By Jarek Czechowicz
Dan Boswell was one of the 70% of managers convinced that their company would always exceed the industry rate of growth. Unfortunately, changing circumstances have placed him in the more realistic pool of 65% that fail to meet these high expectations. Boswell now is on the verge of making changes that he hopes will secure his organisation’s long-term prospects.
In just 22 months, Boswell Operating Systems (BOS), once a market leader, has come face-to-face with the threat of being irrelevant. Boswell remembers one of his consultants saying: “I think some of your people are over-reacting.
Recessions since the 1950s have lasted an average of less than 11 months, and most computer and high-tech industries recover within another 11 months. In any case, this is just a temporary slump.”
BOS had finished setting up a sophisticated subscription service for its operating systems when the downturn in the market started. As soon as the subscription service was running, the company’s customers unexpectedly started turning to a competitor. Boswell was ready to deal with market slumps, but this was something he had not foreseen.
Universal System Exchange (USE) has designed and implemented a revolutionary service in a relatively short time. It allows users of any remote computing device to tap into any number of operating systems through an internet-based broadband subscription service. This service allows customers to run any application designed for any platform. They simply tap into the USE service on demand with a range of new hybrid architecture devices linked to their existing preferred brand.
The subscriber uptake of the USE sys-tem is unprecedented, despite the fact that it is full of security holes and good only for non-critical information. USE is seen in the broader community as a breakthrough in communications rather than as a breakthrough in computing.
Dan always thought his role was to develop better operating systems and to supply them to more customers; the market obviously wanted improved access to all applications and, hence, to all operating systems.
Leading up to the launching of USE, its people established relationships with all the main developers of operating systems and applications, including Boswell. It had seemed like a good deal for BOS at the time. It meant that new customers would have the opportunity to tap into the BOS system, and Boswell thought it could serve as an avenue for converting them to his own range of products. As it turned out, that did not happen.
Before the slump in market conditions, BOS took some heavy losses on the stockmarket. Since then, political turbulence in parts of Eastern Europe and Asia led to losses of some key government accounts. Now BOS is expecting the loss of some related corporate accounts. Feeling the full effects of the downturn, the company is looking at making some divestments.
Boswell sits at his desk recalling those losses. They bring to mind the fact that many of the best calendar months in stockmarket history occurred during the Great Depression. He knows there is some deeper relevance in this fact, but, for now, he does not want to focus on anything other than the task at hand. Boswell’s decisions over the past two years have led the company into a financially weaker position than he expected. His planning was based on years of sound experience, and all necessary procedures were well executed, but the environment just kept changing.
Boswell wonders whether a part of his problem may be that his rapport with managers and staff has suffered in this period. He recalls that in the couple of years leading up to this moment, management turnover at BOS has increased.
It was different when he founded the company. There was a great sense of community in the early days that gave BOS a lot of initial momentum, but the momentum has weakened in the past few years.
Rebellion and staff losses
Before establishing its new subscription service, BOS committed itself to outsourcing its less profitable manufacturing assets. That move had its critics.
Among them were several valued managers and other staff, who subsequently left in protest. Boswell belongs to a rare breed – part entrepreneur, part venture capitalist. As a result he can empathise with the dissenters. He admires them, but he hopes his current team has the commitment required to get through this storm.
“Wang was so committed to word processing that it missed the PC revolution.” Craig Flinders is talking animatedly to a colleague as they pass Boswell’s office.
Boswell remembers the story. Wang’s proprietary operating systems were the company’s golden egg until PCs came along. The advent of the PC made Wang’s mini-computers obsolete.
Boswell can hear the voice of Flinders fading down the corridor. “If only the company had let go of its proprietary operating systems it could have been a leader in the PC market. As it was, the company went from a $2 billion profit in 1989 to a $700 million loss a year later.”
Boswell’s desk is scattered with charts and reports documenting the steps taken in the 22 months since the downturn started. Not only has the financial strength of BOS waned, but the emergence of USE has led to an increase in industry volatility. He wonders whether he is repeating Wang’s mistake as he looks for emerging conditions that might indicate a promising course.
Boswell’s mind turns to his suppliers, programmers, managers and team leaders; people he has known for years.
Their faces parade through his imagination. Falling momentarily into that twilight between sleep and wakefulness, Boswell forgets his surroundings.
“Dan! The teleconference is starting in thirty minutes.” It’s Beth, his communications manager. Her unceremonious call is intended to get his attention. Boswell’s face comes alive, as though startled and on the verge of insight.
On his way to the teleconference, Boswell stops for some water. While pouring the first cupful, he remembers Chrysler’s $US3 billion cost-reduction program, which was coupled with a drive to develop closer relationships with suppliers. This random memory prompts him to realise that he has been so busy attending to the outsourcing program and then to other cost-reduc-tion programs that he has overlooked the key to the company’s previous success and to its future: the community of people that create, disseminate and use its products.
