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Software Company Success Lessons

• Technology Second!  
• Payback First!  (Results / Cost / Benefit)
• 12 Defects, 12 Artifacts, 12 Lessons

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Lessons

Summary

645

Enterprise AI Success Story

Agent Success

Code Generator Success

6/8/2026 An Enterprise AI Success Case by LogistixIQ and Chris Cameron, SVP*

BEFORE AI: Four dispatchers could handle just under 500 Trucks Of Fracking Sand Per Shift

AFTER AI: Four Dispatchers Expected to Handle 1000 Trucks Per Shift

Competitor Benchmark:  Chris tells me he knows of a competitor using 8 dispatchers to handle less than 500 trucks per shift. 

Chris’s team is looking at DOUBLED OUTPUT for same labor cost – possibly 4X OUTPUT compared to a competitor!

Chris Cameron, CEO of logistics IQ, shared some amazing results managing about 30,000 truck shipments per month, seven days a week, 24 hours a day. 

A TIMING AGENT allows the trail of several hundred trucks to act as storage! Significantly reducing storage, handling, and other costs.

The TIMING AGENT also estimates turnaround time to optimize sand supply chain for each well.

A RISK AGENT continuously ranks wells at risk of going down for lack of sand, GREATLY REDUCING chances of well going down. AI is able to handle the complex calculations far quicker than humans. Provides continuous well risk management rather than sporadic. 

TECHNICAL FOUNDATION is a custom built core system in REACT with a MySQL database. Chris uses Windsurf for AI coding.

Chris led the charge to put the AI on top of the course system in less than five months.

Chris will be discussing this case with our Senior Software Working Group at 6 p.m. Central time on Monday, June 8, 2026.  Both in person and by Zoom.

Email me if you would like to join us.  No cost.

644

Effective Allocation of Capital

Product Development: Work Hard to Find Low Capital Niches

Careful – MUST Still Have Barriers to Competition

5/12/2026 Wall Street Journal Shows 99.99% probability big investments in AI will produce poor stockholder returns 

The magnificent seven got where they are by producing huge returns on low invested capital.  

They are abandoning that model, investing huge amounts on AI. 

100 years of detailed US stock market returns show with near certainty that asset-light companies produce better returns than asset-heavy companies.  

History shows that asset-heavy company stock prices do great during booms but lose all the gains when the tide goes out.

The very few winners will win big, society will benefit and customers will get advanced capabilities at a bargain price, but the vast majority of this invested capital will produce poor returns.

Tom: Our research shows repeatedly that the right question to ask is “WHO GETS THE MARGIN?“  (Who benefits from the productivity gain?) 

When a productivity gain is easily duplicated by numerous competitors, the margin ALWAYS goes to the END CUSTOMER and a few select niches in the value chain.

Our recommendation is to focus on those niches where barriers to competition can be created and a strong margin can be sustained.

See Wall Street Journal Article https://www.wsj.com/finance/investing/leading-stocks-are-losing-their-low-asset-edge-4a2885c3?mod=author_content_page_1_pos_3  

643

Effective Allocation of Capital

Polar Opposites Provide Contrast

Warren Buffett vs. Softbank

5/10/2026:  Economist Article Contrasts Two Extremes in Ownership / Investing

Implications for Software Product Development, Software Jobs

Buffet / Berkshire Hathaway Approach: “Low risk, low debt, big cash reserves, strong barriers to competition, predictable profits on moderate to low invested capital, happy customers, happy employees, consistent solid returns for shareholders, holding good companies for a long time.  Buys companies based on present value of future profits.”

Softbank* Approach:  “Invest in any tech that is gut level promising, especially AI, regardless of price.  Extreme debt.  Cash from operations nowhere near able to pay debt.  One in 10 big wins is all that is needed.  Extreme AI investment means Softbank could easily disintegrate.  (Softbank’s demise has been predicted many times.)

Tom Comments on Impact for Software Products, Jobs:  Be aware that there is a school thought for software / tech products which is very close to the Buffett approach:  Insisting on profitability from the start, only pursue niches where we solve a big problem for customers, barriers to competition exist resulting in strong margins on low invested capital.  

I am repelled by the hype, unmet promises, volatility, lack of concern for customers and employees in the Softbank approach.  This is a complex topic – contact us for details.

* Softbank founded by Masayoshi Son, initially an Asian Telecom, has grown into an enormous tech speculative investor based in Japan.  Softbank did well by bringing proven tech trends from U.S. to Asia.

642

AI Lessons from Life Insurance Software

Lessons from North American Life, Midland National Life, Globe Life, AIG Life (now Coforge), U.S. Life

Article in process – 

Will be subject of AI Software Product Development Working Group Session

641

Big Win for AI with Process Improvement

Enterprise Software Product Saves Brain and Heart Tissue, Reduces Cost and Doctor Time Waste

Success By Viz.Ai Using AI To Create More Effective Pathways (Processes) 

 https://www.wsj.com/opinion/the-algorithm-will-see-you-now-e8cc8b93?mod=Searchresults&pos=1&page=1  Wall Street Journal article by Andy Kessler 4/20/2026.

VALUE CREATED

• Reduced time to treatment in a stroke by over an hour. Time is brain.
• AUTOMATED APPROXIMATELY 90% of DOCTOR WORK before seeing patient ( both administrative and low-level decision-making). Frees up doctor for higher level work, dramatically, helping with current doctor shortage.
• IMPROVED QUALITY of CARE, HUMAN LIFE example:  Can now synthesize a 900 page electronic health record to essential, “action needed “essence, significantly increasing the chance of finding disease before symptoms occur.

BEFORE

• Messy workflow, 13 different decisions and handoffs for stroke
• 56 decisions / handoffs for thickening of heart muscles.
• PROCESS TRIGGERS:  Initially triggered by the tech (imaging results processed by AI)

AFTER

• Shortened initial treatment by up to 88 minutes
• Reduced variance in treatment times per patient by two hours and seven minutes.
• Faster and more consistent treatment for all patients. 
• Moved to electronic healthcare record as BETTER PROCESS TRIGGER. Now triggers 90% of workflows. 
• Now in 2000 US hospitals covering 230, million people and 35 European hospitals. Growing 40% per year.

SUCCESS LESSONS

• INITIAL RESISTANCE:  Initially marketed/perceived as just helping the radiologist, neurosurgeon and doctors read scans.
• Resistance reduced dramatically when all realized had to fix the entire workflow FULLY UNDERSTAND PROBLEM
• 20% is detecting disease. 80% is fixing workflow through large bureaucracy.
• WHOLE PRODUCT SOLUTION To SALES CHALLENGES: Appears selling single disease solution to hospitals was a problem. Expanded to 55 diseases/pathways.  35 pathways came from partners.
• AI Agents are part of solution. 
• WORKFLOW DESIGN: started by turning hospital rules into SOFTWARE.

COMPETITORS doing similar work include AI.DOC and OpenEvidence. 

640

Blackberry Revied by Narrow Niche Focus

Right Out of Playbook for Crossing the Chasm, Other Books Advocating Niche Focus

5/2/2026 WSJ article about Blackberry Returning to Profitability Through Niche Focus

Transitioned from handheld to Auto Computer Real Time Operating System niche (RTOS) then to additional niches in medical devices, industrial automation and robotics

NOTE:  TIA’s research in 2024 classified Blackberry as a (huge) ROIC loser (Return on Invested Capital):  

$9 Billion in Capital Tied Up for 9 Years produced a $7 Billion Lost

The news is it has now produced an annual profit for first time in 20+ years. 

A big SUCCESS STORY in turnaround through NICHE FOCUS (so far…)

Their RTOS product is now found in 275 million cars.  It provides the plumbing that allows key driver, assistance:  Collision warnings, blindspot, notifications, adaptive, cruise control, pedestrian detection, steering correction…  It is designed to never, ever fail and moving on to additional niches in autos, factory floor, hospitals, surgical robots, etc.

Some hard work, some luck resulted in finding this great niche. The gigantic blackberry failure drew all attention, leaving this business unit alone to work on solving a big problem for a KEY customer. The desperate circumstances of Blackberry also meant they had no choice but to find a better business model.

BREAKTHROUGH came over a beer with a key Customer, Audi’s engineering chief. He said “we are moving our infotainment business to Google but here is what we need for the next generation of cars...“.  The Blackberry unit Head listened and a new, profitable niche focus was born.

See article at https://www.wsj.com/tech/blackberry-qnx-software-cars-bf2a2280?mod=tech_lead_story 

639

Vertical Software Firms More Stable, Less Vulnerable

4/26/2026  AI-Driven Severe Downturn in Software Company Stocks Shows Industry (Vertical) Focus Holds Up Best Under Stress / Pressure WSJ - see

https://www.wsj.com/finance/investing/wall-street-is-sorting-software-companies-into-winners-and-losers-e44fe73b?mod=Searchresults&pos=2&page=1 

Loans to vertical software companies have only been discounted by 4.2%

Software Engineering firms discounted 16.3%

Horizontal firms by 8.8% 

Cybersecurity by 5.3%

Inherent advantages of vertical / industry-focused software firms:

1. Customer focused instead of tech focused
2. Solves, bigger, higher value problems for customers
3. Higher perceived value by customers due to WHOLE PRODUCT SOLUTIONS
4. Higher switching costs
5. Much higher barriers to competition
6. AI cannot easily replace
7. More likely to focus on profit, mid to long-term value for owners, happy employees, happy customers
8. Less likely to be damaged by lunatic speculation, growth at all costs, acquisitions, excessive CEO pay

638

History of No-Code / Low-Code Solutions

Relevance to AI

Code Generators, No-Code / Low-Code Solutions, Citizen Developers, User Programming …

History, successes, failures, over-optimistic predictions shed light on use of AI to create code.

Click here to see article in process  (password required)

637

Skunkworks

Sybase

Salesforce

VMware

Symbol 

Short Success Stories

Skunkworks, 1974 by, Kelly Johnson and Ben Rich. 14 rules and RIOT ACT resulted, spectacular, unequaled, defense results over 50 years. Most projects completed in 14 months to two years:

• First US jet fighter, 200 mph faster than prop driven, working in five months
• First mach 2
• The stealth fighter which created a 25 year advantage over Soviets and contributed to their downfall
• Stealth technology behind the B2 bomber
• The U2
• The blackbird, mach 3, SR 71
• Best air to air missile initial test in history
• $200 million plus refunded to government is unneeded, unused or impractical

Sybase, 2007 to 2010. Escape Velocity by Geoffrey Moore, page 126. narrow focus on two niches took company from market cap of $2.2 billion to acquisition of for 5.8 billion DURING 2008/2009 GREAT RECESSION.

Salesforce 10 X value creation by reducing enterprise software installation and operating costs versus legacy apps. Escape Velocity, Geoffrey Moore, page 150.

Salesforce results record mixed. BREAKTHROUGH (I think) parentheses: making it dramatically easier for management to get control of sales leads and sales people. Arguably, a net negative for sales people.

VMware 10 X reduction in the cost of data center provisioning and consolidation of unused computing capacity. Page 152, Escape Velocity by Geoffrey Moore.

