March 2, 2014
5 Lessons from David & Goliath
'David and Goliath' story teaches victory doesn’t always belong to giants, powerful or brilliants. In the battlefield of life or business even small, ordinary or underdogs can win by being persistent, following instincts, leveraging strength and targeting competitors’ weakness.
These parable offers following learning for small and medium businesses (SMBs) in IT services industry. These learning are applicable to any IT service organization, because even the large organizations might be small or medium in certain market segment.
Lesson # 1 - Create own rules for execution based on strength and aligned with parameters of differentiation
Majority of the service providers focus on budget, schedule, best quality and fulfill value promise while delivering service. These are essential elements of predictable service delivery. Predictable service delivery helps service provider to manage its own operations efficiently. One tend to pad the execution with extra resources for smooth delivery & de-risk the execution to avoid any surprises.
SMBs should change the execution focus to best time-to-market, optimal business value and acceptable quality. Focusing on cycle-time and optimal value will force to be customer centric and prioritize customer requirements. They should embrace iterative and agile development across most of the engagements. They should negotiate with customer for broader scope, high level acceptance criteria and evolving requirements. ‘Cycle-time and business value’ are the only measurements that create win-win situation for customer & service provider. However this will be feasible when they deliver hygiene and tolerable quality.
Lesson # 2 - Strike the balance while making investment - relationship between outcome and resources is ‘inverted U’
It is feasible to explain most of result – resources relationship in form of Y = f (X). One tend to believe that as the investments and resources increase the result or outcome improves. Initially result improves directly in proportion of resources deployed however after certain threshold value rate of improvement starts diminishing. This was well proven and explained by economists thru law of marginal diminishing returns. Though this is not entirely true for increasing investments. After another threshold value, the returns starts reducing even if one tends to invest more.
SMBs need to find optimal team size that can be managed to deliver the projects in agile manner. Team size of 9-14 resources is optimal to run the engagements agile way. One may design infrastructure to facilitate close interactions with customer and within team. In case of large program one can take approach of running iterations at portfolio, programs and projects.
Lesson # 3 - Be the big player in niche market rather than average player in large market
Traditionally large markets are lucrative. Rules of engagements are well known. They are easy to penetrate. There is a room for everyone. Majority of SIs are targeting Fortune 500 and Global 1000. They are after big government contracts. These customer offers steady stream of business that supports the need of scale.
US mid-market (10 – 1000 mUS$) has 200K + organizations. Out of these 2000+ are in 500-1000 mUS$ range. US mid-market GDP is 5th largest economy after US, China, India and Japan. Even among the EU-4 (UK, France, Italy, Germany) growth of mid-market is more than big markets.
Mid-markets are planning 12% investment in IT. Their primary challenges are to reduce employee healthcare cost and improve margin. SMBs should aim to build relationship partnership with mid-markets rather than being a fringe play for large corporations.
Lesson # 4 - Tough times are necessary to shape character
In modern day literature has advocated this enough and more. There are many quotes – ‘tough times don’t last, tough people do’, ‘the difference between stumbling blocks and stepping stone is how you use them’, ‘what lies behind you and what lies in front of you, is pale in comparison with what lies within you’, etc. indicate that adverse times are essential to push one’s limits.
Number of big IT organizations rapidly grew during 2002 to 2008. Significant numbers of current lot of new managers have joined our industry during that period. They didn’t see adverse times till we hit the financial crisis of 2008. Majority of them struggled to cope with lack of growth, adoption of new services, no salary hike, inadequate resources, etc. They haven’t yet come to terms with single digit salary hike even after 5 years of crisis.
SMBs were small and struggling for resources during that period. They have learnt it hard-way about what it takes to innovate, be agile and develop technology prowess. These aspects are ingrained in their middle-managers. They should leverage these competencies. They should empower and challenge middle managers to take ownership. Managers should open the dialogue with customers, focusing on innovation and operational excellence. It’s a time to leverage openness, conscientiousness and disagreeableness to take bold risks. As George Bernard Shaw once put it: “The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself”
Lesson # 5 - Not all the wars of worlds are won by sheer use of power
Being # 1 or 2 in industry or market segment, having hundred-thousands of work-force, multiple billions of market capital, etc. provide comfort of being powerful, rich, wealthy and strong. It gives assurance that we can throw resources at any problem and it can be conquered. Though it is not a guarantee of success.
Being small, nimble, resource starved position has perception of lack of power. Player with these attributes need to operate by leveraging innovation, excellence, conviction in one’s ability, hard-work, talent and persistence. One need to commit to discipline, rigor and contribution.
Battles of life aren't always won by powerful, fastest, strongest, wealthy and mighty... Most of the time victory belongs to courageous and the one who believes he can.
PS – This is written based on ‘David & Goliath: Underdogs, Misfits and Art of Battling giants’ by Malcom Gladwell. I have made a modest attempt to adopt the core concepts explained in book for SMBs in IT services industry.