimal additional cost of localization. (p.153)
  • Chinese software firms compete heavily with each other at the ‘lower’ end of areas such as office automation and basic ERPs, but revenues are harder to build up because these clients are less sophisticated or well-off and tend to require uniquely developed projects or much handholding (i.e. consulting or customer service) which works against the software firms achieving scale economies. (p.153)
  • These numbers provide a powerful reason why so many software companies— product firms and systems integrators alike—are doing systems integration. In our interviews, many firms, including product firms, noted that it was difficult to survive on products alone. Even Digital China, the software arm of Legend, focused on SI in order to gain additional revenue (as related to us by one of its executives). (p.154)
  • One problem is that even though local software firms have a lot of work requiring highly customized, domestic oriented systems and systems integration work, it is difficult to derive scale economies in such uneven markets. A second problem that Chinese software firms face is the problem of high competition. Many local firms compete with each other at the low end. At the higher end of the market in certain sectors, there is also the increasing presence of foreign firms. (p.155)
  • However, while Chinese software workers have the theoretical knowledge to handle the basic tasks and are fairly sophisticated analytically, they lack the software process skills of Indian software workers. (p.156)
  • Various younger companies such as Tangram, which makes educational system software, and Intrinsic Technology, which makes mobile device software, noted that it was difficult to develop and grow because they lacked managers who could implement the company’s vision. (p.157)
  • Piracy is also often mentioned as something that continues to hurt the software industry, and is now being officially recognized as a problem. Firms that we interviewed recognized that many software pirates are simply firms or individuals who cannot afford the software, and whom the state may be unwilling to penalize. (p.158)
  • At least three distinct strategies appeared to be adopted in order to address the need to survive and grow under these conditions. The first strategy is that of specialization. Specialization is increasingly seen in the better product firms such as Kingdee, Kingstar, and Red Flag. Specialization is one way of deepening competencies and differentiating oneself from other firms that cannot do so. (p.159)

Friday, November 18, 2011

Phantom and Casper scraps Internet Banking

Awal tahun ini, mas Ariya merilis produk barunya – PhantomJS.
PhantomJS is a headless WebKit with JavaScript API. It has fast and native support for various web standards: DOM handling, CSS selector, JSON, Canvas, and SVG. PhantomJS is an optimal solution for fast headless testing, site scraping, pages capture, SVG renderer, network monitoring and many other use cases.
Wow... programmatic web browser! Bisa browsing ke website manapun secara otomatis. Dan karena PhantomJS dibangun di atas WebKit, kita bisa melakukan DOM scripting seperti di browser sungguhan. PhantomJS is indeed a web browser.

Setelah ngalamun sebentar, akhirnya muncul ide untuk studi kasus eksplorasi. Kita akan mem-parsing catatan Mutasi Rekening dari website internet banking secara otomatis. Ini akan berguna di aplikasi e-commerce untuk memeriksa status pembayaran konsumen. Di Indonesia masih belum ada Payment Gateway yang bisa memproses transaksi secara otomatis. PayPal dan Kartu Kredit kurang digemari karena beban fee yang memberatkan. Cara yang paling ekonomis adalah dengan transfer rekening bank.

Cara ini membutuhkan dedicated staff yang bertugas memeriksa apakah pembayaran telah masuk ke rekening merchant. Dengan tekun staff ini akan me-refresh layar situs internet banking dan meng-input data ke Order Fulfillment System. Kasian bener, hari genee masih input manual. Mari kita pekerjakan PhantomJS untuk tugas ini.

Skenario Browsing

Sebelum mengimplementasikan site scrapper, kita perlu mempelajari dulu bagaimana urutan langkah bernavigasi di situs target. Saya memilih BNI sebagai bahan eksplorasi. Prinsip yang sama dapat diterapkan untuk bank lain. Skenario browsing untuk mendapatkan data Mutasi Rekening adalah sebagai berikut :

Screen Deskripsi
Browse ke

Action :
  • Isikan username dan password
  • Submit form
Setelah berhasil login, kita akan tiba di halaman Home. Ada kumpulan menu di side pane sebelah kiri, berupa kumpulan hyperlink.

Action :
  • Parse menu hyperlink
  • Redirect ke page Mutasi Rekening
Di halaman Mutasi Rekening, kita diminta mengisikan parameter query : nomor rekening, tanggal awal, tanggal akhir, dan page (paging untuk grid view). Untuk menyederhanakan, kita gunakan saja nilai default yang telah pre-loaded di form. Kita hanya perlu mengisikan parameter nomor rekening.