SYMBOL technologies, 10 X breakthrough, DEVELOP HORIZONTALLY, SELL VERTICALLY with ruggedness of computers for mobile needs.2003 to 2006, page 155, Escape Velocity by Geoffrey Moore

636

Bessembinder Findings

Only 3.4% of Public Stocks Created Net Wealth in Last 100 Years

Corroborates TIA Research

95% of public firms don’t outperform cash.  50% lose money per finance professor Hendrik Bessembinder of Arizona State University. Wall Street Journal, 4/9/2022 by Jason Zweig

“Most of the return of the stock market over time comes from a few high-performing ‘superstocks.’  More than 95% of all stocks, over their lifetime as public companies, collectively, don’t even outperform cash, and more than half deliver negative returns”

Corroborates 2024 TIA Research finding:  “89% of public software companies fail to outperform cash in a mutual fund over 10 years.”

REMEMBER:  Only 1-2% of Tech Startups Become Public Companies or are Acquired  “Only the best become public companies” may be an illusion.

3/23/2026  BESSEMBINDER CITED AGAIN in Wall Street Journal 

“Research by Hendrik Bessembinder  indicates that almost all the wealth creation from equity investing was produced by a tiny fraction of individual stocks.  

For the 100 years since 1926, the U.S. stock market has returned about 10% annually. But only 3.4% of the stocks were responsible for all the wealth creation.  

The rest of the stocks combined didn’t produce net gains that exceeded the amount that could be earned from investing in 30-day U.S. Treasury bills. And more than half the stocks in the market lost money.  * The generous average return from the market came from a tiny handful of stocks.  An indexing strategy works because it captures these rare winners.”

635

Percent of Services Matters

Barriers to Competition

Whole Product Solution

(AI’s Impact:  Early 2026 is showing BIG drops in major software company share prices.  We are looking a WHY and what to do…)

When Services are Less Than 30% of Revenue, Software Companies are Vulnerable, Unstable

Features, Tech Leadership Alone Are LOW BARRIERS TO COMPETITION

Your competitors will duplicate your features, cut prices and squeeze your margins

Services at 30% or greater shows focus on High Value for customer, WHOLE PRODUCT SOLUTIONS and  creates barriers to competition.

Dassault, a $6 Billion French software giant has sales declines and a 50% drop in stock price.  (FYI:  I have some negative experience with Dassault products – all techno hype and no regard for effective implementation.)  Services are 10% of revenues.

Major company % of revenue from services per ChatGPT on 2/15/2026:

• Adobe:  2%
• Salesforce:  6-7%
• Oracle:  9%
• SAP:  13%
• Microsoft: 2.8%

Our research from 2021 shows that software companies producing a long term Return on Invested Capital over 10% have between a 70/30 and 30/70 software to services mix. 

BOTTOM LINE:  Competing on tech / product features alone leads to very very rare short term wins, but it is a slippery slope.  Much better to focus on creating extreme high value for customers (a whole product solution to an urgent compelling need) with a mix of product, services and partners.

Sources:  WSJ 2/12/2026, TIA Research from 2026 software company stock price drops, TIA Research Update #3 2021, 49 Firms Studied 

634

Who Gets the Margin?

Containing the Failings of Human Nature

Owner Interests Ahead of Personal Interest

Rational Management

“Exciting technology or healthcare stocks end up earning lower returns than companies making bottle caps or toilet paper.”

Robert Haugen, University of California, Irvine, wrote a rigorous book “The New Finance” (out of print.)

He argued that “the pathetically inefficient market doesn’t seem to have a clue as to what is going on.” 

His analysis of data from 1928 to 1992 concluded “the risk-return trade-off is truly negative,”  

Why? Less-volatile stocks are priced too cheaply “because they are boring.” That’s why buyers can earn higher returns in the long run. 

Source:  Wall Street Journal, 2/7/2026, THE INTELLIGENT INVESTOR | JASON ZWEIG

633

Who Gets the Margin?

Who Will Reap the PROFITS from New, Big Technology???

THE GRETZKY METHOD:  Always asking “where will the profits be?” 

Good Competition / Bad Competition

Clayton Christensen did a great service by insisting we REMEMBER to think through VALUE CHAIN PROFITS.  See example page 155. 

He walks us through the PC Revolution and shift to non-proprietary hardware as example.

He shows WHO WON THE BIGGEST MARGINS AND ROI FOR OWNERS – by far:

• Microsoft
• Intel
• Applied Materials
• Disk drive / head designers and manufacturers 

The rest devolved to either commodity status or simply went away.  Think of all the big names that are now no longer relevant:  IBM, DEC, Compaq, Dell, Data General, Wang, Computer Land, Business Land…

WHO DOESN’T GET THE MARGIN:  Feature based competition is easily copied – results in nothing but reduced margins for all competitors – and customer reaps the value / margin.

Bad competition allows others to reap the value of improvements. 

Good competition allows you to reap the value.

Gretzky taught us to “always ask where is the puck going?”  AI fans pay attention.  We need to be asking “who will get the margin?”

Source: Innovator’s Solution by Clayton Christensen, 2003

632

Authority / Responsibility / Competence

Profitable from Day One

Not Chasing Every Dollar of Revenue

Scope, Requirements, Change Control

Narrow Focus on Extreme High Value For Customer

Work Breakdown Structure Discipline Leads to Accurate Status

Cost / Margins

Sales Execution Excellence

Urgent Compelling Need

Big Lessons from the Navy, Long Career in Software.  Interview with Ted Puchacz January 2026.

Ted was in the Navy in Intelligence and had a big career in the software industry leading sales teams for IBM, Nashua, UCCEL, Computer Associates, Siebel and Axiom.  Ted and I discussed some key things he has seen improve software outcomes:

1. Matching authority, responsibility and competence is by far the most important item in Ted’s view.

2. Profitable from Day One.  Stay away from the nonsense of giving Techies infinite amounts of money and letting them waste it.

3. On Scope, Requirements, Change Control: IMPLEMENT THE BASE SOFTWARE FIRST!!!  Then tightly scrutinize the requested exceptions.  Yes, it will mean saying “no” to some lower-level and mid-level people.  Yes, they will have to change their business processes to match the software.  This is a big issue because Ted worked in the Heyday of Siebel when it pioneered CRM as a standalone application.  Siebel was a darling of the stock market and boomed in the tech-boom of the late 1990s-early 2000s, but was severely criticized for extreme cost and complexity of implementations and upgrades.  This translated often into serious customers’ dissatisfaction. The single biggest thing Ted saw in getting over that problem was NOT SAYING YES TO CUSTOMIZATIONS IMMEDIATELY. DO NOT CHASE EVERY DOLLAR OF REVENUE. AGAIN, IMPLEMENT THE BASE SOFTWARE FIRST.

4. Executive engagement, buy-in, control and effective status reporting. Ted made the point that usually you only have to do STATUS REPORT DISCIPLINE a few times. You demand accurate status reporting and take immediate action on  shortfall.  People that can’t meet their commitments are removed.  People that hide problems are removed.   People that accurately report status are rewarded.  “Your status reports will get dramatically more accurate – real quickly.  You won’t have to enforce it again. But you must be willing to demand performance.”

Cost / Margins, Cutting the Team in Half:  A Computer Associates, Charlie Wong story on managing and optimizing the cost of technical delivery: Charlie Wong was the controversial head of Computer Associates. There is good news and bad news about Charlie Wong’s approach, Ted:  “Charlie taught me that on every big software project if you start out with a team of 20, a few months in you can cut it by half, because half of the people are doing the primary work and you’re beginning to understand who they are.  In another few months you will be able to cut that in half again, down to 5 people or so.  It will be very clear who is performing / contributing and who is just hanging on.  

5. Sales Execution Excellence Story: Ted had a big win for Nashua earlier in his career competing against Memorex selling disk subsystems. Though Memorex’s product was cheaper, Ted took his territory from $60,000 in revenue per year to $1.2 million per year.  He did it by meeting a key compelling need for state governments.  On a 5-year lease, Nahsua’s price was competitive with Memorex’s and winning while competing with IBM, Memorex, 3M & BASF.

Ted was able to overcome an Urgent Compelling Need – state governments cannot commit to a lease  for more than one year. Ted structured a rebate of discount rebate where, if the state government renewed the following year, they got the discounted price and the total 5-year cost was attractive.  If they could only pay for one year and did not renew (which never happened) they simply paid for the difference between list price and the discount price.  

631

Containing Human Failings

Leadership Includes Industry Expertise

Quality of People Doing the Work

Costs / Margins Earned for High Value Work

Scope, Change Control, Requirements

Narrow Focus On High Value For The Customer, ROI

Urgent Compelling Need

Finding the High Value ROI

Fix the Process First

Prevent Technology Fascination

Costs / Margins / Risk

Fix the Sales Problem

How Big Consulting Firms Increase Software Project Success Rate from National Average of 35% to As High As 80%**

My research starting in 1998, the Standish Group 2019 Survey, and numerous other sources put National success rates for business software projects around 35% as promised.  The majority of projects in large companies actually deliver only 42% of promised features and functions.

The big firms have a number of advantages.  Mark, a veteran of Financial Accounting and Reporting Niche Practice from both Deloitte and KPMG, shared how - summary below.

The big consulting firms have made a business of doing a better job for their customers – and this is why they get paid well.  Mark’s view over a long career is that projects were consistently well above industry averages and often reached 80% or better as promised, defined as the  “Customer would do it again.”  While these measures are imperfect and subjective, the fundamental disciplines and things that the big firms do are clear, straightforward and repeatable by smaller firms. Importantly, these outcomes were most consistent in projects with clear executive sponsorship, enforceable scope control and alignment between business and technology owners.

Ethics and Partner structure:  Mark and most of his co-workers came from Audit practices where ethics and integrity were everything.  This structure causes partners to share reputation, financial, and governance risk for delivery quality. This enforces an accountability that we do not see in many other sectors performing software projects.

Industry Expertise:  The big firms nearly always include serious executive industry expertise on their teams.  It  costs more, but adds credibility, wins sales and prevents repeating dumb mistakes

Good to Great People:  The big consulting firms charge significantly more than many consulting and services companies to do the same work.  A significant portion of that cost is due a consistently higher baseline of trained, coached, reviewed, and mentored talent, with strong internal quality controls on who is staffed to client work..

Big Firms work with Bigger Customers, willing to pay for Quality Help.  Again we see that price, margins, profits are interrelated with the ability to staff, govern, and protect quality delivery through disciplined controls.

 Scope, Change Control, Requirements:  Mark learned the hard way that the person writing the written agreement for Scope must have experience over 20+ projects.  He also learned the sales process never gets enough detail for adequate scope and change management. THERE MUST BE A POST-SALE EXTENSIVE WRITTEN AGREEMENT ON WHAT WILL ACTUALLY BE DELIVERED.  

He also found you must REIGN IN THE ENTHUSIASM.  There is so much excitement when a sale is closed that team members go off in wrong directions.

Narrow focus on high value for the customer, High ROI:  Mark’s practices were primarily financial reporting using Oracle and other financial reporting tools.

ON FINDING THE HIGH ROI:  Mark found that some 20% of projects the customer was nearly desperate, at risk of failing an audit, failing disclosure rules or the financial reporting problem was so big the customer did not want to take the time to do formal ROI calculations.  They wanted a solution now. This is defined as a UCN (Urgent Compelling Need) in the management literature. When the customer has to act.

