I worked for Dean Douglas for a few years while I was at IBM. He was the General Manager of our Emerging Business Opportunity (EBO) business unit for Wireless Computing. The EBO was based on a business model promoted in the book Alchemy of Growth. The idea was that in a large company like IBM, one needed a focused business unit with a mission to provide emerging technology solutions to customers by working with and through the traditional business units in IBM. So Dean had a worldwide organization with a combination of sales, and services delivery capacity. My group was the services delivery piece.
He is the first CEO I have asked to give his views on what are patterns of success.
John - Dean, thanks for taking the time to speak with me today. Before we get into the core interview questions I did have another question. I saw on the Westcon website that you had been named one of the top 25 Channel Mavericks of 2010. What did you do to earn that recognition?
Dean - I've thought about that too and can't point to just one thing we may have done. Obviously, I am very flattered by the award. I do think it is more about the way we have approached the marketplace. We have not approached the marketplace in a traditional manner or the same as our competition. We looked at where the opportunities were in the marketplace and took an aggressive view of these opportunities but not a conventional view. For example, in the area of cloud computing. Many distributors, and resellers or channel partners see cloud computing as a threat to their traditional data center solution. Westcon sees it as a positive opportunity. If an enterprise depends more and more on cloud services then they are going to need more robust security, more robust network infrastructure. They will need hardware to allow near local response times for those applications that cannot afford the latency of the cloud. So we see cloud computing as way to increase our business-as-usual in addition to the opportunities it presents in other technology areas that we can pursue.
John - So when there is a disruptive technology (of which cloud computing is an example), what Westcon can do is understand the impact of the technology and help its customers with an approach on how to be successful with that disruption.
Dean - To a large extent you are absolutely right, but there is a nuance to what you said. There is a tremendous opportunity in what I call unintended consequences. Take cloud based computing – which we have readily embraced. We are finding that we needed to upgrade our networks, improve our security, at the end user point as well as across the network to make this happen. And those required improvements were not contemplated when we embarked in moving to the cloud. And this translates over to our customer partners as well.
John - So you can encapsulate these learnings around unintended consequences and pass them on to the system integrators and VARs that are your customers.
Dean - Exactly. We have marketing programs in place so our customers are articulate and not just parroting the Westcon point of view.
John - Over the years if you were to take the top 10% successful Westcon customers and compare them to the bottom 10%, are there any patterns that you seeing the top 10% doing that differentiates them?
Dean - One of the hallmarks of success is that there is real customer empathy. You must understand the challenges the customer is facing and the opportunities for success in a way that is consistent with the culture, the business values, the approach, and the business metrics that customer has. And there is no question that by really understanding these items you will be able to convert it to a set of integrated offerings that address the challenges and provides a platform for the opportunity.By the way, those could be tangential to the actual product being sold. The product sale may be a facilitator or it may be a platform for providing other capabilities that had not been considered. So having that open view to what a customer may be wrestling with, as opposed to having preconceived notions of the solution, is what differentiates the most successful of the Westcon customers.
John - How to these companies achieve that customer empathy? Does that mean that they have a larger population of customer facing people, or a more skilled sales force, or what?
Dean - I do not think it requires a larger sales team. But it does require a sales team that is experienced and highly skilled. They should also be conversant in alternative approaches so that they can design a solution that is best for the customer. The training may be in a technical area but it could also be in an awareness sense as well. How do you probe, how do you ask questions that uncover what the customer is really doing and thinking? However, I am surprised by how many sales people miss this and they could have been in sales for a long time. For example, at Westcon we have a capital committee that gets together to make decisions on purchases of anything over $50K. And our capital committee requires the submission to have a real ROI business case. So, if I were selling to Westcon and had something more expensive than $50K, I should know about the capital committee and its decision making process. I should help my customer in Westcon to put together a good ROI, maybe suggesting that other groups in Westcon could also benefit from the purchase and be brought into the sale.
John - So more important than knowing 100 things about a Cisco router, a sales person should understand the lay of the land in that customer and the decision-making forces in play.
Dean - You and I would think of this as a fundamental diagnostic. The more we know about what is going on with our customer the better able we can craft a successful solution for that customer.
John - Let me take it back to that CRN Top 25 announcement. One of the items mentioned was that you had set up a training center for your customers. Does this center provide more than just technical training? Do you also offer up some training on how to be empathetic with a customer?
Dean - Actually it goes beyond both of those. We decided to open a center in Denver and in Brussels to start with. We call these LEAP Centers.... Learning / Experience / Architect / Plan. What we have created in those centers is a real-world data center. In that center are all the products a real data center would have. Servers, networks, routers, storage, both products that Westcon distributes, as well as some products we don’t distribute, but will likely be in the centers that our customers sell into. By having a complete array of products and technologies we can give our resellers the opportunity to come in and educate themselves on what the state of play is in the marketplace today with current hardware and software. We offer classroom instruction as well as true hands on learning. This is the Learning / Experience piece. The second part of the center is to provide our customers a place to consider how they would change or expand their portfolio to deal with the changing marketplace. For example, if they are a networking VAR, you can learn how to have relevance in a network-centric data center or network storage data center. Adding derivative products and capabilities to the VAR’s core expertise. That is the architecture piece of LEAP. Finally, we can bring the end user into the facility to plan on how to bring these solutions to the marketplace. And if your customers only have IBM and Cisco and EMC we can rapidly configure an environment in the LEAP facility to match that product profile. The experience an SI or VAR can get in our facility will give them real confidence that the products they are proposing to their customers will really solve that customer's challenges.
John - I can imagine that a LEAP Center would be in high demand and would need to be reserved so that one of your SI/VARs could come in and work extensively with the products you have.
