During the last recession in 2001, many companies suffered and flatlined. But there were many other companies that not just survived but thrived coming out of the downturn. What was their secret sauce.
Was there a new set of rules? Were they just lucky? Tony Seba did some research on
these successful companies and came up with 9 rules for high tech strategy. He even wrote a book about it (see link at the end of this post).
Here are the 9 rules in the order he discussed –
Rule 8 : Design Products and Services that are easy to adoptIpod succeeded because it was extremely easy to use and download music. The common person did not have to learn about mp3 or any other jargon. So think from the user’
s perspective on how they would use your tool or product or technology and then make it easy for them. In other words look at the entire process of th
e customers buying and using experience and remove all obstacles.
Rule 3 : Add Value not Features
Its great to have a cool technology with patents to protect. But what customers really really want is value. Starmine came up with an algorithm for analyzing stock analysts estimates. They had a cool algorithm. But what customers really wanted was a number. So Starmine worked on it and came up some logic to get them the “number” and Smartestimate was born.
Rule 2 : Focus, win, grow, repeat
It is important to find the sweet spot for your products or services and then win there. After that you move to the next sweet spot. A spaghetti strategy may work but does not grow the company. (Spaghetti strategy = ask your kid to throw spaghetti on the wall and see what sticks).
Symantec had tons of product mostly by acquisitions. By 1999, the only common thing about the product was the yellow boxes – think Norton, Win fax and a host of sub $ 50 PC products. Then a new CEO came. John Thompson decided to focus on Internet and Enterprise Security. During the tech recession, security spending was still up and as more and internet services were sprouting up, security become a mainstay issue. Good for Symantec. From 2000 to 2004, SYMC went up from 7 to 32 (split adjusted). And this in a recessionary economy.
Sidebar – Stock performance is not always indicative of company performance and strategy. There is an element of systematic risk embedded in the stock price (aka market risk), which is outside the control of the company (for the most part). Unsystematic risk is specific to the company. Search for CAPM model to learn more.
Rule 4 : Have a story, communicate clearly
It is extremely important to relate your product or service and personalize it into a story. The story needs to be relevant to the majority of your customer segment. Customer segment by definition means they have a common pain and a common need. Netflix story was not “convenience and selection at you’re your door step”. Their story was “no late fee”. Almost every blockbuster customer had paid late fee. The found Reed Hastings once paid $ 40 for Apollo 13 in late fee. That was his story. Can you relate to that?
Stories have power to shape human existence. Pre-historic man used stories to communicate with each other via drawings. In some cultures (notably India), many of the mythological works have been passed on as stories and have survived 2500 years.
Rule 1 : Feel the pain, then develop the product
It is extremely important to feel the pain from the customers perspective. It is not enough to realize that there is a pain out there. Alphasmart wanted to build computers for schools. But the teachers had a different kind of pain. They visited classrooms to see old stodgy computers with wires running around. So they built class room friendly computers.
Rule 5 : Its a risky world, sell confidence
When the world around is falling apart for customers, it is important to make them feel safe especially if you are supplier. Clickability did just that. They understood the risk from the customers, and assured them on how they will mitigate these risks. Confidence is the key here. Assure your customers that they can still be in business, and you are there to help them.
Rule 6 : Look for Champions, not deals
It is important to make deals, after all you are successful if you make money. But it is far more important to bring in Champions first. Champion by definition means a customer who not only places faith in you, but brings in other customers.
Linked In had a paltry member base initially. So they went after a very select set of VCs to become members. Then other VC’s joined in, fearing that they might miss some action. As the roster of VC’s got added, entrepreneurs came in and became members. And then others started to follow these entrepreneurs. Adoption is a social process. The first 5% brought in the next 95% at LinkedIn.
Rule 7 : Choose the right partners and manage them
Many product categories depend on partners and alliances for bringing in deals and closing deals. It is critical to choose the right one – someone who has the clout to get you in to the customer doorstep. F5 networks was languishing with direct sales, until they decided to OEM their product to key partners. 95% of their revenue is now through selected partners. It is OK to be a slice of the pizza. Everytime a pizza sells, your product will sell as well.
Rule 9 : You are doing well. Congrats. Now change or die.
This is a hard one to fathom. You have worked hard to build your business. You have achieved tremendous success. And now you have to change. Fundamentally, success breeds success. Of course. But in the high tech world, success breeds more competition. Someone will make the same mousetrap that is cheaper, faster, better. Commoditization happens. And in order to keep your edge and your price levels, you have to move on to the next journey. The good news is that you have now more options – i.e. acquisition to go on to the next journey.
So how we change. Look at your current model and ask what a competitor would do to kill your business model. And then address that. IBM and Apple did that quite successfully by fundamentally changing the business models.
From the top 10 computer companies in 1984, only Microsoft has survived. (That’s a story for another day)
Key takeaway for startup – Go outside the building and research before you come back inside and build your product
www.tonyseba.com
Free Book Download : http://tonyseba.com/WinnersBookDownload.html
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