In Other Words - SAS Senior VP and CMO Jim Davis talks about business, analytics and technology

Last week I delivered a keynote on the first day of our Premier Business Leadership Series event in Las Vegas. My topic: Innovate and Optimize. People often say optimization is the enemy of innovation. I disagree. Moreover, you can’t have one without the other, particularly right now.

Optimizing for its own sake without considering how you will innovate is foolhardy. Innovating without any thought to how you will improve your practices is the nail in the coffin. It’s like two governing bodies that play off each other. How do you create the balance between the two?

Optimization is not just about cost cutting and doing things on the cheap. Optimization is also about operations research techniques, price optimization, customer profitability, those things that move your business forward.

Don’t let your CFOs drive your optimization focus as cost cutting initiatives. For a majority of businesses, optimization just means cost cutting. While that might help the outlook in the immediate term, it can be devastating in the long run.

Again, innovation and optimization need to work together. What you need is optimized innovation.

That theme resonated well with people at PBLS. It’s what they want their peers and business leaders to hear. I got many comments saying, “I’m glad to hear somebody stand up and say it’s not just about cost cutting.”

I also got a lot of feedback on understanding how innovation fits within an organization. It’s not just about creating something new and cool. Like Peter Drucker (who would have turned 100 this month) says, you need to deal with your current business, what’s core to your business and where your business needs to be. Your efforts to innovate need to make sense in all three phases.


Photo by Casito

I had a busy travel week recently. I attended the SAS Forum Netherlands, a CIO roundtable event and the SAS Forum Belux.

All were great events and it was especially good to see SAS customers participating at these forums. We learn so much from direct interaction with our customers and nothing will ever replace that.

The theme of SAS Forum Netherlands was sustainability. I think a lot of people thought the economic downturn killed sustainability initiatives, but that’s not true at all. That attitude is really more of a reflection of what the media pays attention to.

It turns out sustainability has two kinds of “legs.” The sustainability play when times are good revolves around doing what’s right for the environment and showing that your company cares, with the resource issues important, but secondary.

In a down economy the economic benefit of optimization of resources like power, fuel, etc. moves to the forefront. The focus is different, but the outcome is the same. Companies optimize their activities in ways they might have gotten around to doing anyway, but now they’re doing it under the banner of sustainability, which is different from previous downturns.

As we come out of the downturn, sustainability will become more a part of everyone’s core business. We’re already seeing that in requests for proposals we get from customers. People who are doing business with us want to see what we’re doing ourselves to be more sustainable.

Did the economic downturn slow down your company’s interest in sustainability? Do you see signs of it coming back?

I’d like to thank everyone who commented on my last post, “Is blogging a waste of my time?” I really appreciate the responses. It wasn’t just a ploy to get comments. I really am trying to figure out if this is worthwhile, and your comments helped my thinking.

First of all, you told me this blog is not a waste of my time. That’s good to know. As I said in the last post, time is hard to come by these days and I don’t like to waste it.

Michael Harvey expressed a concern that I hear from a lot of people. How do you find the time to filter out all the noise and get to the useful information? That’s a challenge for everyone. If you have tips for how you use social media effectively to get useful business information, please share them in the comments.

Chris McCann made an interesting point: You get responses if you ask questions. That’s clearly true, but it can sometimes be harder than it sounds. Writing a conversational post that encourages feedback means more than just tacking, “What do you think?” at the end. I’ll work on that. If you know bloggers who do that well, share that in the comments, too.

I found it interesting that our CIO, Suzanne Gordon, encouraged me to keep posting even if it meant posting less often, and to forget about Twitter. That of course flies in the face of conventional social media wisdom, but it also shows that the real world doesn’t always match what the experts preach.

By the way, my Twitter account is still dormant and I still haven’t found the time to jump into it. I can’t even keep up with my email.

