March 6, 2012
 Email This Post
 Print This Post
“Can you help us break past our plateau?” was what the tech company founder asked me … the first time.
This eventually became an enjoyable question after a decade of marketing consulting. Every so often, a founder calls the Silicon Strategies Marketing offices with a plateau complaint. I noticed various patterns with one uniting theme; that founders were all nearsighted and unable to focus on anything but the tree directly in front of them. Those different founders were at different points in corporate growth, and yet they all suffered from market myopia.
If your revenues are stuck and no amount of money seems to move them higher, then ask yourself if you might suffer from one of these founder delusions.
 Primary Founders Delusion – the untested idea: Most tech products come from a founder identifying a feature or product niche through their insights into technology and some aspect of business or consumer buying. Often a founder will start building a product without performing any market research to verify demand. These founders rarely make a buck at all.
Secondary Founder Delusion – pats on the back: People are nice, which is a terrible thing. Not that being nice is horrible, but they often say things to provide misguided encouragement, which leads to false hope. Founders receiving back pats from friends, family, co-workers, co-founders, early employees and even an occasional angel investor will be encouraged to develop worthless products or not see market obstacles. These founders may struggle through to making some early adopter sales, but rarely gain the big-picture perspective to go further.
Tertiary Founder Delusion – early adopter echo chamber: Early adopters buy specific features that solve specific problems. Founders often continue to listen to early adopter advice on how to improve a niche product, which detracts from developing expected, augmented or whole products. These founders forever enhance their niche solution, and might with the grace of Gawd sell-out some day, though more often than not a larger or more agile company merely incorporates the founder’s product concept into other solutions.
Quaternary Founder Delusion – no whole product in first segment: Founders who struggle through the early adopter phase often fail to cross the technology adoption chasm because they do not identify a beachhead segment, determine what the whole product for that segment is, or are insufficiently creative enough to buy/partner to assemble the whole product quickly and thus dominate their segment before competitors become caffeinated enough to see the opportunity. Early adopter success leads to early majority laziness.
Quinary delusion – no next-segment planning: Even when a founder has led his organization to dominating a market segment, he can fall into a variation of the early adopter trap and simply enhance the product for his cozy segment. This is the final plateau for many companies that we knew and that have since vanished as markets changed around them (bought a Wang for word processing lately?)
If you plateau, ask what trees you are focusing on, else you’ll never find your way through the market forest.
January 2, 2012
Email This Post
Print This Post
Avoiding bad markets is half the battle.
Annually I see multiple software vendors pitching products designed to improve the performance of computers, databases or networks. With few exceptions, these tools disappear within two years because the underlying commodity (computer server, network connection or DBMS) becomes faster and cheaper. One of the most common technology and marketing mistakes is to create a product for an industry that will inevitably correct the problem.
 Take home Internet connections (please, take mine and bring me FttP). Long, long ago – about 20 years back – having a 4,800 baud modem for connecting to the Internet was considered state of the art and painfully slow (recent college CS graduates may have to look-up archaic words like ‘baud’ and ‘modem’). Without fail, once every quarter, someone pitched a software solution for raising the data transfer rate across antiquated telephone technologies. The following quarter a faster modem would become the new standard and obviate the software solution. Modems were eventually replaced with cable, then by 3G wireless, then fiber to the premises, then 4G wireless … well, you get the picture. The providers of personal network connections knew what people disliked most about their service (namely having to wait for anything) and kept advancing the product while simultaneously eliminating software speed-ups.
Hence, the classic marketing mistake is to create a product destined for rapid obsolescence. Riding a commodity wave is a fine way to make money, but trying to sell patches to limitations of a commodity that can be fixed by the providers is fast fiscal suicide.
Understanding this method of mistake leads to understanding innovation and value, which brings us around nicely to marketing and where it fits into the process. “Innovation” is, by etymology, something new (from Latin innovatus, from in- “into” + novus “new.”). Software accelerators and their crippled cousins are by definition something old. To be new requires being something unanticipated by the market. This still is a rather broad notion. Early iPods were not new given that MP3 players had been around for quite some time, and the notion of portable music had existed since transistor radios. But Apple marketed iPods as fonts of spiritual liberation, and that was new (along with white ear bugs, slicker case design, etc). Marketing cannot by itself innovate, since innovations requires the unique human insight that aggregates what is possible (engineering) with what people want to achieve. Marketing contributes by assessing what people want to achieve, and then validating product concepts before build commitments are made.
No amount of survey triangulation will create inspiration.
Inbound marketing adds to the base of knowledge that feeds inspiration and innovation. Though Steve Jobs was not a fan of focus groups during product development, they remain great vehicles for discovering what people are frustrated about or wish to achieve, which can lead to innovation moments. More directly, market research can unmask gaps between competitor offerings and the expected outcomes of buyers. Such investigations lead to +1 value points that decide what company dominates their segment or market.
Most important though is knowing where not to go. Since the probability of success equals one minus the probability of failure [ P(s) = 1 - P(f) ] not failing is always your first mission and not entering doomed markets eliminates a lot of potential failure.
August 30, 2011
Email This Post
Print This Post
It pays to be second
In the wide and weird world of business plans (and having sat on VC panels during start-up pitch parties, I have seen some mightily weird business plans) being a fast follower is the sanest approach. A fast follower lets another company prove that a market exists, then lets the follower rapidly become a competitor by mimicking the core features in their competitor’s ground breaking product while adding those that they missed. Risk is lower, development costs are lower, and if well timed you join the party at the moment early majority buyers raise their sluggish heads and open their tightly clasped wallets.
