Become a big fish

Launching a new product is a critical time for any company. Reputations and the success of the company can rest on the success of this launch and the subsequent adoption and growth of the product.

Many new technology companies develop great products, receive funding, establish some early design wins, set-up sales channels to hit many customers and markets only to quickly fade without a trace. What went wrong?

New products using new, possibly disruptive technology will present features that differentiate them from their competitors and which can be used in a number of applications and markets. For example, in the semiconductor industry a new type of FPGA may be launched with the highest performance and density or with the lowest power and cost. Based on these features alone there are any number of applications and markets that would benefit.

Armed with this best-in-class product most companies will approach the key players in these markets, promote the features and benefits and offer early access software and working silicon when it becomes available. Those early adopters willing to try out the solution are very well looked after and provided with all the support they need to overcome any technical issues.

Having proven the technology, ironed out the bugs, and won some sales, reps and distributors are assigned, trained and targeted with finding new customers. Six months down the line the manufacturer is wondering why only a few design-ins have been won. Their technology is better than the competition so why aren't they winning more designs?

The problem is that because they have targeted a number of markets they have won only a small amount of market share (comprising the early adopters) in each market and so remain very little fish in very big ponds.

All purchase decisions have an element of emotion attached. The early adopters will understand the benefits the new technology bring and will have a vision of what these benefits could mean to their company's success.

All the other prospects in these markets are followers. Yes, they love the technology but they will have networked with others in their market segment, read the same industry press and seen that your solution has barely been used in their market, assuming they see you at all. Their natural caution means they'll wait and see how many others adopt your technology or if your competitor, who they currently use, comes up with something comparable.

Eventually, your advantage is lost and you have to fight for every win. You will either remain a small fish in a number of large ponds or you will sink without a trace. This then is the treacherous gap that separates the early adopters from the rest of the market as Geoffrey Moore describes in "Crossing the Chasm".

These "followers" or pragmatists will not adopt your technology no matter how good it is until they are emotionally comfortable in doing so. This means that enough other companies in their market sector need to be using your product. So you need to establish yourself as a bigger fish in that vertical market segment which means you need to focus your solution and efforts to that segment and no other.

You need to make sure your product meets the particular needs of your target market sector. If, for example you've developed a new CAD tool and your target market is the aerospace industry make sure their particular design requirements and file formats are met.

It's also not enough to focus on the segment that provides the best fit for your product; it needs to be the right size segment and have enough early adopters in it for you to be able to establish a large (50%) market share within a couple of years. So, if you're a start-up with a revenue plan of $5m in two years say, you don't want to target a market sector that is worth $100m, instead you should target a sector that is worth $10m - $15m of potential revenue. That way you have a better chance of grabbing a significant market share.

So you've identified a market segment with enough potential early adopters who should be interested in your revolutionary product and which is of a size where you can establish a significant market share within a couple of years.

Once established, you can identify the next target market sector, of the right size and with enough early adopters, adapt your product accordingly and, with a strong strategic plan in place, make the leap to the next pond.

You have history, case studies and a reputation, albeit in another sector, and so establishing presence in this new sector should be easier. And each leap to the next pond should be easier than the last and target larger markets as your revenue increases. Eventually you'll be a big enough fish in enough markets to consider a change in strategy and target any relevant prospects in any markets and become truly mass market.

Let's look at a particular disruptive technology; electronic paper and the advent of eReaders. At the moment there are around a dozen eReader manufacturers, including Sony and Amazon, competing to become the eReader of choice for electronic books, newspapers and magazines. A few million have been bought by early adopters but the mass market is still probably a couple of years away whilst the rest consider if they really want to read their books this way and wait until the eReaders reduce in price to sub $100 which is half today's price.

So, what can manufacturers do in the meantime? Wait until the average consumer is ready and the maturing technology costs less to produce or should they look at alternative, lower volume markets? Of course I would advocate the latter. They could target a market in which their company's eReaders could command a 50% market share and, because the technology can't yet meet the mass consumer price, the market should be specialised and willing to pay the more for the product.

Which markets could fall into this category? There are likely to be no specialised markets which use this kind of product and so you will need to use your expertise and present compelling reasons to your target markets.

In the case of the eReaders you may be able to present a compelling solution to manufacturing industries, such automotive, that use many manuals to service their cars. Imagine condensing 100s of manuals and 1000s of pages into a ruggedised eReader that can be updated overnight and used by the manufacturers and their dealers. This product would have the potential to reduce cost and increase productivity for these types of manufacturing companies and you would have the opportunity to become a big fish in relatively little ponds ("intelligent service manual" ponds)before going mass market in a couple of years when the price is right.

You may not be a manufacturer but a distributor looking for new lines to build your portfolio. You may be a global company with thousands of customers in many and varied markets. The same principle applies. You may be a massive fish in huge ponds but not with this product and so you should be focussed and target prospects one sector at a time. You could however have a major advantage over the product's manufacturer. You have a portfolio of products and solutions and hence the ability to present your new product as part of a whole solution.

Whether you're a manufacturer or a distributor you should establish a new product as if you're a new company and an extremely small minnow in a rather big lake. Use the relationships you already have with prospects in the same market sector and become the big fish in that particular, not very big, pond.