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Finding out requires listening and watching very carefully. What if you built the perfect product for the wrong market, or worse still, for a market that vanished overnight? You wouldn’t be alone. At a recent network event, representatives from four Pittsburgh technology companies with products at various stages of commercial development described their successes, their failures, and how they learned to tell the two apart. While each company had its own distinctive story, they all discovered that the keys lay in monitoring market conditions, asking astute questions, and then deciding whether it really was a market worth pursuing. Just as important, it involved finding out in detail what those prospects actually do day-in, day-out, coming up with novel ways to relieve their frustrations in getting it done, and figuring out strategies to sell those solutions to people who are able to pay for it.Before you tout the benefits of a new technology product to the marketplace, it helps to learn, in exquisite detail, exactly what the customer actually does and then discover their frustrations in trying to do it. The real benefits of a new product – the ones customers actually pay for – are found in relieving the pain over those frustrations. But in many cases, as panelists in the Pittsburgh Product Strategy Network June 11 meeting confirmed, neither those customers nor their needs are what they appear to be. Consider the experience of Penn Hills-based VoCollect. Can you hear me now? Good. Back in the late 1980s, when VoCollect perfected its first voice-directed computer interface, the company knew it had created an ideal tool for the quality assurance inspectors who roam the shop floors and assembly lines of America’s major automakers. Its wireless headsets, which were linked to remote computers, freed the inspectors from such traditional interface methods as CRT monitors, portable readouts, clipboards, or notebooks. As a result, the VoCollect system enabled the inspectors to quickly access and verify the build sheet data for every single vehicle coming down the line, and to do it hands-free, without once setting foot in an office. As it turned out, their confidence was partly right, recalled VoCollect co-founder and Vice President Larry Sweeny. Auto inspection did turn out to be a great application for the voice-recognition/voice-synthesized system. At Ford’s Taurus and Sable plants, it raised inspectors’ productivity, decreased assembly errors, and generally improved the plant’s throughput. Getting it right the second time But from a business standpoint, it was awful. The number of inspectors per plant needing the system was actually very small – maybe a dozen per plant. Regardless of the automaker’s parent company, each assembly plant had to decide for itself whether to implement the VoCollect technology. And with every model change and retooling, that same decision – and same selling cycle – had to be started all over again. That was when the company realized it would have to find a different, more attractive market application. Eventually, it found one – grocery warehouse workers charged with assembling palates of merchandise for the retail stores they serviced. And one of the company’s first takers turned out to be the world’s largest retail merchant, Wal-Mart, whose workers at the time were obliged to schlep cumbersome hand-held devices everywhere they went. Wal-Mart’s decision caught the industry’s attention. Shortly afterward, Krogers came on board. “We gathered information on other grocery companies where we had contacts and decided that we were going to do one thing very well, and that one thing was order selection applications in the grocery distribution markets,” he said. “That was the application we really focused on and we said that we would be the best in the world and focus on it like a laser beam.” Today, after more than 15 years of perseverance, VoCollect appears to have finally crossed the chasm separating early adopters from the mainstream market. But finding that initial point of entry involved trial, error, and patience. Fortunately for the company, its venture investors had the foresight to know that it would only be a matter of time before the right market match came along. Not everyone is so lucky. Sometimes the market itself can prove to be a mirage. The vanishing marketplace Take the case of Wexford-based telecommunications software developer CoManage. Right from the outset, CoManage – which had been formed by a pair of FORE Systems fugitives – had set its sights on serving the CLEC market – a group of aspiring local telephone companies emerging from the newly deregulated market for telecommunications services. Their needs for sophisticated management tools were huge, and the opportunity to create a fully-integrated suite of telephone system management software was ripe. CoManage, along with substantial backing from its venture capital investors, rose to the challenge and quickly signed on six newly-minted CLECs for its pricey comprehensive software package. That was a heady time recalled Razi Imam, the company’s marketing and business development vice president. And it lasted all of six months, until an industry analyst, invited on a whim to the company’s Christmas 2000 sales meeting, spoiled the party by announcing that the CLEC industry was dying and that, unless they acted quickly, CoManage would die along with it. As the reality of the telecom market collapse began to sink in, the company declared a sabbatical, slashed its workforce, and suspended operations for several months to brainstorm where it