I maintain that Microsoft made its fortune by being a fast follower. MS-DOS was a practical clone of CP/M which had proven that the personal business computer concept was viable. Microsoft also mimicked Macs when creating Windows and Apple mimicked Xerox’s pioneering of GUIs. Imitation is the most sincere form of profit.
 Which brings us oddly to e-books and the revolving lead/follow relationship between Amazon’s Kindle and Barnes and Noble’s Nook. Though e-books had existed before Kindles, the market remained undefined because digital tomes were read on PCs, which was a very un-book-like experience. Amazon innovated and eliminated all the painful aspects of finding, acquiring and reading an e-book (and in the process they cut out every middleman in the book publishing business). They were the innovators.
Barnes and Noble became a fast follower (so did Apple – Sony and a few others were failed contenders). The Nook in its early incarnation was a Kindle that used a different digital e-book format (which didn’t matter to readers at all). But Barnes and Noble knew that following fast was not enough – they needed to take the basic Kindle concept and expand upon it to create a broader reader experience. Thus they developed the Color Nook, which is in fact an Android slab in chains. It delivered book, multi-media magazines and applications, fulfilling broader buyer desires without violating the core mission of making machines the replacement for dead trees. This made Barnes and Noble a fabulous fast follower.
Which is now Amazon’s role as they prepare to release their first slab, which I’ll call the AmaSlab since the proper product name has yet to be revealed. We know it is Android based (like the Nook), has an e-ink screen like the Kindle, and know very little else. But we do know that before rumors of the AmaSlab came forth, Amazon had already created one of the largest Android app stores available, and we can safely bet that shopping for all Amazon products will be very easy on the AmaSlab. So Amazon was the innovator, found real competition from their major fast follower, and is now a fast follower themselves.
The marketing lesson is that new markets are minefields. Knowing that a market exists is iffy in the absence of serious market research. Knowing the exact set of features and the buyer’s expected outcomes is a crap shoot. Letting someone else take the risk of exploring the market, even if they are a mammoth competitor (ala Amazon) is worth while. But it also means that being a fast follower will attract new fast followers who want to do to you what you did to the original innovator. A great strategy is to be a fast follower, then to keep innovating upon the core concept until you achieve market dominance and have exhausted all possible paths to expansion.
Then follow again.
August 23, 2011
Email This Post
Print This Post
I would not want to be an HP employee this week. Well, actually I have not wanted to be one since Bill and Dave went to the big database in the sky.
 Last week, in rapid fire, HP said they will likely get out of the PC/laptop business (either through an Agilent-like spinoff or outright sale), killed their newborn webOS phone and slab business, and bought a relatively obscure software company for a huge premium. Their stock dropped about 30% and HP aficionados are still staring, jaws agape, in disbelief.
Change is the only thing of permanence, and that applies doubly in the high tech business. Tech companies are the most agile known, and many have completely reinvented themselves when faced with undeniable market shifts. Others change because better opportunities exist. HP’s newest CEO, Leo the Lively, knows that software companies make significant margins (Oracle has an overall margin of 30%) on peddling well organized electrons. Leo wants HP to change in that direction. Reportedly, HP’s PC business has profit margins of 7%, though their volume through retail channels makes them the #1 vendor. Though HP’s PC volume and revenues were impressive, sales of consumer PCs and laptops have been plunging (around 23%) and the profit HP earns from PCs and laptops would soon enough be unworthy of staying in that business. So like IBM before them, they seek to exit the soon-to-be unprofitable.
They’ll continue gigging consumers for overpriced ink cartridges, which appears to be a damned (and) good business.
Oddly, they are also scrapping their webOS product line, dumping Touchpads and “Palm” phones. Though they never received respect or respectable reviews, the main catalyst for declining consumer PC sales are slabs and smart phones. HP is wisely shuttering the declining PC business, but have simultaneously aborted their newborn in the one consumer market that has growth potential. Combined, it makes Leo look like a consumer luddite, lacking desire to peddle products to the proletariat.
Which likely makes Steve Jobs smile. He knows how to market to mobs.
Change for change sake is a rarified form of idiocy. I don’t accuse Leo of blindly altering HP’s fabric, but the timing and lack of commitment to product lines makes Apotheker look like a banana republic dictator, changing rules, laws and strategy at personal whim as opposed to long range product planning and revision. Given that HP’s Touchpad was introduced a mere 53 days ago, it was never given a complete chance in the market – no version 1.1, no second generation, nada. It is bizarre for a first entry into a relatively untapped market to be a sacrificial lamb on the altar of ambition.
Today’s market strategy lesson is a two-fer. First, any strategy should not be implemented in ways that cause people inside and outside of your company to lose faith. Stockholders bailed and HP employees, on a private discussion forum, are confused and a bit ashamed. It is better to build your new strategy and have it well-anchored before you jettison the old one. Secondly, it is bad policy to display executive knee-biting as part of the transformation process. For HP execs to bravely proclaim that killing off a seven week old product line based on a $1.2B investment (the Palm acquisition) was wise is unwise. To do so while paying an 80% premium for a software company that is not destined to become a center post of a software strategy simply begs for Leo to don a clown nose.
Change has to have a purpose and a plan. You may not be able to disclose the plan, but causing investors and employees to doubt you have one while hacking away parts of the current strategy is like a politician saying “Trust me, I’m with the government.” It lacks faith-building substance.
|
|