Action :
  • Isikan nomor rekening
  • Submit form
Hasil query disajikan dalam bentuk HTML table. Tabel inilah yang hendak kita ambil datanya. Dilanjutkan dengan logout agar web session berakhir dengan gracefully.

Action :
  • Parse tabel mutasi
  • Parse menu hyperlink
  • Redirect ke Logout
Setelah proses logout berhasil, BNI akan menampilkan action log yang kita lakukan di dalam session ini.

Skenario ini melibatkan beberapa page yang harus diakses dengan urutan yang benar. Bagaimana cara sistematis untuk mengotomatiskan langkah-langkah ini ? Perkenalkan … CasperJS.

CasperJS adalah navigation scripting utility yang dirancang untuk bekerja di lingkungan PhantomJS. Kita bisa menyusun skenario browsing programmatically dengan elegan. CasperJS menyediakan API yang sedemikian rupa sehingga makna semantik program dapat terekspresikan dengan sangat jelas. Let's start code...


Program disusun dalam dua modul utama :
  1. Kumpulan fungsi untuk DOM scripting dan page action dasar. Modul ini akan digunakan oleh modul di layer yang lebih tinggi.
  2. Skenario browsing untuk mendapatkan data yang dituju. Modul ini mengimplementasikan langkah-langkah navigasi page secara programmatic.
Seluruh source code dalam posting ini dapat didownload di GitHub.

Bagian menarik dari program ini adalah keindahan CasperJS dalam mengimplementasikan navigation framework. Perhatikan source code berikut ini dan bandingkan dengan skenario browsing di atas. Hubungan antara code syntax dengan semantic meaning kelihatan jelas banget 'kan!

// Scenario 

    self.evaluateOrDie(doParseMenu,'Silakan mencoba beberapa saat lagi');
    self.echo('click mutasi...');
    self.echo('request mutasi...');
    self.evaluateOrDie(doParseMenu,'Logged out from server');
    self.echo('parse mutasi...');
    self.echo('parse log...');

Detil mengenai data scrapping tidak sulit. Karena kita bekerja dalam environment web browser, maka kita tidak lagi mengobok-obok string. Semua tertangani dengan DOM API dan javascript. Bahkan ga perlu jQuery, javascript gundul aja udah cukup. Kombinasi PhantomJS dan CasperJS sangat mengurangi kerjaan.


Berikut ini demo runtime untuk scrapping data Mutasi Rekening BNI. Kalau mau coba, edit dulu setting username, password, dan nomor rekening di file config.js.
Have fun...

Sunday, November 13, 2011

Skimming : Behind The Cloud

Behind the Cloud: The Untold Story of How Went from Idea to Billion-Dollar Company-and Revolutionized an Industry

The Startup Playbook

  • My vision was to make software easier to purchase, simpler to use, and more democratic without the com-plexities of installation, maintenance, and constant upgrades. (p.3)
  • “The number-one mistake entrepreneurs make is that they hold their ideas too closely to their chest,” Bobby said. “Their destiny is their destiny, though. If they share their ideas, others can help make it happen.” (p.7)
  • My summers at Apple had taught me that the secret to encouraging creativity and producing the best possible product was to keep people fulfilled and happy. (p.11)
  • So focus on the 20 percent that makes 80 percent of the difference. (p.13)
  • Creating an attractive user interface that people enjoy using is the key to building a truly great product. (p.14)
  • What I learned from Larry:
    • Always have a vision.
    • Be passionate.
    • Act confident, even when you’re not.
    • Think of it as you want it, not as it is!
    • Don’t let others sway you from your point of view.
    • See things in the present, even if they are in the future.
    • Don’t give others your power. Ever.

The Marketing Playbook

  • Position yourself either as the leader or against the leader in your industry. Every experience you give a journalist or potential customer must explain why you are different and incorporate a clear call to action. (p.25)
  • I was confident that would be very profitable. In order to get there, though, we needed to build a powerful brand behind our great service. (p.26)
  • Anyone can create a persona, but it takes time and energy to do it properly. Your ‘‘character’’ must fit with your company’s story to bolster your brand. It must be heartfelt and authentic to who you are if it is to be successful. It should not be mere artifice.(p.28)
  • Although I loved the NO SOFTWARE logo immediately, almost everyone else hated it. ... Although research and logic were behind some of their concerns, I felt that their arguments were overruled by the most important rule in marketing—the necessity to differentiate your brand. (p.29)
  • What a company can own, however, is a personality. We own NO SOFTWARE —not because we are the only one doing it but because we were the first to think it was important to customers. (p.32)
  • Over time, as we grew, we required that all customer-facing employees become ‘‘certified’’ in how to position the service and how to deliver our messages. We taught everyone how to defend the messages against objections, which made them feel more prepared and confident. (p.34)
  • only acknowledged one competitor—the market leader. (p.34)
  • Don’t ever let the competition make you angry. You must have clarity of mind to make your own decisions—not the ones that your competitors want you to make. You must be transparent to the competition. See, recognize, and understand what your competitor is doing. (p.40)
  • No doubt, sending carefully chosen members of the press well-crafted office memos is one more way to get your story told. (p.42)
  • It’s significantly cheaper to encourage a journalist to write a story than it is to buy an ad in the Wall Street Journal,... (p.43)

