"During the first five years of this company," explains Michael J. Saylor, chairman and CEO of MicroStrategy, "we constructed customized executive information systems to help executives make better decisions. In our fourth year, we realized that we could do the same for more than just executives. Our motto was 'A crystal ball on every desktop.' A few years later, we realized that there was a way to provide intelligence and answers to everybody. Our motto shifted to 'Any question, any time, anywhere.'"
"Our view for the company has expanded from helping people answer questions to harnessing intelligence to create peace of mind, security, enlightenment, entertainment or to drive insight about the right transaction. As a company, we have realized that our real opportunity is to create intelligence dynamos. To conceptualize intelligence is something greater than the answer to the question analytically asked. It's the realization that intelligence is not just the question answered that creates value. It is the question not answered, the answer not received, or the question you didn't ask that gets answered anyway. That's not to say you couldn't have a successful company if all you do is analytics, but I think we have be-come more expansive in our thinking, more evangelical, and with good reason. I am more excited about the ability to make intelligence a tenth of the economy," states Saylor. "There are certain macro effects around us that when tapped are going to enable companies like ours or other companies to be from 10 to 100 times more successful than they are today. Success is all about persistence, execution and untiring resolve," emphasizes Saylor.
"The opportunities for intelligence now, of course, are 100 times greater than they were five years ago," states Saylor, "and there are three principal ways to inject intelligence into a business to create value. The first is analytics which is the most traditional type of intelligent technology. I refer to the second as narrowcasting, and it involves the application of intelligent technology to one- to-one marketing and customer relationship management. The third is embedded intelligence actually using intelligence to change the nature of the product itself."
Saylor explains that analytics includes areas such as optimal merchandising, logistics inventory planning, stock outs and fraud detection. "It could be scanning for any type of anomaly or it could be optimal pricing such as setting the price of an insurance policy or mortgage refinance rates. The analytical part of our business is all about how you use intelligence to help decision-makers run the business better. It's about optimizing an existing business or optimizing an existing supply chain. It can range from 50-person applications to 500 or 5,000 or 50,000, but they're all still in essence getting the store manager's report or the sales representative's report. The thing that has changed over the past five years is that the technology now is much better, more scalable and much more ubiquitous."
"The second key driver," says Saylor, "is narrowcasting. It is the logical extension of the analytics business. Instead of analyzing the database to see what happened, narrowcasting involves analyzing the database to see what will happen. The logical database is not querying the logistics log but rather querying the customer affinity log. This enables the matching of customer affinities with transaction potentials. There are four powerful types of analytics that can be used with narrowcasting. They include service analytics, arbitrage analytics, disintermediation analytics and demand activation. All of these things together rely on the customer database, permission from customers to synchronize their data with external databases, the analytic, the personal message, the narrowcast, the individual, the transaction and the response. This means intelligence can be used to generate more traffic on an existing brand."
"Embedded intelligence, the third key driver," says Saylor, "involves the use of intelligence to change the nature of a product. An intelligent credit card could shop for a better interest rate. You could even have an intelligent ratchet on a card where it would continually scan across every transaction looking at every way to optimize your price. Or you could create an intelligent bank account that moves its own cash around, getting the lowest possible cost of debt and the highest possible cost of equity. We have been working on a lot of applications like that, and one of our core vehicles to get into that business is Strategy.com which allows consumers to receive highly personalized, relevant and timely information about the subjects that are important to them delivered over the Web, wireless and voice." Saylor sees valuable potential in the application of embedded intelligence. "I expect that the analytics business will continue to grow aggressively, and then some really visionary people will start to embed this intelligence in their systems. They'll start selling cars that tell you how to drive. They'll sell products in supermarkets that give you nutritional advice, and they'll sell you healthcare devices that give you medical advice."