“Relationships! Relationships! Relationships!” says a voice in his head. With that, Boswell has an idea on how to recover lost ground. He realises that his company has been focused too much for too long on improving products and systems. He realises that he and many of his senior people have failed to foresee social as well as market trends. In the meantime, USE has been building up a network of relationships on an unprecedented scale, not only with customers but also with competitors.
Boswell suddenly sees his products in a new light. They are no longer complex webs of computer code for controlling powerful machines or high-tech devices linking into routing systems. Now he sees his products as central drivers in the process of community building. This realisation leads to a cascade of ideas. At the end of the teleconference, he gives instructions to set up meetings with every board member and management team in the organisation. Over the next three months he is going to be doing a lot of travelling to personally unveil a new strategy. He would have preferred it if his long-held and costly plans had enjoyed greater success, but he knows it is time to change.
Leaving the conference, he feels energised, and a few sweet words of his long departed mentor, Marcus Aurelius, fill his thoughts: “We shrink from change; yet, is there anything that can come into being without it?”
How is it possible to manage effectively when change appears suddenly and there is little time to take action? Assuming BOS continues to develop operating systems, how might Boswell resurrect his organisation to remain relevant?
Boswell ‘s strategy was linear and founded in technology. The strategy employed by USE was lateral and founded in relationships. How might individual organisations benefit from the balanced application of both approaches? How does the formation of co-operative relationships with competitors change the notion of competition?
Proposed Solution #1
Robyn Nelson is a senior partner with Dare Concepts, a corporate member of AIM. She has worked in the marketing and communications industry for 14 years at an executive management level. Robyn has an academic background in biochemistry, principally genetic engineering, and works as a group account director.
Dan Boswell remembers the wisdom of Marcus Aurelius: “We shrink from change yet is there anything that can come into being without it?” In business today, it is critical to be aware of the community we live in. It is not just about relationships because, like everything else, relationships change. More critical to our success is our ability to pick trends. We must observe the world around us without founding our values on the behavior of others, and we must understand what motivates them.
In the past 10 years, the global business model has moved its focus from making things to selling things. That means that in the case of Dan Boswell’s BOS, the quality of the final product is not as important as its usefulness to the customer. BOS did not anticipate that its competitor, USE, was a long way ahead of the game in cementing relationships with competitors and suppliers. USE has understood that customers are no longer looking for a one-dimensional product of superb quality. USE has understood that customers need a product that can interface with the many systems that they are interacting with each day; with or without adequate security. In the customer’s mind, security ranks a long way behind the flexibility to talk with many systems.
Although Boswell claims to have learnt well from Marcus Aurelius, the reality is that he has lost sight of his vision for the company and has become consumed by the manufacturing capabilities of the organisation – in particular, with creating a “gold standard” operating system.
Change in the market did not come overnight. USE recognised this and used the knowledge to react to the trends it foresaw. USE planned to develop a product that would solve a market issue, but BOS engineers labored to make their operating system a better and better product without recognising the changing needs of customers. BOS focused inwardly on its manufacturing capabilities, but the customers were becoming increasingly frustrated with the lack of interactivity with the huge variety of products that were appearing in the market.
This is a frustration that has affected several industries. People today need to deal with a much more complex working environment and require better and more flexible ways of managing their communications. The IT industry has spawned many products that perform similar functions. When an organisation adopts a product, it needs to stick with that product for some time to justify the cost. In the meantime, a supplier or client may install a new product on a different platform and, all of a sudden, the two organisations face the challenge of incompatibility when sharing information. Good, relevant products will always find a customer base. But good products alone are obsolete in the complex world we now live and work in.
Even if Dan Boswell has uncovered a gem that is central to his new strategy, he has a lot of work to do to get his organisation to understand the market and adapt his operating system to the task of resolving real problems. Assuming that he can implement his strategy quickly, Dan must offer the flexibility of the USE system to improve customers’ interaction with other systems and then find many more benefits in his product to bring his customers back. At the same time, he needs to make his company less reliant on just a few big players, particularly those in unstable environments. Here his thinking must change. He needs to find stable “bread and butter” clients to regulate his cashflow, and he should take risks only when the risks do not have the potential to pull his company down. For example, with a secure base in the local market, Dan could afford to go into the more volatile markets where, if success-ful, his returns would be big.
Working with competitors is becoming more commonplace when dealing with large companies. Boswell needs to embrace the change and build relationships with his competitors to understand what they bring to the customer. With this understanding, he needs to go back to the table with a plan for how his organisation can work with the selected suppliers/competitors to bring about the best possible outcome for the customer.
Such relationships can be achieved in an environment of trust. Business is no longer war and, fortunately, there can be a bipartisan approach for a mutually beneficial outcome. In the short term, Dan Boswell needs to concentrate on his cashflow and set a plan that will ultimately achieve a strong recovery. Well-managed businesses survive despite a fluctuating stockmarket, but their survival is dependent on a strong customer base built on trust and the ability to solve problems.
Dan Boswell repeats the mistake of many managers: he fails to continually revisit the BOS vision statement or objectives, and so becomes consumed in short-term issues that ultimately lead him down the wrong path and, eventually, off course.
