Monthly Archives: March 2009

How to Build a Bat House

Once upon a time, there was a beautiful old wooden hotel in the North Country. The owner had coaxed an award-winning chef with a new family away from the hurry-scurry of the big city, so the food was fabulous. The staff were locals imbued with the history of the region and an encyclopedic knowledge of hiking trails, scenic vistas, off-the-beaten-track cross-country trails, and so on. The cleaning staff took pride in ensuring that floors and woodwork were polished, the rooms were well-equipped, and bathrooms were spotless. The fixtures and furniture were old but functional, and the atmosphere was charming, down to the homemade quilts on the beds, each one individually selected.

Eventually the owner, beset with health problems, sold the business to a bright young entrepreneur. Several years later, there was an economic downturn, and revenues fell off. The new owner seized the opportunity to cut costs. He replaced the chef with the sous-chef, at a much lower salary. He revised the menu to remove the most costly items. He instituted a retirement buy-out for the original staff, replacing them with rent-a-clerks and teenagers. He replaced the maids with a commercial cleaning service, and traded the difficult-to-clean quilts for store-bought linens and coverlets. He was able to decrease the room rates by 25%.

To the new owner’s dismay, revenues continued to fall. Former customers were turning up at the local Best Western and Holiday Inn franchises, whose newer buildings and minimalist rooms consistently undercut his prices, no matter how much he lowered them. He was forced to close one wing of the old hotel, then another, and more of the staff were let go. Finally, he had to shut the business entirely. After a while, windows blew out and bats moved in, hence the title of this story.

About six months later, the young man met the old owner for dinner. “I’m sorry about what happened to the old place,” he said. “The economy tanked, and no matter what I did to cut costs and lower prices, we just couldn’t recover.” The former owner stared into his wine glass for a while. Then he shrugged, looked up, and asked, “What reason did people have to stay in your hotel? The food was mediocre; the rooms had lost their charm; you fired everyone who cared about the guests, or who could help them enjoy their visit; and poorly-paid commercial cleaners will do the bare minimum, if that.” The young man asked, “What should I have done?” The old man shook his head. “Who knows,” he said. “But people always need vacations, and when times are tough they want an extra-special place to stay. I’d have made it more special, not less special; and I might even have increased my rates and my advertising. Heck, if someone is paying $200 a night for a room, $220 isn’t much of a sacrifice.”

The young man smiled tolerantly. “Yes, but this downturn is different. Everyone’s in trouble. Businesses are failing left and right.” The old man refilled his glass. “I’m sure you’re right,” he said. “Who can say whether my strategy would have worked?” The two men began applying themselves to their meals. Between forkfuls, the young man asked, “So, what are you doing with yourself these days?” “Oh, ” said the old man, “nothing special. The doctors eventually figured out what was wrong with me and fixed it, so I got restless and bought an old ski lodge about a year ago. We renovated the rooms, brought in a French chef, put in an outdoor 4-season pool, and recruited a bunch of savvy locals to run the place.”
   “How are you doing?”
   “We’re booked solid.”

I’d like to thank the Anonymous contributor who provided this story. It really makes the point that Marketing is NOT optional!

Marketing is NOT Optional!

Although it was targeted at retailers, a recent Harvard Business Review article titled How to Market in a Downturn made a good point that enterprise software and solution providers need to heed, especially if they want to not only survive this downturn but pick up new business. The message is this: “Marketing is NOT optional.”

Here’s the Catch-22: if companies don’t market, buyers don’t know they exist. And if too many companies trim their marketing budget to zero, advertising channels begin to shut down (as newspapers are doing), further narrowing opportunities for customer acquisition. In the sourcing vertical, now more than ever, buyers need a solution that can help them reduce and avoid costs, so they can notch an ROI quickly. If you’re a services provider (for example, an expert consultancy in category cost reduction or spend analysis), or a SaaS vendor with a low cost of entry, your time to acquire new customers is now — but that’s going to be difficult if customers don’t know you exist. Ironically, if your potential customers aren’t able to get the help they need, which will be tough if they can’t find you, then they could go out of business as well, taking with them an account that you’ll never win.

As the HBR article pointed out, building and maintaining a strong brand — one that customers trust — remains one of the best ways to reduce business risks. IBM, who had a record profit last year and who recently announced that they plan to have another record profit this year, has spent decades building their brand. Closer to home, Ariba, Oracle, Emptoris, and other big names grab the lion’s share of the spend management business, funding, and buzz. They are names people know, because, year in and year out, they make sure people know them and what they do. Are they the best solutions? With regard to most of their spend management offerings, they are not the best, sometimes not even close to being best. But that doesn’t matter, because everyone knows who they are and they get invited to almost every RFP, while most of their best-of-breed competitors, who haven’t done enough marketing (or, these days, aren’t marketing at all) aren’t invited to the party.