In the other 80% of clients, the ROI came from the impact of the accuracy of financial reports and how quickly  management got it. Labor savings alone will not justify the project.  The anecdotal impact of mistakes that management had made in the past because of late or poor financial reporting produced all the ROI justification needed to proceed with these projects.  (Tom:  I have used this “cost of past mistakes” approach to ROI very successfully.)

Fix the Process First:  The big firms all have standard best practice process templates.  Mark’s practice required in the contract that the best practice process would be implemented prior to implementing the technology.  This might be the single biggest thing the big firms do right.  They insist, even over lower level objections, that the client process be fixed before applying the technology.  Mark noted that front line low level and mid level people often resist changing the process where senior management universally supports getting to best practice processes.

Business Result First Prevents Technology Fascination:  The narrow focus of Mark’s niche lent itself to keeping “Technology for Technology’s Sake” pressures at bay. This is another of the key issues that the big firms do right.  

Scope, Change, Risk Control #2 - the “Deal Review Board” was a critical control mechanism.  It was rigorous, escalated reviews based on dollar volume and insisted on a profit margin commensurate with risk. Margins in the high 20s to 40% range were typical for approval, with higher-risk or less-defined projects requiring either higher margins, additional controls, or outright rejection.  (Tom:  My research shows that 38-40% margins are necessary to keep a firm continuously improving and able to weather storms.  Below 38% I have seen a downward spiral of poor people, poor systems, unhappy customers and declining profits.

The Sales Problem:  The big firms are noted for spending a substantial portion of their effective cost structure on sales activity when partner selling time is included.   They don’t call it that, and the Partners’ business cards don’t say, “Salesperson”, but that is what they do. This is another essential to the big firms’ success.  They spend the money to build a pipeline of work so they can pick the good projects with good margins, rather than taking anything they can sell just to meet payroll.  (Tom: I worked for a former big firm partner that helped me understand why big firms spend 1/3 of revenues on sales / marketing.  I watched IBM do this and conducted my own research showing that at less than 28% spent on sales / marketing, software companies tend to decline.)

** (Tom:  The improvement to 80% success rate was not provided by Mark.  It is a “guesstimate” based on my research and a long software career.  It is not rigorous or statistically proven.  My point is that the big consulting firms do things that dramatically improve client outcomes – we can all learn from these lessons.)

Authority / Responsibility / Competence Matching

Notes On Authority / Responsibility / Competence Matching, January 2026

Key seems to be placing authority as close as possible to the decisions / work.

• SOUTHWEST AIRLINES vs. American Airlines:  When asked what he thought was the most important contrast in his 25 year career at Southwest, Doug E., a veteran of reservations, customer service and cargo cited “the authority – at the front line – to do the right thing for the customer and the company – and knowing your supervisors will back you up.”  Doug cited numerous examples such as a customer with a death in the family would receive a free rebooking.  A caution:  “I eventually moved out of customer service because of “nonsense” demands such as “I want a refund because I was stuck in a center seat.”
• SUBMARINE CREW PERFORMANCE, DRAMATIC IMPROVEMENT:  In the book “Turn The Ship Around”  U.S. Navy Captain David Marquet tells how his subs achieved big, measurable improvement:

•           U.S.S. Idaho’s preparedness rating improved from the bottom (3) to almost top of fleet (nearly 9 on 10 point scale)
•           U.S.S. Santa Fe improved retention rate by 300% and “Officers to Command” by 900%
•           Accomplished without adding people, money, or better equipment—only better leadership practices

His most important factor?  Vesting the Chiefs (front line supervisors) with authority and requiring them to take ownership responsibility for improving outcomes.  See the book – a great read.

• Authority to Match Responsibility, Without Interference (“broad latitude to accomplish goals as he/she sees fit) was cited as the #1 most important factor in job satisfaction and retention for middle and later career people.  (Source:  Wall Street Journal, Jan 2026, citation pending.)
• Israeli Army Authority Lessons:  Person per person, many military historians believe Israel is the best.  As a small nation of 10 million, surrounded by 200 million Arab people, survival has depended on getting the highest possible performance from each person.  Among the top techniques Israel uses is pushing authority downward – to the point of best information – to match with responsibility.  Competence is matched by effective training.  The amazing victories of the Israeli military and the supporting details can be found in Certain Victory, by General Robert H. Scales, 1994, Warrior: An Autobiography by Arial Sharon, 2001 and The Sword of Freedom by Yossi Cohen, 2025.

630

Urgent Compelling Need

Narrow Focus On High Value For The Customer, ROI

Cost / Margins to Pay for Good People

FGIC Problem (Financial Guys In Charge) 

Lessons from Convex Super Mini Computers:  Convex came to dominate the Super Mini Computer segment in the 1980s and 1990s with more than 500 units installed worldwide.

Convex took a significant number of sales away from Cray Computers because it found a niche, “Half the power of a Cray Supercomputer for one-tenth the cost”.

Convex is cited by Regis McKenna in Relationship marketing for defining and dominating a segment (super mini computers).  Cray was too established in super computers and DEC was too strong in mini computers.  

A friend who worked for Convex for some 15 years mentioned some of the things that made Convex:

1. Focus: Did one thing very well.
2. Earned High Margins by solving important problems for customers.  These high margins were necessary to afford superior tools and people.
   1. For example, Brad explained that even a simple software product requires dozens of servers, lab area, sophisticated software tools and competent people to simply do compatibility testing, stress testing, cyber testing, etc.  A super computer required much, much more for R&D, testing, user applications, etc.  Convex earned the margins necessary to pay for good tools, systems and people.
3. Decline in Leadership when acquired by HP: Initially, the leadership of HP were engineers that came up the ranks – but that changed. Carly Fiorina brought in a shift to “the financial guys in charge”. (Tom: note that Charlie Munger and Warren Buffett have been openly critical of Carly Fiorina’s leadership.) Brad saw the decline and eventual demise of the Convex Unit.

629

Fix The Process First 

Containing Human Failings

Requirements, Scope, Change Control

Use Cases

Exceptions Control

Authority / Responsibility / Competence Matched

Quality of “Doers”

Narrow Focus On High Value For The Customer, ROI

Cost / Margins

“What I learned from a $20 million disaster.”

A colleague with 35 years experience in the software business (Oracle, PwC, Bearing Point) told me about the hard lessons learned leading a huge failure for CBRE (the largest real estate and property management in the U.S.)  The application was hand-held facility management.

1. Best Practice Process Abused: “Process is oversold and corrupted by self-interest of vendors and consultants.  The vendors and consultants in this effort claimed to have ‘best practice’ processes.  In reality, these processes were BIASED TOWARD SELLING THEIR TECHNOLOGY.  The end was an unworkable system that users rejected  - and complete failure.” (Tom: I have seen this abuse directly and personally.)
2. Solution: Start from the As-Is Process.  ”Do the work to document the As-Is Process and understand why it exists. Then compare it to the alleged best practice. Where it makes sense, adopt best practice.  Where it doesn’t, figure out how to adapt to what is working for the organization. 
3. THE KEY IS TO FIX THE PROCESS FIRST, BEFORE BUYING THE TECHNOLOGY!
4. Focus on the 80% Use Cases that accomplish the primary work. Have written agreements up front  that prevent the distraction of trying to handle all exceptions.
5. Containing Human Failings: “One of my biggest takeaways was that politics and self-advancement played a key role in this devastating failure.  Numerous people were continually pestering upper management with ‘I have a better solution, better software’, in attempts to advance their own interests, rather than what was best for the company.”
6. Tom Comment: Authority, Responsibility and Competence Matching are some of the keys that prevent these problems. Berkshire Hathaway (Warren Buffet and Charlie Munger) have pioneered incentive systems and other controls that drastically reduce the problems caused by the fallen nature of human beings.  My colleague and I reviewed my 1998 research showing that this fundamental problem was one of the big four issues that has to be corrected to achieve effective software outcomes.
7. Quality of Young People Decreasing Due to AI Dependance: My colleague hires younger people and interns on a regular basis and has noted a distressing trend.  Younger and entry-level jobs are fewer and the people who apply for them are too dependent on AI and the internet for their solutions.  They lack understanding of the fundamentals.  Solutions to this problem are a much bigger issue, but a good beginning is to focus on a narrow set of customers where you produce extreme high value and can afford to hire the best of available people and train them is necessary.

628

Leadership

Authority to Say “No”

“Mechanical / Electrical Engineer In Charge” Problem

Requirements 

Scope / Change Control

Architecture

Authority / Responsibility / Competence Matched

Sales Problems, Pressure to Sell

Selling to Board Members, CEOs

Technical Execution Excellence

Commander’s Intent

Ross F, former Texas Instruments Program Manager and Software Team Lead for 16 Years, Led 12+ Programs / Projects (Classified and Unclassified).  Huge Win Selling His Own Tech Company for Millions, Other Big Software Rolls / Wins, Retired Lieutenant Colonel, U.S. Army Tank Commander in Dessert Storm

Ross and I met in 2025 and 2026 to discuss his big lessons from and long career in Defense and related software projects.  My summary of key takeaways:

1. Software leadership must have the authority to say NO.  The leadership team must also include Mechanical and Electrical Engineer and Sales heads, but WATCH OUT FOR THE “EE / ME / Sales In Charge” problem.  Software is intangible where EE and ME disciplines are largely based on physical elements (case, circuits, semiconductors, etc.)  Sales also does not possess the skills / discipline to execute software.  These leaders, in practice, will not enforce the necessary disciplines such as Requirements / Scope / Change control.   Unfortunately, the norm is that software leadership gets overridden and the software is late, over budget and not as promised – time after time after time.  (Tom: I have also seen these problems to devastating effect.  Time after time after time.)

2. Architecture:  Product must be designed with TWICE the memory and processing power for initial requirements or the product will become obsolete.  

3. Competence: The Military REQUIRES people to come up through ranks - know the jobs they are supervising.  Military is also good at matching authority to responsibility.  (Tom and Ross agree - the Commercial side often allows “politicized incompetence”, the equivalent of the “POLITCAL GENERALS PROBLEM” that was so devastating in the U.S. Civil War.)

4. "Just Get The Product Out The Door" Problem:  We see this everywhere.  Must find the balance.  (Tom:  Yes, we must sell and make a profit – but there are solutions.  Keep reading.)

5. End Customer (Government) Problems That Must Be Managed:  "Do not even attempt a pilot unless you have an order in hand and 25% down.  The customer can change their mind and withdraw.  Requiring a written agreement and a deposit forces at least some basis to manage scope and enforce change control.   It forces sales, manufacturing and engineering to all focus on a contained scope - instead of all the possible bells and whistles”

6. Sales Problems That Must Be Managed:  “You cannot allow sales people to define the product.  Software and engineering must engage and have authority.  I found the software lead had to travel with sales to see the customer and be present for all commitments.  I learned this the hard way but once I insisted on traveling, it became easy.

7. Burning All Cash to Deliver Pilot:  “This might be devastating, or it might be OK if you know you will get follow on work.”

8. Get the first win and do a great job!  “Board members and CEOs network with each other.  Do good work and others will hear about it.”

9. “Clear Commander’s Intent is Everything.  The best possible value for the customer is job one.  Only pursue business with adequate margins in our focus area.  Scope, change control, development, testing, clear disciplines that are enforced.  Architecture designed for enhancements and upgrades, honest sales representations, honest status reports, PSEUDOCODE…  These are all examples of communicating what the military calls Commander’s Intent.”

