Weekly Download 14.20

download-158006_640Here’s a recap of news and notes from around the Web that caught my attention over the past week or so.

Ever sent an email you wish you didn’t? I have, leading to my adoption of this modern commandment: thou shalt not hit send in anger. You Can Recover From a Snippy Email, But Prepare to Grovel is a practical guide to  what type of emails to refrain from sending and how to make amends when you have done so and are regretting it. It includes a history lesson:

Abraham Lincoln is said to have advised his secretary of war, who was furious with one of his generals, to write the man a sharp letter, then “put it in the stove.”

IBM Plummets as CEO Abandons 2015 Earnings Forecast. I commented on this back in a July 2014 post.

How Wolves Change Rivers. Perhaps you’ve seen this making the rounds on the internet or Facebook. I thought it was very powerful example of “systems thinking” and how small things can impact distant and seemingly unrelated items. Like our natural systems that this video demonstrates, much of our work occurs in a larger system (such as our organization’s culture) that may be hard to see or understand.

Character matters. I don’t recall how I found Psychopaths in the C-suite: Fred Kiel at TEDxBGI, but I liked the research-based approach that links certain character traits and profitability. The four character traits studied are: Integrity, Responsibility, Forgiveness and Compassion.

Bonkers World is a fun site. Who doesn’t like comics? I particularly enjoyed the humor in this one:

Credit to Manu Cornet

Pathways to Success

Recently there have been major write-ups on tech companies that have pursued very different strategies to achieve their desired financial results. The contrast between blue chip IBM and Software as a Service (SaaS) pioneer Salesforce.com is remarkable. Box.com, one of the newer cloud storage and file sharing services, is charting yet another course.

Image courtesy of cooldesign / FreeDigitalPhotos.net

Image courtesy of cooldesign / FreeDigitalPhotos.net

Why IBM is in Decline. IBM, under the realm of CEO Samuel J. Palmisano from 2002 – 2011, doubled earnings under a plan called Roadmap 2010 and is on schedule for a repeat with Roadmap 2015. This extreme focus on profitability and wooing investors has left a trail of wreckage for new CEO Ginni Rometty, who, inexplicably, seems committed to follow the same path. Catastrophe may be looming for one of America’s greatest brands. The singular and narrow focus on quarter over quarter, year after year earnings may not be sustainable in the long term. There are many cycles in the economy and in business that may not fit this smooth curve approach. Also, while meeting short-term profit goals, IBM is paying the price in terms of low employee morale, suffering customer service, lack of innovation and lagging technology.

Understanding SaaS: Why the Pundits Have It Wrong. At the other end of the spectrum, there are many SaaS companies or cloud providers that lose more money annually than they earn in revenue.  One example is Saleforce.com, one of the early pioneers (founded in 1999) of cloud-based CRM systems.  They incurred a net loss over the past couple of years due to their focus on growth rather than margins. It’s a vicious cycle: to fuel growth, they spend a lot to acquire customers, which negatively impacts margins. See Salesforce Q1’15 Earnings: Revenue Growth Strategy Continues To Trim Margins to learn more.

Tech companies like Box.com spend more on marketing than they generate in revenue. Box.com has the dubious distinction of having a financial profile that it is out of line even compared to other SaaS companies. THE BOX IPO ANALYSIS: This Company Is Burning Twice As Much Cash As Any Comparable Company is enlightening. Customers and employees alike will pay a significant price if one of these companies implodes. 

What is the right balance?  How do mature companies continue to fuel innovation and growth while also serving their shareholders?  How do you allocated monies in your budget for innovation and growth while also delivering bottom line results?  Is there a balance of investments in people and customers to achieve long-term sustainable success?

A moderate approach that may serve both maverick and mature companies equally well is based on the patient use of capital and a balanced portfolio. Companies that plan seeds now for growth that will be ready for harvesting in three, five or ten years will experience some ups and downs, but the overall trend will be positive.

In the end, only time will show which path is sustainable.

Teaching Microsoft to Dance

Thai Elephant

Image courtesy of Aduldej / FreeDigitalPhotos.net

Twenty-one years ago this month, Lou Gerstner came from RJR Nabisco to take over at IBM. He cut billions of dollars in expenses and made tough decisions that no insider would have made easily, including cutting OS/2 (IBM’s PC Operating System) and eliminating the dress code (pinstripe suits, white shirts, wingtip shoes) and the “no alcohol” policy. At the time, IBM was perilously close to running out of cash. It was expected that Gerstner would oversee the company’s dissolution, but, instead, he executed an extraordinary turnaround that has become a classic business case study.

Certainly the situation today is different at Microsoft, but perhaps no less challenging. Which begs the question: can recently-named CEO Satya Nadella teach Microsoft how to dance?

Satya Nadella certainly forged new ground in his first public speech at Microsoft. For example, he was using an iPad on stage and referencing Android, while there was a relative absence of plugs for Microsoft Hardware.

Here are some of the dimensions of his challenge as I see it:

Old Model New Model
Desktop or Laptop PC Mobile and Cloud
Enterprise I.T. Support Cloud Support
Multi-year Large Enterprise or Package Software Pay-as-you-Go and micro-transactions
Multiple years between major releases A few days (or less) between updates
Focus on I.T. Professional Experience Focus on Consumer Experience
Vertical Stack of Technology Part of a Horizontal Ecosystem
Thick, feature laden client side software Thin mobile or zero footprint services

The list could go on.  Probably the biggest elephant in the room is the culture.  How do you reshape the hide-bound Microsoft ways fast enough to capture market opportunities?  The reshaping of Microsoft has begun—it should be interesting to watch.

In the meantime, I’ll be dusting off my copy of Teaching Elephants to Dance. You can get yours on Amazon for a penny, or spend up for Gerstner’s first-person account, Who Says Elephants Can’t Dance?