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| Changing the rules of the game HOW IFS STAKED ITS CLAIM TO THE E-BUSINESS MARKET [page 2 of 2]
Changing the rules In 2000, we began an international advertising campaign for IFS eBusiness. This time, we needed to appeal to both the traditionalists and the upstarts. We did so with a simple proposition. The rules of the game had changed. To illustrate this, we showed games with changed rules. Chess where one side started with twice as many pieces as the other. Table tennis with the net closer to one player than the other. A sailing race where one boat also had an outboard motor. A simple proposition, with short copy. If the rules of your game seem to be changing, then come to IFS. We can give you the advantage you need in the new game. A message that resonated with both upstarts and traditional companies. The results So how did we do? Well, the campaign got noticed. Even in the swollen bulk of magazines like Red Herring and Business 2.0, which were running issues of several hundred pages in those days, research showed that the IFS ads were among those that readers recalled best. At the UK’s “Computers in Manufacturing” trade show in 2000, the IFS eBusiness campaign was awarded Best Advertising Campaign – the second consecutive year that IFS had won this award. The campaign also won a “50-Watt” award (a sort of bronze medal) at the Swedish “100-Wattare” awards, prizes dished out for advertising which combines creative excellence and effectiveness in meeting the client’s business objectives. In 2000, IFS’s sales reached their highest point yet, at SEK 2,352 million – a 21 per cent increase on the previous year. Not as impressive as 1999’s 60 per cent, to be sure, but no company can sustain organic growth like that for long.
Most impressive of all was the growth in IFS’s licence sales – its new business, in other words. IFS’s licence revenue in 2000 grew by a whopping 74 per cent, far ahead of any of its competitors. Of course, it would be ludicrous to claim that the advertising campaign was wholly responsible for that growth in new business. Advertising in this kind of market doesn’t create sales: the best it can do is improve the environment for selling. Much of the growth can be explained by the fact that IFS was still aggressively expanding into new geographical markets – notably North and South America – where its much larger competitors were already established. But the coincidence – if that’s all it was – is certainly one we’re proud to point out.
What happened next? IFS’s revenues peaked in 2001, at just over SEK 3 billion. Purely by coincidence, 2001 was the last year in which Fraser & Bilder was involved in IFS’s marketing communications. From 2001 to 2005, IFS’s revenues declined – steadily, not dramatically – to SEK 2,149 million in 2005. So what went wrong? Well, since we weren’t working for IFS at the time, we don’t have the inside story. The following analysis is based purely on observation from outside, so it may not be worth much. But here goes. First, it’s important to point out that the whole ERP industry went through a rocky period after 2001. The total market at best stood still, and in some years shrank notably. (The world was going through a recession, after all. The dotcom boom, as we said at the start, was followed by the dotcom bust.) It’s also fair to say that during this time, ERP matured as an industry. Just about everyone who needed an ERP system had one by now; the market was shifting towards replacements and upgrades. In a mature market, positioning becomes extremely important. It’s about defining which slice of the cake really belongs to you, and you alone – instead of trying to go after the whole cake (and risk being left with a handful of crumbs). Knowing when not to play In the heady days of the late 1990s IFS was going all out for growth. It booked almost no profit, ploughing everything into expanding into new geographical markets, and improving its product. Nothing wrong with that: it was the right strategy at the time. But once the market began to mature, IFS was less successful in defining its own niches. Its segmentation of the market was weak and half-hearted. Even in 2006, IFS still claimed to specialize in no fewer than seven market segments. And these segments appeared somewhat fuzzy (though it should be said that in terms of the internal logic of how ERP systems work, they made perfect sense). “Industrial Manufacturing” – one of the seven segments – doesn’t seem like a precisely defined target market. Neither does “Process Industry”. In a mature market, it was no longer enough for IFS Applications to be positioned as a different (and better) kind of ERP system. The competition had caught up. Even if there were architectural differences between systems, they were all, now, equally competent, and well enough supported to succeed with any type of customer. It’s the classic positioning dilemma of sacrifice: you have to decide for whom you want to be the best, focus obsessively on those customers, and abandon your efforts to sell to others. As the industry analysts AMR Research put it in January 2006: “The key for IFS will be focus and, most importantly, having the courage to pull out of opportunities that are not core. … Success for IFS will be in knowing when not to play.”
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DOWNLOADS Campaign case study (pdf, 1.7 MB) Press advertisements (pdf, 0.7 MB) IFS Ebusiness brochure (pdf, 2.2 MB)
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