Tom:  I require “Fix The Process First”.  How can you have a clear commander’s intent when you buy technology and throw it at a broken process?

10. “Why I Require Developers to Write Pseudocode First:  It forces them to write (in English!) the concepts and flow of the solution.  It leads to good documentation, testing, security and ability to fix and enhance software use of Artificial Intelligence.”

629

Authority / Responsibility / Competence Matched

Saying “NO” to Bad Business

Not Chasing Every Dollar of Revenue

Extreme High Value for Client First

Margins To Do It Right

Fanatic Controls on Risk, Margins, Merit of People

Quality of Leadership, People

Strategy

Leadership Accountable

Competence, Hard Truth and Results – Not Good Intentions

Disciplined Process for Selling, Contracting and Execution

Lessons From Big Consulting – The Best of the Best:  Accenture

2024/2025  I’ve had the chance to learn from some long term Accenture people.  No firm gets it perfect every time (we discuss a failure below) but Accenture’s record of growth, profitability and happy customers deserves study.  Some lessons:

MANAGING DIRECTORS ARE IN CHARGE! 

• They have both sales and delivery authority / responsibility / competence matched. 
• They are incented and penalized when they sell good or bad business. 
• My contact SAW HALF DOZEN EXECUTIVES DEMOTED, LOSE BONUSES OR LEAVE THE FIRM because they sold bad projects.  
• They regularly say NO to bad business
• Client Directors were particularly strong as the single point of responsibility for a client.  They usually had strong industry credentials, proven project management skills and enough technical skills to keep the projects correctly focused on the best possible business outcomes.
• Team structures included financial director and multiple delivery leads
• A P&L for every project! Fanatic about margins and profits! Monthly review!

EXTREME FOCUS ON BUSINESS VALUE for CLIENT – Not on Technology.  Example:  My contact’s boss was “no BS, hyper focused on extreme customer value, brutal and disciplined after 35 years at Accenture.”

Deliver Extreme High BUSINESS Value And Charge For It!

• ESTIMATING disciplines with QA on estimate: 50% minimum markup plus overhead plus contingency
• Enforced contribution margin commitments by Managing Directors and Partners!
• Made the high cost of committing people to marginal/bad projects clear to everyone

Accenture is very good at fixed fee projects but my contact noted that the Cost+ or Hourly work segment matters.  It serves as a low risk pool of talent to keep people on the team, trained for higher value work and to elevate the best people to highest value work.

Projects over $X went to Deal Review Committee which included people from all over the country.  If big enough the project had monthly oversight by the deal review committee. This takes advantage of all the expertise within Accenture instead of just “blasting ahead on your own.”  E.g. “Sally in Indiana has done this before”.  Some additional comments from my sources:

• “Accenture runs as a Meritocracy!  They don’t just say the words – they live it.” 

• “The leadership, strategy and future focus are amazing. I saw them retool the entire company twice in 13 years.”

• “Accenture does scale incredibly well if the client will sign up for the outcomes needed”

• “Because Accenture holds partners accountable it can do big, complex, involved projects.  It can take risks other Big 4 firms cannot.  For example, Accenture is ten times the size of Deloitte’s tech practice.”

• “Accenture is now building its own products such as chatbot agents to replace humans in software development, chatbots to replace insurance claims people, chatbots to replace auditors and chatbots to replace tax prep people.  In some cases this can save the labor of 40,000 people”

Where Problems Show Up:  My contacts were candid about when Accenture makes mistakes or gets in trouble.  

• CLIENT WON’T PAY FOR EFFECTIVE PROGRAM / PROJECT MANAGEMENT.  Client PMs are never as good, never have the authority to execute and are usually compromised by internal politics or self-interest.  The client PM tries their best but money and time get spent and when the problems become undeniable it is too late for an Accenture PM to deliver the project as originally sold.  THIS IS THE  BIGGEST RECURRING FAILURE I POINT HAVE SEEN.”    (TOM:  This is a well known and documented problem.  I have seen it in 100+ situations.)  SOME SOLUTIONS:  
  • “We started burying the PM cost as a REQUIRED OVERHEAD item to prevent the client from pulling out the expense.”  (TOM:  I recently made a similar mistake.  I made it too easy for the sales people and a client to identify the contingency funds and pull them out.)
  • “We would confront clients with a “non-–performance“ letter. In one case we risked $150 million per year to correct the situation.”
• “BIG CLIENTS GET THE BEST PEOPLE AND BEST RESULTS.  Second tier clients are where the problems usually show up.”  Many of us know of big consulting firm failures.  As we dig into WHY, we see these failures are rare with the really big clients who are willing to pay to do it right.  These clients get the best of Accenture’s people (and their people tend to be better as well.)   Sadly, other clients get less than the best – and are often unwilling to pay to do it right.  Many, many lessons are under this fundamental truth.
• Other Solutions That Improve Client Outcomes: 
  • “CONTRACTUAL Governance, Cadence, Meetings, Change Control, Release Timeline, Issue, Resolution, Escalation, Earned Value, Work Packages, Work Breakdown Structure, Budgets…” 
  • “We FORCED client executives to review project reports and see costs of WHAT THEIR PEOPLE WERE DEMANDING.”
  • “We showed the percent of features Accenture delivered versus those delivered by in-house Project Management Organizations (PMO).”

Sometimes, It Still Goes Wrong:  We finished by discussing a BIG NIGHTMARE at a Fortune 500 Dallas client where Accenture REFUNDED MILLIONS OF DOLLARS.  Even the best of the best are not perfect but there is much to learn from Accenture.

627

Trap:  “Sure, We Can Do That…”

Trap:  Lack of Real Product

Long Term Manufacturer’s Sales Agent on REQUIRING REAL PRODUCT before He Will Take On A Client

In 2024 Trent H, a long time friend and 20 year+ veteran of selling in and around the semiconductor industry mentioned this issue.  Mos of us have seen that software people always respond with “yes, we can do that…”  I found it instructive that in an electronics / hardware based business like semiconductors he found the same problem.  As Trent put it “I can't sell 'one more engineer's great idea'.

626

Strategy

Requirements

Scope

Process

Sales / Marketing

Leadership

11/29/2025 WSJ:  Anduril (Defense Contractor) Drone Boat software failure results in public embarrassment, 30 drone boats towed out of exercise zone to prevent hazard to navigation

625

Cost / Margin

Strategy

Leadership

Barriers to Competition

Authority / Responsibility / Competence (OPERATING EXPERTISE REQUIRED)

Discipline of Profitability Day 1

10/9/2025  CISCO FOUNDER JOHN CHAMBERS:  VENTURE CAPITAL (VC) MODEL FAILING, TOO LONG, TOO MUCH RISK

•           Predicts 1/3 of VC Will Fail, Implode.  (He is a VC now.)
•           VC bad for four years, exits not happening, Limited Partners not happy
•           IPOs take TOO LONG  (12-15 years), risk TOO HIGH
•           VC successes have come from prior generation investments
•           MANY TRAINWRECKS - come from OVERFUNDING, OVERSPENDING
•           Survival requires OPERATIONAL EXPERTISE, A RAPID PATH TO PROFITS
•           NOT TECH FOR TECH’S SAKE – looking for OUTCOMES
•           B to B AI and Cyber Security are his focus.
•           AI:  Where’s the PAYBACK / 10X SOLUTION?  Customer service and coding:   Should see 30-40% operating improvements per year for end companies
•           Link to Article

624

Discipline of Profitability Day 1

September, 2025, Harvard Business Review,.   Why Startups Benefit When Big Investments Come Later.  Summary of research by HARSH KETKAR of UT Austin and Maria ROCHE.  CONSISTENT WITH

• DISCIPLINE OF EARLY PROFITABILITY by Christensen and Moore.
• GOOD MONEY / BAD MONEY concept by Christensen.
• RIGHT STRATEGIES EVOLVE – RARELY RIGHT FROM THE START by Christensen

- Concludes startups are MORE SUCCESSFUL when funding stays low early in company lifecycle.

- Argues that experimentation, innovation, unconstrained are essential to evolution of effective strategy.

- Also notes that investor tolerance for experimentation, exit strategy, and degree of micromanagement are make or break issues.

- Study of 11,853 US tech companies from Pitch Book.  Note: most were creating apps and websites. Not seeing significant rigor in the research. Appears to have come to the RIGHT conclusions for wrong reasons. Study is overly focused on innovation as solution to all startup problems.

620

LANDMARK on  STRATEGY

Compete on Product / Tech / Features

vs.

Compete on Cost / Economies

vs.

Compete on Highest Value for Customer

1960 Landmark HBR Article - Theodore Levitt Problem / Opportunity:  MARKETING MYOPIA.  Mistake of focusing on YOUR PRODUCT instead of CUSTOMER NEED.

•           Argued that companies fail when they focus too narrowly on their products instead of the customer’s underlying needs.
•           Classic example: railroads thought they were in the "railroad business," not the "transportation business," which left them vulnerable to cars, trucks, and planes.

Also Popularized the Product Life Cycle (PLC):  Products go through predictable stages: introduction, growth, maturity, and decline.

617

AI Updates

Who Gets The Margin?

USE CASES:  Show Cost / Benefit

STRATEGY:  Compete on Highest Value for Customer

9/2/2025  Containing The AI Hype:  Big software company SN spent three years, big cost, big hype adding AI to product line.  Out of Thousands of customers, to date have only sold two “Agent AI” customers and a dozen paying for “Advisor AI”. Per MM, details confidential.  See HOW THE WINNERS DO IT, Other Useful Lessons

January, 2025  McKinsey Paper, Other Citations show PROBLEM IS FOCUSING ON TECH – RATHER PROBLEMS and SOLUTIONS CUSTOMERS ARE WILLING TO PAY FOR – AT HEALTHY MARGINS

Also known as the THEODORE LEVITT TRAP (a Harvard Professor):  When A Business thinks of itself as SELLING PRODUCTS rather than SATISFYING CUSTOMERS.  Click for Details

2/10/2025 WSJ, Andy Kessler:  The Best Use Cases:  Call Centers, Doctor’s Notes Summaries, Legal Tasks, Companions, Software Coders, Education, Graphic Designers

9/2/2025  Other Key Use Cases Identified in Last Three Months:  Detecting Deep Fake Video / Audio Forgeries, Checking Code for Hacking Vulnerability

616

How to Get Dramatically Better Outcomes from Big Application Software

Fix The Process First!!!

