Category Archives: Business & Marketing Strategy

Pivot Du Jour

Unless you are perfect, or a psychic, a pivot is a necessity of business. Let’s face it. Things happen. Whether it be marketing to the wrong customer base, adjusting the revenue model or reacting to a new competitor; businesses need to pivot. While it is essential to pivot from time to time; it is hazardous for companies to fall into the rookie mistake of the Pivot Du Jour. The Pivot Du Jour, which translates to the Pivot of the Day, can kill your business. There is a certain art to a pivot. Most of the time, it is not accomplished easily. Pivoting solves one issue but tends to open a Pandora’s box of new problems. Now if a company were to continue on this path of pivoting every time they ran into a problem, not only would they have new issue after new issue, but they would never get anything done! In fact, when a company is turning to the pivot as a solution too often, it may bring to question the execution abilities of the team. At the end of the day, it is about accomplishments to move the company forward. While a pivot is movement, it is horizontal rather than forward. Success takes time and perseverance. While we think it is necessary to change direction when plans are not panning out, we recommend staying grounded in experience and vision. Effective pivoting is a shift in strategy, not a change of vision. In essence, learn from the past while looking toward the future. What do you think about the impact and necessity of the pivot? Even better, do you know anyone suffering from Pivot Du Jour? – Nikki Griggs, Business and Marketing Associate, Tech-Rx

It's not B2B, it's not B2C, the problem is it's G2G

We look at a lot of early-stage mobile and internet companies.

Companies with really cool technology. Companies with really cool technology and lots of users. Companies with really cool technology and lots of users, that are failing. Companies with really cool technology and lots of users, that are failing and almost out of money. Companies with really cool technology and lots of users, that are failing and almost out of money……

because none of their users will pay for their product!  

These entrepreneurs tell us “that’s because we focused on B2C aka. the “consumer market” when we should have been focused on B2B aka the “business market,” or vice versa. or whatever.  On closer examination we find that, besides adopting the Freemicide model, in itself a death-wish, they have unknowingly, or perhaps naively, focused on G2G –  the Geek-to-Geek Market.  Their MLVP (Minimum Less-than-Viable Product), rather than attracting legions from their intended target market, has instead found a flock of interested early-adopters (Geeks) who will put up with almost any kind of roadblock or pothole to try a product.  Many of them become faithful users (while not paying a dime for the service).  Soon growth slows and stops and the founders decide that “if we shift our focus on the {fill in the blank} market, we can charge money (almost always deciding on $9.95 per month) and will most certainly succeed.”  They “pivot,” trying to sell their G2G product in the B2C marketplace, burning precious time and money, and producing dismal results.  The simple truth is that their current product is simply too-geeky for the average user to adopt.

There have been online storage providers since prehistoric times (the mid-90s).  Yet none of them were very successful and most have died a painful death – painful for them and also for their G users.  Along comes Dropbox which, in a very short time, dominates the consumer (and small business) on-line storage business.  Why? Because, while they recognized the value of G users, they also understood that the population of G users is relatively small.  They focused their efforts on a larger market – every web user in the universe – and built their product so that it was simple enough that anyone who could fog a mirror and could log on to the web was able use their service. They beat the odds of their freemium model, garnering a gazillion users, enough of whom wanted the paid version for them to succeed — all because they did not focus on the G2G market.

Moral:  Don’t decide that you are wildly successful because you have x thousands of users.  You might have captured 100% of the (non-paying) G market.  Instead, focus on a much larger market – C and/or B – and make your product sufficiently simple to use that anyone can buy it and use it.  Recognize G2G for what it is – simply a data point on your path to success and not an end in itself.

— Steve Hogan

Freemium is Freemicide

Why do we see so many entrepreneurs adopting the Freemium business model? Giving away their base product for free to anyone who wants it and hoping that users will ultimately pay for a more-full-featured premium version – almost always at the low, low price of only $9.95 per month?  Do they have a business death wish?  Or did they fail to answer this question?  Whatever the answer, they ultimately find that —

Freemium is Freemicide

No one will pay for an upgrade to a product unless it materially increases the value to the buyer.  And in most cases, the free product already meets the user’s needs.  There is absolutely no compelling reason to upgrade.  Of course, there will always be exceptions i.e. Dropbox.  However, we believe a better model is —

Try it.  You’ll like it.

You will make more money if you give your product away for a free-trial period and then require payment, even if it is only $0.99 or even $0.49 per month.  Set the price below the pain threshold and capture revenue from your early adopters.  However, recognize that they are probably Geeks, and that you must capture populous packs of princes, proles and peasants to be truly successful – and maybe even charge them $1.99 per month after a 2 month free period.  There is a reason why drug dealers will give you free samples for a week or two.  Assuming that your product actually fills a need, once your users are hooked, they will be delighted to pay you.  Worst case scenario – you find out that no one wants your product before you blow your kid’s college savings.

— Steve Hogan

We Have No Competition

BUSINESS PLANNING SERIES

Last time, we wrote about the importance of “True Competitive Advantages” and how the lack of at least one will likely condemn your business plan to the reject pile. Today, we will look at another common fatal error – Incorrect Positioning vs. The Competition. The most common errors that we see (frequently in the same presentation) when talking about competition are, amazingly enough, total opposites:

 “We have no competition”

 “We combine the ‘best features’ of four competitors.”

