Putting customers before shareholders

Today’s post asks whether an organization’s long term financial health is best served when the organization’s main focus is to increase share price each and every quarter, or if more value is generated by putting the customer their needs first.

Recent literature on the subject implies that the popular trend of the last three decades may not be the best choice – prioritizing share price above all else may actually rob longterm shareholders of wealth that could have been generated with a customer first policy. In the January-February 2010 issue of the Harvard Business Review, Roger Martin (dean of the Rotman School of Management) took a close look at a few companies that put the customer first. Interestingly, many of these companies generated strong shareholder returns compared to the S&P 500 while creating customer loyalty (or because of it).

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Competing with free

Over the past few years, free products have been moving up the stack from tools used by technical staff such as Linux and Apache to services consumed by the general public like Youtube, Pandora and Google news. So in this era of free, on-demand access to information, media and tools how can companies who charge for their offerings compete?
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Snoop Dogg on differentiation and brand identity

Legendary rapper and businessman Snoop Dogg sat down with CNBC to talk a bit about how he created his personal brand and how he differentiates himself from the competition. Although he is not what you would traditionally consider a business icon or mentor, Snoop is very successful in both the music and media industry and as a serial business owner and entrepreneur.
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Creating new markets with open source

Blue Ocean authors W. Chan Kim and Renée Mauborgne have an article in this month’s Harvard Business Review discussing market re-structuring based on strategic decisions. In this post I will discuss how their new ideas can be applied in an open source ecosystem to restructure the marketplace.

Background: What is blue ocean strategy?
Kim and Mauborgne identify two kinds of oceans: red oceans and blue oceans. Red oceans are current markets. Competition exists and players must fight to carve out a share of the market in order to create value. Blue oceans on the other hand are undiscovered markets. Markets with no competition and low cost of entry. By looking for niches parallel to their current markets, organizations can discover blue oceans in order to create and capture a large share of a new market. Blue ocean strategy is based on a finance theory called endogenous growth. Endogenous growth theory states that strategies which promote innovation and openness will result in growth, and that organizations have the ability to change the market they operate in. Read the rest of this entry »

The evolving value of open source

In yesterday’s post I mentioned that organization’s views on open source are always changing and they tend to be going in a positive direction. Where open source was once viewed as an arbitrary process-less free for all where anarchy ruled today it is recognized as a legitimate form of software development with decentralized management and lightweight but effective processes. Business’ views on open source began to change in 1995, with the release of Red Hat Linux. Tom Young, then CEO of Red Hat architected a brilliant plan – offer the operating system for free and make it available for download anywhere on the internet. Red Hat was the first distribution of Linux available for free and the first available for download. Young’s plan worked, Red Hat became the Linux standard and organizations began to adopt it. This marked the start of an era where open source was viewed as legitimate by businesses.

Today, use of open source is common practice in many organizations. Projects like Apache & MySql (important parts of the LAMP stack) have commercial support options and still enjoy a majority share of the market. Company PBX’s run on Asterix and projects like Eclipe’s RCP are used to jump-start product development. But this is all old news. This is part of the traditional definition of the value open source provides. Much like open source projects are maturing, so are the businesses that depend on them. Now OSS is recognized as a tool to create and capture value, it is leveraged to create competitive advantage and to identify new markets.

This new breed of manager recognizes that ecosystems can be built around open source projects that not only serve customer need, but also provide stability and value for the organization. Organizations such as Red Hat, Novell and Eclipse have realized this and are leading the way, enjoying profitability as they go.