Fix The Process First:  Click for article in process, citations from Bill Davidow, Geoffery Moore, Clayton Christensen, Fred Wiersema, Tom Davenport, Lynne Markus

• SAP (ERP software) discovered in 1992 that their customers who were already good at fixing the process first had dramatically better re sults from implementation.  SAP partnered with 14 large service providers to help the vast majority of customers who were not good at fixing processes first.  While financially successful for SAP and the services providers, customer results and feedback from service provider implementations have been mixed to negative.  (Crossing The Chasm, CITATION PENDING)
• End Customers Who Are Already Good at Fixing The Process First:  At some point these companies have been noted for this skill.
  • General Electric, TE Connectivity, SAB Miller, Danaher (per David Rice), Cisco
  • What they have in common:  All identified so far have implemented “Lean”.  Most are acquirers who have learned over time that “fix the process first” is essential to integrating acquisitions effectively.
• Process Improvement Practice in Seatle, WA:  (Name confidential) discovered several issues that helped significantly:
  • SEPARATE PROCESS IMPROVEMENT PROJECTS FROM TECH PROJECTS – do process first!
  • DOCUMENTATION + PROCESS:  Look for clients who are already pro-process and pro-documentation.  Lean / Six Sigma / Quality initiatives are best leading indicator
  • MINIMUM $50,000 TO $100,000 PROJECTS.  Qualifies and separates from those not really committed

612

FGIC Problem (Financial Guys in Charge)

Strategy

Leadership:  Authority / Responsibility / Competence Matching

Cost / Margin

Labor / Capital / Technology Cycle Arguments:  (article in process - see OneNote)

•           Long-Wave Economic Theory (Kondratiev Waves):  (per Chat GPT)  Capitalist economies go through 40–60 year cycles of boom and bust.  Innovation & production → over-financialization → crash → renewed focus on real economy

•           I think we are 40 or so years in – resulting in finance having too much power, reaping unearned rewards.  I hope we will soon return to PRODUCERS OF VALUE in charge.

•           Technology Cycle Argument:  Life cycles of new technologies such as the printing press, telephone, auto, airplane, television, microprocessors, the internet, cell phones, etc. are widely recognized.  Andy Kessler of the Wall Street Journal and others argue that the microprocessor is nearing the end of its cycle.  (No doubt AI is the next big thing.)

•           I hope to see these cycles return to VALUE FOR CUSTOMER, VALUE FOR PRODUCERS within my lifetime.

501

Big Lessons from Our Research

Our study of 427 PUBLIC AND PRIVATE SOFTWARE COMPANIES

2025 and Ongoing:  Our study of 427 PUBLIC AND PRIVATE SOFTWARE COMPANIES reveals hard truths

• Software industry UNPROFITABLE since 2015.   Robert Morris Associates (RMA) has been publishing financial results studies of the software industry since 1989 (when software was a healthy industry).  In 2015 the industry profits turned negative (due to the switch to SAAS subscription billing), but have not recovered, with annual losses as high as 5% for the industry.  Don’t be distracted by the profits of Microsoft, Oracle, Salesforce and SAP.  Big profits by a few distort reality in an industry.  Your chances of picking a winner are less than 1%. 
• Only 11% of Public Software Firms beat the RETURN ON CASH invested in a MUTUAL FUND over 10 years.  Our research shows 89% of software companies pursue the wrong strategy.  We study and discuss the strategies of Winners – how these 30 companies manage to provide a return greater that 7% consistently over many years.  Several exceed 20% per year.
• Software industry debt has climbed from 60% of assets in 1989 to 95%+ today.   Intangibles have risen from 7% of assets in 1989 to 40% of assets today.  This is due to extreme overpayment for acquisitions (and other bad practices.)
• WASTED BILLIONS OF OWNER CAPITAL among public software / tech companies is BEYOND BELIEF.
• CAUTION, CAUTION, CAUTION.  I think making a solid profit on fundamental value is so hard most have given up.  All the attention goes to techno-hype, product feature competition, growth mania, hockey stick projections and – when the inevitable nonperformance occurs – trying to sell the company to the greater fool.
• How the Winners Beat The Return on Cash Invested in a Mutual Fund:  
• Why 89% of public software / tech companies are pursuing the WRONG STRATEGY and WHAT TO DO ABOUT IT

Click for Full Study  (password required)

629

Ongoing:  Berkshire Hathaway, Warren Buffett, Charlie Munger Lessons for the Software Business (Summary by Tom Ingram)

• Click for details (password required)

506

Big Lessons from Management Literature

3/10/2025  The Innovator’s Solution by Clayton Christensen

• Click for details (password required)

507

Big Lessons from Management Literature

3/17/2025  Crossing the Chasm, 3^rd Edition by Geoffrey Moore:

• Click for details (password required)

508

Big Lessons from Management Literature

3/24/2025  The Discipline of Market Leaders by Wiersema and Tracy:

• Click for details (password required)

499

Find Your Niche

Shorten Sales Cycles

Narrow Focus on Extreme High Value for Customer

10x-30x ROI for Customers

Barriers to Competition

Self Referring Niches

Urgent Compelling Need

Ideal Prospect

Solve Sales Problem

Sales Execution Excellence

Avoid Sales Traps

Whole Product Solution

Documentum Case:  From Sales of $2 Million to $75 Million and IPO in 4 Years!  Shortened Sales Cycles from 18 Months to 6 Months.  Customer Payback Average Of 10 To 1, As High As 30 To 1.  Saw Strategy Working Within 60 Days

Strategy

• Narrowed 1 million+ prospects to 41 pharmaceutical manufacturers. Closed 39 in 1 ½ years.  NOTE:  Financial services was a BIGGER niche, but need ws NOT AS URGENT as pharmaceutical need. 
• Culture focused on customer problems – not “what we do”
• Focused entire company on single niche. 
• Grew other niches through referrals from first niche.  Chemical manufacturers needing regulatory approval was the second niche
• Value of defining a niche small enough that you can dominate it
• UCN (Urgent, Compelling Need) defined as customer must act in 90 days
• Ideal Prospect model to define, clarify target 

Product / Offering

• Don’t go crazy on perfect pitch – go, learn, improve. 
• Just get after the single niche – make calls – improve the offering rapidly
• Reshape offering to get to a single line of business decision maker. 

Sales Execution

• How Shorten sales cycles:  "Urgent, compelling problem that we solve" clear to sales, entire org. 
• Medium sales person executing focus strategy superior to senior person with big Rolodex. 
• Marketing’s Job:  Give Sales Person a List, Who Call on, What Listen For. 
• TRAP:  Unfocused approach defeats the referral process
• TRAP:  Taking big deals that pull you off focus.  Rule on taking business outside your top niche
• TRAP:  Not doing the homework to give salespeople effective prospect list,
• WHOLE PRODUCT SOLUTION:  Not just the software.  Everything the customer needs to say “I just give these people money and my problem goes away.” 
• TRAP:  Failing to ruthlessly qualify. 
• TRAP:  Failing to simplify message to three things that solve the problem. 

More information

• See TIA full case study  https://tiainc.net/No25DocumentumSuccessStory.pdf    

• Harvard Business School CASE STUDY ON DOCUMENTUM (WITH INGRAM HIGHLIGHTING):  Ask us for reference.
• Video Interview with Jeff Miller, CEO of Documentum
• Video Interview with Mary Twain, VP of Sales, Documentum 

(Source: Interviews and Crossing the Chasm)

497

Narrow Focus on Extreme High Value for Customer

Beating Bigger Competitors

Whole Product Solution

Bowling Alley of Adjacent Niches

Fix The Process First

Barriers to Competition

Seeing Big Picture, Macro Trend

Circle of Competence

Actively Fight Complexity

“Sign Posts” To Differentiate from Competitors

Winning 

The “Integration Devastation”

Single Line Of Business Buyer

Urgent Compelling Need

Rare Win in Volatile Industry

Sign Post Signal of Differentiation

Lawson Healthcare Niche Success:  Grew from $4 million to $40 million in four years.  Dominated Super-Narrow Niche Of Healthcare Integrated Delivery Networks (HIDNs).  Successfully Competed with Oracle and PeopleSoft

BRILLIANT NARROW FOCUS on BEACHHEAD segment of HIDNs.  This is a great example of whole product, creating barriers to competition and selling multiple bowling pins (products) to the same customer.

Fixed The Process First With Activity Based Costing Training / Consulting As Part Of The Whole Product Solution. 

Spectacular Example Of No Code Workflow Software + Costing Helping Customer To Reengineer Processes.  No code software was kept simple, did not require coding skills of most competitors.  (Tom:  I have seen this problem many, many times).  Other notes:

• Training in Activity Based Costing for users was a key differentiator and barrier to competition.
• Lawson retained market leadership even after a fast follower attack by PeopleSoft.

• SUCCESSFUL NAVIGATION OF HEALTHCARE LANDMINE INDUSTRY WHILE WARREN BUFFETT AND TOM  STAYED AWAY.  Saw healthcare systems in turmoil in the 90s. Computer systems needing dramatic overhaul.
• Treated smallness as an advantage, forcing it to focus.  FOCUS IS VERY HARD IN LARGE INSTITUTIONS always looking for big returns right out of the gate.
• SINGLE line of business buyer: CFO and staff
• Urgent Compelling Need: Customers were desperate to get pricing under control with the new business model. 
• Minimum set of products and services needed to fulfill the UCN
• Activity Based Costing module was essential for customer to understand revenue and cost by patient, procedure, fixed asset, health plan. Had to adapt to new pay model going forward.
• BIG WIN FOR NO CODE SOLUTIONS PLUS PROCESS REENGINEERING
• Included Materials Management software for unique needs of health care – e.g. a Surgery Cart.  BECAME SIGN POST SIGNAL of differentiation
• INTERFACES to legacy application systems: Most critical was patient management. Became so strong in the segment that major legacy applications allied with Lawson over Peoplesoft.
• Whole Product Solution Nuanced Win:  All competitors had standard training.  Added training on Activity Based Costing to round out whole product and create barriers to competition. 

(Source:  Crossing the Chasm, Innovator’s Solution) 

496

Profitable From Start

Overcame Technology for Technology’s Sake 

Actively Fight Complexity

Costs / Margin 

Practical Beats “Cool”

Brickstream breaks cycle of failure and finds the right new strategy. 

• Failed with initial vaporware, techy, bleeding edge video solution for retailers 
• New management refocused on solving a much simpler problem 
• New solution was not as compelling or dramatic but it was a VIABLE BUSINESS 
• Key was DEMANDED PROFITABILITY VERY EARLY ON to validate 

(Source:  Crossing the Chasm) 

495

Narrow Focus on Extreme High Value for Customer

Urgent Compelling Need

Bowling Alley of Self Referring Niches

Pragmatic Buyer – Not Early Adopter

Effective Reseller Programs, Contains Problems

VMWARE Examples:  220% ROI in 9 Years.  New Product $0 to $40 million sold in Texas alone in two years. 1,000 New Customers

• Had a string of niche product wins before Crossing Chasm 
• Urgent Compelling Need that built the company was testing and other short term needs to spin up, spin down servers quickly and cheaply  
• Second bowling pin niche was unutilized capacity 
• Ask us about Bruce Switzer's win with Viper product (software based storage). $0 to $40 million in sales in 18 months in Texas alone.  
• Has 3-4 failures for every success like this.
• Clear, high, pragmatic buyer value. 
• Took time - year or two - to organize and execute.
• Strong Profits = High, Stable Market Value
• 2/26/2024 recently acquired by Broadcom
• Feb 2024, WSJ:   BUNDLING:  Consolidated 160 products to TWO primary bundles.  ADDING FEATURES AND CUTTING PRICE – AS PORTER PREDICTED
• 3/21/2024 WSJ:  has done a GREAT job of productizing complex software so can be effectively sold through distribution.

•           Keeps reseller products and services simple.  Retains high complexity, high margins services for itself improving customer results and margins.

(Source:  Crossing the Chasm, Innovator’s Solution, Interview with former executive) 

494

Profitable from the Start

Absolute Software:  GREAT job of profitability from the start

See TIA publication How to Increase Margins for Software Companies 

(Source:  Crossing the Chasm) 

493

Whole Product Solution

Narrow Focus on Extreme High Value for Customer

Architecture, Product Pipeline

Corelation Inc (Credit Union swr, GREAT EXAMPLE OF Focus, WHOLE PRODUCT PARTNERS. 