Saylor's plans for the future of MicroStrategy will undoubtedly be enthusiastically embraced and executed by the MicroStrategy team because of the culture he has built within the company. "There are dozens and dozens of things that have amalgamated to get us where we are, but I think the single greatest accomplishment was the creation of an intelligence culture that actually has a self-image of 'we engineer intelligence engines and convince the world to embed them in their business processes.' The people in our company are on a mission to create technology that will change the nature of products and the nature of markets. We've seen this industry go from nothing to something, so there's a pretty deep cultural thread that runs through our management team and a deep-seated belief that we can actually invent the future. We're certainly the longest continuous management team in this industry that has not been ripped apart in one way or another. We've managed to emerge through the first generation of the industry intact. Having the same people, especially technically, is a big asset," says Saylor.
Fine-tuning a company and its mission to adequately respond to market shifts and opportunities requires a well-planned strategy. "Our biggest challenge right now is execution in a very turbulent environment where there's lots of energy and lots of confusion. We have to continually refocus our employees, our customers, our partners and our shareholders. Our core mission is to change the way we do business, and we have to continually evolve our own processes. Our two big issues right now are to reengineer the way we distribute technology and reengineer the way we run the company," says Saylor. "The distribution is all about sales and marketing reengineering, and we're basically taking our enterprise sales model and converting it over into a Web store where everything is on the Web. All prices are disclosed on the Web, and you can buy without human intervention either through a channel or direct to a customer. This forces us to change the way our field sales force deals with our inside people, and it gives us the ability to create a telesales force and de-scale the selling process to get velocity in the system. The point at which someone decides they want to do business with us is the point where they have the software in their hand. With the Web model, it could be in 24 hours, rather than 24 days or 10 weeks."
"We are arranging our entire supply chain to take capital out of the system the capital for us is time. We're trying to squeeze out time from our marketing to customer meeting, time from customer meeting to agreement to evaluate the product, time to get the software installed and time to negotiate the contract. These are 'wait states' that drive up the cost of doing business. It takes a very different mentality," admits Saylor, "to make everything transparent and high velocity, but it's essential right now because we're moving from a market where we used to serve 1,000 people at the top of the pyramid the very expensive data warehouse-type installations to a market where there are reasonably 100,000 projects or more that could use this technology. You can't distribute to 100,000 the same way you distributed to 1,000. So, we have to change our go-to- market strategy, our pricing, our offering, the nature of how we work, and the nature of how we work with customers," he states.
"I'd like the readers of DM Review to know that we believe intelligence can make the world a much better place double or triple the size of the economy, cut waste in half, improve the quality of life. We also believe that only one-tenth of one percent of the applications that are going to enable this improvement have yet to be invented or deployed. The big theme over the next ten years will be to inject intelligence into the economy to maximize high-velocity growth. We'd like to be partners to customers and other companies in getting their intelligence solutions off the ground," states Saylor.
Those partnerships are destined for success if Saylor has anything to say about it. He admits to being motivated by the desire to engineer something well. One of Saylor's favorite, and often recounted, success stories involves the ancient Roman bridge in Alcantara, Spain. Caius Julius Lacer was the engineer that designed the bridge more than 2,000 years ago. The bridge stands more than 100 feet above the underlying water. "The impressive achievement of Lacer is not that the bridge still stands, but that Lacer's goal was to create something magnificent and lasting and he was not afraid to declare his intent. The inscription on his tomb, erected near the bridge, reads: Pontem perpetui mansuram in saecula mundi. This roughly translates to: I leave a bridge forever in the centuries of the world. He didn't say that it will stand until I'm dead or until the Roman Empire ends. He said it will stand forever. That's gutsy," says Saylor. "He had the same turmoil we have labor problems, strife, bureaucrats, perhaps health issues and political issues but somehow he managed to transcend all of that in order to create something that would last for 60 generations, not two. Sixty generations is probably 35, 40 or 50 times better than two generations, maybe even 100 times better. But it didn't cost him 100 times more money. He just did a good job. I respect people that do a good job really good engineers. The message is that there are some human beings who are able to transcend their environment and prove it for the rest of mankind. That's what motivates me." And that's what drives MicroStrategy.
MicroStrategy Incorporated Fact Table
Publicly Traded (Nasdaq: MSTR)
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