Intel Q1 2014 Earnings Conference Includes a Glimpse of How It Broke New Ground in the Tablet Market

During the Q&A session at the end of Intel’s Q1 2014 Earnings Conference Call, Blayne Curtis of Barclays asked a big question: ” . . . it’s pretty clear [the MCG (Mobile and Communications Group) business] is now losing $3 -$3.5 Billion, how do you think about this business? Obviously you’re trying to ramp the product set, you are a bit behind, you’re entering from the low end and that pricing seems quite tough, and you’re facing some subsidies that you need to do on the tablet side . . . Are there some milestones that you look at to get this business back profitable, or, maybe, would you consider this strategic enough that you would continue to run this as a loss?” (quoted from the Intel Q1 2014 Webcast)

Stacy J. Smith, EVP and CFO took the question. Smith emphatically affirmed the strategic importance of these markets: “It’s critical from two in one devices down to the Internet of Things” As to the MCG Group loss for the quarter, he noted: “We don’t go into these businesses thinking that we’re going to lose money. We believe we have a road map to get to profitability in that business.” (ibid).

Intel is a mature ISV. But the process for Intel to take the kind of new direction represented by the MCG product line is no different than would be the case for an early stage ISV attempting to come to market with, for argument’s sake, a new Cloud SaaS offer. In other words, the experience Curtis’ question brought under an analyst’s microscope included:

  1. a “Ready, Fire, Aim” product strategy. Intel chose to retool the Baytrail chipset from the PC market over to the tablet market. Opting for this method hastened their full scale entry to the tablet market. But the components, themselves, were brought to the task at a comparatively higher cost than comparable offers from Intel’s competitors.
  2. and a set of subsidies for OEMs for some of these higher costs

Presumably Intel’s rationale for opting for “Ready, Fire, Aim” was to quickly make a long overdue entry to the tablet market as a serious competitor. Smith noted why Intel’s market-leading experience producing SOC systems with the widest possible range of communications options promises to fuel their advance, which makes a lot of sense.

The rationale for the subsidies to OEMs is no different, I would argue, than the kind of “freemium” business model Cloud SaaS ISVs implement to persuade consumers to get started with their offers.

Disclaimer: I’m long Intel.

Ira Michael Blonder

© IMB Enterprises, Inc. & Ira Michael Blonder, 2014 All Rights Reserved


Entrepreneurs Need to Carefully Plan Significant Transitions Between Types of Products

We have written frequently to this blog on the topic of “ready, fire, aim.” This topic is well known. The core concept is that, for some businesses, it makes sense to plan products by marketing various versions of a product until a winning combination is identified. Despite the fact that this product development approach is well known, we need to note here that entrepreneurs should establish clear limits on the type of business opportunities that warrant a “ready, fire, aim” product development plan, in contrast to those that do not. A blanket application of this approach to any/all business opportunities to develop products is not only dangerous, but potentially disastrous.

Businesses that need to transition from a revenue model based on product sales, to one based on sales of services, should proceed very slowly and carefully. In other words, this type of serious change in revenue, which is the most critical component required for a business to manage its own operating costs (not to mention its profitability), requires a “ready, aim, fire” approach if it is to be successful. Therefore, management should commence planning for this type of change well in advance.

Unfortunately, in many cases necessity is the driver, which obliterates any opportunity for management to plan the transition successfully. If conditions are at hand that threaten the continued operation of a business around a product sales revenue model, it makes more sense to discontinue operations than to rush into a services revenue model. Simply charging into a radically different type of business, that is largely unfamiliar, makes little sense. Nevertheless, lots of early stage businesses follow this dangerous route.

Where there is time to put together a plan of action, it makes sense to engage with as many knowledgeable people as possible to gain insight. Of course, an ability to network with peers, industry spokespeople, and even potential customers is very important. As plans coalesce, it will make more sense to go back to some of these contacts to test assumptions and ensure that plans are, in fact, promising. It almost never makes sense to simply rush, blindly, into this type of transition.

A best case scenario for a radical change in revenue strategy is a business that is expanding; for example, a product manufacturer opting to add a services group. IBM Corporation is an excellent example of a business that successfully implemented this best case scenario. A current example of a business attempting to follow this model is Dell. In the next post to this blog we will look closer at how Dell’s move is actually a hybrid amalgam of product type transition, and business growth through acquisition.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Deciding When to Move Beyond a Software Product Targeted to Enterprise IT for an Alternative with More Promise

Once one’s primary revenue source is adequately safeguarded and methods to collect data from direct engagement with market participants and online visits are in place, then a “ready, fire, aim” strategy of rapid market sampling can be undertaken, profitably, by an enterprise IT ISV. When captured data is analyzed and unexpected and unwanted market sentiments are revealed, we think management must seriously consider either terminating product efforts, or at a minimum, renovating features, branding, etc. to better address opportunities.

Often, products will fail to deliver on revenue assumptions where data supports the kind of conclusions to which we have just alluded. In these cases, sales teams and their activities, and marketing efforts, are often carefully reviewed to ensure that poor product performance is not the result of human ineptitude in one of these areas. Of course, the need to undertake this kind of scrutiny makes complete sense. After all, it would be entirely wasteful to cease product development where, in fact, poor performance can be attributed to sales mistakes, or a lack of good leads as the result of ineffective marketing communications. But where these conclusions cannot be safely drawn, we do think it makes sense to change product plans.

