The real decision makers
There is a common belief among the tech industries that the
most important person to talk to is the engineer. Magazines like EDN, EE Times, Electronic Design and
Electronic Products are traditionally dedicated to the electronics engineer and
providing "solutions" to the engineer's problems. They are right, of course, that the
engineer has to be convinced before a product can be sold, but the problem is
that in today's economy, the engineer isn’t the final decision maker. That decision rests with the CFO. And they aren't buying anything right
now because no one is telling them what they want to hear.
The CFO asks only one important question and, invariably,
the head of engineering answers that question wrong. And the reason they answer the question wrong is because the
vendor's marketing efforts are geared only to answer the questions the
engineers ask, so the engineers are not prepared to answer the CFO correctly.
What's the question?
"Can we you do your job with what you have now?"
What does the engineer answer? "Of course we can."
So the CFO says they can't buy the tool or service.
Engineers always like to have the latest gizmo to try out
and see if it work, so they get
enough budget to try a few new things but never enough to put the new stuff into action. Engineers believe that they can solve any problem with whatever tools they have already and whatever
they don’t have they can jury rig. The tech industry will remain in a slump until someone
figures out who the real customer is, because it isn't the engineer.
Take for example, my favorite whipping boy, Electronic
Design Automation. Just about
every company in that industry will say the same thing about marketing: There's only 5 to 10 companies that we
are concerned about as customers, we know who they are, so we don’t need to do
marketing. Let's take a look at
who those companies are:
Freescale, Texas Instruments, AMD, Intel, Infineon, Nokia, Samsung, NEC,
Toshiba, LSI Logic.
Not a single company in that mix, with the exception of (Yeah, yeah. I've heard of all kinds of wonderful things are being worked on, but nothing of significance has come out for a decade.)
Intel, is doing anything of consequence in new semiconductor development. They are only tweaking what they have already developed. Some of them are on the verge of
disappearing altogether. They are renewing licenses of current EDA tools, but
they are not buying anything new because they are not making anything new. Those small companies that they are
talking to are being strung along with experimental single-license sales, and they aren't giving permission for the
smaller companies to say anything about their relationship, so there is no
marketing advantage in the relationship for the smaller companies.
Almost no company in EDA has made a financial case for their
technology to their customers.
They can give all kinds of reasons about how it makes the design of the
customer's products easier, but that means the customer ultimately needs fewer
engineers to do the job, and they aren't going to tell the CFO that. (Full disclosure: my compatriots in the communications biz aren't establishing their financial benefit either. And because I'm one of the few who does, no one believes me. Sheesh.)
The semiconductor companies have the same problem. They can't sell the financial benefit
of new products to systems companies because they don't know what that benefit
is. The systems companies don't
know how much money their customers will save by buying their systems and so
those customers can't sell new products to, ultimately, to the general
consumer, because they can't figure out what good it is. (Link NSFW).
The way we get out of this financial mess we are in world
wide is to figure out how to sell the financial benefit, not the engineering
prowess. That is going to take
some investment in the form of marketing, and that still is in the hands of the
CFO.
That's
our bottleneck right now.
Sorry Lou, but, as you say over here, that dog won't hunt.
ReplyDeleteThe notion that EDA generally does not make an economic case for its technology simply does not hold.
First, I think that you're using the term 'engineer' here as a straw man. Because what I'd immediately ask is, 'Which engineer do you have in mind? Are we talking about the guy doing the P&R or the engineering manager overseeing a whole project?' Because, in this example, they are both engineers and they both get marketed to in different ways according to different objectives. They may both get told different stories (including the one about how many staff a certain tool or software suite might allow you to cut).
Second, EDA describes its selling points as does any automation industry and very much in economic tools. Return-on-tools eminates from, to cite a few examples, reducing design life-cycles, obviating the need to complete certain tasks in-house, providing access to new design features that can improve end-product performance. Since when were these not bottom line issues?
Third, I defy you - I honestly defy you - to find me any industry where the public marketing consists of, "Buy my product and you can sack some staff." Do such discussions take place? You betcha - in private, though. Promoting yourself in the press or any open medium on such a basis, though, would merely invite opprobrium and hatred. Even as obvious an outsourcing service as contract manufacturing will publicly present itself on the basis that it can make your product to a better quality standard and more reliably than you can yourself. In public, the EMS guys go ixt nay on the layoffs.
Fourth, and finally, marketing to the CFO simply is not wise. The history of doing it shows us that it commoditizes any market or product that is foolish enough to pursue the strategy, as the initial price inevitably becomes the only competitive differentiator of note.
Otherwise, great blog, keep it coming.
Paul Dempsey
Editor-in-Chief
EDA Tech Forum
Thanks for the encouragement, Paul.
ReplyDeleteHowever, I can introduce you to several EDA entrepreneurs who's companies have tun into brick walls when their PO hit the CFO desk. You can sell a few tools on spec, but unless you sell the CFO and not JUST the engineers, you're screwed.