Several people suggested I make this blog more personal, and I appreciate that suggestion. My first thought was that I never intended to turn this into a personal journal. (Chris Starke made it clear he doesn’t care what I have for dinner.) But I suppose the whole point of this blog is to put a personal face on my professional life at SAS, and I will think about ways to make that happen. You’ve given me good suggestions already for how to do that. Feel free to keep them coming.

For one, look for some of my photographs on this blog. Now I need to figure out how to post directly here from my iPhone.

Thank you again. We’ve been looking at the traffic for this blog and there’s no question that readership is trending in a positive direction. However, I do enjoy the feedback and want to continue to ensure I’m hitting the mark.

I welcome thoughts, feedback and criticism on a regular basis.

I started this blog about four months ago. It’s been both energizing and vexing. It’s energizing because I like the mental break that I get from putting things on hold and thinking in a different way about what I’m doing and what SAS is doing.

It’s vexing because it takes time, and time is hard to come by. Plus I still haven’t gotten to that place where blogging is natural to me. I was talking about this with Dave Thomas, our social media manager. Dave and I both love photography, which is really a passion for me. We were discussing the fact that when you’re taking pictures regularly, you see things in photographic ways. The more you do it, the more you see.

Dave assures me it’s the same with blogging. The more you do it, the more ideas come to you. He wrote about it in a post called “Developing your social media muscle.”

People seem to be reading this blog and the volume has been steadily increasing. I get a lot of feedback through non-social media avenues. People call me up to talk about a post, or stop me in the hallway. I’ve had conversations in airports with people who read this blog.

But I find it interesting there aren’t a lot of comments. I wonder if that’s the way the blog world is going. As blogs become more popular and more mainstream, are people consuming but don’t feel compelled to respond?

In my own experience following more bloggers I’ve seen how much there is out there and how hard it is to find what really makes a difference for you, and find the time to read it. I’m also trying to get involved with Twitter but I keep finding myself feeling too busy to get started. I just need to do it and trust that when I do it’s going to flow.

I get the feeling that in a year or two the act of blogging as we (or at least I) do it will seem ancient. We’ll probably be onto something else, but I don’t know what that is. The devices coming out from Apple and RIM and Nokia will change the game. Will Apple’s upcoming tablet have the same impact that the iPod did, and the iPhone? I think we’ll be seeing more and more disruptive technologies.

I guess I’m wondering what my social media muscle should look like at this point. What do you think? Am I off base? Am I boring? I’ve tried from the start to avoid turning this blog into a platform for SAS messages.

What can I share about what SAS is doing and what I do that would be interesting and useful for you?

I often wonder what the life of a CMO is like in a publicly-traded company. From a marketing standpoint they’re constrained by SEC, Safe Harbor and Sarbanes-Oxley. They have to be very cautious in their forward-looking statements. Does that suppress their ability to paint a vivid picture for their customers? And even their employees?

Is the CMO of a public company catering to the customer or catering to Wall Street? In reality they’re having to balance the needs of both, and to me that’s kind of a shame.

So how is it different for SAS? For one thing, we can project our vision of the future and hope it will spark reaction and get feedback from customers. It’s a very collaborative and open process. (It’s well suited for social media, by the way.)

A lot of consumer packaged goods organizations do that, but they have to be very careful. If they set an expectation in the marketplace while they’re feeling the market out, that could turn into Wall Street expectations. Then rumors start abounding and when the reality doesn’t live up to the hype, that can impact their stock price. Then the finance guys get involved and before you know it you’re laying people off.

That’s another benefit of being privately held. We don’t have to manage to the expectations of Wall Street. We can create campaigns and strategies and give them time to develop.

Imagine the challenge they face at Apple. Is there any company that generates more consumer product rumor and speculation? I wonder how much their marketing strategy fluctuates with the share price.

I’ve read different reports that put the average tenure of a CMO at somewhere between 18 and 24 months, and I’m not surprised. But that’s both a symptom and a cause of the problem. How can you create a comprehensive marketing plan that will have long-term benefit if you have to justify your existence every day based on the ticker?

