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Do Leopards Change their Spots?

A few weeks ago, I gave a keynote speech to the global marketing team at Cisco Systems. In my talk, I made a provocative observation. I noted that Cisco has acquired several B2C (business-to-consumer) companies including Linksys and Pure Digital (makers of the elegant Flip camcorder). Further, Cisco has other interesting products like Internet phones that are relevant for consumers. Finally, John Chambers has identified the home market as the “next big frontier” for Cisco. But my contention was that Cisco still doesn’t “get” the consumer market. If they did, they would offer a simple universal home connectivity and storage solution that would store my media, route my video and voice traffic, run my telephones and videoconferencing in the home. And it would be available from Best Buy and installed “out of the box”. That’s not likely to happen soon. It will probably take a genetic mutation for Cisco to truly embrace the consumer market. For that matter, Apple is never going to become a big player in business markets either. They have “consumer DNA”, not “B2B DNA”.

As Geoffrey Moore has observed, there are two types of technology companies – companies that make “complex systems” and companies that make “high volume” products. IBM, Cisco, SAP and Oracle are in the first category while Apple, Sony, Intuit and Nokia are in the latter category. And never the twain shall meet. Efforts to transform B2B companies into B2C companies are almost never successful. Yes, there are some exceptions – HP and Microsoft possibly come to mind. But in general, you are either fish or fowl.

There is another dimension to the same problem. There are “product” companies and “services” companies. Product companies sell things while services companies offer services and solutions. For instance, IBM is a (primarily) services company while Motorola is a product company. Product companies that try to “cross the line” face serious challenges. Consider the Google NexusOne phone. Google is quickly finding out that selling a product is quite different from offering an online service. When people pay $529, they expect personal service. Knowledgebases don’t cut it. And when Intel got into the services business with Intel Online Services, it was a disaster as Intel wasn’t very good at the 7x24x365 mindset that services demand.

So why can’t leopards change their spots? It turns out that B2B markets don’t only differ from B2C markets in terms of products. They differ in the entire business system that is needed to design, develop, market, sell and support the products. The development process is different. The figures of merit in product development are different. The price points and margins are very different. The importance of target costing and price-volume analysis is different. The sales & distribution channels are different. The partner ecosystems are different. The branding approach is different. The differences are systemic – they are embedded in every aspect of how companies think, how they are organized, how they operate and who they hire. And even if the “consumer division” is held at arm’s length (as Cisco has done with Linksys and Microsoft has done with Xbox and Zune), there is a “dominant logic” in every company, and everyone knows who the real Brahmins are.

Why should leopards change their spots? They need to. A secular trend I observe is the consumerization of technology. The consumer market is becoming more important than ever before as technology products reach beyond the rarified atmosphere of enterprises and seep into the mass consciousness. Consider mobile devices. Time was that cellular phones and wireless email devices were predominantly used by businesses and professionals. Now, even the staid RIM is coming up with sexy consumer models like the Pearl and the Storm. And of course, Apple has completely changed the game with the iPhone. Other markets will follow the same logic – unified communications, networking, cloud services, to name a few. So the writing on the wall is clear. If you are a B2B company, you have to figure out how to “scale down” your offerings, first to the mid-market and Small Business segment and eventually to the consumer market.

But how? I think companies will be well-advised to study the few success stories – HP seems to pull it off well. So does Microsoft, to some extent. And Adobe. How they did it and what they do differently is the subject of another post someday. Meanwhile, B2B marketers, consider yourselves warned!

#technology

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