Dean - Well it turns out that with modem virtualization technology we can offer a lot of the center capability remotely and rapidly configure the environment. For example, the Westcon team in Brazil uses our Denver center for their customers.
John - Do other distributors offer a LEAP-type Center?
Dean - Everyone has a demo center, but Westcon is the only distributor that I know of that offers the kind of capabilities we have talked about to help SI/VARs.
John - Do you also use these centers as a place to bring in emerging technologies in order to evaluate and showcase what might be coming over the horizon? For example, I attended the BladeSystems Insight Summit earlier this year and saw an immersion cooling technology from Hardcore Hardcore Computer that I thought was very intriguing. Would this be something you might use on a couple racks in your LEAP data center?
Dean - Absolutely. We have to be careful in how we do that so that the products have real applicability, but we want to educate our customers on the emerging trends that will affect their business.
John - You had mentioned one pattern of success is having empathy with your customer. Any other patterns?
Dean - Yes. This may sound almost intuitive, you really must have currency in what is happening in the marketplace today to be able to really be effective. If you step away from the marketplace for a year or two, you are lost. So successful VARS/SIs must invest in continuous education of their workforce. What Westcon has done is to set up an office of the Chief Technology Officer. Our CTO understands the technical trends in the marketplace, what new technologies are being adopted, and how they are being adopted in specific applications. With this insight, Westcon can recruit new suppliers to extend our portfolio.
John - With this understanding, do you package it up and offer it to your customers? If the SI/VARs challenge is to keep current and Westcon can facilitate that process then your customers become more competitive.
Dean - Exactly, we use blogs, emails, Twitter, newsletters, whatever mechanism is the best for our customers to communicate this information. Some of this information is regulatory and how the regulations can create opportunities for growth.
John - You mentioned a number of outbound messaging mechanisms. Do you also have contact centers to support queries from your customers?
Dean - We actually try to avoid call centers. We want all our customers to have a primary Westcon contact for any issues or questions. We think that having a relationship with the customer is an important part of our service. In fact, in a recent 2010 survey that we conducted with over 1600 partners worldwide, our front line account management team was rated as one of the top factors contributing to our partners success.
John - I wonder if a pattern for the top 10% is that they interact with Westcon more frequently. If you were to correlate annual sales with contact frequency would that line up?
Dean - If you look at the Westcon customer base 60% are traditional resellers, and some of them are very large companies.... several hundred million dollars a year in sales. But the majority of the resellers are sub $10M per year. The remaining 40% of our revenues come from global systems integrators, Federal systems integrators, and large service providers. Our largest customer is a large telecommunications company. For these very large customers they have developed all the technical resources that they need around a given product or technology. There are other services that we provide our large customers beyond technical insight. They could buy direct from the manufacturer, but they buy from Westcon because we can offer global logistics, global deployments that can address county specific compliance issues, backup/recovery support, import/export support. Basically the high end customers have a different interaction and benefit in different ways by working with Westcon, then do the high number of smaller customers. We have to be able to succeed with both types.
John – Let’s shift gears and look at some Failures to Launch. Could you tell us about companies that tried to work with Westcon and the reasons that they might have failed?
Dean - The most fundamental thing that I have seen is a company that goes into a competitive deal with a set planas opposed to maintaining flexibility. They have a preconceived notion of what the customer needs and push that aggressively to that customer. They may have done all the due diligence but the requirements at the time of the deal may have shifted and they just do not listen.
John - Do you think this is because they are trying to be more economical and not invest as much cost of sales?
Dean - The ones that I have been personally involved in seem to apply the same amount of effort but the sales team has this preconceived notion of what the customer will say and didn't clarify by probing to validate the information. They just assume the response is going to be what they originally believed and jump rapidly to their offering. Sometimes the SI/VAR spends too much investment up front building a one size fits all solution when they should listen to exactly what their customer is asking for.
John - What do you think the NEXT BIG THING will be? I am looking about three years over the horizon. It could be an emerging technology OR a new business model for Westcon.
Dean - OK. One of each.
Dean - I think in the application of technology it will be the emergence of the virtual desktop. A device that does not have local storage but depends on connectivity to a server. These virtual desktops might be a laptop or a tablet. It requires network attachment to the server in order for its application portfolio to be used. Part of the reason for the shift will be economic. And the lower cost of the thin client is a fraction of the total cost of ownership. I think that the simplification in distribution, support, and security of data will be the significant contributors to cost reduction.
John - Would a concrete example be iPads, Chrome OS, and even smartphones?
Dean - I personally think that the smartphone has too small a footprint to be a total desktop replacement but the iPad is a great example of the virtual desktop. I think you are seeing the traditional desktop vendors like VMware, Citrix, and Microsoft shape their products to compete in this emerging space. For Westcon, we have to think about the impact of desktop virtualization to the network and data centers for security, load balancing, data management, etc.
John - And the second NEXT BIG THING?
Dean - Today we see a lot of very specialized hardware in a data center that supports different specific services. Three years might be a little too soon, but I think we will start to see the replacement of these specialized hardware platforms with more generic, lower cost hardware computing modules. These modules have a common virtualization environment and the specific functionality is provided entirely by a software layer on top.
John - And how does this impact Westcon?
Dean - The solutions that we offer will become more complex in that we have to do a lot more configuration and integration of the software that gives these commodity modules the applications that our SI/VARs need. I think with all this software we will have a different economic model around the licensing, maintenance, and support. It might look like a long term annuity type model. And Westcon would offer extensions and specializations to base software modules much like service providers like Verizon do today for smartphones.
John - Thank you again for providing your insights to the Patterns of Success.