Chapter 10: Dealing with Obstacles

The Art of ‘Ware [version 2.0] by Bruce F. Webster

[Copyright (c) 1995, 2008 by Bruce F. Webster. All rights reserved. Last updated 04/30/08]

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Problems will arise, both inside and outside the company. Those outside have to do with the customers: what their demands and expectations are. Those inside have to do with the employees: their commitment, their competency, and their interactions with each other. Both are ultimately the responsibility of the CEO. A good CEO cannot guarantee success, because of the vagaries of the marketplace. However, a bad CEO almost always brings about poor sales and internal turmoil.

Sun Tzu talks in his tenth chapter about various types of terrain and how to deal with them, as well as various problems within the ranks and how they come about. His conclusion: if you know the enemy and you know yourself, then your victory is not at risk.

There are six kinds of markets: open, entrapping, indecisive, narrow, custom, and future.

The first part of this chapter deals with six general classes of markets. These markets are defined in terms of how large they are, what kind of sales opportunities are in them, and what it will take to get money out of them. Your challenge is to correctly recognizing the nature(s) of the market you’ve entered.

An open market is one that you and any number of competitors can readily enter. The first company to win acceptance among customers and to establish its attributes as standards has a powerful advantage.

Case in point: the desktop graphical user interface market was open for a long time, until Microsoft finally won it with Windows 3.0. That was not a foregone victory, though, given the negative response to and lackluster sales of Windows 2.0 and Windows 386. If GeoWorks had come out with PC/GEOS a year or two earlier, or if Apple had licensed the Macintosh OS to hardware manufacturers several years sooner, the market might be quite different now.

In much the same way, the current race to provide high-bandwidth services to mass consumer and business markets is under way. The race may not have a single winner, but the company or companies that get there first will have a tremendous advantage over those who lag behind.

An entrapping market is one that you can enter only by making commitments that will require long-term support. If the competition isn’t prepared to face you, then you can succeed in this market; if they are, then you may fail to gain the benefits of the market, yet be stuck with ongoing support costs.

Certain niche and vertical markets can be entrapping, particularly where you have large sales to a small number of customers. Many government markets are like this, since in order to win a contract you may have to guarantee support for your product over a number of years.

The potential nightmare here is finding yourself having to support a customer base due to long-term contracts, yet making little money on it or, worse yet, losing money. Think carefully before entering such a market, and watch what you sign.

An indecisive market is one that holds no clear advantage for you or the competition. The key is to lure the competition into the market, then to go focus on a better market elsewhere.

Getting the competition to fill that market for you has two advantages. First, it gives you a reason not to be there yourself. Second, it consumes the competition’s resources without yielding much of a payoff.

A narrow market is one that is really only big enough to support one company in your product area. You need to capture this market first, then defend it from the competition. If the competition is already in the market, do not enter and compete with them unless they are not yet established.

There are product niches that, once filled, are not worth competing for. If you can get in first with a solid product, then you can probably capture and hold most of the potential market share. If someone else has done it first, then it’s probably not worth the effort unless (a) their product is significantly lacking or (b) you can expand the overall market size.

A custom market requires extra development and support efforts to win customers. You must capture the market first; or else it won’t be worth the resources spent on it. If the competition is already in it, seek another market.

Custom markets are like narrow markets, but much smaller; each customer is, in essence, a separate market, and extra development is almost always required. It is difficult to take existing customers away from the competition in a custom market, even where there is significant dissatisfaction. It is, however, possible to learn from the competition and use that to capture new customers.

The biggest danger in this market: charging too little for your product and services. If you do that, it’ll bleed you to death.

A future market exists only in potential and will not yield customers for some time to come. All companies are at an equal disadvantage, and it is difficult to engage in competition in such a market.

Future markets present a danger and an opportunity. The opportunity is that future markets at some point become open or narrow markets, and the first company in has a real advantage. The danger is that going into a future market too soon or with the wrong product won’t yield much in sales and will give away to the competition both product ideas and market research. This is why it is often the second or third product shipping that ends up dominating that market.

These are the principles relating to these six kinds of markets. Understand them and study them with great care.

Certain characteristics and attributes determine the “landscape” of a given market. You need to be both able and willing to look honestly at those characteristics and to draw the appropriate conclusions. If you misread the market, out of ignorance or wishful thinking, you will bring failure upon yourself and your company.

Some company problems are not a natural consequence of doing business, but are the responsibility of the CEO. These problems include: market rout, insubordination, product failure, internal conflict, organizational collapse, and mismanagement.

