Editor’s note: This is part two of Don Rose’s look at what it takes to bring a technology-based product to market. This time he examines “The Lopsided Product.”
Don Rose, Ph.D.
Heleos Advisors
In the early stages of bringing a novel technology to market, it is essential to consider technology commercialization from three perspectives: 1) technical capabilities; 2) the needs of the market; and 3) the revenue model for selling the product (see last week’s column).
One can think of a product as a three-legged stool, each leg representing one of these different perspectives. Success in bringing a technology to market is driven by how each leg supports the product. For example, a revolutionary technology has a broad range of technical capabilities.
Not all these technical capabilities can support a product because of cost considerations or relevance for the customer. It is essential to choose those capabilities aligned with the customer’s needs. Does the customer really care about the reliability, speed, size, or power?
Likewise, the revenue model (how is the product to be sold) must support the product relative to the customer and the technical capabilities. Certain technical capabilities may drive or limit the choice for the revenue model. Does technical complexity or reliability limit broad customer usability and therefore drive a fee-for-service model?
Striking a Balance
Like the three-legged stool, a balance must be struck between these three perspectives to develop a successful product. If a product is deficient in one area, the result is a lopsided, or worst yet collapsing, stool! Let’s consider these deficiencies.
Failing in the Field
Rarely do technology-based products have obvious deficiencies in technical capabilities. Their nature is to come loaded with technical features. The problem lies in a full understanding of the capabilities, what it takes to manufacture a product around the capabilities, and what it takes to make the capabilities robust enough to be put in the hands of a customer. These products can succeed with strong marketing and aggressive pricing but eventually fail as word gets out that the product does not meet the hype and the competition moves in with products which have better execution to meet the customer’s needs.
Build It and They Will Come:
These products have great technical capabilities (100x the competition), executed in a cost-effective and robust manner using a good means for revenue generation (typically a strong technical sales force). However, the products fail because very few customers need these products.
Sometimes, these products were developed with a “Build It and They Will Come” attitude, an attitude where ego or technical fascination will doom a company from the start. Other times, sophisticated (i.e. expensive) market research was carried out.
Market size was verified, competition was scrutinized, and market messaging was developed. But somewhere along the line, someone never bothered to ask the customer what they thought. There is no substitute for a living, breathing customer.
No Can Sell
These products have the innovative technology highly focused on customers with real needs. However, the revenue model does not fit with the product offering. The issues here can be many. In some cases, the product is priced above the competition and the customer’s perceived value of the product is not aligned with the price premium.
In other cases, an inappropriate sales channel is chosen. For example, the most common mistake for technology-based products is choosing a distributor as compared to a direct sales force. A distributor has less invested in “making things right” for the customer when the product has a glitch in the field (which happens all the time). Secondly, the flow of information from the customer to the company (product fixes, new product ideas, etc), is much better with a direct sales force.
The next three columns will explore each of the legs of the stool in detail and attempt to help the entrepreneur answer three critical questions: 1) what do you have? 2) Who Cares? And 3) Who Pays?
Don Rose is a partner in Heleos Advisors, LLC, a consulting firm providing strategic consulting for technology companies. He can be reached at don@heleos.com.
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