CORE Processing Solution is designed to enhance credit unions and includes no code, dashboards, user engaging interface.  

Collaborates with strategic partners to integrate additional functionalities into their platform such as online and mobile banking, digital account opening, loan origination, and digital card issuing. 

Jack Prim IS A FAN:  Private, solid, great profits, where Jack Henry was 20 years ago.  Does not want to go public or raise capital "leave us alone and let us run this business") 

(Source:  Crossing the Chasm, Jack Prim, former CEO of Jack Henry) 

492

Whole Product Solution

Narrow Focus on Extreme High Value for Customer

Niche With No Dominant Competitor Which You Can Dominate

Intel Won The Microprocessor War With A Whole Product Solution. 

Product included the chip, application notes, ads, microprocessor development systems, emulators, software, field applications engineering, single board computers, customer education programs and marketing's capture of public imagination.

Intel beat HP and Tektronix in Market for a new segment of electronic instrumentation. Competitors built general purpose equipment supporting any manufacturer’s microprocessor. 

Intel focused narrowly on being spectacularly good at the whole product surrounding Intel microprocessors.  Competitors could not match Intel's whole product solutions.

Initially found niches with no dominant competitor.

(Source:  Marketing High Technology) 

491

Business Expertise

Narrow Focus on Extreme High Value for Customer

Cost / Margins

Barriers To Competition

No Tech for Tech’s Sake

Extreme Focus on Service to Customer

Whole Product Solution

Pragmatic Buyer Market instead of Early Adopter

Big Lessons from IBM

IBM salespeople were consultants. Their personal contribution could overcome price and performance deficiencies. 

SPECTACULAR DOMINANCE OF MAINFRAME INDUSTRY page 151.  70% market share, 95% of industry profits.  Proprietary products, strong cost advantages, high barriers to competition, 

DIFFERENTIATION.  ACCOMPLISHED WITH NARROW FOCUS, EXTREME HIGH VALUE FOR CUSTOMERS.  Primary focus on service, value to customer over technology.   

REMEMBER – THIS SERVICE DOMINANCE CAME DURING ERA OF EMERGING, UNRELIABLE MAINFRAME COMPUTERS.  Customers needed high level of service and were willing to pay 

REMEMBER - IBM’s System 3, 34, 36, 38, AS/400 Series.  Likely best, longest whole product application value for customers in history.  Certainly for mid-range.  PROSPERED while Wang, Apollo, Prime, Convex, Data General, DEC went away!  

Amusing how derided as “old tech” for decades, but continues to sell and provide value to customers today.  WHOLE PRODUCT IS CLEARLY SUPERIOR FOR THE PRAGMATIC BUYER, even though the generic product itself is old tech. 

Great Precedent: IBM AS/400 and HP 3000 thrive while Wang, Prime, Apollo, Convex, DG, DEC gone

IBM’s System 3, 34, 36, 38, AS/400 Series

•           Mid-range business applications
•           Best Customer Intimacy Case in All IT History
•           Likely best, longest whole product application value for customers in history.  Certainly for mid-range.

Additional Positives: 

1. Probably BEST EVER AT EXTREME HIGH VALUE FOR NARROW SET OF CUSTOMERS 
2. Rock of Gibraltar reputation 
3. Technology follower - not a leader. Became a strength 
4. Best total solution for pragmatic, main street buyer
5. Easily weathered technology changes 

Some Negatives 

1. Nonproprietary movement was too big of a change, IBM was too slow (note that this is very common in corporate history) 
2. (Arguably) took advantage of their monopoly power 

(Sources:  Crossing the Chasm, Discipline of Market Leaders, Marketing High Technology, Innovator’s Solution, Tom’s experience competing against IBM) 

490

Profitability from the Start

Narrow Focus on Extreme High Value for Customer

Big Lessons from GE

GE’s famous “#1 or #2 or get out”

(Source:  Marketing High Technology) 

489

Profitability from the Start

Narrow Focus on Extreme High Value for Customer

Saying NO, Not Chasing Every Dollar, Extra-Large Customers

Margin / Cost:  Can Afford to Invest In Service

Charges Significantly More Than Competitors

Urgent Compelling Need

Understands Customer Problems Better Than They Do

Are You Sufficiently Focused:  How To Know

Rational Acquisitions 

Ruthlessly Qualify Prospects

Sell the Business Executives, Not IT Dept

Service as Primary Barrier to Competition

Avoiding Wall Street, IPO Traps

Jack Henry:  500% Return on Invested Capital from 1995 to 2005.  300% Return on Invested Capital from 2012 to 2021. 

See our case study for these key lessons: 

1. Focused on medium/smaller banks and credit unions where needed and valued high level of service. 

2. AVOIDED BIG BANKS who think know it all, can demand anything

3. Extreme High Service for customers who will pay for it.

4. Healthy margins as leading indicator you are doing the right things.

5. Watch for shenanigans by incumbent vendors.  Walk away.

Disciplines

1.       Saying "No" to Big Customers

2.       Saying "No" to Overpriced Acquisitions

3.       Hard Data Shows the Customers Love What They Get for the Price

4.       Sales Execution
   1.       Business Unit Executive Sell – NOT SELLING TO IT
5.       Technical / Operations Execution
   1.       Customer Service – strongest possible

(Source:  Case Study:  No27JackHenryProfitable30Years.pdf , Interview with CEO Jack Prim, 2^nd Interview with Jack Henry CEO Jack Prim)

488

Narrow Focus on Extreme High Value for Customer

Economies of Focus

Avoided “Tech for Tech’s Sake” Trap by Focus on Customer Need

Generic Products Not Viable

Reseller of No Code / Low Code Software and Services.  Grew from $1000 investment to $28 Million in Sales by Narrowing Focus  

See our case study for these key lessons: 

1. Altered focus from generic product to narrow, discrete target markets. 
2. The horizontal sales approach no longer works
3. Narrowed universe of prospects from one million to 200. 
4. Changed customers!
5. Tight focus and producing super-high customer value, solving urgent needs
6. Customers skeptical, tired of unmet promises
7. Becoming and expert in a very narrow field
8. Trap:  Focused on “what we sell” rather than “what customer needs”

(Source:  TIA Case Study  No23SwrFirmStartedwith1000.pdf)

487

Narrow Focus on Extreme High Value for Customer

Leadership Replaced

Tool Kit Products Not Viable

Shorten Sales Cycles

Barriers to Competition

Whole Product Solution

European Software Company Struggling in U.S.:   Closed Six Large Sales in Eight Months (After Closing Zero Sales in the Previous 16 Months).  

See our case study for these key lessons: 

1. Discovered (the hard way) that Europeans would buy "Toolkit" Products while North American buyers demand Whole Product Solutions. 

2. Most of Management Team Replaced After 16 Months of no sales

3. Lead sales person came from target customer’s industry

4. Dramatic shortening of sales cycles through narrow industry focus and Whole Product Solution

5. Consultative Selling worked (defined as focus on customer outcomes and results as first priority.)

6. Whole Product Solution thinking resulted in offering that was substantially better than any competitor

7. Found Right Resellers.  Resellers significantly contributed to the Whole Product Solution

8. Hard part was getting management to listen to those close to the customer

9. Shortened sales cycles by adding six additional swr modules to create a WHOLE PRODUCT SOLUTION.  

10. Customer tells themself "I just give them money and my problem goes away."

(Source:  TIA Case Study  No24SwrCoCloses6LargeSalesin8mos.pdf)

486

Narrow Focus on Extreme High Value for Customer

Shorten Sales Cycles

10X Payback for Customer

Ideal Prospect Concept

Direct Approach Worked

Distribution Channel Through Consultants

Did Not Chase Every Dollar of Revenue – Selective on Customization Requests

Struggling Software Firm Gets Focused, Sells 12 New Accounts in 16 Months, Generates Over $10 Million.  

See our case study for these key lessons: 

1. Product was SAP add-on for change management.  Solved very large problem of user change requests.
2. Key was focus on one strong product sold to a tightly defined niche. 
3. Successfully targeted IT Buyer (where many have failed). 
4. Closed every pilot project sold except one
5. Huge ROI on Solution.  Saved customers between 13% and 20% of labor spent on changes.  (Easily saved $1 million to $10 million per year.)
6. Ideal prospect: WOULD ADMIT THEY HAD A PROBLEM, could afford $100,000 cost. 
7. Direct contact approach worked
8. Built distribution channel through big four consultants.  Consulting firm earned big implementation revenues and endorsed the product.
9. Picked the gem among all the acquisitions.  Ignored the rest.
10. Had capital, was able to define product from customer requests.  Selectively accepted customization requests if they strengthen the core product

(Source:  TIA Case Study No26StrugglingFirmSells12NewAcctsin16Mos.pdf)

485

Urgent Compelling Need

Narrow Focus on Extreme High Value for Customer

No Price Competition

Whole Product Solution

Barriers To Competition

Bowling Alley of Self Referring Niches

Leadership

Say “No” To Business Outside Your Focus

Shortened Sales Cycles

Minimal Acquisitions, Done Well

Docucorp:  Struggled for Five years, Got Focused, Grew Sales from $15 Million to $75 Million During Difficult Post-Tech-Bust Years! 

From initial losses, rose to solid profits, spectacular return on low invested capital

See our case study for these key lessons: 

1. Hyper-focus on nothing but policy production for insurance companies, Dominated Niche. 
2. Narrowed the Universe of Prospects from 1 Million to 500.  
3. Narrow focus creates efficiencies, dominates competitors at low cost.
4. Found an urgent need to buy niche that did not require major changes to their product
5. No Price Competition
6. Moved away from “product-feature” selling to “what is the whole product solution the customer needs to solve their problem?”
7. Picked the Right Niche, Dominated It, Then Moved On to Subsequent Niches
8. Narrowed the Universe of Prospects from 1 Million to Less than 500
9. Stopped Trying to Sell Technology to Anybody Who Would Listen
10. Picked the Right Niche, Dominated It, Then Moved On to Subsequent Self-Referring Niches
11. Focused on Profitability and Cash Flow, Simple, Straightforward Business Plan
12. Six to Twelve Months to Know They Were on the Right Course
13. Had to Invest in Developing the Leadership and Management Team
14. Walked away from business outside their focus
15. Shortened Sales Cycles by focusing on an industry, stopped selling to IT, found Urgent Compelling Needs
16. Few acquisitions, done well, while competitors floundered with numerous bad deals

(Source TIA Case Study:  No28DocucorpSuccessStory.pdf )

484

10X Payback for Customer

Narrow Focus on Extreme High Value for Customer

Honest Sales Representations

Solving the Sales Problem

Minimal Price Competition

Fiserv:  11.14% Average Net Return on Sales during DOT COM bust.  Grew from $20 Million to $3.5 Billion in Sales, Profitable Every Quarter.  Share Price Up from $1.22 to $37.00 a Share after Seven Stock Splits

Spectacular market value on moderate invested capital.  Sustained market value as Tech Bubble burst.

