Chris Halliwell, Executive Director of the Technology Marketing Center here with timely Q4 thoughts about making your number next year.
It's that time of year, to put plans in place that deliver those ambitious sales goals that management has promised to the Board. You need to define high value targets for growth, priorities, and a game plan. So here are some thoughts to consider.
Your growth may depend upon avoiding the biggest customers and markets you serve. The question is: would you rather dominate a small fast growing target, or struggle to take share from the incumbents in a slow or no growth large target? You can tell by my question structure (or if you've ever met me) which one I'd advocate. But it's not that obvious to most sales and marketing teams out there, and even if it seems obvious to you, how do you convince others?
Growth Begets Growth
At the very least, when the sales and marketing team gets together to strategize on how to meet next year's sales objectives, take a look at target CAGRs (compound annual growth rate), last 3 years and projected next three years. If you can penetrate a target account or segment that is growing faster than the overall market, you automatically grow faster than your competitors, i.e. take market share.
When targets are growing that typically means there are "greenfield" business opportunities that can be pursued with everything you've got, especially if you are not distracted by trying to pry a customer out of the clenched teeth of a competitor in a big, slow growth market. It's expensive to do that.
The great marketing, former nerd, guru Bill Davidow, developed a proof, for the technically oriented managers in your organization, that the cost of entering a market/account against an entrenched competitor is 70% of the incumbent's share multiplied by the size of the market/opportunity. (Marketing High Technology, Chapter Two and Appendix A).
GE/McKinsey Opportunity Analysis Matrix
The GE opportunity matrix is a handy tool that management teams can use to evaluate a set of growth targets that visually compares market size and your market share in a space you design to consider CAGR, as well as other success determinations of both market attractiveness and your ability to compete. Here's a link Opportunity Analysis, and if you want a copy of a spreadsheet that generates this graphic, let me know.
All Greenfield, New Technology Adoption Growth
New technology adoption is a special growth case, frequently the issue in B2B markets. Here the real competitor is some alternative process or method or business case. When considering your targets for next year there are some rules of thumb about big customers and big markets.
Should you target large accounts? Yes, usually. Larger accounts tend to have more internal resources to evaluate and implement new technology. Early adopting accounts are therefore large accounts, however, not all large accounts have the risk appetite or technology evaluation resources necessary to take on your particular new technology. There are four types of large accounts involved in growing a new technology category.
- Innovators: Large accounts that actually act more like smaller accounts, in that they love new technology, all new technology, for its own sake. They will generate early sales, but will not generally create a market by influencing other accounts to join. Typical examples here are behemoth customers that operate in very concentrated segments, E.g. aerospace.
- Early Adopters: Large accounts that see your technology as critical to their business strategy and have a lot of internal technical resources related specifically to your technology area.
- Opinion Leaders: Hold majority market share in a segment of interest to you, but do not have the internal technical wherewithal to "be first". Once they do adopt, the rest of the segment will fall in line.
- Early Adopter Opinion Leaders: BINGO! The absolute best target for new technology adoption. They have the internal resources to commit and fully deploy, and their use will drive all others in the segment to consider the new technology seriously.
Which Market Segment Makes The Best Target for New Technology?
Here again, we wrap up where we started: the biggest segment is not necessarily right, you are looking for the best segment right NOW. In other words, consider adoption order of the segment.
TOO HOT: Early growth in new technology categories typically does not come from the largest accessible segment because that segment is humming along happy with prior technology, or at least happy enough not to cover cost of switching.
TOO COLD: Neither does growth come from some brand new application, now possible with your technology, but not yet fully realized as a segment.
JUST RIGHT: Growth comes from an existing segment with an important problem standing in the way of segment success that cannot be solved ANY other way, except to employ your new technology. In other words, you have compelling value.
Here's an example: Advances in video capture, low cost sensors and web platforms bring a new category to behavioral animal research in drug development. Do we target a big obvious, and very competitive, vertical market like cancer? Do we target the very exciting, but nascent, market for age-related degeneration? Or do we target a business model that allows novel behavioral measurement across any number of vertical indication markets? Where is the growth?
What do you think?