The channel to global market leadership

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The channel to global market leadership

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Now displaying: January, 2017
Jan 4, 2017

Hans Peter Bech:

I am Hans Peter Bech and today I am interviewing Ugné Kontaré. Ugne is responsible for global revenue generation with Soft4.

Ugne can you start by telling us: “who is Soft4”

Ugné Kontaré:

SOFT4 is a provider of industry-specific software solutions, namely:

  • Soft4RealEstate, a solution for commercial and mixed property management companies
  • Soft4Leasing, software for asset finance and leasing companies
  • And we have also built a unique solution for inventory management per the Theory of Constraints, called Soft4Inventory.

All these solutions are built on the Microsoft Dynamics NAV platform.

We are a part of Softera Baltic located in Lithuania, employ a little over 70 people and have been busy with software solutions for almost 15 years.

Hans Peter Bech:

Lithuania is a tiny country, way too small to support the growth rates needed for keeping a software company competitive. How do you manage this challenge? 

Ugné Kontaré:

Yes, Lithuania is a very small country, but we are very smart people.

The first 10 years we grew the business domestically working closely together with our customers. We are now the leading provider of Dynamics NAV based solutions in Lithuania.

However, we soon learned that businesses around the world face the same challenges and need the same solutions. Our big advantage is that we use Microsoft Dynamics NAV as our platform. Dynamics NAV is available in versions accommodating the differences in the legal requirements for business administration systems in most countries. We add the industry specific solutions on top.

The first international customers found us, and since 2013 we have systematically been exploring ways to reach customers all over the world. 

Hans Peter Bech:

What is your go-to-market approach?

Ugné Kontaré:

We work through so-called value-added resellers around the world, Microsoft Dynamics NAV partners who have a very good understanding of the software platform our solutions are built on. We started with a great partner in Canada, and today we have more than 50 partners worldwide, adding around five new partners each year. We help companies from North America to Europe to Asia and Australia deal more effectively with their business challenges.

Hans Peter Bech:

Why did you choose this approach?

Ugné Kontaré:

First, we’d been thinking about SOFT4 potential customers: Customers need someone who can help specify and implement the solution. Customers prefer someone speaking their language, within the same time zone and reacting fast to their inquiries; customers want to use software that is adjusted to local legal and accounting requirements. Who else rather than a local reseller can best meet these requirements?

Another thing, we felt that the resellers could also win from the Soft4 solutions: instead of reinventing the wheel, they could offer their customers a software solution fitting their business well, fast to implement and easy to upgrade. I must mention that distribution and manufacturing are the main industries software providers compete in. With SOFT4 solutions for property management or asset financing, our partners can differentiate themselves, shorten the sales cycle, enjoy better competitiveness, and win loyal customers. In addition, the resellers can benefit from repeatability, as they can complete more projects in the same time compared to typical software implementation projects. This becomes very important when talking about new cloud business trends.

Of course, there was a value for us in this business model, too – we did not need to build an entire infrastructure to gain and serve SOFT4 customers outside Lithuania. We decided to give away some margins in exchange for sales volume and gaining market share faster.

So, we all have a win-win situation: the customers get a well-tested industry-specific solution that meets their needs, the reseller can upsell and complete projects faster, and we at Soft4 get another opportunity to develop and adjust our solutions to new markets and customers and secure a much larger volume of customers.

Hans Peter Bech:

What are the challenges with the indirect approach?

Ugné Kontaré:

In the beginning, it took the partners some time to get to know us and give us their trust. In most of the new countries where we came with Soft4 solutions, we did not have any customers and references.

So, the first challenge was to encourage local customers to believe that Soft4 solutions are capable of solving their business issues, and can solve them better than other alternatives; also that we had to demonstrate that we are a reliable software provider that are in the business for the long term. 

The second challenge was to convince the resellers that there is a market for Soft4 solutions and it is worth investing their time in learning a new add-on and a new industry; in these specific industries, understanding the business process is way more important than technology knowledge.

The success came once we started intensive marketing actions in some countries of interest and introduced the first potential customers to the local partners. Our task today is to be visible, promote the SOFT4 brand and keep passing inquiries to our partners.

The Company culture and way of doing business is another important thing to mention. When building the partner network, we must always think about how the new partner will represent our brand, how well and fast they can handle customers’ requests, how well they learned the solution and industry-specific processes to implement Soft4 solutions themselves. And then we must make sure that serving our customers with SOFT4 solutions are an attractive business for the partners. When customers and partners are happy, then we are happy.

Hans Peter Bech:

What are your ambitions and plans?

Ugné Kontaré:

Today we are a fast-growing company with our focus on the customer – so that they can do their business without having the headache of IT and the software they use. We’d like to keep that customer-centric approach and develop software that is fun to use, fast to implement, easy to develop and support, because that’s what all our customers are looking for. Today, we have two targets: firstly, for SOFT4 solutions to become the number one choice for property management, asset finance and leasing customers, and secondly, to encourage new Dynamics NAV partners to join the SOFT4 Partner Network to grow their business and face market challenges.