This is not just a pitch problem. It says that you don’t know WHO your customers are or WHAT they want or WHERE you stand in the marketplace. Let’s look at how this error shows itself and what it says about you and your plan: “There are no competitors.” – Either you have failed to recognize direct competition or you are ignoring alternatives such as “build it yourself.” “No one is doing this the way we do.” – Of course not. You offer a unique product, exclusive features, different pricing, revolutionary sales strategy, blah, blah and blah. However, uniqueness does not mean lack of competition. “We have no competition because this is an industry/market that has never used XXX to solve this problem.” – This sounds good but it also means that you must convince people to trust your XXX. Your competition is the status quo which puts you at a disadvantage. “We have no competition because people don’t know there is a problem.” – If potential customers are not feeling the pain, your product will be a tough sell. If you want to become an evangelist, this is the way to go! Preach your gospel if you wish, but people will hear “Time and Money Sink.” OK, those are pretty obvious. You can fix those, right? Good! Now lets look at one that is not quite so obvious:

Defining your company in terms of your competition

Your company is uniquely defined by its own strengths, ideas, values and products, not by how it compares to others. You need a strong position – one that would be clear and compelling even if competition doesn’t exist. Here’s how this error shows itself: “We combine the best features of our competitors, letting them show the way to our success.” – It’s nice that you have learned from the mistakes and successes of others, but “combining the best” is not the key. Each of your competitors has made tradeoffs to make their products the “best” for their target customers. Things that you see as “not the best” may, in fact, be the best for their market. What makes you so sure that enough people will not only agree with you but will be willing to switch to your product? The Feature Comparison Graph – This is the chart with rows listing all of the features and columns listing all of the competitors. It’s full of X’s and check marks everywhere except in your column, where it is all check marks. What baloney. (Actually, that’s not exactly what we think, but this is a G-rated blog.) “We’re just like X, only we’re Y.” So you are betting that Y so monstrously cool that customers will flock to your product. Well, Y had better be super-awesome! And it better be impossible for X to copy – or even to copy one-half of Y. Congratulations. You have just placed your fate in the hands of your competition. “We’re the same as X, only cheaper.” – Cheaper cannot be your only strategy. It might be part of your plan, but it will only last until the established competitors meet, or worse yet, beat your pricing. (Does anyone remember when people used to pay real money to buy a web browser? That lasted until Microsoft decided to give IE away for free.) A variation on this same theme: “We do 75% of the features for 50% of the price.” Less for less is NOT inspiring. OK. So how can you effectively contrast yourself against the competition, but not let them dictate your identity? Tune in next time and we’ll suggest some very effective solutions. -Steve Hogan

3 Reasons Why µPE™ is Better

There are dozens of articles on venture capital, private equity and angel investing, but what about µPE™ – Tech-Rx’s Micro Private Equity model? µPE™ is a new asset class that has yet to be fully realized by the industry. However, it is truly an appealing and promising investment model that traditional investors should take notice. Below are three reasons why µPE™ should perk your ears.

1.    µPE™ is lower risk.

µPE™ is lower risk than investing in a brand-new startup because there are fewer unknowns as they are later in the game. By making the investment later in the game, you benefit by knowing if the technology works, what the market response is, what the strengths and weaknesses of the current team are, what the operational effectiveness of the company is, plus knowing what has or has not worked previously.

2.    µPE™ has shorter exit periods.

µPE™ targets 24 to 36 month exits, which is much shorter than typical angel and venture capital investments.

3.    µPE™ is the virtuous investment.

Forget the money to be made, µPE™ breathes life back into a faltering company and is beneficial for society! It saves a technology and prevents wasted capital! It is the ethical investment.

What are your thoughts on µPE™?

Are there any rival asset classes comparable to µPE™ that you can think of?

Let us know!

-Nikki Griggs Business and Marketing Associate, Tech-Rx

7 Things Investors Don’t Want to Hear

Learn from the experience of Bob Graziano, CEO of Ford Australia, and just say what you mean. Earlier this year, Graziano was under fire for using meaningless jargon to announce that 1200 jobs were planned to be axed. Forget that the downside was negatively perceived, the use of meaningless words to announce this decision was portrayed as scheming. The use of jargon typically creates a completely abstract façade to mask what is really trying to be communicated.

Below you will find seven words and phrases (and our reaction when we hear them) that are like nails on a chalkboard to investors, journalists and everyone else that listens to countless pitches a day. Save yourself an eye roll and stay away from these words and phrases in your next pitch.

1.    Poised

As in…Our company is poised to become a leader in the software development space. (Gee, I sure hope so, but we’ll be the judge of that.  Just tell us what you do!)

2.    Next-generation technology

As in…Our next-generation technology is the solution to today’s problems.  (Well, that’s a lot better than last-generation or even current-generation technology.)

3.    Leverage

As in…By leveraging our dual-platform, your work is seamless.  (How about “Using our…?”)

4.    Cutting-edge

As in…Our cutting edge-technology is the next Google. (Probably, in fact, most-likely not. However, we might be interested if you just cut to the chase.)

5.    Move the needle forward

As in…We are moving the needle forward.  (Better than moving it backwards.)

6.    Drinking the kool-aid

As in…We aren’t drinking the kool-aid here.  (How about “We disagree?”)

7.    Paradigm shift

As in…We are essentially shifting paradigms. (And we are “essentially” tired of listening to words and phrases with no meaning.)

By refraining from using words such as these, your message will come across more authentic.

Are you guilty of using jargon? What other words did we miss on our list?

-Nikki Griggs, Business and Marketing Associate, Tech-Rx