The Art of ‘Ware [version 2.0] by Bruce F. Webster
[Copyright (c) 1995, 2008 by Bruce F. Webster. All rights reserved. Last update: 04/30/08]
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OK, so you don’t have the market to yourself. You have to worry about the competition, not to mention the customers. How well have you thought through all the possibilities? How will the competition react? How will the customers react? Are you being overly optimistic in your sales projections? Will you really achieve your planned revenue 120 days after product launch?
There’s a real temptation to push your product out onto the market and wing it from there. That approach succeeds just often enough to keep us doing it. But the successes are all that we see, most failures are quick, quiet, and invisible. If we saw them as clearly as we see the successes, we’d be a lot more thoughtful and prepared in releasing a new product.
Sun Tzu, in his fourth chapter, talks about how the general must control the situation before conflict starts. Unless the general understands both his own strategy and that of his enemy, his approach to battle is in doubt before it is even begun.
First, carefully build a strong position while looking for weakness in the competition.
There is no point in bringing a product to market unless it can stand on its own merits. It must be compelling enough to convince customers to spend money on it. Having defined the product’s attributes and strengths, you can then examine the competition to see if there are weak areas that can be exploited.
A CEO is responsible for the company’s strength; competitors, for their own weaknesses. You can make your company strong, but cannot make competitors weak.
You can control (or at least influence) research, product development, and marketing in your own company. However, you have much less influence over the competition and cannot count on them being worse than they actually are.
Indeed, there is a strong and dangerous temptation within a firm to underestimate the competition, to assume that they’ll make the wrong moves or that they don’t understand all that you do. This usually results in a series of unpleasant surprises as the competition does exactly the right things necessary to counter or undermine your efforts.
You may even see how to succeed without being able to do so.
Put simply, a brilliant and/or superior product can fail if the competition is just too strong. It can also fail if the customers don’t need or want it: look at what happened to the slide-rule market after the introduction of calculators, or the vinyl record industry after the introduction of compact discs.
A defensive posture is for protecting market share and during times of weakness; an aggressive approach is for direct competition during times of strength.
You maintain market share by convincing your customers that your product is superior (or at least good enough) and that the costs and risks of adopting a competing product are too high.
You enter a defensive, entrenching posture when pressed by a competitor with a superior product, superior marketing or both, or when your company is having significant problems. The danger: if you are perceived as being in a defensive posture, the market will interpret it as a sign of weakness and instability, and it may further erode your position.
You gain market share by attacking competing products and convincing the customer that the costs and risks of choosing (or staying with) a competing product are too high, or that the costs and risks of adopting or trying your product are low.
When you have the upper hand in terms of product and marketing, you can choose your course and compel the competition to react accordingly. In the game of Go, this is known as sente: your opponent must respond to each move you make, leaving you free to choose each new move.
Entrench the product so as to resist all attacks; view the market from a high level, rapidly moving into new market opportunities as you see them. By doing this, you can protect the company while gaining market share.
There are two parts to this approach. First, you need to focus on defending your market share against all comers. Look for ways to so entrench your product and technology with customers that they will resist all competing solutions. The classic examples of this approach are IBM (mainframes in the 1960s), Microsoft (operating systems and applications in the 1990s), and Apple (digital music in the 2000s).
Second, you need to be looking for additional opportunities. New market segments and niches open up on a regular basis, and it’s often a while before anyone notices. Keep thinking of new ways to apply existing technology, or new technologies that can be developed to coincide with the opening of a future market. IBM pretty much failed at this and Microsoft now appears to be failing as well; time will tell whether Apple can avoid their mistakes.
Many successful companies have done so with such apparent ease that their achievements are downplayed. The CEOs of such firms are seldom credited with skill, brilliance, or courage. Still, their successes are not by accident or luck. they set things up to succeed before they ever competed, and they found ways ahead of time to make their competitors fail.
We forget how many pundits and industry analysts considered the iPod dead on arrival after its announcement by Apple in October 2001. Yet by the end of Q1 2007, Apple had sold over 100 million iPods and over 2.5 billion songs via its iTunes store, driving Apple stock to an all-time high.
Likewise, many previous successes of the computer industry — the Apple II, VisiCalc, MS-DOS, Lotus 1-2-3, Turbo Pascal, dBase, WordPerfect, Windows, MS Office — are dismissed as being due to luck or just filling the right need at the right time. Yet those who succeeded had what it took to be in that right place at that right time with the right product. Witness the number of people and firms who had similar opportunities and did not succeed.
