Whatever happened to the best of breed? 

This past June, Oracle’s Larry Ellison is reported to have said, “Best of breed is dead, except for dog shows.” 

I've spent weekends, for several years, competing at dog shows and also admire Mr. Ellison’s sales chutzpah.  But, is Ellison right?  Is best of breed dead?  Do bundles, suites or end-to-end (E2E) solutions really win Best in Show?

Gaining new customers and keeping existing customers, both profitably, are the objectives of all sales organizations—including those in telecom. Over the modern history of telecom, sellers have tried many approaches to differentiate their product from that provided by others; to make their offer, as perceived by their customers and prospects, to be either unique or provide more value than offers from competitors.

There has been a continuous swinging of the pendulum, back and forth across the spectrum, from point products to complete systems solutions and back again. Today, with the proliferation of bundled offers, telecom is certainly favoring the broader solution end of the oscillation.

At this same time, however, the push for open standards and interfaces is also very broad based. On the surface, standards favor the best of breed product, not the suite or solution, since, presumably, in a standards environment, integration and interoperability should be better. Each network element gets to evolve and improve according to its own pace. 

The new and improved standards-compliant product can simply be “plugged” into the existing network environment and connects, via the standard interfaces, to the existing upstream and downstream elements.  Voila, the user gets immediate value from increased productivity (revenue) or reduced cost, or both—from implementing a best of breed product.

How do we rationalize the push for open standards, which favors best of breed, with the simultaneous rush to better and more complete solutions or bundles?  Let’s examine this apparent contradiction more fully.

When a technology or product space is totally new, when a new innovation has just come to market, the intrinsic value of that new product is so high on its own, that it expands beyond the early adopters and becomes widely deployed with strong market (demand) pull.  Such was the PC revolution, once IBM ratified the Wintel standard. 

So, too, was the router, a true innovation, when it was launched by Cisco.  And, along with the web and the browser innovations, the router enabled the Internet’s incredible adoption—creating not just a new product category—but also an entirely new market space.  Innovation often springs from the drive to address unmet customer needs and often creates new markets and a need for a unique, more valuable product—a better idea—a point solution—a best of breed.

The success of an innovative product spawns its own competition. Each of the competitors entering such a new product market leverages its company’s individual strengths in choosing how it will compete.  The competitors have a few options.  They can try to sell their product as better, faster, cheaper—the new best of breed.  Or, if the competitor is already a multi-product player, it may leverage its existing product base by offering their “me too” point product as part of a suite or E2E solution. Then the marketing claim is that the group of products meets a broader set of customer needs—to be the solution to the customer’s whole problem.

When the single product innovator, who established the market, offers its second product, it usually extends its business to an adjacent product space (either horizontally, within the same “layer” or vertically).  Then the innovator can choose to compete by selling its two related products, with combined functionality going beyond the capability of either its original product or its “me too” competitors.  And so competition evolves and the pendulum swings in the opposite direction—towards E2E solutions.  These solutions provide more value by meeting broader needs and may even command a premium price, until the competition can catch up.

When a competitor finds itself in a market with many competitors offering the same or largely similar products, the competition changes from being based upon meeting unique needs with innovation, to commodity competition generally based upon access to customers, flexibility of billing systems and finally price.  We have this situation today where many service providers—ILECs, IXCs, CLECs, ISPs, ASPs and wholesalers—all offering largely indistinguishable products to the mass market. 

Selling more services to your existing customers, to make it more difficult for them to move to your competitors appears to be a very logical response to this competitive situation.  By the same token, attracting customers from your competitors by offering a bundle with perceived higher value and providing a multi-services loyalty discount makes sense. 

Intelligent bundles—those where a competitor may not be able to respond to a valuable portion of the bundle—can also be a good idea.  Competitors will try to respond, like the RBOCs recently did with their satellite video alliances designed to compete with cable’s triple play (video, broadband and telephony).

So, how does a company determine where along the spectrum of alternatives can it compete successfully?  There are a couple of logical steps:

• understand your customers, their varied needs, desires and buying preferences, by market segment;

• understand your own capabilities, your strengths and weaknesses;

• understand your competitors’ capabilities, both the obvious and the not-so-obvious, and their strengths and weaknesses;

• develop alternative scenarios for how you can play;

• anticipate the responses to each scenario that each competitor might employ;

• select your strategy and build in key signposts that can tell you how well your strategy is working, or if it needs adjustment, or even a complete change; and

• execute flawless because even if you have the the best-of-breed product, it is the only way to succeed.

To answer the initial question, I think Larry Ellison is both right…and wrong!

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David H. Yedwab is Executive Vice President of The Eastern Management Group, Bedminster, NJ. He can be reached at dyedwab@easternmanagement.com.

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