See our case study interview with the CEO for these key lessons: 

1.       “We are Not a software company.  We are a firm that produces results for our customers and we happen to use software”
2.       “We serve a very narrow customer set.”
3.       “Before you focus on revenues or earnings, you focus and quality and customer satisfaction”
4.       “We solve inherent problems with internal IT departments”
5.       The Business Process Reengineering Problem: 
   1.   “We help the customer when industry consolidation creates FAR MORE WORK THAN THEIR PEOPLE CAN DO”
   2.   “We help them meet the need for rapid change and ever reducing costs”
6.       “We do acquisitions right”
7.       “We provide executive bonuses and recognition tied to customer satisfaction and customer retention”
8.       “All promises and representations made to the customer are done so in writing and in a fashion that is enforceable, testable and verifiable.”
9.       KEY LESSON:  Where can you find a niche, like FiServ, where you can solve big and important problems for your customers and they will be delighted to pay you for it?
10.   We have strong sales and marketing keeping the pipeline full because there are things beyond our control...”

Fiserv provides services and software to financial services industry.

(Source TIA Case Study:  No29FiServSuccessStory.pdf   NOTE:  This interview took place at Fiserv’s height in 2004.  Fiserv has come under some recent criticism…  We can still learn from what built this spectacular success.)

483

Early Profitability

Narrow Focus on Extreme High Value for Customer

Barriers To Competition

Solved Tech for Tech’s Sake Problem

Sales Funding, Execution

Whole Product Services Critical to Success

Ixos – Imaging Software.  20+ software sales of $1 Million+ at 50%+ Gross Profit.  Profitable after 3 ½ years.  

Workflow Add-On for SAP AP, AR, Other Financial Apps.  

EXTREME SUCCESS, LESSONS BENCHMARK versus competitors with technology focused strategies. 

Prospered with Focused Application Value niche while competitors (Viewstar, IBM) floundered.  

Filenet, a competitor, also prospered with Focused Application Value niche while competitors (Viewstar, IBM) floundered

Initially 5-10% services, grew to 40-50%

Sales Execution

• See Sales Successes by Ed Slayton, Bill Seven SPECTACULAR https://tiainc.net/RevenueSideResultsSummaryWord.html
• 35%-40% of revenue spent on sales, marketing 

(Source:  Interviews, Tom worked for competitor)

482

Narrow Focus on Extreme High Value for Customer

Bowling Alley of Self Referring Niches

No Tech for Tech’s Sake

Said “No”

Profitable From Start

Tyler Technologies:  TIA study winner, 100% ROI in 5 Years

200% ROI in 9 Years. 

Narrow focus on city government, started with city tax management and electric utilities.  Grew to eight city management segments total. 

• KEY TO SUCCESS:  FOCUSED ON END CUSTOMER EXPECTATIONS - NOT GENERIC CUSTOMER SATISFACTION
• AVOIDED TECHNO FASCINATION TRAPS THORUGH FOCUS ON CUSTOMER
• Steady Profits = Big, Stable Market Value
• Said No on deals that pull off focus
• Lots of growth by smart acquisition
• Stayed FOCUSED on core capabilities
• Well attuned to the voice of the END USERS and citizens

• Municipal govts 10,000+ universe of prospects

• PRICE - NOT NOTABLY HIGHER than competitors

• DID NOT TARGET SINGLE LINE OF BUSINESS DECISION MAKER.  Were able to sell to bureaucracy and committees in municipal govts, responsive to all inputs 

(Source: Customer, Interview with Marketing Consultant)

481

Profitable from the Start

Narrow Focus on Extreme High Value for Customer

BENTLEY SYSTEMS INC (PROJECT MGMT FOR ENGINEERS AND CONSTRUCTION)    2023 TIA Research Winner.  100% ROI in two years. 

Focus on STRUCTURAL AND CIVIL ENGINEERS USING SOFTWARE TO SIMULATE BIG PROJECTS.  

4/19/2024 WSJ:  Schnieder Electric bidding for control where it will merge its software business with Bentley.  Family controlled Bentley may not go for it.  APPEARS SCHNIEDER UNDERSTANDS BENTLEY IS WAY BETTER AT SOFTWARE THAN IT IS.

(Source:  TIA research)

480

Narrow Focus on Extreme High Value for Customer

Urgent Compelling Need

Whole Product Solution

Do Not Chase Every Dollar of Revenue

Saying “No”

Scope / Change Control

Big Winner Without Most Current Tech

Black Knight, Inc.  (LOAN ADMINISTRATION SWR)    2023 TIA Research Winner.  100% ROI in four years.  

Urgent Compelling Need:  Regulators compelled Bank of America to move off their home grown mortgage software and implement a package approved by the regulators.  

BofA management wanted one reliable neck to hold responsible.  

Fiserv was a distant second choice.  

The WHOLE PRODUCT SOLUTION included regulatory compliance and a rigid implementation process.  

Black Knight used a super rigid implementation and NEVER FAILED to get a customer implemented.  It was a 

genuine, strong process but not sophisticated.  “Their way or the highway”.  

Said “NO” to customizations.  Significant hard feelings with very big banks who want it their way, think they are smarter than everyone else

Stodgy, old tech.  Mainframe app with new interface

Now adding some bolt on apps for more value

(Source:  Bank of America former employee) 

479

Narrow Focus on Extreme High Value for Customer

CADENCE DESIGN SYSTEMS INC  2023 TIA Research Winner.  100% ROI in two years. 

Focus is electronic engineering design

- STRONGEST PROFITS IN STUDY

- Low invested capital

- Huge valuation

(Source:  TIA Research)

478

Narrow Focus on Extreme High Value for Customer

Cerner  2023 TIA Research Winner.  100% ROI in six years

•           Became a dominant company in medical records, medical systems
•           Winner from original study
•           Large invested capital
•           Net Profit:  13% avg at update, originally very strong profits, avg 18%
•           Gross Profit: 83.5% 
•           Software/Services Mix:  56% services
•           SG&A 40% of revenues avg
•           Strategy:  Software Sells High Margin Services
•           Acquired by Oracle – going downhill fast

(Source:  TIA research, met founder, interview ex-employee)

477

Fix The Process First

Narrow Focus on Extreme High Value for Customer

DESCARTES SYSTEMS GROUP INC  (Canada, 2023 TIA Research Winner.  100% ROI in eight years 

BUSINESS PROCESS AUTOMATION SWR, supply chain  management business processes) 

(Source:  TIA research)

476

Narrow Focus on Extreme High Value for Customer

GLOBALSCAPE INC   2023 TIA Research Winner.  100% ROI in 6 Years.  300% ROI in 9 Years 

CRM software, provides secure information exchange, data transfer and sharing capabilities

Successfully acquired due to STRONG PROFITs and LOW INVESTED CAPITAL

(Source:  TIA research)

475

Profitable from the Start

Narrow Focus on Extreme High Value for Customer

Barriers To Competition

Group 1 Software 2023 TIA Research Winner.  100% ROI in five years. 

Direct marketing and customer relationship systems

ACCOMPLISHED WHILE COMPETING WITH SALESFORCE! 

Winner from original study

•           Low invested capital
•           Acquired

•           Big Win:   spectacular market value from very low invested capital
•           12%-15%, one down year,
•           Modest acquisitions

(Source: TIA research)

474

Profitable from the Start

Narrow Focus on Extreme High Value for Customer

Barriers To Competition

MANHATTAN ASSOCIATES INC  2023 TIA Research Winner.  100% ROI in 3 Years, 200% ROI in 9 Years. 

SUPPLY CHAIN management software, solutions to manage supply chains, inventory retailers, wholesalers, manufacturers

FOUND NEW MARKET HELPING MANUFACTURERS SELL DIRECT TO CONSUMER. 

ACCOMPLISHED WHILE COMPETING WITH SAP AND ORACLE! 

Big Win:  spectacular market value on low invested capital, held value through tech bubble burst

Profits:  30%+ before tech bubble, 10% after, significant acquisitions

(Source: TIA research)

473

Narrow Focus on Extreme High Value for Customer

NATIONAL INSTRUMENTS CORP   2023 TIA Research Winner.  100% ROI in 9 Years 

ENGINEERING software for automated test equipment and virtual instrumentation software 

(Source: TIA research)

472

Narrow Focus on Extreme High Value for Customer

Barriers To Competition

Profitable from Start

Paycom Software, Inc.  2023 TIA Research Winner.  100% ROI in 6 Years

Software puts all HR functions online including talent acquisition, time and labor management, payroll, talent management and human resources management

Accomplished while competing with Workday, Peoplesoft, Oracle!

(Source: TIA research)

471

Narrow Focus on Extreme High Value for Customer

PTC INC.  2023 TIA Research Winner.  100% ROI in 9 Years 

MANUFACTURING software for computer-aided design / engineering, manufacturing, and services

Steady Profits = Durable Market Value

(Source: TIA research)

470

Narrow Focus on Extreme High Value for Customer

SHOPIFY INC.  2023 TIA Research Winner.  100% ROI in 9 Years. 

MARKETING TECHNOLOGY software enables merchants to sell their products across different sales channels 

Found niche HELPING MFRS SELL DIRECT TO CONSUMER

(Source: TIA research)

469

Profitable from Start

Narrow Focus on Extreme High Value for Customer

Bowling Alley of Self Referring Niches

VEEVA SYSTEMS INC  2023 TIA Research Winner.  100% ROI in 4 years.  140% ROI in 9 years

PHARMACY software cloud solutions for the life sciences industry / pharmaceutical, biotechnology, and medical device companies

Very Strong Profits created Very High, Stable Market Value

(Source: TIA research)

468

Narrow Focus on Extreme High Value for Customer

Dominate Niche

Boston Consulting Group study 1968:  MUST pursue sufficiently isolated segment which can be dominated. 

If cannot be dominated – withdraw.  

(Source:  Marketing High Technology, page 14) 

467

Narrow Focus on Extreme High Value for Customer

Ideal Prospect

Barriers to Competition

Reynolds And Reynolds - Big Win:  Spectacular market value on very low invested capital due to debt pay down and stock repurchase. 

SEE CHARTS, HUGE WIN FOR INVESTORS, Sustained Market Value after Tech Bubble!

Focused On Auto Dealers Who Needed Help And Were Willing To Pay 

Sales Execution

• Tom:  I called on a car dealer as a competitor - R&R so strong I never called on another car dealer in 40 years.

Technical / Operations Execution

Big gains early, but big drop due to divestiture, regained some revenue growth

See study PROFITS OF 427  PUBLIC AND PRIVATE SOFTWARE COMPANIES, 2022

(Source:  Innovator’s Solution, TIA Research) 

466

Narrow Focus on Extreme High Value for Customer

Pragmatic Buyer Instead of Early Adopter

Oracle: Standardized on IBM’S SQL interface. 

Ported To Every Relevant Operating System / Platform 

APPS DEVELOPED IN ONE EASILY MIGRATED TO ANOTHER 

KILLER USE CASE!  Won pragmatists in IT depts 

This is what built Oracle

SPECTACULAR WIN FOR NON-PROPRIETARY

Oracle, disciplined enough to say NO to bad integration projects, demands from big customers

Jim C., Real Page former COO story, mad at first, then respected their discipline and focus

(Source:  Crossing the Chasm, Jim C, interview) 

465.5

Narrow Focus on Extreme High Value for Customer

Profitable from Start

SYNOPSYS INC  SEMICONDUCTOR TOOLS SWR   2023 TIA Research Winner  100% ROI in 8 Years

Semiconductor Engineering Simulations Design

Focused Application Value

Steady Profits = Big, Stable Market Value

12/23/2023 WSJ update:  Market value up from $60bb to $80bb, still going strong, chip design focus, acquiring Ansys

AMAZINGLY SMOOTH MARKET VALUE GROWTH FROM STEADY PROFITS.  VERY MUCH WORTH STUDYING

Source:  TIA Research 2023

465

Narrow Focus on Extreme High Value for Customer

Profitable from Start

ANSYS INC  2023 TIA Research Winner.  - STRONGEST PROFITS IN STUDY.  100% ROI in eight years. 

