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VMware's Strategy: Customer Centric Innovation

This is an interesting approach. And it really is a no-brainer. WHY? Because every startup has walked through that alley. They've gone through the "Client is the king", "The one's who are closest to the clients are the gurus" (Not some dry sales guys who have a target to meet). Problem is when your portfolio expands (and bloats in most cases, Microsoft is a perfect example of it. Look at products like Office, Windows etc) you start deconstructing the constructive and collaborative practices.

Then you drop the sales and marketing staff to fend for themselves. They have to end up facing the harsh world. But it doesn't stop there. If you're looking for a job in a well established company and have tremendous skills and will power, don't expect the R&D division to be a haven. It is just about as far away from the customer. It is not Customer Centric anymore. They don't bond with the core customer group. They don't liase with the external factors that have a deep impact on their very internal, deep down in the basement R&D labs and eventually on the product line.

Ok I always held VMware as the Google of server market. (Google is their client anyways). Both these companies have bags full of surprises. As a competitor you would go nuts wondering what they would be going to do next. Their plan of action is pretty simple and easily achievable. Google has everything on the web. Customers (users) come over from all over the world and with all the beta projects to indulge in, you have multitude of possibilities to participate in the "customer feedback" program.

So how to proceed with this ever-growing market and competition playing all kinds of games (besides the REAL GAME PLAN which they will take a long time to figure out). They are indulging in all kinds of disruptive practices (likes of SWsoft, Xen, Microsoft) like going to the press and calling it slow and expensive (SWsoft said that a few days ago).Parallels did a good job by releasing support for Intel Mac. This move pushed the competition to newer levels as it will draw a huge public from the Apple lovers. VMware has plans to introduce MAC support pretty soon. Xen is moving towards the Linux market and OS vendors like Redhat and SuSe will have virtualization support built in pretty soon.

So take a look a how you would use your Customer Centric Innovation to fend of competitors, please your customers (OK so that framework you have laid out already by creating a core customer program, successful community program, technology network, blogs, open source model, collaboration to name a few) and maintain growth. But don't be fooled a lot of companies have that. Oracle too has that. It has a community forums too but I have not yet seen an aggressive community forum like that of VMware. A lot of companies have the R&D program as well but still an innovative product dies and is not even accepted (sometimes) by the early adopters. Question is why does this happen. It happens because there are too many islands.

Too many islands?

Well that might sound as a good thing to separate marketing, sales, finance and R&D. I don't know (a couple of versatilists in your group and you have a combo-team!) why but I'm sure many companies will have a very good reason to do that. Well it is wrong. Sure you should do it where your innovation ecosystem still needs some field work and you have time to deploy. You have market advantage and you were the first to be there. Problem is that it is very tempting to go geographically centric but as long as you stay focused on your innovation ecosystem you'll realize that all these divisions must be split up as logical components and put together is several locations (both existing and newer regions) in smaller effective result oriented "guru mini-VMware" units. And using the core customer group to also be part of your units.

How to sustain growth? Good question but every organization has its challenges. Every dollar you put in your R&D must yield a positive return. More dollars (of euros if you will). Dell, 7Eleven and the likes have done that successfully. Sony for instance did a lot of cool geeky innovation work but lost a lot of dollars because they didn't include the customer and the community in it. For each dollar they got 20 cents back! VMware and Google do exactly the opposite. They let the customers decide and even use the disruptive practices of their competitors to their advantage!

Again how to sustain, expand, stretch, expand the growth?

  • Defense : OK now looking at VMware its clear to see that they do have the "Innovation head start" and "innovation advantage" over their competitors. And I think VMware did very well in proactively disrupting the disruptor's attempt. Here I'm talking about releasing the VMware server free and freezing the GSX server work. Microsoft too was forced to free it. So in this case the market giant played a good game by disrupting the disruptor's attempt.
  • Offense: Acquisitions (like that of Akimbi, I expect Reflex VSA too to be absorbed as it has some added value. EMC did pick up RSA Security. Adding a good security IPS/IDS appliance to its product range (as an addon) will help VMware sharpen the sword we call competitive advantage.
  • Expand : Customer segmentation (customers are like fish in the ocean, each has its only sets of attributes and needs and they all are dependent of factors such as salinity, warmth, light etc. To serve these huge variety of customer you have to segment your strategy and make segment sensitive gurus in charge), sub-segments, penetrate through core customer groups, create new cores.
  • Collaboration: Seminars, Partnership with vendors, joint ventures in exploring new markets.
  • Kill anti-innovation: You need to constantly work on the mind-sets and perception. You don't want your innovation to get stranded because the mind was not really ready for the change.
  • Create guru-units (islands, see above) with mini-CEOs (Chief Evangelist Officer*) :Here you create "front line staff to champion the cause of the field imperative" who are instrumental in your development strategies and are the ones who actually drive the vehicle. Thus the term guru-units. Guru because they know they kick ass and are not just some dry marketing or sales staff!
  • Community R&D program: This program will invite people which may not have anything do with your core customer group and yet are potential candidates for conducting researches and even extending the program to allow these "virtual employees" to offer trainings, seminars. Programs like the Appliance Challenge which VMware did does just that. And a $100,000 cash prize can sometimes be a lot better than a job offer! The idea is to promote R&D. And VMware knows that very well.
  • Customer R&D program: VMware does a very good job at it. Inputs from community forum are taken very seriously and a lot of VMware employees participate in it. This is a huge repository for the R&D. So you see its not just a select group, it goes both upwards and is expandable in all directions. (Thus again making the competitors staying clueless of what the game plan is)
  • Focus, Unfocus, Refocus: Customer focus is very crucial to a successful strategy. You lose focus, don't panic. Unfocus and try refocusing on the customer needs. Ask questions almost everyday, several times a day "What are my core product? What is the allowable perimeter for diversification? How far can I push it? How close am I to the customer today? How close/far was I from the customer yesterday?".
  • Maintain Offensive and Defensive ventures: This is an ongoing process. Continuity is crucial.

* Someday I'll also talk about how I think the leadership and roles need to be addressed. CEO, CFO,COO, CTO,CIO must soon be replaced or complemented with a more effective roles. This trend has started already Bill Gates, Scott McNealy do that work while being already "out of office". And you don't have to be a CEO to do it.


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