This is Eugenia Jones, signing in to the technology marketing center leader’s blog, offering the second installment on “The Founder effect.”
In the last post I described “the Founder effect” and briefly discussed two examples of firms where implementation of the founders vision was, and is, one of their key competitive differentiators. In this post I will examine how the founder effect can impact the technology adoption cycle.
The success or failure of start-up companies, which generally have a single technology product in their portfolio, is intimately tied to the product’s ability to acquire mainstream market share. Before any technology product crosses the chasm, reaches the tipping point and is purchased by the mainstream market the new product needs to be accepted by a community known as early adopters. And early adopters watch market innovators to determine which products may be of interest. Product acceptance by innovators is the first critical step in the technology adoption lifecycle, and it is this step that is most heavily influenced by the founder effect.
Innovators differentiate themselves among their peers not only as risk takers, but also as extremely knowledgeable, capable of rapidly distinguishing junk from gems. Innovators acquire an emerging technology to determine if the product meets expectations, i.e. if the product does what it claims to do. Innovators are driven not only to be among the first to acquire, but may also be the customers with the greatest unmet need. Innovators provide the independent proof of concept and functionality needed to garner the attention of early adopter community. If the product performs as promised for the innovators, you’re positioned well, but disillusion them and as the saying goes, “You never get a second chance to make a first impression.” Innovators do not need to be enchanted, but they do need to be believers in the technology and the product derived that technology.
Founders comprise three groups, the inventors, the venture capitalists, and the business entrepreneurs. For start-ups it is the reputations of these groups, as well as the advertised product functionality, that defines the innovator’s expectations. Selling products to innovators requires different types of proof when compared to selling to customers elsewhere in the adoption cycle. Innovators adopt novel products, without external performance data, so they use other cues to determine if an offering is of interest. One of those cues is reputation.
Innovators frequently are familiar with a companies entrepreneurs and inventors, and that familiarity can play a significant role in determining if a customer will consider purchasing a product. Here the sale is consultative, relying on the reputation of the technology and the individuals involved. Reputation alone can cause a product to fail to gain share in a market.
I consulted for a company with a good product that performed as advertised, met a market need, and yet was having a hard time gaining traction, while a less complete solution that didn’t quite live up to expectations was gaining share. It only took a few phone interviews with perspective customers (innovators) to realize the issue was two-fold; the inventor was summarily disliked and the management team was unknown to the market. The inventor had a reputation as undeserving of the attentions and accolades he had received, which caused potential end-users to be wary of the utility of the product. The potential client expected the product to be as overblown and useless as the man who had invented it. This was exacerbated by business teams inexperience in this market; the end-user couldn’t use a favorable impression of the business team to counteract the inventor’s poor reputation. Had innovators in this market had a positive impression of either the business team or the inventor, they likely would have tried the product, because they perceived the risk to be lower. Ultimately the company failed.
A new technology product can garner the interest of innovators with an unknown business team if the inventor is well respected by the target market, or vice versa. A product with an unknown inventor and business team, may eventually gain traction among innovators, but if either has a questionable reputation innovators are unlikely to try the product. The founder effect arises from the willingness of innovators to test the product based on the founder’s reputation. Without the proof of product functionality, provided by the innovators use of the product, early adopters are out of reach.