We’ve gotten a lot of attention since the IBM acquisition of SPSS for being a privately-held company and our desire to stay that way. While looking at all the coverage we’ve gotten, I keep coming back to an analogy made by Mary Hayes Weier in her InformationWeek post, “SAS Institute: There Is No For Sale Sign In Our Yard.”

Imagine you're a homeowner standing in the yard watering the flowers when a potential buyer walks up and makes an offer. Even if you aren’t thinking of selling, you’d probably stop and listen.

“Indeed, at this point, SAS seems content to keep watering its flowers,” she said. And it’s true.

We have been growing wonderful things in our garden for over 34 years, but a lot of these stories talk about us as being a well-kept secret. When you’re a private company you don’t get the coverage that a publicly-traded company does.

Over the years, other publicly-traded companies got recognition and media attention for their contributions to business intelligence and business analytics. Our role was often overlooked because we don’t generate those exciting share value stories. It can be a little frustrating.

But it’s pretty clear now that our strategy has paid off, and not just in a spike in media attention. We’re the largest independent vendor in our space, we have high customer retention and we put a much higher percentage of our revenue back into R&D than public companies could ever get away with.

Our garden is of great interest because of the downturn and the pain publicly-traded companies are experiencing. Buying our nicely-tended patch must look a lot more appealing than all the digging and weeding they’ve got ahead of them.

When I first visited Tokyo for SAS in the ‘90s, it was like traveling a few years into the future. I don’t see Tokyo that way anymore. It doesn’t feel much different than going to Toronto or Chicago or New York.



Japan is experiencing a serious downturn. They’ll come back, but things will never be the same. Think about it. They used to dominate consumer electronics, but not anymore. Who dominates portable music? It’s not Sony anymore, it’s Apple, and Apple’s stuff is manufactured in China.

What are Japan’s core competencies? It’s certainly the banking center of Asia, but who knows, in our lifetimes that might go to China as well. It reminds me so much of New York: there are leaders in the financial world who are rising above the herd, but there are also a lot of stodgy old bankers trying to figure out what to do.

We’ve experienced the same shifts in North Carolina, which for decades had an economy dependent on furniture manufacturing and textiles, and that’s shifted to Asia. We were lucky that we had visionaries like Luther Hodges who understood the need to plan for the future and drove the creation of Research Triangle Park in 1959.

(As an aside, I watched a two hour special about the 40th anniversary of Woodstock recently. RTP was ten years old in 1969. It’s hard to imagine that this and this were only ten years apart.)

Just as nations have core competencies, obviously, so do businesses. At SAS our core competencies are knowledge-based, and that keeps me up at night. We have an awful lot of smart people who work here, but there are still plenty more smart people out there. Our constant challenge is to provide value for our customers beyond what they could get from a competitor or an open source solution. We continue to be successful at it, but we can never allow ourselves to become complacent. Whenever we find ourselves doing something “because that’s the way we’ve always done it,” we kill off a piece of our future.

In Good to Great, Jim Collins talks about the “hedgehog concept,” figuring out what you’re passionate about, what you can be the best at, and what drives your business. I’m constantly amazed at how few businesses actually take the time to sit down and figure this out.

How much time do you spend thinking about your core competencies, and what are you doing to protect yourself against these kinds of tectonic shifts? And what’s keeping you up at night?


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I regularly read Rich Karlgaard’s pieces at Forbes.com, both his Digital Rules blog and his commentaries. His piece from Monday focused on Peter Drucker and his take on leadership. Rich calls Drucker “the greatest management thinker of our time” and references his piece called “Managing Oneself.”

The gist of it is that before you can manage an organization, you need to be able to manage yourself. In the piece, Drucker asks a number of questions:

What are my strengths?
How do I perform?
What are my values?
Where do I belong?
What should I contribute?

This is a great exercise for any leader. You need to understand who you are and what you contribute before you can ask others to follow you. For one thing, you need to know what you’re good at and what you aren’t. Most managers can tell you their strengths. Not as many can tell you their weaknesses. That understanding is key not only to delegating but also to hiring the people who work with you.

