Improved PR Precedes Turnaround at J.D. Edwards
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Improved PR Precedes Turnaround at J.D. Edwards

Two years ago, J.D. Edwards was running “fourth in a three-horse race,” according to media reports, struggling to compete for share of voice with larger competitors with formidable budgets, including SAP, Oracle, and PeopleSoft.

Paul Holmes

Earlier this month, when Bloomberg was looking for a company to feature in a series of pieces about successful turnarounds, it called J.D. Edwards. For Victor Chayet, the software company’s senior manager of communications, it was the vindication of a two-year public relations effort that transformed what was once “an outstanding stealth marketer” into a high-profile media favorite.
 
Two years ago, J.D. Edwards was running “fourth in a three-horse race,” according to media reports, struggling to compete for share of voice with larger competitors with formidable budgets, including SAP, Oracle, and PeopleSoft. Worse, the company’s strategy was not well understood, even by those who followed it. Said one analyst, “In order for you to succeed, you will need to clearly define a market that you can credibly lead.”
 
Such negativity came as a surprise to the Denver-based company, which had quietly become a leader in its highly-profitable niche. “We make the most complicated software there is,” says Chayet, referring to the company’s enterprise resource planning (ERP) products, which help companies manage key operations, such as payroll and distribution. While others in the space were focused on giant Fortune 500 customers, J.D. Edwards targeted mid-market companies with revenues of $250 million to $3 billion, and had come to dominate that market.
 
The company did a great job of designing complex software, and had an impressive reputation for customer service, but it had been less successful when it came to telling its story..
 
“For 23 of our first 25 years we were an outstanding stealth marketer,” says Chayet. “Our founder came from a development background. This was a company of designers and engineers. They made terrific software, but they didn’t embrace the power of communications. They didn’t understand that good design is not enough.”
 
For 20 years, J.D. Edwards was privately held, and its communications shortcomings could be concealed. But in 1997 the company went public, and it was clear its approach to marketing and public relations would need to become more sophisticated—especially since a market that had been growing at 30 percent a year was suddenly seeing a slow down.
 
J.D. Edwards lost $39 million in 1999, the first year of losses in its history. Just as troubling, some of itrs larger competitors were beginning to muscle in on the company’s turf. At the end of 1999, the German ERP giant SAP, announced it would enter the same midrange market Edwards had traditionally dominated. According to the magazine InfoWorld, “Small to midsize enterprises, once overlooked by business software vendors for the likes of General Motors and Kellogg, are now finding themselves the belles of the ball, courted by even the mightiest in the land.”
 
The problem was exacerbated because while rivals were cutting staff, J.D. Edwards—in the words of a Forbes article—“toyed with trendy Web hosting and B2B exchanges.” The company posted $1 billion in revenues but losses of $15.4 million in fiscal 2000, and founder Ed McVaney—who had turned over the reins two years earlier—returned to lead the company.
 
Chayet came back to the company about the same time. The 15-year communications veteran started his public relations career at Denver-based agency MGA Communications, and worked in the utility sector before joining J.D. Edwards four years ago as manager of communications for the consumer industries group. After a brief detour to the dot-com realm, he rejoined in the senior communications role, well aware of the challenges facing the company and the vital role public relations would have to play in addressing them.
 
“The Y2K run up spurred enormous growth for companies like ours, because companies needed to upgrade their software and make sure they were Y2K compliant,” says Chayet. “Then there was the dot-com boom. A lot of companies had what amounted to a blank check for IT product. To a lot of people, it looked like a pattern, as if 30 percent growth year after year was reasonable. So when things came back to normal, it looked like a downturn.”
 
Another issue was the company’s location. Being headquartered in Denver, the firm was regarded with skepticism by the east and west coast media. “There wasn’t any buzz,” says Chayet. “There wasn’t the energy you get in Silicon Valley or other technology centers.”
 
In 2000, The Wall Street Journal reported that J.D. Edwards had been “beaten by its rivals—including SAP, Oracle, and PeopleSoft—to the starting gate.”
 
“We were being described in the media as the fourth horse in a three horse race,” says Chayet. While J.D. Edwards’ products often beat those of its competitors in reviews, the company was both outspent and out marketed. “Their market capitalization is an order of magnitude larger than ours,” says Chayet. “That market capitalization translates into a public relations budget and a public relations staff two or three times larger than mine.”
 