The Events Playbook

  • ... after seeing this unfold at event after event, we began to recognize what was happening: people weren’t attending these events to meet us. They were coming to meet other people using the product. (p.50)
  • customers are mostly sales, marketing, or customer support people, the people who use traditional enterprise software products. Yet traditional enterprise software companies had never marketed to these people. Enterprise software companies target the executives who control the budget. (p.52)
  • Selecting the right site is important—the location should be one that reflects what you want to say about your brand. (p.54)
  • We rely on the quality of the product and provide an opportunity for the product to be discussed. The most effective selling is done not by a sales team but by people you don’t even know who are talking about your products without your being aware of it. (p.58)
  • A market doesn’t exist until there is a competitor, and ideally two or three competitors. (p.61)
  • Most of all, our smaller competitor’s stunt didn’t work because we never forgot or underestimated the lessons we’ve learned. We’ve seen what happens when bigger companies act defensively and validate small competitors. No one should ever make that mistake. (p.65)

The Sales Playbook

  • A good Web site is more effective than any direct marketing campaign. A lead capture screen, where visitors are required to enter their contact information, is an effective way to find hot leads. It’s essential to keep a Web site easy to use and fresh with regular updates. (p.73)
  • We quickly discovered that the more salespeople we hired, the more we saw revenue increase. This proved that we couldn’t simply encourage salespeople to sell more. We needed to increase the number of salespeople. This was the key to growing revenue. (p.79)

The Technology Playbook

  • As we went against conventional wisdom, we found the secret to being successful in the technology industry. Companies must not only see innovation before it is obvious to the market but also have the courage to pursue that innovation years before it’s accepted, or even understood. (p.106)
  • When it came to building innovative technology, we took a bet on a few existing things. First, we took a big bet on the Internet, and on Java as the programming language for the Internet. Second, we relied on the Oracle database. (p.109)
  • The site—located at—offers real-time information on system performance with up-to-the minute information on planned maintenance, historical information on transaction volume and speed, reports on current and recent phishing and malware attempts, and information on new security technologies and the best security practices. (p.113)
  • Today, if our servers are down—even for twenty minutes—we call our top customers. (p.114)

The Corporate Philantrophy Playbook

  • About thirty minutes after the awful phone call, a battalion of U.S. Marines swept into the school. Our team was caught by surprise when they said they were there to install the computers. Although there was relief in knowing that this force would get the job done, it didn’t give me much solace. Oracle had its own army of fifty thousand tech-savvy employees, several thousand of them just a few miles away; why did we require the Marines’ assistance to set up computers in a middle school? (p.139)
  • I began to consider how to make a philanthropic program part of a company’s DNA. I knew that if we had been able to draw on Oracle’s full assets—its employees, customers, products, money, and partners—we could have made a much more substantial contribution. This idea became a passion of mine, and it further ignited my interest in starting my own company. (p.139)
  • We understood that although we would not immediately see the cash for this commitment, we needed to take a long-term approach. This eventually led to a 1 percent product initiative (whereby we donate the service in lieu of profits)—a contribution that we’ve since realized can have a much greater impact on a nonprofit organization (by helping it scale) than a cash donation might have. (p.144)
  • One way to get your philanthropic programs started easily is to begin by providing your product or service for free or at a dramatically discounted rate to nonprofits. Gather a team of people to think creatively about how your product or service might help answer a social problem or move a nonprofit’s mission forward. (p.158)
  • The foundation has made us a better company. It has served as a tool for collaboration with other companies. It has made our employees more fulfilled, more productive, and more loyal. (p.167)

