Plateau Predicaments

Many clients have come to me complaining that they hit a plateau – that sales and profits had quit growing. We have helped many of our clients identify the barriers they faced and navigate to new levels of success.

Others remained stuck, mainly because they were too stubborn to listen.

It is common for start-ups to hit seemingly invisible plateaus. Like a rock climber on a virgin cliff, they cannot see their way around outcroppings and boulders, and they aren’t agile enough to dodge eagle droppings hurtling in their direction. In nearly every case, these plateaus are artificial and solvable, though the very genius that launched the company is often the plateau itself.

I offer as example one client we initially engaged six years ago. Silicon Strategies Marketing performed some primary (and I dare say groundbreaking) research into the psychology of their targeted buyers. Throughout the research, one variable was clearly a game changer – a clear path to recruit new customers, both within divisions of existing clients and within new enterprises.

Six years later they still have not executed on those findings and are at about the same revenue level (the fact that the recession has not materially reduced their revenues indicates that our rebranding effort worked well for them).

Start-ups plateau for a number of common reasons, all of which can be fixed but often are not. The main plateau points are:

Visionary blindness: Often it is the company founder, CEO and president who are the biggest impediments. The boss was the original visionary, and (s)he perceived the product and the market in one specific way. Indeed, their company’s early success may be attributed to their specific market vision. The problem is that once they have met the limited market/product vision the founder had, he retards or restricts expansion. New segments, competitive threats and key trends may well go unanalyzed because they fall outside of the visionary’s view. When a CEO shoots down every staff recommendation because of his “experience”, he is the problem.

Segment saturation: Despite common wisdom and endless preaching, many start-ups never segment their markets wisely. Start-ups routinely wander into one segment, accidentally growing a whole product solution for that segment alone. They never exploit adjoining segments, much less carefully plan the necessary steps to do so. People and companies enjoy comfort, and expanding into unfamiliar territory is uncomfortable. Too often organizations will try to grow their already saturated segment. Competitors who do know how to map and invade segments will eventually create permanent plateaus for the original innovator.

Marketing myopia: Products, competitors and markets change. Continuing to market to the same people in the same way over time is deadly. Like humans, marketing people get lazy. They lose the drive to take chances and innovate their campaigns. There is a long history of companies that kept innovating products but quit innovating marketing, and thus never even expanded even their installed base.

SuSE Linux in North America had flat revenues when Silicon Strategies Marketing began advising them on marketing strategy. In the late 1990s, having flat revenues in the Linux business was preposterous. Red Hat was growing at quantum speed in North America, and SuSE was doing well in Europe. But in North America, SuSE sales were stagnant. They had plateaued in a high growth market.

SuSE’s suffering came from their inability to understand their regional market position and how to work around it. In both Europe and North America, techies were dragging Linux into the enterprise. In North America, Red Hat had the commanding respect and loyalty of the techie caste. For years SuSE had attempted to tempt North American techies as they had in Europe, and with zero success. Red Hat’s lead in mindshare was too steep and SuSE’s management could not see past their original, techie-focused strategy.

We changed SuSE’s strategy on two fronts: who they sold to and what they sold. More fundamental shifts in product marketing strategy could not be made. But the net effect is that sales went from flat to 5,000% growth in two years.

While Red Hat continued to promote to techies, SuSE switched gears and started courting IT executives (see Silicon Strategies Marketing premier paper from that era on what CxOs Think about Linux). Research told us that executives had intellectually bought into Linux as a strategic infrastructure element going forward. It was our job to convince CxOs that SuSE was the better choice.

Since executives are paid to think strategically, they were already thinking several years down the road. So instead of aping what Red Hat was saying (Linux saves money, and Open Source is better) we caused SuSE to talk about how Linux was part of IT’s long-term strategy, which included human resources issues, technology consolidation and commodity infrastructure. When SuSE demonstrated to CxOs that they knew what CxOs were thinking, those executives put SuSE on the short list. SuSE also sold IT execs on strategic partnerships, showing that major vendors like IBM and Oracle were our friends, which was a major selection criterion for CxOs.

The net effect was that if bitheads in an account could not convince executives of the technical superiority of Red Hat over SuSE (which did not exist) then the IT execs mandated SuSE. Red Hat continued to sell to the bottom. Recognizing that boulder, we maneuvered around it and sold from the top.

SuSE was lucky. At a critical juncture they found a new strategy (and also found a great PR firm whose media strategy complimented Silicon Strategies Marketing’s marketing strategy). Many start-ups are not so fortunate. They continue courting their original markets segments with their original product, using their original outbound marketing to fulfill the founder’s original vision.

And they die.

The marketing lesson is fairly simple. If your company has plateaued, then one or more people in your organization – perhaps your CEO – are seeing only the rocks in front of their faces, and not the chute that leads them further upwards. If you are stuck, get an outside opinion. It does not have to be an expert outfit like Silicon Strategies Marketing (though any other choice is obviously substandard), but it has to be a disinterested outsider who can look at markets, segments, buyer genotypes and promotions without the distortion of dangling from the same rope as your executives.


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