Hans Peter Bech:

Thank you very much Ugne for this interesting summary of the Soft4 business. If you are interested in knowing more, you will find Ugne’s contact details by the end of this post.

Our you can use the Twitter handle @soft_4

Thank you for listening and have a great day.

Jan 3, 2017

Just do it!

That is the catchy payoff used by Nike.

For most people venturing into sports that may not be the best advice to follow. Yes, you should indeed start today, but do it according to a plan, or you may end up with severe injuries that will only delay the whole effort and postpone the results you wanted in the first place.

In business, we also often find the "Just do it!" mentality. As no plan of activities will survive the meeting with reality then why bother planning. Let's just do something and see what happens. We can adjust the course as we learn what works.

Don't just do it!

When I click the seatbelt on my morning flight to see a client, then I am convinced that the airline does not have the "Just do it!" mentality. I am sure they have plans and contingency plans for what should and could happen until I am safely on the ground again. I am confident that they have the "Think!" mentality introduced by IBM in 1911 (a couple of times IBM became convinced that they could predict or control the world and paid dearly for such hubris).

Planning is cheap

The fact is that planning is much cheaper than execution. You can change a plan from one moment to the next. You can refine and adjust the plan with relatively little effort in a couple of days, weeks or months. You can define milestones, budgets and KPI's that you will expect the execution of the plan to meet and produce. You can communicate the plan and involve people in the planning process ensuring alignment behind and their support for executing the plan. As long as you are in planning mode, everything is possible.

The only thing a plan cannot do is predict or create the future, but if you are creative and committed one of your many plans may become successful and may even make a dent in the universe.

Plans come in various sizes

Let's say that your ambition is to become the global market leader in your particular business. Today you have 5% of your domestic market, and in 10 years you want to have 20% of the global market. Doing the math, you must over the next ten years enter the 15 strongest markets in the world (of which the US must be one), and you must grow your company from the current 100 people to probably 10.000 people with operations in at least the 15 key markets.

You are convinced that if you don't achieve this position, then someone else will and that someone else will then have the muscles to make your life miserable even in your domestic market. You also believe that your value proposition (based on the IP or unique capabilities that you have) has the potential to achieve global market leadership, so why shouldn't you go for it.

There is no way you can develop a plan that can lead you to such an ambitious objective. You will have to break down the goal in smaller steps and then plan each step ensuring that you are heading in the right direction.

You will most likely do a 3-year plan with a budget and activity plan for the first year, then do a review on a monthly basis during the first one or two years, and then every quarter when you have gained momentum with a modus operandi that scales well.

Execution is expensive

Now it is time to execute the plan, which means opening the CAPEX and OPEX budgets that you assigned and implement the activities that you assumed would deliver the revenue and gross margin at the top of your budget sheet and the profit at the bottom of the sheet. Money starts pouring out of your pockets, but the revenue doesn't trickle in as fast as your plan assumed. You are behind the budget, and the plan seems to fail. It happens for the vast majority of companies, and now you need to decide what to do.

Were you overly optimistic on the revenue side? Do you just have to wait and then the revenue will pick up? Are you investing too little? If you invest more will the revenue then come faster? Did you underestimate the competitors? Did you misjudge the market's need for your value proposition? Were the customers' switching costs higher than assumed? Did you fail to reduce the perceived risk of doing business with you? Did you assign the wrong people to do the implementation?

This exercise is called "making corrective actions" and is a standard procedure with any business plan. You will revisit all the assumptions in your plan and check which of them needs updating. You will also consider if there were assumptions that you overlooked.

You'll keep doing this until your plan works and will meet your objectives or you abandon the mission and reconsider your strategy. There is no guarantee that a plan will eventually work. My claim is that planning gives you three major advantages:

  1. You will increase the probability of success substantially.
  2. If you are way off target, then you can cancel the mission earlier and with less sunk cost.
  3. Even when you fail, you will have learned something that will improve the quality of your next plan.

Which format should you use?

A business plan for a project that is of vital importance to your company should always start with the business model canvas including the value proposition and the business model environment. Getting aligned on the big picture and the vocabulary is a huge step towards success and will help you tremendously when you dive into the details and face the brutal meeting with the real world.

The business model framework is easy to understand and well documented. There are workshops available teaching how to use it, and there are plenty of consultants available to facilitate your planning and implementation processes. If you use the Strategyzer app, then the exercise will make the business plan as a byproduct, but you can also choose to write down the current state of your business model in everyday prose and use that as the latest version of your business plan.

I recommend buying the business model starter kit and put that big poster on the wall of your "war room." Follow the guidelines and use a separate poster for each new product/service/market segment.

Executing without a plan

If you had no plan before starting the venture, then my guess is that you'll be inclined to jump to a quick conclusion and make some changes (when the results don't match your expectations). After using this approach for some time, your venture will be in a miserable shape, and you'll abandon the mission.