One of the first things Chayet did in his new role was initiate an agency search. Fleishman-Hillard won the business, replacing The Weber Group, which had helped the company go from private to public a couple of years earlier, but which at the time lacked the global capabilities Chayet was looking for. F-H was a snug cultural fit too. “There’s something about Fleishman-Hillard that matches up very well with J.D. Edwards,” says Chayet. “I’m sure part of it is our shared Midwestern roots. We have a very strong focus on customer service and so does Fleishman.”
 
A few days after Fleishman-Hillard was brought on board, the company held a meeting at which several outsiders were invited to give their perspectives on J.D. Edwards. One of those outsiders was Morgan Stanley analyst Chuck Phillips, who told management the company’s valuation was not what it should be because its audiences did not understand its value proposition. Edwards, Phillips said, had not clearly articulated a market space that it could dominate to achieve sustainable growth.
 
“That meeting prompted some internal discussion on the public relations side,” Chayet says. “We had a very strong position in our market space, but our market space was not clearly articulated. We had a very defined product strategy, but our product strategy was not clearly articulated. We had a strong market position, but nobody knew about it.”
 
Fleishman-Hillard employed its proprietary FAST (First Analysis for Strategy and Tactics) methodology to identify the right positioning platform, message set and communications plan. Primary and secondary research with over 1,000 media and industry analysts indicated that J.D. Edwards’ historical strength in the mid-market was a key differentiator, providing it with a unique and credible message. In addition, the company’s reputation for building long-term relationships with customers was an important differentiating message.
 
“One of the things we do very well as a company is listen to our consumers and let them guide us,” says Chayet. “What we heard was that a lot of customers were having difficulties selling our software and out company to their board because we didn’t sponsor a golfer of have our name on the side of a car.”
 
In fact, J.D. Edwards lagged behind competitors by all traditional communications measures:  including message pull-through, story favorability, and share-of-voice.
 
The F-H research was probably the first communications audit the company had conducted in four years, says Chayet. “In six weeks, the FAST process gave us a game plan. It also made sure that the network of Fleishman-Hillard offices understood our business well enough to start pitching the media. Too many PR firms jump right in—it’s ready, fire, aim—but this process gave Fleishman’s people the insight they needed into our business.”
 
As a result, Chayet says, the company’s communications efforts really began to hit their stride in 2001. “We identified the issues that mattered, and who cared about them, and we figured out how to make them care more, and we built our entire communications program around those issues.”
 
Using the FAST findings, FH created a series of “message ladders”: compelling, unique and simple messages supported by fact and third-party opinion. Every pitch, message, and press release stressed that J.D. Edwards’ products worked with other companies’ software and the existing “legacy” systems of customers. At the same time, all press releases and related documents stressed the company’s expertise in meeting the needs of mid-sized enterprises and companies seeking cost-effective, innovative solutions that leverage existing investments.
 
The message ladder typically consisted of nine bullet points, starting with the premise and ending with the proof. “It’s a valuable way of crystallizing our messages,” says Chayet. That’s particularly important, because the communications team identified more than 63 spokespeople within the company, from the CEO to experts on individual products, or industry categories (from real estate to wine), or technologies.
 
“One of the things I take a lot of pride in is the way we provide access,” says Chayet. “If a reporter wants to talk to our CEO and there’s a legitimate reasons, he is going to talk to the CEO. The public relations person is not there to be a gatekeeper; he’s there to be a conduit. We wanted to be sure reporters could talk to the people who could answer their questions, but we also wanted to be sure we could stay on message and speak with one voice. That’s what the message ladders allowed us to do.”
 
The team also relied heavily on third-party support, particularly from existing customers and technology industry analysts. The Fleishman team set out to uncover the customer success stories buried within the organization, with a particular emphasis on those illustrating how the use of J.D. Edwards’ technology saved the customer money and helped them realize increased value.
 
In particular, customers using J.D. Edwards’ (XPI) middleware—the backbone to its collaboration strategy—were key to establishing momentum in the collaborative commerce market.
 
The good news was, “The relationships we had with our customers were unbelievable. We didn’t have an installed base; we had a fan base.” As an illustration, Chayet points to the company’s annual user group meeting in Denver, attended this year by 8,000 people—at a time when travel budgets are being cut and at a location that is not among the most glamorous convention destinations.
 
The strength of customer relationships can be traced to McVaney’s influence on the company’s culture. Says Chayet, “There was a Midwestern sensibility that said we didn’t over promise, and we didn’t duck problems when they came up.” As an illustration, Chayet points to the recent announcement that the company will provide lifetime support for many of its products. Some competitors cut off support once a product has been discontinued, giving customers a year or so to switch to a newer version of the software before leaving them stranded.
 
