Monday's Musings: It's The Relationship, Stupid (Part 5) - Living In Denial
Economic Downturn Challenges Enterprise Software Executives To Uphold The Sanctity Of The Vendor - Customer Relationships
Conventional wisdom would assume that in a challenging economy, strong relationships would be a key success factor to retaining business and mitigating loss of revenue. Unfortunately, this does not appear to be the case for many companies, including vendors in enterprise software. Blame it on the economy, fear of depending on their people, or plain greed, but a good number of executives have taken an approach that attempts to preserve shareholder value at the expense of their vendor - stakeholder relationships (i.e.employee, customer, and partner). Now in their defense, these muckety mucks face dire times and hard decisions need to be made. However, they are not in a unique situation and risk jeopardizing brand value, trust, and market credibility for short term gain. Let's look at five common value destruction strategies:
- Part 1: Commoditizing the client facing workforce at the expense of the client
- Part 2: Slashing the quality of support and maintenance while failing to deliver value
- Part 3: Pushing products that clients don't need in order to grow revenues
- Part 4: Under-investing in R&D and then repackaging existing content as new innovation
- Part 5: Living in denial by ignoring stakeholders
Part 5: Living in denial by ignoring stakeholders
Successful relationships often span across key stakeholders that include partners, employees, suppliers, investors, and of course customers. Lately, management teams at enterprise software vendors have chosen to placate investors over other key stakeholders. As a short term strategy, boards will succeed in meeting the short term quarterly whims of investors. But in the long run, these management teams risk alienating customers, partners, and employees - a slap in the face of a prime source of funding and innovation required to meet current and post recession challenges. Conversations with over 47 stakeholders highlight some key findings including:
- Forcing Kool-Aid down the throat of employees. "Our customers kept telling us that we were losing credibility given the rash of aggressive sales tactics over the past few years. An increase in pricing or maintenance would be the straw that broke the camel's back! Most customers chose the lowered tiered offering. There was really no additional value in the new offerings yet we kept pushing. Many of us complained to our management teams but the decision was already made. We must have lost 20% in deal flow in the past 2 quarters. The resulting backlash could have been avoided." Customer Support Technician for Global Support Services - Big 4 ISV
- Glossing over channel partner concerns. "They kept telling us that customers had asked for this new SME product. Extensive customer research had been incorporated. And, any customer let alone employee who didn't see the value in the new offering needed to be re-educated. Despite being late to market, the product would sell itself because of our reputation and brand. What they failed to understand was that country managers had already discounted the flagship enterprise product to a point where it was creating huge channle conflicts with sales of our SME product. We warned them this would happen. They kept ignoring our concerns over the past 12 months. Amidst such confusion, our best and long time partners now are leaving for competitors. For those that have stayed on, our biggest challenge has been trying to help them understand their role and input into our product strategy. " Vice President of Software Partnerships - Global Systems Integrator
- Ignoring customer requests. "We need more choices in our user license options. We used to have concurrent users, then we had named users, and now they want to move us to processor based licenses. While they have been giving us conversion credits to the new models, we feel that each approach seems to benefit the vendor and not us the customers. We have raised this issue with the management team each year. They continue to ignore our requests. After our recent acquisition, we now are in a position to leave the vendor next month. It's all lip service and they don't value our input or relationship enough, even though we have spent $4M in 5 years." - Global Director for Packaged Apps - APAC High-Tech Manufacturer
The bottom line - relationships matter despite the chaos around us.
Strong relationships are crucial for success, particularly in a difficult economy. Vendors and customers need to find win-wins in order to succeed through this current down turn. For vendors, they need to get a better grasp on what's top of mind with key stakeholders. Executives should walk the halls and directly solicit feedback from employees. Management team members need to reach out directly to stakeholders and have honest conversations. Too often, the fear of managing up prevents a company's execs from hearing about the issues. Instead, they think everything is working out fine despite how much middle management has quelled the groundswell of opinion. Once these relationships can be reestablished, stakeholders will be there to assist by providing valuable feedback, seeking advice in solving business problems, and serving as references. In the meantime, this trust needs to be reestablished. Its truly the relationship that will pull you out of this downturn!
Got a success story where your vendor has put a value creation strategy based on keeping good relationships? Or got a great story on the bone-headed thing your vendor or your employer has done to destroy value in the relationship! Send me a private email to rwang0 at gmail dot com. Posts are preferred! Thanks and looking forward to your POV!
Copyright © 2009 R Wang. All rights reserved.