Monday, August 17, 2009

Thoughts about Starting a Technology Business: Marketing

Marketing
First of all for my fellow technologists, let's be clear about what marketing is. You'll hear lots about brand, collateral, communications, etc, etc. These are merely the day to day tools of marketing. Simply put, marketing is "discovering a need and communicating your ability to satisfy it better than anyone else."

Notice I did not mention your technology. Technology is essentially irrelevant to marketing. Business is about satisfying a need. That need must be specific and have value. If your Customers are businesses, this value must be expressed in $ and €. In fact, if you cannot find the line on their P&L or Balance Sheet that you increase or reduce, then you have not identified their need yet. Go look again! If your Customers are individuals, then your value may be in $ or €, or it may be emotional. Not being an expert on consumer marketing, I'll leave you with that.

Crossing the Chasm in a Small Market
I started Fraysen Systems here in Ireland, a small island of 5-6 million people far from the large markets at the centre of Europe. This fact has an effect which can be viewed as an advantage / disadvantage. I have found that Customers are, in general, unwilling or unable to articulate their needs, or to bridge from your solution to their need. When you think about it, it's perfectly reasonable -- it's not their job! I believe this is the reason for the famous "chasm" that new technology products must bridge from their early adopters to their mass market.

In large markets, like the United States, the opportunity is much greater for an entrepreneur to meet visionary, risk tolerant Customers who can understand the value your product provides, even if you don't. These Early Adopters give start-ups in these markets a foot hold and early sales. However, given that I believe it is particularly difficult for technologists to think of their products from a Customer perspective, the risk is that the entrepreneur never internalises the need they are satisfying or the value they are providing, and therefore they cannot articulate this to the mass market. So they hit the chasm, and they die. Or maybe they achieve some understanding, but never fully realize what they could provide, and putter along, with their full potential never achieved.

In a small market, the chance of happening on one or more of these early adopters is much, much smaller. Buyers also tend to be more conservative, and often have to justify their decisions to parent organisations far away. This means that, from the start, the entrepreneur must do that hard work of understanding and crystallising the need they satisfy, how their solution does it better, and the value their Customers will receive. Therefore there is a higher risk that the start-up will run out of cash before it achieves "traction" -- the disadvantage. On the other hand, because the entrepreneur is forced to think harder than their competition in more "favourable" locations, it can take their offering to a value higher than that which their competition has been able to identify and articulate, and allows them to develop a proposition that will bridge more effectively from the early adopter to mass markets. If you live this long, this could be a great advantage!

Achieving this, of course, requires that the entrepreneur be an unusual person. They must understand:
  • People: their Customers, both as organisations and individuals;
  • Business: the need they are satisfying;
  • Finance: to articulate the value they are delivering; and finally,
  • Technology: presuming theirs is a technology based business!

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