What can we learn from Nuance Communications about how to respond to our changing business world?
Selling things has become much more competitive in recent years. Access and distribution barriers, that once provided some competitive advantage, have fallen for many products and services and everyone should now realise that meaningful difference is what drives value. If it is available online you now need to give buyers a good reason to go to an old-fashioned shop; that’s why so many retailers are trying to be seen as destinations these days. Businesses have also become leaner as a consequence.
One notable area of technology-driven cost saving has been replacing people with automated systems increasingly driven by voice commands. Not many of us would choose to speak to a computer but the recent improvement in the quality of voice recognition systems is beginning to make the experience a tad more bearable. Nuance Communications has been leading the field in the development of this technology over the past decade. Nuance created Siri for the iPhone 4S too, a high profile product signpost for its move beyond voice recognition to advanced natural language processing. We’ll soon be able to have a more sensible conversation with a machine than we can have with many humans.
The trouble is that whilst Nuance has been doing great things in the lab the growth of Cloud computing has meant that competition has changed the business model for software vendors and upfront license fees are being rapidly replaced in many industries by monthly usage-based charging. I have many clients who have and still are facing similar changes and so I am only too aware of the impact on cash flows and margins. This major change in software business models can be very painful and Nuance is still adjusting to it and will be “for some number of years” according to its CEO. Sadly, Nuance has now missed Wall Street estimates for two Quarters in a row with its share price suffering as a consequence and it now has Carl Icahn on its tail too, sensing the metallic taste of a bargain. Though a wonderfully successful business in many ways Nuance is now vulnerable because it has not responded quickly, or fundamentally enough, to the changes in the market and its CEO of 13 years may well pay the ultimate price.
My systematic model for business development, set out in my recent book Build Your Ultimate Business in 100 Days, has two cycles of activity: an initial Focussing Stage and then a second Leveraging Stage. Nuance is a market leader but it is now arguably spread a little too widely and needs to refocus once again to evolve with the times, which so few businesses are able to do. It needs to go through the Focussing Stage of my business development model again. If it doesn’t do it on its own someone else will do it instead. Whether that is Carl, or someone else, will remain to be seen, but to my mind things aren’t looking good for the current management.
So, what does all this have to do with you? Well, if your business is not performing as well as you want, or things are changing around you that are likely to affect your business in the future, you too need to do a bit of focussed thinking. If you do you will give yourself the best chance of surviving the event, whatever it is, rather than finding that the outcome is now out of your hands.
The most important thing to remember when things change, and you think it might be to your commercial disadvantage, is to respond. If you don’t know what to do get help from someone who does and that always means from someone who has done it before (if you have an iPhone, Siri might not be the best choice). The second most important thing is to make sure that you emphasise difference over everything else when thinking about exactly what you are going to do next.
For my complete business development model see the second edition of my book below.
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