While reading this I was also struck by how much it applies to organizations. Most corporate leaders don’t spend enough time analyzing the core competencies of their company. This framework provides a good way to do that. If you don’t know who you are, as a manager or as a company, you can’t know where you’re going.

There’s an article in Tuesday’s Wall Street Journal titled “The Economic Recovery: Fast, Slow or Neither,” claiming that we’re pulling out of the economic slump, and giving various predictions on whether the economy will rebound slowly, quickly, or spike and return to a slump.

Another really interesting article in The Guardian lists “Winners and losers in the global recession,” based on a breakdown of GDP numbers for key countries. According to the figures the US is in recession but leveling out and the UK is still in recession and facing a slow recovery. Japan is still in recession and looking forward to one percent growth in the second quarter, which would be its first expansion in five quarters. Germany and France are out of recession, The Guardian concludes, and Australia stayed out of it completely.

What I find most fascinating, based on the theme I seem to have developed in this blog of growth in established and emerging markets, is that China and India are both expanding dramatically. China’s GDP grew 7.9 percent, up from 6.1 percent in the first quarter. India’s rate of growth has slowed a bit, but it’s still looking at 8 percent growth this year, making it one of the fastest-growing economies in the world.

We’re coming out of a trough. We’re headed in the right direction. What do we do differently?

That’s the real question. What do we do differently? It’s one thing to be more efficient doing what we’ve always done, but this market is different. We need to look at what new businesses we should be in – in addition to concentrating on our core. The sooner we recognize the world has changed, the sooner we are likely to be able to see outside our traditional walls.

I just got back from a trip to Singapore for our Premier Business Leadership Series, with a stop in Tokyo. Sometimes I think that if I was blindfolded, put on a plane in Raleigh and let off in Tokyo or Singapore, the only real difference I’d notice would be the time zone.

It was hot, it was humid, people are concerned about the economic downturn and they’re all trying to optimize their businesses.

If I had delivered my presentation two years ago I would have been quoting from Thomas Friedman’s The World is Flat, and talking about how emerging markets have the advantage over mature markets. There’s fiber everywhere and small economies can take advantage of easy access to data. They don’t have the red tape and entrenched attitudes. They’re starting new.

Two years later the world is flat and all those things are true, but the emerging markets are feeling the same pain as we are. We all face the same challenges: how do we do more with less and recognize this economy is changing the game.

We’re facing the same challenges, but that also means mature markets have the same opportunities as emerging markets.

Everybody is dealing with issues related to optimization, whether you’re a young company or an old company. We met with a telco that’s trying to evolve from being a wireless provider to an information provider. We met with a retailer that needs to optimize their inventory and their price points.

We had similar conversations in Mexico, and we know the Indians and Chinese are facing the same problems. The economists we heard from in Singapore are talking about the same issues as economists in the US.

The only difference is I was sleepy.

Oh, and the sushi is better.

From the start of this blog, I’ve talked about the value of analytics for companies who want not only to survive the economic downturn, but come out of it stronger. Today we learned that IBM is acquiring SPSS. Not only is it further validation of the value of analytics, but it’s also sending a jolt of electricity through the industry.

I wasn’t surprised to see this announcement. But there's an important issue to keep in mind. This market is not about selling software – it’s about providing value. That was true even before the downturn and it’s even more important now. The key is value-based selling. Customers want to know that if they spend a million with you, they get back $10 million in value.

You need to show that you understand your customers’ industries and can help them solve industry-specific problems. It’s far from one size fits all. Retailers need size and price optimization. Banks need fraud detection and credit and operational risk solutions. Manufacturers need warranty analysis and supply chain optimization.

Without domain expertise, it’s all just software.

IBM’s biggest challenge will be to piece this all together and see if they can create a complete analytics solution from the disparate elements and business units. That’s no mean feat. Obviously they have a strong installed base to build on, one that may be patient while they work out the kinks.