When Marcus Aurelius communicated to Boswell, “We shrink from change yet is there anything that can come into being without it?”, Boswell hailed Aurelius as his mentor. Yet, in the daily cut and thrust of the business, Boswell did not take his mentor’s lead and forgot what it felt like to be inspired, or how important it was as a leader to inspire others.
Proposed Solution #2
The contributor to this second case study response is a personal member of AIM but because of the closeness of this scenario with a current issue relating to his senior management team, he wishes to remain anonymous.
Like so many corporate downturns, the BOS crisis is neither dramatic nor clear cut.
The situation is very much the norm in a market that has dramatically altered from a product-centric model to a people-centric model.
The central issue that dominates the crisis is the way BOS has ignored the real needs of its target market. Common to so many product-based companies and manufacturing entities, it is always more comfortable to stick to what you know; in this case, making something that is more technical and more sophisticated than the last thing you made.
The big question is: “Is that what your customer wants?”
Invariably, the answer is: “No.”
In the case of BOS, a sophisticated subscription service for its operating systems turned customers away and straight into the hands of USE, whose flexible “all access” system meant convenience and simplicity. One catered for a real need – a service that would allow any remote computing device to tap into and connect to all types of operating systems through the internet. The other, the BOS system, missed the opportunity to make it easy for customers. In effect, USE made it a “no brainer” in a market crying out for simplification and solutions, not more high-tech options and confusion.
The overriding issue in the crisis engulfing BOS is that is has been out of touch with customers’ real needs and too engrossed in proving superior technical knowledge. Customers just wanted things simpler and easier to use. Worse still, this central issue has been worsened by a management style in which senior executives seem to be more comfortable leading the company into areas they know and understand rather than exploring possibilities beyond their comfort zone.
This is about active leadership management, in which the role of the management team is to manage the opportunities and challenges of the ever-changing market; not to stay focused on old ways. In the BOS case, it seems that it was much easier to look to complicated new technological systems than to stop and try to understand the shifting needs of real people in the real world. The result was insular management and a form of leadership that denied its very reason for being: that is, to look for things not yet seen and understand issues not yet understood.
First and foremost, many management teams treat change as the enemy. “If it wasn’t for the fact that people keep changing things, we’d have a great business,” they cry. However, as Alvin Toffler said many years ago, before the internet and before September 11: “Change is not merely necessary to life … it is life.” There is no such thing as sudden change. All change can be seen coming, in one form or another. In the case of BOS, as Boswell himself realised a little late, the big change lies with the newfound sophistication and demands of customers who want real relationships with real people, rather than just more sophisticated options. This change was not sudden. It was merely Boswell’s realisation of this evolution in customers’ needs that was sudden.
Clearly, the resolution of this crisis lies with getting in touch with people, not in products. First, Boswell must establish simple and effective ways of communicating internally the lessons learnt so that he can motivate his people to establish a new lease on life. The communication must be simple and honest, admitting to mistakes and clearly outlining the new approach to relationships.
However, this does not just mean having a beer with customers. It means establishing what the customers’ real needs are, then designing solutions that take the core competencies of BOS and convert them to fulfil real needs. Meeting customer needs will inevitably mean assessing and, in some cases, getting closer to, competitors so as to offer real solutions.
The second crucial aspect is to take the newfound understanding to the streets, to communicate to existing and potential customers that the BOS focus will now be on ensuring that their skills and technology are used to satisfy real needs, such as finding better ways of streamlining operating systems in complex companies.
The crisis still facing BOS is that it may fail to remain grounded while it is establishing its new relevance to customers. In so many cases, even with newfound internal understanding and passion, a company with products such as BOS offers ends up getting esoteric and ethereal, without being able to sell tangible products to its customers. BOS must find a way of repackaging its expertise so that its operating system is relevant and valuable. This means adding value by clearly showing how customers can get great gains from BOS systems, in real and measurable ways. That may mean training, implementation ideas, further customer-support programs or better joint ventures with the likes of USE and other competitors.
One thing’s for sure. The USE “service on demand” is just what customers needed. The challenge facing BOS is to ensure that its core products are given fresh relevance to a wider range of new clients.
First and foremost, BOS must talk to its customers and ask them the most basic question: what do you want? It all comes back to one simple lesson – stay in tune with the ever-evolving needs of the customer.
Practical suggestions in summary
1. Talk to present and prospective customers to establish a clear set of needs in the area of operating systems.
2. With that in mind, establish a clearly understood and mutually agreed new positioning for BOS, based on real customer needs, not management comfort levels.
3. Communicate that positioning internally, along with a measurable course of action, to all BOS staff, always allowing for constructive feedback.
4. Apply that new perspective to the current product portfolio, altering it where necessary to accommodate real needs.
5. Repackage and re-invigorate BOS to external customers so that it has a clearly understood “point of difference” in the market.
6. Ensure that access to BOS products is easy and that all levels of service clearly match the positioning.
7. Develop a continuing management system to ensure that the ever-changing needs of customers are tracked and taken into account.