I Just Want to Say One Word to You …
Apr 19, 2016
No, it’s not “plastics”!
(Remember “The Graduate”?)
Plastics are so passé!
(Image source: https://en.wikipedia.org/wiki/The_Graduate)
The word I have for you is “pull-through”.
It's hard to find an official definition for pull-through. In marketing and sales, pull-through is used almost synonymously with demand. More specifically, a pull-through effect is achieved by using one thing—e.g., product or service—to sell more or something else (typically another product or service) in addition. Pull-through revenue is the additional revenue gained from the sale of more products by the same vendor.
Pull-through is not a revolutionary invention such as plastics were in the late 60s. It isn’t even a new concept, but its importance is growing in the world of enterprise communications.
I’m sure you have engaged in multiple conversations (maybe even heated debates)—during formal briefings as well as over cocktails—about which enterprise unified communications (UC) vendors and/or providers are going to make it through the next decade. Admit it, you’ve heard it multiple times (maybe even said it as often) that few vendors (Microsoft and Cisco being the most frequently cited) are going to dominate this space in the future, at the expense of their dozen or so direct competitors. It puzzles me that we are so fast to bury well-established market participants—many with long track records in delivering feature-rich and reliable solutions. But it’s a fact that ongoing mergers and acquisitions (M&A) as well as the occasional bankruptcy are obliterating brands that have survived decades of prominent existence.
There’s no doubt that the enterprise communications market has been stagnant for years and future growth is suspect. Technology innovation continues at a rapid pace, but most vendors’ revenues are flat at best, with scarce pockets of growth in market segments such as UCaaS, VCaaS, team collaboration (i.e., next-generation messaging) and some other niche markets. Market consolidation through M&A provides only a temporary (and mostly bitter-sweet) relief for industry malaise.
It is natural to expect some vendors to disappear through M&A in a highly competitive market. But what is the key to survival and success? Most market participants are betting on technology innovation and solution affordability to stretch the elasticity of demand for advanced UC solutions. Every day we are witnessing the launch of compelling new products and services and prices are only getting lower. Yet, something is holding the market back.
UC vendor spokes people talk a lot about transformation, both their own and that of their customers. Information and communications technologies are transforming the way we live and work, further accelerating demand for technology innovation and compelling vendors to rapidly transform themselves as well. Certainly, reluctance or inability to adapt to evolving market trends is a sure recipe for disaster and a technology vendor’s quick demise. However, as political economists and historians have discovered, modernity is great, but modernization can be unsettling. Periods of transformation disrupting the status quo can take a huge toll on market participants.
Today, we are experiencing an identity crisis in the UC space. Over the past decade, many communications vendors and providers evolved from PBX vendors to UC and collaboration vendors, to software and services companies, and now to UCaaS providers. In that process, some lost their strong identity and brand power. Many diverged into technology areas that had little in common with their existing portfolios. Failed launches abound—hosted email, docking stations, peer-to-peer VoIP systems, and tablets to name a few. Cloud-based next-generation messaging/team collaboration seems to be the latest fad. Many UC vendors are frantically launching new messaging products in an attempt to differentiate and reinvent themselves and tap into new growth opportunities.
Many articles have been written about team collaboration apps and their value proposition. They have their use cases like any other product or solution. They work for some and not for others. But demand alone is insufficient to determine individual vendor success. How team collaboration apps or any other innovative and radically different solutions affect vendor competitive positioning is a matter of both strategy and execution. And here we come to my point about pull-through.
If you look at tremendously successful vendors such as Cisco and Microsoft, you will find that they have been particularly effective in creating pull-through. These vendors have had their fair share of failed product launches (e.g., Cisco’s hosted email foray or Microsoft’s Response Point system, for example). However, overall, they have asserted their market power over and over again by constantly generating pull-through for their core products. Cisco’s ability to tap into new markets that create demand for its networking gear is proverbial. Microsoft’s ability to pin everyone to the desktop PC and the vendor’s productivity apps and business databases with every new product they launch is no less impressive.
Few businesses have succeeded in completely severing ties with their past and re-inventing themselves to better address new market realities. Most brands that have survived multiple decades have stuck to a strong set of core competencies, which they have only gradually evolved to remain competitive.
The transition to software-based solutions, cloud delivery models, mobile-first product development, productivity-centric (versus technology-centric) solutions, and other new strategic areas is a complex and error-prone process. UC vendors must have a strong vision for the pull-through effect they are seeking and execute upon it. As counter-intuitive as it may sound, cloud strategies can create pull-through for premises-based systems and endpoints; new messaging solutions create pull-through for existing telephony capabilities; partner-enablement strategies create pull-through for managed and professional services; and so on.
Each UC vendor has a differentiated skill set, a tremendous amount of unique expertise, and other capabilities (e.g., brand, patents, installed base, channel partnerships) that can be leveraged for future success. The key is to align all assets and capabilities in a strategy based on total portfolio pull-through. Another critical consideration is maintaining a strong brand and constantly reiterating a clear value proposition. The market likes to hear about evolution, but buyers have a conservative side that also expects consistency and stability. No one can be everything to everyone. The winners know how to be the best for many.
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