Oh sure, we are going to sell more by selling to fewer customers

Good day from Chris...

This is one of a series of posts on internal team struggles to do the right thing, strategically.  We'll start off with the classic battle over market focus.  While most high tech business people would readily agree that focus is in theory a good thing, few are really motivated to focus.  Why?  Because the ugly underbelly of focus is the ability to say "no" to some customers.  In the heat of raising the next round, or achieving quarterly results, the logic of saying no to business, especially profitable business, escapes most of us.  Even as I'm writing this I'm asking myself if I have any idea what I'm advocating.  I can unequivocally say I think I do.

The money people want to see the largest possible market for their technology investment dollar.  The sales people want to have as many chances to sell as possible.  The engineers want to save the world.  All very broad visions.  It's left to the marketing people to explain why one achieves world domination one country at a time, like playing RISK.  "Yes," you shout into the seeming void, "it is a better use of our scarce resources to sell more new technology to fewer early adopting customers who fully intend to deploy the new technology and will influence others to buy it."  If one were pressed to name the single biggest contribution of Moore's Crossing the Chasm, it would be that the book popularized innovation diffusion theory and broght this point home with confidence (and humor).

The other big barrier to market focus I've encountered is more a personal, rather than business, issue.  Segmentation can create organizational winners and losers.  How would you like to have been the executive for the education market at Apple Computer back when the decision was made to focus on desk top publishing in the business market?  Like you were funding some other executive's success?  Well you would have been right.  Or maybe you are the US Sales executive and the team is asking for focus on consumer manufacturing customers?  Have a nice day.   The plain truth is that focus on high growth segments and your most profitable customers in an established enterprise with broad sales coverage probably implies a re-distribution of sales resource.  Unlike engineering programs that can be reshuffled (ego battles and dissent aside), sales resources are people with careers, mortgages, and families.

The best advice I can give if you find yourself in the situation of needing focus that is hard to achieve in your business team is to get these issues out in the open and discuss them before you start analysing market sizes and value chains.  Elevate the issues to the resource owners and clear the air.  One other nasty issue inherent in segmentation and market focus that you will want to discuss up front is value versus volume.  This dichotomy between fewer similar customers offering greater opportunity to achieve competitive advantage (value), and more customers offering spread risk and greater growth on given resources (volume) can derail the effort as surely as the emotional and organizational barriers I've discussed. 

I'm opening up this issue with the hope that you'll chime in with your experiences and advice, so please do, and despite the format for comments, you do NOT have to be a typepad member to respond to this post....And for more on this topic join us here at TMC for our Executive Interview on January 29 with a CEO who will talk about Finding Your Headpin Customer For a New Technology.

Comments

[Geoff Anderson]

Wow, it is like you are reading my mind.

Our history has been to try to be everything to everybody, no order is not worth taking. However, this strategy (is it a strategy?) has led to our inability to really capture market share. Instead of attacking segments with potential, we take what is at hand, sometimes with disastrous results.

Part of our problem is that our sales channel is incentivized to chase anything, and thus we get shanghaied into bizarre customizations that really dilute our effort to focus on growth and markets that are strong (coupled with our GM who has dollar signs roll in his eyes with every opportunity. We are doomed.)

I often feel like we are trying to boil the ocean, and like any such futile effort, we come up short at every junction.

[Chris Halliwell]

Geoff, since you have a large customer base and a 1sy-2sy transactional purchase model you can't champion focus on a couple of leading customers in order to gain market leverage. But by analogy on the topic of leverage, could you identify a solution partner, either other hardware/software, or more likely service partner, who is focused on your high priority target markets, and devise a "marketing program" that basically circumvents your current channel to achieve some level of increased focus?
Chris