The MIT Enterprise Forum is a great program for gleaning business insights from real, live case studies.
Every month a CEO of a local, up and coming, high tech company presents an executive overview of his/her business and introduces two current challenges they’re facing.
Then an expert panel of advisors gives their advice and feedback and offers potential solutions to these challenges. Audience members get to observe the presentation and panel interaction, and then offer their own questions and observations. The following recaps lessons learned from this month’s program.
I’m not calling out the company or its founder here because this isn’t intended as a critique of them – rather, I’m hoping these lessons are helpful to all businesses. But here’s a bit of background:
This month’s Forum covered an email marketing company which had experienced great success as a trailblazer years ago. But now as the gap between the company and the competition has narrowed, the company realizes the need to respond with a robust next generation solution. The founder explained the history of the company, introduced the company’s new offering, and asked for advice on the best customer value proposition for this new version – should it be a suite of brand management and marketing services OR an email marketing provider which also offers related services? The panel was comprised of really smart businesspeople and I got a lot out of their discussion.
Below are nine lessons based on the panel’s advice as well as my own insights from the program:
1. Don’t let your product define your vision – The key question of the case presentation was actually the wrong question. Instead of trying to figure out whether to position the company as an integrated solutions provider or an email marketing provider, the company needs to first identify its brand vision. It needs to figure out what it wants to stand for and what future it wants to create. The values and attributes which define the company and differentiate it will be far more sustainable, extendable, and defensible than a product-based value proposition.
2. Innovation isn’t always the answer – For many tech companies, innovation can be a knee-jerk reaction to commoditization. As lower-priced competitors start stealing market share by offering the same products and services, it seems the only answer is to shore-up development and try to innovate your way into a new, less competitive space. But that transition is not easily, cheaply, or quickly made – and there’s no guarantee commoditization won’t ultimately show up there too. Instead of innovating simply for survival, perhaps the company would be better off figuring out how to thrive in a commoditized world — whether through a distinct feature set, target audience, or pricing strategy.
3. The business you’re in may not be the real business you’re in – The company views itself as an email services provider and that may be the root of the problem. With such a limited view of what business it’s in, the need to transition to a broader, more comprehensive offering seems obvious.
But if it were to re-frame the business from what it does to what it provides, it might see itself in the customer database business or in the message distribution business. A database orientation would lead the company to focus on services managing relationships and optimizing the value of the database. A distribution business might lead it to focus on efficiency and deliverability of communication across multiple channels and platforms. Either direction provides a more focused path for the company than pursuing an amorphous “integrated solutions provider” platform.
4. Know thy customer – Throughout the panel discussion it became clear that the company lacked clarity and insight on their customers. The founder talked about targeting “marketing professionals” without acknowledging that this could include everyone from an account representative at an ad agency who manages email marketing for multiple clients, to a brand manager who is responsible for all marketing programs for his consumer packaged goods brand, to a small business owner who does her own B2B marketing. “Everyone” is not a target strategy. The company needs a robust market segmentation which indicates the differences in needs and drivers between segments as well as the current profitability and projected value of each segment, so it can determine which segments are its best targets.
5. The customers you have may not be the ones you want – Further on the customer, the company must look beyond its current customer base. The most valuable segments in the market or the ones driving market growth may be different from the ones which have fueled the company’s current business. It’s important to understand who these prime prospects are and how they differ from existing customers in order to determine whether or not to target them instead. And instead of feeling assured by positive feedback received from current customers, the company should solicit input and development collaboration from target prospects.
6. Figure out the problem you can solve better than anyone else – The founder explained they designed their new product to solve as many problems as possible. All of these problems fall under the broad umbrella of customers not having enough time, but they’re an unwieldy bunch of needs when grouped together. It’s the classic mistake of trying to do a bunch of different things and ending up producing mediocre results, instead of being focused on doing a few things well. The company needs to start by intimately understanding its target customers’ needs and then it should identify the one or two ways it can serve them better than others.
7. Just because you can doesn’t mean you should (aka “the Lycra principle”) – This is a corollary to the previous point. With its new version, the company added a host of capabilities and features, some of which seem truly impressive. But the result is an overwhelming home page and a user experience that actually gets in the way of the user accomplishing his/her mission. This is a common problem among technology firms, where product development is driven by a product/engineering mindset vs. a customer needs mindset.
8. Be confident but not arrogant – It seems the company has a distorted view of the competitive landscape. On the one hand, the founder talked about many different competitors in different sectors (Constant Contact in email marketing, Facebook in community, etc.) – he struggles to identify where his company fits in. He needs to be clearer about its competitive advantage and to be able to communicate it confidently and compellingly.
On the other hand, it seems the company is somewhat dismissive about the strength of its competitors. The founder listed email marketing giants like Constant Contact and Exact Target as competitors but suggested that his company really only competes with a little known player because it’s the only one which rivals his company’s quality and robustness. Overconfidence can be misleading.
9. “Once bitten, twice shy” may hold you back – Several years ago the founder brought in a CTO and essentially handed over the reins to him. Unfortunately that person overpromised, under-delivered, and ultimately left the company stranded with indecipherable code and without a new product launch. It’s clear the founder felt burned by this and is now gun shy about hiring in other leaders. But it’s also clear he needs to bring in other people to help him run the company. He needs a strong marketing leader to address many of the points above, and he’s going to have to trust this person to take the company to the next level. At this point in the company’s lifestage, marketing needs to be the driver.