Are you trying to sell market leading to market laggards?
I was at University of Toronto last week to see my father receive his 60 year anniversary medal for graduating from Engineering in 1951. During the ceremony, I recognized a gentleman who was a senior executive at one of my customers 25 years ago. At the time, I was at IBM and the IT industry was in the first wave of selling office automation technology. Today, it is hard to believe that email was once a leading edge technology but in the mid-1980's, email systems were large mainframe based and represented million dollar investments.
My customer was a large global manufacturer. They weren't a technology market laggard but they certainly were not a leader, especially when it came to systems like office automation or email. At the time, as a young sales rep, I was drinking my own Kool-Aid. The benefits of email were immense. After all, in the Information Technology industry, speed and efficiency of communications was a big thing and industry leaders, like IBM, were rushing to internally implement email and other office efficiency tools. It was the same in industries like banking or insurance. Their employees were geographically dispersed and information was their stock-in-trade, so email systems were selling like hotcakes. Not so in my manufacturing customer. Their priorities were elsewhere.
In hindsight, it is obvious to me why selling email systems felt like pushing a rock up a very steep hill. The culture in manufacturing was conservative. Most decision makers still had secretaries that did all their administrative work for them. The pains of inefficient communications were not readily apparent to executives. The average age of workers, especially management and executives, was above average so they were not "wired" to see the vision and benefits of email. Rather, the manufacturing industry was focused on automation of manufacturing processes to improve quality and reduce cost. The majority of their costs were spent on raw materials, manufacturing plants or capital equipment. Unlike banks and insurance companies, making their office workers more efficient didn't affect their profitability to the same degree.
Today, with 30 years of experience under my belt, I frequently see bright entrepreneurs with good products trying to push that same rock up that same very steep hill and the reasons for their struggles haven't changed from 25 years ago.
I recently met with an entrepreneur with a great product targeted into the Retail Industry. Selling information technology to Retailers is challenging. Their business is cost focused so they have a reputation for being cheap. They also have a reputation for being technology laggards and weak at change management. They have resisted implementing WiFi in their stores, were slow to adopt data mining and analytics tools, and have struggled with the opportunity to exploit e-commerce in the same way that banks have exploited on-line banking. Unfortunately, this entrepreneur does not have the luxury of choosing which industry he targets. His product is retail-industry specific. Regardless, his business plan needs to reflect a realistic adoption curve for his solution. This will mean greater requirements for investment and sweat equity initially and will make investment capital more difficult to find.
It is very difficult not to drink your own Kool-Aid. It is hard when you are 25 years old to think like the 45 or 55 year old that will be buying your product. You have different experiences, different education (we still used punch cards in first year engineering at Waterloo in 1974) and different expectations about technology. Unfortunately, often the person at the customer who is making that investment decision to buy your product doesn't share your experiences, education and expectations. They didn't grow up with the Internet and Mobile, or they may recognize that their average employee didn't so adoption within their company may be an issue. They are looking at their world differently in terms of priorities, costs and value in their business.
The key to selling new products is finding customers and industries where instead of pushing a rock up the hill, you are going to have to chase it down a hill to keep up. Conversely, in situations where your product defines your industry targets, you will need a realistic business plan and timeline for success that matches your customers' propensity to adopt. This requires critical analysis of your markets to determine the headwinds or tailwinds that you will encounter. Here are some questions that I would recommend you ask yourself when building your business plan:
- What value does your solution deliver and how does it relate to the value your typical target customer could get if they spent their money on other priorities?
- Does your product or solution directly tie into what your customer makes and sells and does it significantly increase the value and velocity of their product's sales?
- How rapidly is your target customer's industry changing and are they under-threat of going out of business as an industry if they don't find new solutions or markets to evolve into? Is your product an answer to the disintermediation that they are facing?
- How visionary is the industry that you are targeting? Do they have a track record of successfully implementing technology? Do their people use and embrace new technology?
- Do you have competitors? Competitors validate markets and solutions. What industries are your competitors targeting? What do they know that you don't?
Hopefully, your answers will help you launch your company successfully.