Another challenge for SPSS, as for any of the recent acquisitions, is to remain focused and innovative. Being privately held gives SAS the ability to pump more than 20 percent of our revenue into R&D every year and keep innovation at the forefront.

It’s much harder to stay dedicated to innovation when you’re a small business unit within a big publicly-traded company.

Some acquisitions turn out well, others cause problems. We’ve heard customer rumblings from some of the previous acquisitions about maintenance issues, service plans and pricing. A new owner always brings a new focus. I wonder, for instance, if current SPSS customers will see a bigger focus on optimizing SPSS to work with DB2, at the expense of Oracle or SAP integration.

Ultimately, as always, customers will decide and vote with their IT budgets.

Writing about the acquisition in The Wall Street Journal’s Digital Daily, John Paczkowski says, “Business analytics powerhouse SAS best watch its back.” Thanks for the advice, John, but we’ll keep looking forward. You don’t get to be the largest independent vendor in this market by watching your back. You get there by focusing on your customers, understanding what’s keeping them awake at night, and helping them solve their problems and find new opportunities.

I’ve just started reading Jim Collins’ new book, How the Mighty Fall. I’m only on the first chapter but I’ve found a lot already that is relevant not just to us at SAS, but to any company that wants to survive the downturn and come out stronger.

Jim points out the five stages of decline: Hubris Born of Success, Undisciplined Pursuit of More, Denial of Risk and Peril, Grasping for Salvation, Capitulation to Irrelevance or Death.



I’m still reading about stage one, Hubris Born of Success, but there’s a lot that resonates for me. Especially in this economic downturn, it’s essential that we stop long enough to look in the mirror and see who we really are and how we’re acting.

Jim talks about the markers for stage one: Success, Entitlement and Arrogance.

“Success is viewed as deserved rather than fortuitous, fleeting or even hard-earned in the face of daunting odds; people begin to believe that success will continue almost no matter what the organization decides to do or not to do.”

This ties in with some of the themes I’ve tried to explore in previous posts. The world is a very different place and this economic downturn is actually a marker (or tipping point, to borrow another buzzword) in the business world. The formula that has made any company successful to date probably isn’t going to work anymore. If we continue to believe that what we’ve been doing for the last 100 years will carry us forward, we’re crazy.

It takes discipline to realize that success was based on the market at that time, and we can’t ignore that the market is changing and is different now.

It’s not a doom-and-gloom message. The subtitle of the book is, “Why some companies never give in.” If you find yourself at this point, it doesn’t mean you’re finished, but you do have to stop and examine what you’re doing to take advantage of the next wave. The tide has gone out, but it’s going to come back, and we’ll need to be able to catch the wave when it does.

How does an organization prepare to catch the next wave? Think about the theme for our Premier Business Leadership Series in Singapore: “Innovate. Optimize. Transform.” You have to understand what each of those mean for your business.

Regionalization is probably gone. Globalization is a reality and isn’t reserved for the traditional markets. Technology plays a large role and the data can help us understand where the opportunities lie, and give us insights into the market.

It’s all out there - the pieces and parts we need to understand what this world will look like when the waves start crashing the beach again. Are we stopping long enough to re-evaluate how the world is changing? Are we taking advantage of the analytics and optimization tools that will help us sort it all out?

If we don’t understand what’s coming at us, the next wave becomes a tsunami that destroys our village.

When Carl Farrell and I traveled to Mexico City to participate in a program on Business Analytics, we shared the program with Andreas Weigend, and I mean it as a sincere compliment when I say he is a mad scientist. He used to be Chief Scientist for Amazon, and now he consults with companies like BestBuy, MySpace and Nokia. He also teaches at Stanford, UC Berkeley and Tsinghua in China.

According to his website, Andreas works with clients to “understand the principles underlying the social data revolution, and teach them how to transform these principles into measurable results.”

