Monday, July 27, 2009

10 Reasons Why Emerging Technology Companies Fail..

During my years as a marketing practitioner in large and small companies I have witness and participated in an interesting diversity of executive philosophies and behaviors that have dictated the success or otherwise of a an emerging venture. Over the past few months I have been thinking about these experiences, and lessons learned, in the context of a start-up enterprise with interesting and innovative technology but one that fails to realize its market potential. A summary of my thoughts follows and I welcome all comments, thoughts, additions and suggestions.

1. Myopic or extraneous market research:
Many start-ups get there beginnings from inspired founders who identify a need and identify a solution. However the business viability of these ideas need to be validated through basic market research both qualitative and quantitative. However care should be exercised in developing the underlying research assumptions to avoid any bias, unintentional or otherwise, which could influence the data and predetermine the outcome. Market research data generally forms the bases of a business and marketing plan and inaccurate data, incomplete data, manipulated data or data ignored in favor of an executive’s life experience can seriously damage the prognosis for success.

2. Product development guided by internal perceptions and biases.
To often development efforts are divorced from the realities of the end user world which can lead to products that do not solve a real customer issue resulting in a solution looking for a problem. See note 2 above. Users do not buy technology they buy a solution that solve a particular pain, increases their profitability or enhance their competitiveness. Note; the greater the pain being eliminated the greater the chance of a potential user spending valuable budget dollars.

3. Over optimistic marketing plan:
Nothing wrong with being optimistic about your marketing plan. To be honest if you are not enthusiastic and optimistic about the plan, you have the wrong plan; if your team is not enthusiastic then your execution will fail. However being overly optimism can mean unrealistic forecasts and blind you to realities that will doom the venture.

4. Incomplete product:
The overall customer experience is a measure of the value of a product from a user’s perspective and is quite different from the perspectives developed by vendors. Emerging companies tend to be led by technologists who consider that feature function or unique technology as the primary drivers of a successful product but the user community takes a different view.
Companies should not compete on product centric attributes alone. Users consider the out of box experience that includes installation, training, financing, technical support, application support, application ecosystem and the company’s reputation. The intangible nature of some critical buying criteria underlines the importance of looking at products holistically.

5. Undifferentiated products:
Unless you can clearly articulate your differentiation you are doomed to failure or at best mediocrity. Beware however what you consider to be a winning differentiator as it may not be considered meaningful by a potential user. Differentiation can take many forms as the definition of a complete product would suggest and avoid the common mistake that technology or price are the only elements that can drive meaningful differentiation.

6. Weak or confused market focus:
The fear held by many executives is that business might be lost, any business, and that fear blocks meaningful market segmentation. This lack of market focus creates a behavior that encourages the chasing of every bright new sales opportunity whether profitable or not and whether it is in the companies sweet spot or not. That behavior leads to an over extension of limited resources, an increase in selling costs, increase in support costs, increased competition and a negative impact on the bottom line. Simply chasing revenue can be a false and costly strategy.

7. Vague messaging and poor positioning:
Vendors who are unable to clearly and crisply articulate the end user value of their solution in user identifiable terminology or are unable to effectively position their product against competitive offerings will struggle to get end user mind share. Consumers are continually bombarded by marketing messages all seeking to attract attention and create opportunities to access an end users budget dollars. Time spent developing messaging that resonates and builds brand equity is time and money well spent.

8. Channel confusion:
Selecting the correct distribution channel is critical with many ventures failing because their channel strategy is confused and mismanaged. Whether the correct channel choice is direct, indirect or a combination, ambiguities must to be eliminated and knowledgeable channel management in place to avoid the channel conflicts that lead to channel ineffectiveness.

9. Executive thinking that promotion is marketing:
To often CEO’s, VC and most certainly Chief Sales Officers look at the marketing function as having only one task - demand generation. Yes that is an important deliverable of marketing but not the only one. Such myopic perspectives are short sighted and damage the long term prospect of the company.

10. Marketing and sales teams disconnected:
Despite what should be a synergistic functional relationship between marketing and sales, too many times do these teams take adversarial positions. Too often do these two critical functions have priorities and objectives that do not align, but with each believing that they are the ones aligned with the corporate objectives. This disconnect creates negative internal competition that is detrimental to developing a high performing and successful enterprise. I have also noted that there is a relationship between the degree of discord and the functional heritage or preference of the chief executive. Personally this is a particular frustration having witnessed functional ego’s destroy better than average opportunities.
Between the marketing and sales functions there are a number of opportunities for collaboration. These include identifying segmentation and the identification of target customers, development of go-to-market strategies, channel strategies, lead generation and qualification, sales tools and training. Effective coordination between marketing and sales will improve sales efficiency.

Any and all polite feedback welcome.


Anonymous said...

Excellent post. Thanks for sharing.
Saad Hameed
Sr. Demand Gen/ Marketing & Sales Ops Manager

Anonymous said...

I can think of a 8-year old over-funded storage company that violates almost all of your points. All the $$$ in the world means nothing if a company does not have focus on solution, market and strong value proposition. Also your note... out of box experience that includes installation, training, financing, technical support, application support.. is often ignored by smaller companies and this either leads to longer sales cycles or frustrating or poor user experience that slows/kills upgrades