An earlier chapter stated that the CEO is responsible for the company’s strength. These problems are symptoms of various failures on the part of the CEO in that responsibility. When you see these problems in the competition or — Heaven forbid — in your own company, you know where the problem lies.

All other things being equal, if a company takes on a competitor with much greater resources, the result is market rout.

If the other company has greater resources and has products, developers and marketers as good as yours, you’ll get your head handed to you. Case in point: no sane investor would back a new Windows-based word processor to go up against Microsoft Word for Windows. Anyone foolish enough to do this has ignored all the advice in Chapter 3, and there’s no one else to blame.

When developers are bright and confident, but the managers are poor quality, the result is insubordination.

It is foolish and wasteful to hire outstanding developers and engineers, then to hire mediocre (or worse) managers. The developers will have no respect for the managers and will disobey or subvert their directives.

When managers are bright and confident, but the developers are of poor quality, the result is product failure.

Even the best managers can’t get blood from a turnip. The “warm bodies” approach to development will always fail in the long run, and usually fails in the short run. Products will be late, if they ever ship at all, and they will fall short of what is needed.

When senior managers are angry and insubordinate and push ahead their projects and products without a company-wide strategy or the approval of the CEO, the result is internal conflict.

This problem can show up in one of two ways. First, the senior manager is more interested in empire building and self-advancement than in serving the good of the company and its employees, and so pushes a given project ahead to that end. Second, the senior manager realizes the company is headed down the wrong direction, but can’t get the CEO to listen, and so pushed ahead with a given project to help save the company.

In either case, the CEO is at fault for not leading the company properly and for not listening to the senior managers carefully.

When the CEO lacks influence and skill, when assignments and responsibilities are unclear, and when there is not clear delegation of responsibility and the commensurate authority, the result is organizational collapse.

The CEO is responsible for the organization of the entire company. To accomplish this effectively, the CEO must set an example for the rest of the company, must establish priorities and responsibilities among the senior managers, and must delegate authority commensurate with those assignments.

This last point — delegation of authority — is critical. Without it, the company becomes inefficient, employee morale suffers, and the CEO will lose senior managers and other employees.

The CEO who pushes a new product forward without seeking all the glory, and who withdraws from a market without worrying about criticism or blame, but whose sole purpose is to protect employees and to serve the best interests of the company and its investors, is rare and priceless.

This approach will win tremendous loyalty from employees and will draw forth their finest efforts. At the same time, the company will be well served, with the CEO putting the company’s well being ahead of ego or self-protection.

If you look upon your employees with a sense of personal responsibility, they will stay with the company even through difficult times. If you treat each one as an important individual, they will give all they have to help the company succeed.

All management books aside, there are few things as powerful as personal loyalty — and that only comes when you give the employees reason to trust and respect you, and when they know that you trust and respect them. Loyalty, after all, is a two-way street.

If you are too indulgent to demand accountability, too friendly to enforce authority, and too casual to require organization, then your employees will be like spoiled children and will be useless.

To build trust and respect among the employees, you must treat them like professionals, not like friends or relatives, and you must expect them to behave like professionals. This is not necessarily the same as “behaving in a professional manner,” which is often an excuse for officiousness and high control needs, such as strict dress codes, rigid working hours, and other signs of insecurity.

If you know that you can bring your product to market, but you don’t know if the competition is vulnerable, you’re only halfway to victory.

Point one: you need to know that you can sell against the competition.

If you know the competition is vulnerable, but you don’t know if you can bring your product to market, you’re only halfway to victory.

Point two: you need to know that you can develop and ship the appropriate product in a timely fashion.

If you know the competition is vulnerable and that you can bring your product to market, but you don’t know if the marketplace is one you can succeed in, you’re only halfway to victory.

Point three: you need to know that customers will spend their money on your product rather than on something else.

Thus, those who are experts at competing don’t get distracted once their efforts are set in motion, nor do they lose focus when competition has begun.

You need focus and endurance while developing; you need energy and persistence when marketing.

If you understand your own company and your competitors, success will never be in danger. If you understand the market and the economy as well, success will be complete.

You are unlikely to fail if you know what your company is capable of creating and marketing, and if you know the same of the competition. But that’s not enough for complete success: for that, you need to know what the customers will buy.

It is important to recognize how different market situations can arise and why each requires its own response. If we’ve solved an earlier crisis a given way, we may be tempted to use the same approach for successive problems, whether or not that solution is appropriate. It is also important to realize that internal problems are as critical — and require as much thought and effort — as external ones.

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[Copyright (c) 1995, 2008 by Bruce F. Webster. All rights reserved.]

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