But not always! Even blind chickens will find corn, and we can all make a lucky punch now and again, but what did we learn?

I must admit that I am a planning freak and for good reasons. When I was a 3rd year university student, I was asked to make a presentation of some housekeeping stuff for the 1st year students. I thought about what to say well in advance, but as I entered the stage and faced the 250+ people in the auditorium somehow my memory of what I should say evaporated. I made a terrible and embarrassing performance. People were very friendly to me afterward, but I knew that I had failed and I promised myself that it should never happen again. I went to the library and borrowed a couple of books on public speaking, and I talked to some of my teachers (that were present in the auditorium that day). I learned how to prepare a public presentation. I learned to write it down. I learned to rehearse with someone. I learned to rehearse it front of the mirror. I learned to make and use cue cards.

I learned that planning is cheap and execution is expensive.

Jan 1, 2017

Happy New Year

This first day of the year may be a good time to consider the one thing that you should do differently in the future—one thing that will make a massive difference for yourself and your co-workers.

May I suggest that one thing is the systematic application of the Alexander Osterwalder business model framework?

Using the Alexander Osterwalder business model framework will give you the following advantages:

1. You can quickly kill ideas that at first glance sound great but cannot survive the test of the business model analysis (it is unlikely that ideas that don't work on paper will work in real life).
2. The ideas that pass the business model analysis are better documented and better understood by the people who are to implement them.
3. By having a common framework and language, you will save enormous amounts time. You can cut to the core of new ideas much faster and with less effort.
4. You will have a business development language that you can take with you and apply anywhere (the same way that the English language will enable you to communicate with people all over the world).
5. You can quickly analyze, ask relevant questions about and finally understand the business models of your customers, your channel partners, your co-workers, your suppliers, your strategic alliances and your investors.

So where does the term business model originatefrom?
The term "business model" became widely used by the end of the 90's in conjunction with the introduction of the "new economy." After the dot-com bubble, in 2001, we learned that the "new economy" had to follow the same laws as the old economy. However, especially in the information technology industry, there still was a need for explaining why it could make sense to invest millions in companies that hardly had any revenue and were unprofitable. The business model became the standard phrase used to explain how you could turn a brilliant idea that lost money into a booming business in the future. But, it wasn't until 2010 when Alexander Osterwalder et al. published the book Business Model Generation that we got a complete framework for what a business model is. Before Alexander Osterwalder, we still wasted tons of time discussing what the business model format was in addition to discussing the business itself. It was like building the Tower of Babylon, where differences in languages stood in the way of solving the actual challenges.

H1: When will the business model framework cross the chasm?
Alexander Osterwalder taught us that the business model framework was not for exotic startups only. All types of business issues in all kinds of organizations would benefit immensely by applying a common structure and a common language.

Alexander Osterwalder et al. published the Business Model Generation book in July 2010, promising vast improvements in the business development discipline. And, while the business model framework can be learned at a little cost, we are still at the start of the adoption curve (it has always puzzled me that people who are supposed to be innovators are slow to adopt and use new business development frameworks). I hope this post and my little present for you at the end can help you climb the adoption curve a bit faster.

H1: The business model framework at a glance
The business model framework has nine building blocks, and the explanation of your brilliant idea for starting or improving a business needs to include them all.

You mostly start by clarifying your value proposition and its attractiveness to particular kinds of customers (often called the product-market fit). Then, you explain the channels required to find, nurture, mature, activate, develop, and win new customers (often called your go-to-market approach) and the customer relationships required to make, keep, and grow happy customers. You complete the story by showing how the revenue flows through your channel and customer relationships. These five building blocks make up your business model front office.

The next step is to explain the business model back office required to drive the front office. You describe the activities required, the resources needed, and the strategic relationships that you must have in place to deliver your value proposition successfully. You end the story by estimating the cost required to run the back office.

When you have done your business model homework, you have a preliminary P&L Statement (Profit & Loss) that can be refined as you mature the project.

Most users of the business model framework stop here, but that's way too early. While most of the business model building blocks are within your full control (revenue is the exception), you have to operate in a world that is completely outside your control. You need to make it to page 200 in the Business Model Generation book before you are introduced to the business model environment, describing the external powers and trends that impact your venture. Alexander Osterwalder has developed a very useful kit for running a business model environment workshop, which I recommend that you get.

With the first version of your business model and the environment documented, you can start to refine and optimize. The last sixteen pages of the book spell out the format for running a business model design process within your company.

H1: My New Year present for you
If you haven't bought the Business Model Generation book yet, then I suggest you do so now. After reading the book and using the framework for the first time you will be left with a big question: How do I implement my business model?

I have written an e-book giving you the format for generating revenue. The e-book will be published by the end of January, but as my faithful reader, you can get it now.

Happy New Year and may your 2017 projects turn out successfully for your customers, your co-workers, and you.