could go and what it could do to stay alive. They brought in a well-connected telecom CIO to guide the effort, which included talking to every Tier One, Two or Three telecommunications executive they could find and attending every industry seminar. It was an offhand remark at one meeting, from a smallish Canadian telecom, that finally held the answer. Salvage and reinvention One comparatively minor feature of CoManage’s original system, it turned out, allowed telephone companies to take inventory of their switches and other technology assets scattered on poles, lines, utility cabinets and substations all over the countryside. Knowing what was out there would help the telecom to make better investment, service, and maintenance decisions. Surprisingly, however, in just about every case, the phone companies had no systematic record of what their field assets actually were. In fact, industry-wide, nearly half of all the telecommunications assets, amounting to an astounding $40 billion, were stranded – unaccounted for and unavailable to use for revenue service. Identifying those assets represents a huge value to the telecoms, as well as a great opportunity to anyone able to help recover them. And unlike CoManage’s original target market, which focused on new and inexperienced startups, this one applied to the established and well-capitalized Tier One telecom market as well. Look in the mirror It took a while, but some time after Strip District-based Printcafé succeeded in penetrating the commercial printing marketplace with software that allows printers to manage their supply chain online, the company realized that there was also a huge mirror market – on the print buyers side. In fact, according to the company’s business development director Raji Sankar, print buyers now represent the fastest growing segment of the company’s business. As a result, Printcafé – which is itself on the verge of being acquired – not only has software running in almost all of the nation’s largest printing companies, its customer portfolio also includes more than 50 of the Fortune 1000 companies who buy those printing services, including such media giants as AOL Time Warner. And how does her company go about doing its market research, or at least get a line on new prospects? It’s simple. “We just follow the junk mail,” she said. “I don’t want junk mail at my home; I actually want people to print junk mail and send it to other people. We go after the leading companies in each of the top categories of mailing and then hope that the rest will follow along.” Engineering types TimeSys, based in downtown Pittsburgh, makes programming tools that help builders of embedded computers – the ones hidden inside auto engines, cell phones, TV sets, and so on – develop specialty applications using royalty-free Linux open-source software code. It is a $27 billion market, and one the company has approached through a series of partnerships with board makers. How does his company go about stratifying a market so big and so diverse? Forget the industry; it’s the users that count. “Instead of a segmentation by aerospace or telecommunications or automotive, which is how we do our marketing, we started looking at what these engineers actually do,” according to Mike Bauer, TimeSys’s vice president of products. And what we found was there’s this very specific type of engineer who takes an operating system, puts it on a piece of hardware, and then hands it to somebody who goes right to the applications,” he said. “We call these guys ‘board builders’; and we keep honing in on what do these people do all day and getting their feedback.” But as Bauer discovered, you have to be careful how you ask those customers and partners what they want. Otherwise, he found, they will ask for more than they really need and far more than anyone can reasonably hope to deliver. Instead, he advises, be particular about who you ask. And instead of being straightforward, he suggests, be subtle. Ask them how their business process works, what they’re trying to accomplish, what it is they actually do, and what it is about their work that bothers them – where’s the pain? Their answers are what you build your business around. Other Questions, Other Answers What if relieving the customer’s pain involves more than you can deliver? Partner with the end customer, focusing on what you can actually solve and deliver. Understand your own competencies, later you can take on partners to flesh out those capabilities to deliver a comprehensive solution. Some of those partners can be consulting companies who could also do some selling for you. But take it in stages. What is the best way to price a new technology product? Perceived value and pricing are related, but different factors apply in different markets and each customer has his or her own distinctive price thresholds that need to be identified. CoManage uses ‘target costing,’ where the asking price is justified on the basis of a business case ROI analysis, but the actual price can vary considerably from the target. As a result, you need to be flexible about pricing, test various price points, and adapt quickly. It’s also important to recognize that the market can change over time. VoCollect, for example, created and owned the market for its integrated system of voice interface products. As a result, it could command premium pricing. But, according to Larry Sweeney, the company also sees a time when other vendors will be able to offer at least some elements of a competing technology. “We are preparing ourselves for eventual dis-integration of the market,” he said.
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