The Global Playbook

  • This idea stemmed from my work at Oracle with principal technologist Yoshi Oikawa; it demonstrated that global capabilities were not an add-on feature but an intrinsic part of our service. (p.170)
  • The market loved the David versus Goliath strategy, and we launched the business in Europe by using the same tactics that dictated our strategies in the United States: free trials, building relationships with members of the press, and encouraging customer evangelism. (p.173)
  • I had loved working in Japan when I was at Oracle and had always considered’s international focus on Japan a high priority. It was the second-largest IT market in the world, and I knew that Japanese businesses could benefit from our service. (p.179)
  • Whereas we were able to start with smaller companies in the United States and Europe, the top-down model is the way to succeed in Japan, where the largest companies provide the most powerful references. (p.186)
  • The end goal is always for the international business to be run by local leaders. However, during the earlier stages of international expansion, tapping two leaders with different experiences is an effective way to lay the right foundation for a company. (p.186)
  • Many U.S. companies use Australia as a gateway. The demographics are similar to those in the United States, the market is made up of early adopters, and the similar time zone and close proximity to Asia make it easy to do business with the rest of the region. (p.188)
  • Technology companies have historically centered their Asia-Pacific operations in Singapore, making the area rich with tech-savvy talent. Furthermore, the city-state’s high standards of education and emphasis on bilingual or trilingual skills meant that candidates were often fluent in three or more languages, making them valuable across various geographies. (p.194)
  • In Asia, business is conducted face-to-face, and anyone with whom we wanted to do business expected to see us a lot more often than we had first planned. (p.199)

The Finance Playbook

  • She might be your friend, or your grandmother, but treat her as an investor. This is not only because it’s respectful but also because not doing so could come back to bite you. If you target larger investors later, the legal teams at these organizations will scrutinize your capitalization structure, and any previous negligence will cost you. (p.204)
  • I’m not suggesting that profits aren’t necessary, pivotal, and even beautiful. It’s just not appropriate to stress profits over revenue in the beginning when you are starting out and building a company. (p.208)

The Leadership Playbook

  • V2MOM enabled me to clarify what I was doing and communicate it to the entire company as well. The vision helped us define what we wanted to do. The values established what was most important about that vision; it set the principles and beliefs that guided it (in priority). The methods illustrated how we would get the job done by outlining the actions and the steps that everyone needed to take. The obstacles identified the challenges, problems, and issues we would have to overcome to achieve our vision. Finally, the measures specified the actual result we aimed to achieve; often this was defined as a numerical outcome. Combined, V2MOM gave us a detailed map of where we were going as well as a compass to direct us there. (p.226)
  • We now collaborate on the corporate V2MOM with all employees through IdeaExchange, a social networking tool that employees use to contribute their ideas as well as promote and comment on others’ ideas. Most recently, when our V2MOM went live on IdeaExchange, we received feedback from more than half of the company’s employees over a two-week period. (p.231)
  • Although most start-ups don’t hire a dedicated HR person right away, doing so made sense to me because acquiring the right talent is the most important key to growth. (p.233)
  • ... the better the developers you have, the better the product you build. The more developers you have, the more products you can build. (p.233)
  • Asking candidates to present allows us to see how they perform on the fly, and especially how deftly they can handle curve balls. It works on a more subtle level, too. Preparation demonstrates how badly candidates want to be with us. We note whether or not they have been to our Web site. Are they familiar with our products? Do they know our customers? (p.235)
  • If we move into a new market or a new product, I want the most knowledgeable person—the guru—on our side. Once the guru articulates the strategy, he or she makes the necessary hires and invests the resources necessary to execute it. (p.239)
  • Conventional wisdom says you should hire people who are not like you. That’s wrong. Hire people who are like you, only better. (p.240)
  • It’s very important for hiring to be consensus driven. To that end, we use the ‘‘all yes’’ rule. If a candidate meets ten people and nine say yes and one says no, that candidate will not work at our company (p.242)
  • Brands are built and sustained on consistency. Whether employees realize it or not, everyone in a company interfaces with customers in one way or another, and their attitude will affect the brand. A wrong message or attitude from one person has the potential to dilute our brand, so we try to make sure everyone is in alignment from the beginning. (p.244)
  • After several months, the Ebersoles went back to Atlanta. Everyone is doing great now, and that’s what’s most important, but as a result of helping his family in a difficult time, we earned the 100 percent loyalty of a valued employee. ‘‘ has made this situation as good as it could have been,’’ Scott said. ‘‘I’ve always felt that I have their support, and it’s made me to want to work even harder to give back.’’ (p.247)
  • Using education as a way to extend our service and expand our capabilities is our strategy for future growth. It comes down to simple mathematics: we can hire one hundred developers to develop new functionality, or we can hire ten trainers who have the capacity to train thousands of developers. Leveraging the power of trainers has allowed us to have thousands of developers creating new functionality, sharing it in our online marketplace, and enabling us to offer a more comprehensive service to our customers. (p.253)

Thursday, October 27, 2011

Skimming : Don't Just Roll the Dice

Don't Just Roll The Dice - A usefully short guide to software pricing

Some – but not too much – economics

  • From the diagram, you can see you should price the Time Tracker 3000 at around $300. It’s not where you’ll sell the most units, but it’s where you’ll make the most money. (p.13)

Pricing Psychology: What is your product worth?