A successful company first sets up the conditions for success, then goes into the marketplace; and unsuccessful company dives into the marketplace, then tries to determine what it must do to succeed.
Often a tremendous amount of time and money is poured into a product development, and it is only after the product has been launched that you try to find customers. At that point, you discover what it is that customers really wanted, which often is something quite different from what you developed. Product launch is then followed by product revisions and repositioning in an effort to gain acceptance and sales, and that is often followed by downsizing, assimilation, and evaporation. The entire history of the original “pen computing” market, with tens of millions of dollars poured into Momento, Go, EO, and others, bears eloquent witness of the dangers of building a product with no customers.
A much better approach is to ensure that customers will want what you have to sell before your product is ever released. That is not as easy as it sounds, because what customers say they want is often quite different from what they are willing to adopt and buy. Furthermore, if you’re selling a large organization, you often have to satisfy different people with different desires and expectations. User wants something more convenient and powerful, but not that different from what they’re currently using. Managers want something that will improve that bottom line. Information systems (IS) people don’t want anything new or different unless its completely compatible with existing solutions.
Those skilled in product development and marketing cultivate Tao and build their company upon strong principles. That way, they succeed where companies looking for shortcuts fail.
In the technology industries, the half-life of the products, concepts, and technologies is short, as noted elsewhere, the distance from the leading edge to the trailing edge is getting smaller. Because of that, it is important build a team that can adapt and compete as it to build products. It is still critical to build products; “think tank” companies seldom make a decent return on investment. But the customers themselves are a moving target, so it is likewise critical that you build a teams that can do course corrections in the middle of product development without bickering, starting turf wars, or losing significant time.
There are five keys to successful product development and marketing:
Measurement of market size, both current and potential;
The trick here is not deceive yourself or to be deceived by overly optimistic predictions of the market size. May CEOs look at vast markets out there (installed PCs, houses wired for cable, etc.) and play the 5% game: “If we capture just 5% of the market, we’ll be successful!” Market share isn’t based solely on the number of possible customers for your product: that’s merely the upper limit. The lower limit can be pretty small indeed — close to zero in many cases. Market projections must be based on bottom-up projections, not on some hypothetical percentage of the total market.
Assessment of competing products and likely market share;
Several questions help you to further lower the upper bound on potential market share. First, how many people have a need or desire for the solution you offer? Second, what percentage of those do not yet have an acceptable solution (such as a competing product)? Third, what percentage of those have the money to purchase your product? Fourth, what percentage of those would rather spend that money on your product than on any of the other myriad things they could buy with it, especially competing products?
Calculations of cash flow, capital and return on investment;
You can have significant success in the marketplace and still lose money: it just depends on whether you spend more or less money than you bring in. (Car makers demonstrate this all the time, as do various divisions of IBM.) You can make a profit and still not have enough capital to do further development and marketing. You can make a profit, grow the company, and still never create an acceptable return on the initial and subsequent investments.
Comparisons of different market approaches;
There are various ways of marketing a given product. Success lies in knowing or discovering what they might be, in evaluating feasibility and potential results, and in choosing one or more approaches that will work.
Success in product releases.
The issue affecting the bottom line is product acceptance upon release. Many companies with promising technology have stumbled or even failed because of slow market penetration.
Also, you only get one chance to make a first impression. The reputation that a product gets on initial release, deserved or not, can linger for years. Witness Apple’s stumble with the Newton hand-held computer, or Microsoft’s current woes with Windows Vista.
Success comes from accurate comparisons, which come from accurate calculations, which come from accurate assessments, which come from accurate data, which comes from accurate market research.
The same data, more or less, is out there for everyone. Success comes from gathering accurate information, interpreting it, making plans based on it, and choosing from among those plans.
There is a dangerous temptation to make self-serving assumptions in this process; reality will always intrude, sooner or later, and it’s usually unpleasant when it happens.
Thus, a successful company compares to an unsuccessful one like a boulder colliding with tumbleweed. When factors are lined up correctly beforehand, the successful company bursts into the marketplace like a flash flood.
A successful company can push through problems and obstacles, using its momentum and resources to carry it past the rough spots. An unsuccessful company gets hung up, blocked, or diverted easily.
Evaluation, coordination, cooperation, and timing are all essential. To make all factors mesh is difficult and rare, or else everyone would do it. Again, it is the responsibility of the CEO to that that it happens, but it is the responsibility of everyone else in the company to see that it works.
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