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Recent Articles Pittsburgh Companies Reveal Strategies for Disrupting Marketplaces
Recent Articles Pittsburgh Companies Reveal Strategies for Disrupting Marketplaces | Pittsburgh Companies Reveal Strategies for Disrupting Marketplaces |
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You can hide, but you can’t run. At the September 25 Forum of the Pittsburgh Product Strategy Network, four early-stage companies whose technologies pose a clear and present danger to their market’s status quo, discussed strategies for winning a new product category with their disruptive technology. Disruptive technologies – technologies that fundamentally change the way business is done in the markets they serve – can form the building blocks for long-term financial success, lasting product category leadership, and enduring customer satisfaction. With the right know-how and a lot of luck, these technologies can also attract savvy investor dollars, and give their owners a powerful head start on imitators down the road. However those same breakthrough properties can seriously threaten incumbent suppliers and disturb traditional market spaces. Those are precisely the reasons why being smug about the inevitability of success can prove fatal; the world doesn’t always beat a path to the builder of better mousetraps. In fact, as several panelists in the September 25 Forum “Cultivating Product Category Winners” observed, the landscape is littered with the ruins of promising startups whose disruptive technologies were crushed, frozen, or in other ways neutralized by their wealthier, more powerful, entrenched rivals. Particularly for a thinly capitalized startup, learning to get along with, or at least to elude the wrath of the giants in their business space, can make the difference between survival and extermination. Yet to judge from the panelists’ comments, there is no prevailing wisdom about responding to that paradox. Just the opposite, in fact. Take the case of CombineNet, a company built around an optimization algorithm created by a Carnegie-Mellon University professor. Although the company’s technology concept can be applied across a wide range of business decisions, it chose to make its initial mark in strategic procurement – a space already dominated by well-established players including Pittsburgh-based FreeMarkets. Under the radar “Early on we would enter an account through the back door and try to stay under the radar screen of FreeMarkets and other people in this space,” according to CombineNet Marketing VP Michael Concordia. “Eventually, we got a few wins under our belt. Now we’re out and we have many more competitors. So it’s a different game, and now we’re going to have to step up to the next level and do some things very differently than we have in the past. “We already enable one competitor of FreeMarkets based in Atlanta, and we could enable many other companies – an ‘Intel Inside’ kind of strategy,” he noted. “But we think we have to first prove the market space by doing it ourselves, creating the opportunity, disrupting it a little bit, showing them how you can change the game. Then we’ll get some big players interested enough to collaborate with us and negotiate from a position of strength.” But CombineNet’s early taste of success is not lulling Concordia into complacency. “Be paranoid,” he advised. “There are a lot of smart people in the world that are developing what we have. I hope to stay paranoid as hell for as long as we’re in this business.” Have no fear. Not so with Akustica CEO Jim Rock, whose company is pioneering the development of tiny semiconductors for use in microphones and other devices. “We have no fear. We can’t be crushed. And we talk to everybody,” Rock claimed. “I’ve put together a team that tells the entire world what we have, including the enemy. We know our technology can’t be stopped. There’s always an execution risk, but we haven’t held back from identifying the people we plan on putting out of business: the Panasonics, the Intels, Microsoft hardware, signal processor chip makers like TI, and the software providers. We’ve taken a shotgun approach and told everybody about it. And it’s working for us. We’re netting out just who may be the right set of partners for us to get together. You have to take a lot of risk as an entrepreneur, but it was a very deliberate strategy on our part.” Discovering the potential for partnerships in areas where mortal combat might seem more appropriate is also a strategy being tested by Renal Solutions – the Cranberry-based developer of a self-administered, home-based kidney dialysis system whose competitors include an array of pricey dialysis center chains operating in communities throughout the country. “We’ve got some big competitors out there that can crush us if they want to,” Renal Solutions’ CEO Pete DeComo noted. “And many of these competitors not only have competitive technology, they also control the patient therapy chain – how and where they get their therapy. We originally believed that we would be a competitor to the dialysis centers because the paradigm would shift and patients would go home,” he said. “We realized we would be addressing a pain that patients had – high mortality rate, high morbidity rate, poor quality of life. “What we didn’t realize three years ago was that we would also be addressing a pain that the dialysis centers have: 80% of their patients are covered by Medicare, and they lose money on them. If we could take these patients home in a collaborative way with these centers, we could be partners to these centers, and we could be an extension of what these centers are currently doing on an in-center basis and do it on an at-home basis. So we tested that in the market. And we shifted our strategy from being competitors to those centers to being collaborative with those centers.” Learn to get along For Stephen Vogelsang, co-founder of Laurel Networks, a maker of sophisticated data switches for telecommunications suppliers, learning to get along with competitors is also a survival tactic. “We’re trying to build one product that becomes part of a huge system that Verizon or AT&T might have. So the first thing was that our product had to work with the other systems in the network. Some of those other systems are our competitors. So on the one hand, we’re trying to beat the competitor at their own game. At the same time, we have to kind of work with them in a friendly way to make sure our systems are compatible with theirs or else we can’t get put into the network. “We’re sort of David fighting Goliath – competing for that large chunk of capital that’s going to get spent,” he said. “The fact is when we go into a really big project, we can lose the business through no fault of our own. Cisco Systems, for example, is a company that has over $20 billion in cash on their balance sheet and can literally kill us; they can just crush us if they want to. So we’ve had to go out and find customers that really want to change the way networks are built and have incentive to do so,” Vogelsang observed. “We’re a small group of guys here in Pittsburgh who think we can beat Cisco at their own game and do it a little better than them. So far, so good; we’ve been able to go out and win some accounts. It’s not a technology that in and of itself is going to change the world. It’s really more execution – being able to deliver a technology ahead of the big companies by being a more nimble, more agile group of individuals that can get it done more quickly and find the right channels to market our piece of a very big pie.”
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