He mentioned a few mind-boggling facts. He told the audience that each month the equivalent of 100 years of video is uploaded to YouTube. He went on to say that five billion pieces of content get shared on Facebook every month.

We've talked about the data explosion and what it can mean to business, but how many companies have even begun to consider the value of that data as a tool to measure customer preference, or the impact of relationships on purchase patterns?

People wonder how social media sites like Twitter and Facebook will eventually monetize. Surely the value lies in the data that people voluntarily share there.



Andreas Weigend
photo from weigend.com

Last week I went with Carl Farrell, Executive VP of SAS Americas, down to Mexico City and did an event on business analytics. It was a full room - there were more than 100 people signed up.

Our time in Mexico City reiterated the idea that emerging markets are adopting the tools of the established industrial leaders and are using them to catch up quickly. The playing field is being leveled globally. I’m receiving constant validation of that. Data is the common denominator that will push people forward.

From the SAS standpoint, the growth opportunity for us is unreal. It’s a market that is not even close to becoming saturated. It’s a market that is dying for our services, and for the advantages data can provide for their businesses.

I left with excitement. Our operation in Mexico has 130 people, and they’re hiring. The average age in that office is 27. You can really feel the energy, the dedication, the go-get-it attitude. There is no complacency in that office whatsoever.



If I look at opportunities for companies other than SAS, the first thing I notice is the support infrastructure: it’s not just software. Cloud computing plays a big role in getting people up and running and giving them the proof points. I’ve said in previous posts that cloud computing and software as a service will let companies see the value of business analytics before deciding to bring the software in house, and the same is true of emerging markets.

I also see huge opportunities in telecommunications, an industry that seems to be growing faster everywhere than it is in the US. We’re burdened by an aging infrastructure and a lack of sophistication by some of the traditional players. The Telefonicas of the world appear to be articulating a message far in advance of what you hear in the US.

Education is important as well, and Mexico City is no different from the US in that regard. As you look for people in your organization who are devoted to fact-based decision making, where did they come from? Where can you find more like them? SAS helped create a Master of Science in Analytics degree at NC State. There’s a market for that in Mexico as well. The executives we met with understand what data can do for the bottom and top line, but where do they get the people with the knowledge to manipulate the data? This is a problem facing both mature and emerging markets.

In my last post I talked about our analyst conference in Spain and what messages resonated with them. We talked about analytics and how they can help our customers in the downturn. We also talked about making those advantages more accessible through software as a service.

It's part of a larger theme I've been thinking about: what analytics are and what they are not, in terms of being able to predict the future of your business. Let's be honest, analytics is in danger of becoming an overused and abused term, in the same way that “business intelligence” got watered down as more and more companies claimed to offer it.

It's no surprise I think analytics play a key role in helping companies make better decisions, especially now, when it can make a real difference in a tough competitive environment. A lot of companies might be worried about the cost, but cloud computing makes it more affordable for companies that need it right now but can’t afford to bring it on site.

We have to recognize that our customers are at different stages of their evolution. Employing analytics in a software as a service environment lets you see if they have a positive effect on the bottom line. If so, you can go forward with a fuller installation.




I stole this “8 levels of analytics” chart from sascom magazine and use it in presentations. The first four levels, while they are legitimate and relatively commoditized at this point, don’t really show you what’s likely to happen in the future. They support reactive decision making. They’re great at benchmarking, but what about the other four types of analytics? If we think about growing our business in tough economic times, we need to be more proactive in our decision making. Steps 5 through 8 are all about the future: customers, suppliers, sales.

Again, this is where the term “analytics” has been watered down. There’s no doubt that everybody offers reactive capabilities, in spreadsheets, in OLAP cubes, in report writers. But how many people are using the proactive tools around optimization, modeling and forecasting? There’s a misconception that those capabilities are reserved for companies with massive computing power and PhD statisticians. That’s no longer true with the advent of cloud computing and software as a service.

That message appeals, not only to the analysts but to our customers.