Focused on Manufacturing (especially simulations for Aerospace, Healthcare, Automotive.) 

MANUFACTURING SWR, engineering simulation software, simulates how real products work

Increasingly important for structural, mechanical, power? reasons as products smaller and more complex.

Very large invested capital

12/23/2023  Synopsis acquiring, TWO STRONG PERFORMERS, BUFFETT / MUNGER STYLE – ACQUIRE STRONG COMPANY AT FAIR PRICE?

(Source:  TIA Research) 

464

Narrow Focus on Extreme High Value for Customer

APPFOLIO INC  2023 TIA Research Winner  - 150% ROI in 10 Years 

PROPERTY MANAGEMENT SWR / Real Estate Swr

(Source:  TIA Research)

463

Narrow Focus on Extreme High Value for Customer

Cheetah Mobile Inc.  2023 TIA Research Winner.  100% ROI in five  years.  PROFITS GOOD BUT UNEVEN

Software applications for smartphones and tablet devices

Moderate invested capital, Market Value Dropped by $20 BB, Still Profitable, Viable.  

(Source:  TIA Research)

462

Narrow Focus on Extreme High Value for Customer

Bowling Alley of Self Referring Niches

NICE Ltd. (Israel)  2023 TIA Research Winner.  100% ROI in 9 Years 

CRM Swr  Customer Engagement and Financial Crime and Compliance markets   

(Source:  TIA Research)

461

Narrow Focus on Extreme High Value for Customer

Saying “No”

Go Find Good Business

35%+ Of Revenues on Sales / Marketing

Bowling Alley of Self-Referring Niches

EDS – Numerous Lessons

e.g. HOW BUILT $100 MILLION BUSINESS UNIT.  Services Only to Defense Contractors:  Engineering Manufacturing Development, Virtual Assembly Aviation Defense Contractor Niche

Initial Big Successes from Narrow, High Value Initial Offerings

1. In 1962, understood the value providing, had courage to charge for it.  Sold fixed price five year contracts for services while competitors sold 60 to 90 day contracts.
2. DISCIPLINE made the company.  No alcohol during business hours, conservative dress, loyalty, duty, near military management style created results and employee devotion.

THE DISCIPLINE OF NARROW FOCUS ON HIGH VALUE APPLICATIONS almost certainly proceeded from the core disciplines.

Core IBM principals (Don’t take bad business, Go find good business) also contributed.

3. Early Customers, Collins Radio and Frito Lay helped but found real niches in:

Insurance data processing niche

Medicare processing started in 1965.  40% of business by 1977 and largest in nation by 1990.  Cumbersome 1965 legislation created opportunity for EDS

4. First bank customer in 1968, grew to world’s largest data processing service for banks and S&Ls.
5. Some failures, niches did not work
   1. Stock Brokerage
6. Additional customer niches

• Turnkey for hospitals
• Turnkey for S&Ls 
• Saudi Arabia
• Iran – famously hired special forces guy to get his people out.
• U.S. Army
  7. Beginning of the end:  Sale to GM, Switching to Integration Projects, Sale to HP

(Source:  Former employee interviews) 

Horizontal / Vertical Focus Done Well

Narrow Focus on Extreme High Value for Customer

Bowling Alley of Self Referring Niches

High Margin and Worth It

Peoplesoft:  Great Example Of Horizontal Platform Marketed Vertically To Industries

Captured 50% Market Share For Client / Server HR Apps, Then Moved On To Related Niches

- Lagged behind until Windows 3.0 established as standard for client of client server in early 1990s

- One of 3 core apps that Drove Windows 3.0 adoption (also Sap and Oracle)

- Able to keep charging premium because of market dominance

- HR systems were low risk app for pragmatists to try client / server

- Moved to next pin, financials, very strong due to HR position

- Challenge will be narrowing financials app targets to ones where HR strength is enough advantage to compete with Oracle and SAP

From Crossing the Chasm 3^rd Edition pg 173-174 and Inside the Tornado (subsequent Geoff Miller book)

460

Narrow Focus on Extreme High Value for Customer

Workday (See Peoplesoft as Starting Point):  

Peoplesoft success was due to bringing big suite of interactive HR tools to client / server (which HR had never had). 

After hostile takeover by Oracle, former executives formed Workday and did the same thing with SAAS / online HR software.  

BIG HORIZONTAL WIN BY FOCUSING ON JOBS CUSTOMER NEEDED DONE (rather than industry vertical) 

- Key SAAS benefits

  * IMMEDIATE implementation

  * Pay as you go, lower risk

  * Continuous releases / updates

  * PERCIEVED LOWER SWITCHING COSTS (process is still the bigger barrier)

(Source:  Innovator’s Solution) 

459

Narrow Focus on Extreme High Value for Customer

Bowling Alley of Self Referring Niches

Urgent Compelling Need

Clarify:  Possible big win with textbook Chasm Crossing approach 

Software Application Support:  Full SAAS automation of Customer Service Software and Network Hardware Support.  

Won Cisco, 3Com, Synoptics, Wellfleet, Microsoft. 

NOTE:  Jury is still out – not sure if successful yet, but good lessons

Next Niche:  Telecom.  Same customer service / application goals as TE Connectivity 

- Agent Screen:  Customer Calling, (all possible info), Product causing call, Knowledge to meet need 

- Increase Sales through Better Service  

- Increase Sales with Buying Patterns, Promotions tuned to customer 

- Order / Shipping knowledge, troubleshooting 

- Screen sharing with customer 

*** Bug Case routing to development org, tracked through resolution 

- Skill based routing to best fit agent 

- Hot Lead capture, prioritization 

- Email, voice or chat as customer prefers 

- Automated chatbot service where works 

- Quotes tracked through on time response, esp. outside service dept. 

- Service Level Agreements enforced for resolution 

- Warm handoff of leads to partners 

- Agent productivity, measurement, training calls 

- Tiers of service, charge for, effective 

- Universal Agent:  All able to do customer service, product specialist, inside sales jobs, best possible 

- Remote agents on PCs or Tablets  

- Integration to tracking sensors, other customer systems 

- Speech to text, natural language, text analytics 

Urgent Compelling Need:  Competitive advantage, increased sales from superior service

OPPORTUNITIES:  

- Network Hwr Support, Vertical market with broken mission-critical process

- Niche lends to whole segment of customers – not just one at a time

LESSONS:  

- Make a total commitment to your focus niche, use whatever you have left to service other easy business coming in

- Started with Network Hwr Support, won Cisco, 3Com, Synoptics, Wellfleet

- Next bowling pin:  Software App Support, won Microsoft

- Next Pin:  Telecom

(Source:  Innovator’s Solution, Tom client)

458

Narrow Focus on Extreme High Value for Customer

Failed Horizontal Approach

Lotus Notes:  Big initial success with narrow focus on global account management for worldwide accounting and consulting firms. 

Migrated to another pin – customer service for high-tech companies.  Other customers started adopting, became fragmented, used for everything, lost focus, 

BECAME HORIZONTAL, acquired by IBM, died.  

NOTE THAT SUPERIOR COMPETITORS, HP’S NEW WAVE, NEXT’S NEXTSTEP, ARGUABLY TI’S PRODUCT, NINTEX, DOZENS OF OTHERS FAILED BECAUSE THEY WENT HORIZONTAL 

(Source:  Innovator’s Solution)

457

Narrow Focus on Extreme High Value for Customer

Whole Product Solution

Industry Expertise

Lost Their Way

Seibel – Pioneered CRM Applications.  MIXED - GOOD AND BAD  

1. Saw half dozen apps for No Code Solutions 
2. KEY WAS INTEGRATION ALMOST COMPLETELY PREPACKAGED 
3. Ted worked for them five years, was #3 in the World in Sales 
4. Success with implementation partners – why mixed 
5. Selected partners based on industry strength, number of implementors / developers 
6. KEY ITEM WAS PARTNERED WITH DELOITTE TO VERTICALIZE SOFTWARE.  THIS MADE DELOITTE HANDS DOWN THE PREFERRED IMPLEMENTATION PARTNER. 
7. IMPLEMENTATIONS DRAMATICALLY BETTER WITH THESE SPECIALIZED FOCUSED IMPLEMENTATION PARTNERS (AS OPPOSED TO SOMEBODY WHO COULD JUST SELL THEIR WAY INTO WINNING THE IMPLEMENTATION BUSINESS) 
8. QUICK HITS, SMALL WINS / KEEPING MOMENTUM AND FUNDING GOING WAS EVERYTHING 
9. POSITIVES: 
   1. Great Tech 
   2. Verticalized the product 
   3. Already had interfaces working, ready to go 
   4. Picked good Big 4 partners with vertical strength 
10. NEGATIVES: 
    1. Tom Siebol 
    2. Cocaine  
    3. Weekly call – micromanaging any deal over $1 million – worst issue – why he left 
    4. Was overfocused on Chase and Citibank – the big guys  
    5. Story about US Bank, customer who knew Tom Siebol’s problems and refused to meet with him 
    6. Numerous lawsuits 

(Source:  From former #3 sales exec in the world) 

456

Focus on The Pragmatic Buyer

Extreme High Value for Customer

Lessons from Microsoft

Microsoft’s position in history and size make it unlikely that its success will ever be replicated, but here are some lessons we can take away

Microsoft was built in large part on this concept:  “Customer funds initial software, we productize the software – make ready for large scale sales - sell big value for low cost” – e.g. MS Office.  Note There are significant costs to productize the software – making it ready for large scale sales.

Focus on pragmatic customers:  Low cost, high value software. 

SPECTACULAR WIN FROM THE SHIFT TO NON-PROPRIETARY HARDWARE.

(Source:  Former employees, TIA Research)

455

Narrow Focus on Extreme High Value for Customer

Authority / Responsibility Matching

Controlling Interference from Investors, Board Members

Sernic:  Canadian Supplier of ERP Software to NGOS (Non-Govt. Orgs.)

• Grew from $4 Million to 12.5 Million in 7 Years
• Profitable, But Would Have Done Better With Different Customer
• STARTED WITH MARKET / CUSTOMER ANALYSIS
• Sell what Customer will buy
• Improve, Replace People
• Enormous difficulty and distraction from board member continually demanding “What about Block Chain?”

(Source:  Randy K, former CEO)

454

Narrow Focus on Extreme High Value for Customer

ACI WORLDWIDE, INC., 2023 TIA Research Winner  100% ROI in six years

Complex FINANCIAL SERVICES software for transaction clearing, security between banks.  

- Large invested capital

- Very strong profits while growing revenue

- Unusually low market value

- CAUTION:  Possible problem period with customer hostility but has new CEO 

(Source:  TIA Research)

453

Focus

Barely A Winner, Lost Their Way

ALLIANCE DATA SYSTEMS CORP, 2023 TIA Research Winner   100% ROI In Seven Years

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