We have worked with quite a number of entrepeneurs over the 11 year history of our company. Whenever the need arises to make radical changes in product marketing plans, we are often taken by the fact that different types of personalities handle the need to terminate product development and change direction in different ways. While we do not plan on including much detail about psychology in this post, we still do need to note that the personality of the business owner, or the product champion (where a team has contributed to a decision to proceed in a direction with regard to a specific product), will have a direct bearing on whether or not a business will successfully navigate through this type of experience.

Of course, the steps we have outlined in the preceding three posts to this blog can be used, effectively, to empower even the most stubborn business owner to decide to change course. For these types of owner it should, and likely will, make sense to change direction when adequate information has been received from a marketplace that, for one reason or another, a product effort is not adequate.

In our experience, this type of data has, often, also included important indications of the type of product that would be, truly, valuable and worth an investment. Successful businesses act upon this information, renovating product plans as required for success.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Transforming Poor Product Performance for Enterprise IT Software Into Opportunities – Insulate Core Revenue

Enterprise IT ISVs with poor performing products can use these products as the basis of new, and likely to be more promising, opportunities to develop products for these same markets. The first requirement, obviously, is to take the required steps to ensure that the business is not the victim of product poor performance. Two methods of insulating the business from product failure are rather obvious, including:

  1. Launching products that are otherwise tangential to the primary revenue stream of the business
  2. Launching new products under the radar

The first strategy can be put into motion by an entrepeneur who opts to begin a business while employed, or otherwise dedicated via a contract to a customer. In this scenario a business is usually operating solely on funds received from the business owner, who pays out the funds from salary, personal savings, etc. A product failure of this type should not threaten the overall business, unless the product, itself, is introduced to a market that is closely connected to the market targeted by the employer of the entrepeneur. Even a miserable failure of this type, which can be identified by an employer, who, in turn, can construe this type of a business venture as a threat, should be avoided, at all cost.

The second strategy is usually implemented by a business that has achieved some level of revenue. In this scenario, a new product is launched under the covers, certainly with a wholly separate brand, and, perhaps, for a separate market. A potentially familiar example of this type of effort can be found in the “Saturn” automobile effort undertaken by GM in 1982, which was largely disconnected from the GM brand until 1994, when GM accomplished an effort to ” . . . is [fold] Saturn into GM’s Small Car Group.” (quoted from Saturn Timeline: 1982-2009). We wrote frequently on the topic of this type of under the radar marketing approximately a year ago.

If either of these two strategies are implemented as the basis of operation while a product is introduced, there is a good likelihood that the business will survive, should the initial product effort fall short. In fact, there are other ways of paying for a product launch beyond these two methods, but for expediency sake we are not going to detail them here. The key point, which we will explore in the next post, is to very carefully collect and analyze the specifics that arise as market prospects are engaged on the topic of the product.

If you are planning on launching a software product (on premise, cloud, software as a service, etc) you need to make sure that your business plan promises to insulate your core revenue driver from your still to be proven product concept. If you lack the internal resources to manage this type of effort, then you need to engage with a third party.

IMB Enterprises, Inc. offers directly relevant experience on this type of effort. Our monthly plans start at $3200.00, with a 3 month minimum client commitment. Please contact us to learn further. You can call Ira Michael Blonder at +1 631-673-2929 to further a discussion about our services plan. You may also email Ira at imblonder@imbenterprises.com.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved


Sometimes Ready Fire Aim makes sense

Sometimes it makes sense to implement a ready, fire, aim product development strategy. For example, to test out market interest in various product types, or to gauge the readiness of a market to purchase products and solutions for otherwise unqualified needs.

Maintaining product direction in an entirely pliable state, capable of moving any which way to meet market needs, while engaging with prospects on ostensibly clear sales discussions is a great posture to gather lots of useful information about product perception, first hand. This stage should be incorporated within any product marketing plan as it makes little if any sense to finalize product performance without some reliance on the perception and interest of representatives in the marketplace. Usually this type of information is gathered through prospect and customer interviews, but with ready, fire, aim it is possible to go even deeper with prospects and, thereby, gather the most credible response from the market. The fire stage, after all, is actually mustering selling efforts around products. A go to market strategy on the fly.

Notice that I stressed maintain products in an entirely pliable condition. If, on the other hand, products are rigid, then engaging with prospects in this fire stage prior to aiming sales efforts can provide little more than an excuse to either race into product development, or to abandon the business plan altogether. Therefore, but have your funding in place before entering into this type of marketing strategy to ensure that you realize the most benefit from this exercise.

With regard to using the fire stage to determine present buying interest in products and services, this technique can jump start revenue building–no doubt about it. Even more compelling, this stage does not require the support of a full complement of marketing communications tools, etc; therefore saving cash strapped technology innovators precious cash. Further, marketing communications materials can be assembled and published entirely on an as needed basis, which may make the most sense from a funding perspective.

Despite these advantages, I counsel caution with regard to implementing this approach. By no means should your firm look half baked as the result of proceeding in this direction. Be sure, as ever, to stay under the radar while you navigate these turbulent waters.

Call us for further information on the above points. IMB Enterprises, Inc. has considerable recent experience implementing lead generation programs for complex sales of IT products and services to global business. Please telephone us at +1 631-673-2929 to discuss your products and needs. We are particularly interested in technology products–software or hardware–as most of our experience has been garnered from working with software and computer hardware manufacturers.

© IMB Enterprises, Inc. & Ira Michael Blonder, 2012 All Rights Reserved