Now, you’re free to believe what you will and disagree with me, but from where I sit, this is what I see: any vendor who doesn’t market is likely to be among the next to go. This prolonged recession is busy doing what years of M&A activity couldn’t, namely, condensing the market to a small handful of key players for each technology and services offering. A number of providers in this space, who thought they could forego all marketing, halt new product development, stick their heads in the sand, and wait it out, have already undergone significant layoffs, and I know of a few who are on the block. I thoroughly expect that more folks who have adopted the conserve-cash and wait-it-out strategy will join them in the year ahead, especially those that simply don’t have the cash reserves or the steady revenue model that will allow their competitors, but not them, to survive.

Thus, if you are an end user, it’s very important to take a good look around and see if you notice your vendor. If they no longer take out advertisements, go to trade shows, host webinars, or appear on the blogs, chances are they’ve stopped marketing. A muzzled marketing department is often the canary in the mine, and it can mean that pipelines have dried up and new deals aren’t closing. Note that this is especially true of traditional software companies whose revenue models rely on hefty up-front payments from new sales. Such companies are particularly vulnerable to dry pipelines, whereas companies using a sales or services model that yields a steady revenue stream are much less vulnerable.

If a company doesn’t have enough customers to sustain themselves at their current level of operation, you’ll see them slashing head count. This is pretty much guaranteed to affect your service level. And if they were already operating at a minimal level of staffing, as many of them were before the downturn, then there’s a chance they could cease operations altogether, leaving you high and dry.

So, take a good look around and make sure your vendor is visible. If they’ve gone radio silent, it would be a good idea to take the time to ask them how they’re doing, and not let up until you get a straight answer. Don’t be afraid to ask them, point-blank, what happens if they don’t get any new customers for a whole year (which is a question you should ask every SaaS provider anyway). If you don’t like the answer, considering looking for a more stable provider. The last thing you can afford in this economy is to be left high and dry when you are depending on critical cost-saving e-sourcing and e-procurement software.

Upcoming Events from the #1 Supply Chain Resource Site

The Sourcing Innovation Resource Site, always immediately accessible from the link under the “Free Resources” section of the sidebar, continues to add new content on a weekly, and often daily, basis.

The total number of unique, active resources exceeds the 2,400 mark, and breaks down as follows:

And includes the following upcoming events, among many others:


Dates Conference Sponsor
2009-Apr-2 to


The Supply Chain Management Summit

San Francisco, CA, USA (North-America)

2009-Apr-5 to


2009 Supply Chain Conference

Miami, FL, USA (North-America)

2009-Apr-27 to


The Logistics & Supply Chain Forum

New York, New York, USA (North-America)

Richmond Events
2009-May-6 to


eProcure & Supply

Nuremberg, Germany (Europe)

Nurnberg Messe
2009-May-11 to


European Supply Chain & Logistics Summit

Dusseldorf, Germany (Europe)

WTG Events
2009-May-27 to


AMR Supply Chain Executive Conference

Scottsdale, Arizona, USA (North-America)



Date & Time Webcast

14:00 GMT-04:00/AST/EDT

Generating Working Capital in Today’s Credit Crisis

Sponsor: Receivables Exchange


8:00 GMT-07:00/MST/PDT

Explore Revenue and Margin Growth in a Recession

Sponsor: QAD


11:00 GMT-07:00/MST/PDT

Creating Safer Communities: Technology for Improving Public Safety

Sponsor: SAS


8:00 GMT-07:00/MST/PDT

Measuring World-Class Finance Performance

Sponsor: The Hackett Group


13:00 GMT-06:00/CST/MDT

Measuring Your Green Initiatives

Sponsor: APICS

which are all readily searchable from the comprehensive Site-Search page. So don’t forget to review the resource site on a weekly basis. You just might find what you didn’t even know what you were looking for!

And continue to keep a sharp eye out for new content and even more new content categories which will be coming on-line in the near future!

Good Advice for CEOs, Good Advice for CPOs

Chief Executive recently posted a good article on why you should simplify and clarify your business. According to the article, knowing where to concentrate the effort is critical. A business should focus on where it earns money now and, even more importantly (in the doctor‘s view), where it will earn money in the future (as business, and demand, is constantly changing). To help you do just that, the article presented an approach to Keep it Short and Simple (KiSS) that it believes will help a CEO do just that:

  1. Clarify and communicate what the business is, does, and delegate down the line.
  2. As CEO, aim to remove yourself as much as you can from the dayt-to-day operational business and concentrate on strategic areas.
  3. Aim to reduce meetings and have a clear (and simple) outcome for those that do take place.
  4. Reduce the number of people involved in those meetings.
  5. Communicate, communicate, communicate.

This is also great advice for CPOs.

  1. A good CPO clarifies what procurement does for the business and how it meets the strategic objectives.
  2. A good CPO empowers her people to do their jobs and focuses on the big picture.
  3. A good CPO doesn’t waste her days in meetings … she spends them charting paths to procurement success.
  4. A good CPO only includes people who need to be there in meetings … and empowers those who are there to disseminate the information as required.
  5. Not only does a good CPO communicate, communicate, communicate, she also collaborates, collaborates, collaborates.