McVaney’s commitment to the culture was reflected in his “management-by-walking-around” style—he was famous for handing out doughnuts to workers as he passed by—and in the 25-page manifesto, Our Culture, that is presented to each new employee. But not everyone was a fan of the culture. As a member of the firm’s global support services team told Forbest last year, “The culture thing is kind of superficial. A lot of people just wish we were more recognized, like Oracle and SAP.”
 
That was Chayet’s job, and the FAST research process really did help. F-H hit the ground running and the new customer leverage program garnered 20 new customer references within its first 90 days of inception.
 
The agency also built a strong analyst outreach program and identified “ally” analysts, lining up their participation before, during, and after news releases were distributed.
 
“The watchword for everything we did was proof,” says Chayet. “We knew that’s what would get the media interested, and we knew we had a lot of it. We decided we would let our customers and analysts and others who knew us tell our story. It makes it more difficult, because we had to clear stories with a lot more people before a release went out, but it was more effective than beating our chests.”
 
The reaction from reporters was interesting. Says Chayet, “The first question we got was, Where have you been?”
 
Media analysis had also indicated that among key audiences, there was little recognition of J.D. Edwards’ collaborative capabilities and non-ERP products, so the company devised an unusual—perhaps even risky—strategy.
 
According to Melissa Mirabile, a member of the J.D. Edwards account team at Fleishman-Hillard, “J.D. Edwards maintained a good reputation based on the strength of its ERP products, so the company decided to engage in an unusual strategy, devoting almost all its product communications budget to product offerings outside its flagship product and focusing its resources on its supply chain management, XPI [extended process integration] and customer relationship management products.”
 
Two multi-city media tours served to build relationships with key trade and business journalists. A spring tour set the stage for J.D. Edwards to play in the collaborative commerce arena and shifted the emphasis away from its ERP offering and onto its APS and XPI technologies. A second tour in the fall updated journalists on the company’s progress and highlighted its recent acquisition of a leading customer relationship management vendor and the integration of its technology.
 
Meanwhile, a new news bureau created a steady stream of press releases focused on key products outside the ERP suite. Each release focused on three key messages that were mid-market friendly: low total cost of ownership, flexible integration with the company’s existing and potential partners’ technologies, and the right features and functions.
 
As a result, at least half a dozen trade media outlets, including CRN, InfoWorld, eWeek, Computerworld and InformationWeek, assigned reporters to the J.D. Edwards beat for the first time in the company’s history.
 
In addition to the Bloomberg story on turnarounds, J.D. Edwards started to get unsolicited calls on other issues. Says Chayet, “Toward the end of the year, the phone started ringing. Reporters were working on stories about a particular issue, and they wanted to know our opinions. When the Bloomberg story came along, it was a surprise. We didn’t feel we were ready to tell the turnaround story, but they had done their own research and the producer called me directly.”
 
Using FH’s message measurement process, ECHO (Each Communication Has an Objective), media coverage was monitored and measured quarterly. From January to December 2001, J.D. Edwards’ share of voice, a key measure of message pull-through and coverage volume, increased from one percent to 10 percent. The company emerged from the pack as a leader in story favorability and in messaging related to collaborative commerce.
 
According to Mirabile, “J.D. Edwards’ key message pull-through is now equivalent or superior to the company’s larger competitors. Since May 2001, the company has had the highest percentage of positive coverage—nearly 70 percent—among its competitors.”
 
“This was accomplished without any significant increase in the amount of money we invest in public relations,” says Chayet. “It was not just a matter of spending more to get more. It was about being smarter, more focused. It was about execution.”
 
More important, positive public relations was a leading indicator of a turnaround at J.D. Edwards rather than a lagging indicator. The improvement in media coverage took place in 2001, as the company’s losses grew to almost $180 million. In the year after McVaney returned as chief executive, J.D. Edwards stock was down 68 percent, to $9.44.
 
But there is every indication that 2002 is going to be a better year. Bob Dutkowsky,a veteran of IBM,  replaced McVaney as president and chief executive officer in January of 2002 and told customers, shortly after taking the CEO’s job, that while McVaney had gone to sleep at nights worrying about the quality of the company’s technology, he would go to sleep at nights worrying about customer satisfaction
 
Says Chayet. “Our new CEO comes from a sales and marketing background. He embraces communication as a strategic business tool.”
 
The company has now delivered two profitable quarters in a row, and while Dutkowsky knows that two quarters do not a turnaround make, he believes the company is back on the right track. “We’ve made good progress and are starting to build momentum,” he says. “We’ll deliver more software over the next two years than we have in any two-year span in our 25-year history.”
 
Clearly, there is going to be plenty more work for the communications department to do.
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