  • These two facts, the awfulness of the product and the magnitude of its success, can be reconciled if you understand that Sage’s product is more than just the software.(p.16)
  • If you want to change how much Willhelm will pay for your product, then changing the product is one option, but only if you can also change his perception too. In fact, it turns out that you can change Willhelm’s perception of your product’s worth without touching the product at all. That’s one of the things marketing is for. (p.18)
  • People base their perceived values on reference points. If you’re selling a to-do list application, then people will look around and find another to-do list application. If they search the internet and discover that your competitors sell to-do list applications at $100 then this will set their perception of the right price for all to-do list applications. (p.19)
  • Ultimately, it comes down to differentiating your product. (p.24)
  • If your customers can’t find a reference point for your product, then they look for proxies, or signposts. (p.25)

Pricing Pitfalls

  • If you are going to compete on price, then you should minimize the possibility of a counter-reaction from your competitors. (p.27)
  • They put a copy of your software into the hands of people who will not pay, cannot pay, are too dishonest or too principled to pay, or who simply don’t value your work that much. However, a pirated copy will end up, eventually, in the hand of somebody who will pay.(p.29)
  • The second reason that pirates can be your friends is that they are a bellwether. They indicate the existence of a market failure. (p.29)
  • There are some things you can do to mitigate switching costs, and even to use them in your favor.... Early versions of Microsoft Word not only opened WordPerfect files, but had a dedicated section in the help for WordPerfect users, and even allowed you to use the WordPerfect shortcut keys. (p.31)
  • You might have spent one hundred dollars developing your product, or a million, but that money is all spent. Gone. It’s a sunk cost. What matters now is not how much you’ve spent, but what people are prepared to pay. (p.34)

Advanced Pricing

  • That’s what’s versioning is about. It’s a mechanism of segmenting your users according to their willingness to pay. You figure out if you can group your customers in different ways, and then see if those groups are willing to pay different prices for your product. (p.36)
  • But here’s the second subtlety. This only works if people can easily compare the products being versioned. (p.39)
  • If you insist on selling a site license then make sure you define ‘site’ well. Is it for a specific office, or country, or worldwide? (p.45)
  • You must consider your customers’ purchasing processes when you set your prices. If you’re selling to businesses, then there will be a number of thresholds that you need to think twice about before crossing. ... At each stage, not only does the cost increase, but the hassle does too. If you can figure out where these thresholds lie (and they move around as the state of the economy changes, and according to the characteristics of your customers), then it’s worth pricing your software just under a threshold rather than just over it. (p.45)
  • If Starbucks can de-commodify coffee and charge $4 for coffee beans and hot water, if Stormhoek can de-commodify grapes (the only wine maker I know of who sells branded G-Strings), and if Perrier can de-commodify water, then you can certainly de-commodify the complicated software application that you have created. (p.48)
  • The mere fact that customers could try out your software, if they wanted to, transmits a strong signal about its quality. (p.49)
  • At the very least, you need to be careful, and make sure the free version is good enough to be useful, but not so useful that it cannibalizes paid-for sales. (p.49)
  • Network effects occur where the value to your customer of using your product increases as the total number of users increases. (p.51)
  • It becomes, therefore, extremely important to reach the tipping point as quickly as possible, and the ‘free’ price point is a good way of doing that. Of course, once you’re past the tipping point you’ll need to make money from your product, without losing users. (p.52)
  • When choosing your pricing model, here are two recommendations. Firstly, be boring. Secondly, license your software as your customers expect it be licensed – fit in with their business model.(p.58)

What your price says about you (and how to change it)

  • Prices are never neutral. They send signals. For example, a high price can signal that you have a quality product. ... If your competitors are selling software at $10,000 a seat, and you’re selling yours at $100, then that says something about you. Of course, you might be saying ‘game changing’, but your customers might be hearing ‘toy’. (p.60)
  • Whatever price you choose, the signals it sends need to fit in with your brand, and your brand needs to fit in with your reality. (p.61)
  • You’re never going to know if you’ve chosen the exact right price or not, but you should experiment once you’ve set your initial price; not experiment in the scientific sense of forming a hypothesis, changing a single variable, and accepting or rejecting the hypothesis, but in the sense of changing something and seeing what happens. (p.62)
  • It’s not what your customers say that’s important, it’s how they behave. Whenever you make a price change, pay close attention to what your customers do. If they stop buying, rethink. (p.64)