In the information age’s infancy, two Stanford graduate students created a simple directory to help users navigate the Wild West of the internet. They called it “Jerry and David’s Guide to the World Wide Web.” Within a decade, the duo’s pet project would become valued at more than $100 billion and would rebrand itself as Yahoo. Yahoo’s search engine, e-mail service and newsfeed covered almost all of the major services needed by the millions of new PC owners, and as a result, it was one of the hottest companies on the NASDAQ. Yet the next decade would see this icon of the industry be surpassed by younger startups, and in July 2016, it was bought out for just $4.8 billion.
Technological innovation breeds new products and go-to-market strategies by providing huge opportunities for companies to come in and disrupt the establishment. At the same time that Yahoo was on the ascent, the shift in enterprise computing from mainframes to PCs allowed companies like Hewlett-Packard and Dell to burst out of garages and dorm rooms, and usurp the traditional hardware manufacturers. Part of their competitive advantage lay in their expertise in client-servers technology, which formed the digital backbone to any company’s workforce. The other part of their advantage was their go-to-market strategy, which was tailored for these new products. HP developed a strong indirect sales ecosystem, and Dell pioneered the low-cost telecommunications/web sales model in order to gain unprecedented market penetration while at the same time changing the economics of the industry.
We are now at the beginning of the next wave of technological innovation as companies accelerate from the client-server model to a third platform built around the cloud, mobile, big data and social media.
Microsoft is a prime example of a company that has been vying for a stake in these new frontiers. The former “world’s most valuable company” is faced with declining sales of its operating system and productivity suite for PCs, but it is refusing to go quietly into the night. The company’s recent strategic initiatives show a methodical approach to slowly transforming each area of its business. In addition to changing and expanding its in-house product offerings, the company has been making strategic acquisitions and is changing its go-to-market strategy accordingly.
Microsoft’s cloud-computing platform, Azure, and the transition of Microsoft Office to a software-as-a-service offering have grown Microsoft’s cloud business dramatically, and they are critical to the company’s efforts to establish itself as a leader in enterprise solutions. On the mobile front, the company not only acquired Nokia but also released new products, such as the Surface tablet, and completely overhauled Windows 10. Microsoft’s acquisition of LinkedIn has also given the company a strong foothold in social media with a wealth of data on professional networks.
Other companies have made similar strategic portfolio shifts but failed at adapting their go-to-market strategy to bring the product to market. Despite some false starts, Microsoft has pulled ahead of the pack by investing in transforming its ecosystem of channel partners along with its product portfolio. In an effort to grow its subscription cloud business and drive customer loyalty, Microsoft has restructured its existing channel strategy by training partners on the new business model, as well as recruiting new partners to help sell the company’s products.
From our perspective, the industry leaders who’ve been successful in embracing these new technologies have done so by focusing on five key elements:
- Rethinking the business model and pricing strategy to reflect the fact that services on the cloud need to constantly iterate and prove their ROI to justify the recurring expense
- Shifting the role of marketing away from customer acquisition and demand generation to customer management and loyalty
- Becoming data rich by capturing and harnessing data to enable advanced analytics to predict new customer up-sell and cross-sell opportunities
- Putting the improvement of the customer experience at the core of all of these changes because a positive customer experience drives a successful customer lifecycle
- Adapting their channel strategy to better align with their customers’ buying preferences and more effectively enable their channel partners to transition to the new business models