CIOs and Effective Vendor Management

A few days back, we did a workshop for one of the leading FMCG brands in India. It was a workshop to do a Vision 2015 for one of their popular brands. The workshop was attended by senior people from across the world representing different important geographies like South Africa, Southeast Asia, Brazil, and India of course.

It was an extremely engaging and intellectually stimulating two days that I have had the fortune to be a part of. Coming from a completely different industryIT hardwareI could not help but think of so many learnings that could be cross-pollinated between the two industries.

For both industries ie, the IT hardware and FMCG, there is a huge dividend to be exploited from geographical expansion. FMCG by its very nature has an appeal to a broader base, whereas IT hardwarefrom the current penetration point of viewat 4% of the market is still a virgin territory in India. Add to this, the huge broadband expansion agenda that the government has articulated, the FMCG manager would perhaps be licking his fingers at this familiar opportunity staring him in the face. Of course, easier said than done, but fighting over the paltry 4% was never easy anyways, was it?

While IT hardware sales in India is very selling focused, FMCG by its very nature is more marketing focused. It is about occupying a certain mind space in the customers head. I suspect a FMCG marketer would see this as a gap and perhaps relook at the market with this new set of eyes. For example, what do brands like Lenovo or Acer or HCL stand for in a customers head? Yes, HCL would have a low cost positioning.

Acer would have a Low cost-MNC brand positioning. But, I believe there is a huge space available for other non-cost positions up for the taking in the market. The only brand currently crystal clear on a long term positioning plan is Apple with its Kool positioning. Pick up the paper and go through any PC advertisement. Nine out of ten are around tactical messagingaround a Core2 Duo processor, a Windows 7 or at best a Entertainment PC. Seriously, in a world overloaded with brands shouting for attention, isnt it too much to expect a consumer to remember the messaging of a certain product defined by cryptic numbers of a larger brand? Yes, I know what a Merc stands for, but do I know what a C class, E class or a S class individually stand for? Who cares?... except perhaps the brand/category manager of that product line!

But a positioning or messaging takes years to percolate down to the masses. Nike, I believe, took close to six years before their iconic communication around Just do it really began to stick with people. If there is one big input a FMCG marketeer can get init is this tendency in the hardware industry to think with a horizon of three months. Michael Dells glorified statement around a nano-second to stop and breathe before running again has perhaps got overhyped and has cemented a wrong kind of thinking that urgently needs a relook. The success of Apple in overtaking mighty Microsoft in market capitalization is perhaps a lesson that hardware managers should pause to think about.

In both industries, there is again a huge potential to get people to move up the ladder by using unbranded or assembled products. The unbranded hardware market at 55% of the current market has for long been a promised land that hardware marketeers have eyed with much anticipation. The thinking really was that if a branded product is today made available at a slight premium over the unbranded product, the flood gates will open. Numerous really interesting projects and brilliant people have had their go at this logic. But, the fortress still stands strong. Why?

I proposemaybe its a mindset issue with the industry. Many of the people who are today at the helm of the IT hardware industry are mostly folks who got into the industry during the boom days of the 90s. This was the time when a 386 PC would sell for more than

a lakh and margins were generous. In boom times, the whole focus is always on getting in as many orders as possible and executing them at speed. The fifth P in the marketing mix became PACE. Therein lay the seeds of order taking as against selling value. Price in such a scenario got a glorified importance. What followed next was a familiar human tendency... If all you have is a hammer, everything you see is a nail! So, when the challenge of cracking the assembled market came forth when the boom times subsided, it was natural to think in terms of price proposition.

A FMCG marketeer, may perhaps have a different take. Today people buy a FMCG product not particularly due to product features, but largely due to emotions associated with the brand communication. Surf, for example which says, Dirt is good achieves a certain association in the consumers mind, which makes him overlook the fact that it is 20% costlier than Wheel. It also makes clear the fact that it contains certain kind of chemicals or moleculesa secondary fact to his buying decision. This is not to say that features or price do not matter in an IT sale. On the contrary, it does. But, the balance in weightage given to features and price can definitely be reduced in comparison to the weightage given to building a consistent brand positioning and messaging.

FMCG marketeers have tasted huge success in India in serving out their offerings in small plastic sachets. That one innovation brought in a huge number of consumers into their fold, who used the products on occasions. So for example, a shampoo sachet is often used in many households only when there is a function for which the family goes out. Pay as you go has been a concept that has often been dabbled with in the hardware industry in the past. But, with cloud computing, SaaS (software-as-a-service), web 2.0, unparalleled connectivity and converged productsall coming together now, the time is perhaps right for a fresh assault on this front, that has the potential to unleash the same kind of demographic dividends in IT as it has already done in FMCG.

By the very nature of their DNA, FMCG marketeers are always looking to tap into societal trends. They scout for popular culture, literature and the buzz to tap into deep insights that then reflect in their product marketing campaigns. So, when Pepsi said that there was Nothing official about itmore than the fact that it was tongue-in-cheek, what really catapulted the campaign was that it tapped into a generation of people who had grown tired of Indian officialdom. The tools of the trade of an FMCG marketeer are perhaps getting relevant today in the IT hardware industry, where consumers demographics are changing rapidly. The IT decision makers in urban homes are more often the younger generation. The salience of getting the communication just right is getting amplified more than ever. Tactical ads of the past which showcased specifications and pricing are passe. The key question increasingly becomes: What is the one tension in society that your messaging is giving a release to? Apple is the only one which has it right at the moment by its positioning of being cool. It releases tension of the Apple user by saying, This is who I am. I am an Apple user. I am cool.

The IT hardware industry in India, I believe, is on the crossroads. On one hand, it stands at a moment in time where the earlier wave has subsided. New generic competition from mobile players like Nokia and telecom players like Airtel (which provides online computing) are changing the playing field. Legacy mindsets of order-taking as against selling has steadily weakened profitability in the industry. On the other hand, it also stands at the cusp of a great new wave that will be propelled by converged products, huge investments in broadband reach, new wireless technologies, and the startling figure of an abysmal 4% IT penetration to-date. My bet is that when this next lot of consumers come of age, the fight in IT hardware industry will be between marketeers and not between the sales folks. The company that will win will be the company with the sharpest marketing focus and the deepest consumer insights.

Arun Rao
The author is director, Focus Adventure India