This has not been a good year for new concepts.
High tech companies keep stumbling in the marketplace – not
enough customers fast enough, not enough revenue, not enough
profitability, not enough growth in stock value. Small setbacks set off cataclysms of remorse, withdrawal, and
termination.
Perhaps some common sense is required here.
Even in mundane undertakings like the opening
of new restaurants or retail stores, failure rates are very high.
Eighty per cent of new businesses fail in their first five
years. The causes of
failure? Often cited
are inadequate capital, inexperienced management, and naïve
business plans. Sound
familiar?
The tendency is to throw the baby out with the
bath water rather than trying to do the hard work or figuring out
what’s wrong with the execution of an essentially good concept and
trying to fix it before time runs out.
That’s why dot.com is now a dirty word (although there are
lots of successful Internet-based businesses), Business Week writes
scary stories about the high risk of doing business with ASPs, and
online Marketplaces go from Hot, Hot, Hot to Not, Not, Not.
Have you been burned yet?
Or has the continuing bad news simply made you reluctant to
try anything new?
In fact, much of the value of many good ideas
goes to early adopters who can use the new concepts to create new
ways of running their business, or even craft new business
opportunities. Later, the ideas become simply part of the standard business
environment. Everyone
uses them, everyone benefits from them, and there’s little, if
any, competitive advantage left.
This means having a set of methods that allows
you to identify new concepts that are particularly applicable to
your business (or the future of your organization) and a good way of
evaluating the companies themselves to avoid likely losers.
Identifying Great Ideas
I have a technique that probably won’t work for you, but
it’s non-fail for me. Whenever
I’m looking at an absolutely breakthrough technology my heart
starts racing and the hair on the back of my neck stands up.
It doesn’t happen very often, but I’ve learned to trust
it. A sensible person
would tell me I’m just using my experience to judge that I’m
looking at something exciting and getting excited.
I guess so.
Getting excited is key.
A breakthrough idea should make you feel passionate, because
you’re going to have to explain it in a compelling way to a lot of
people who are going to think (a) What is he talking about, and (b)
Why should I care. If
the idea isn’t exciting to you, it’s hard to get through that
process and very hard to excite anyone else.
But getting excited isn’t enough. The idea has to have relevance to your organization (unless
you’re looking at it as an investment).
The best ideas solve long-standing problems which your
company’s management has failed to resolve.
Here, there is no need to establish the problem, just the
solution. Ideas that
will add revenue to the company, in measurable ways, by enhancing
existing businesses or creating new ones, are also very relevant
(but sometimes harder to explain and sell).
Evaluating New Companies
How, you may ask, should you evaluate the
potential for success of the new concepts that you see and like? It’s both harder and easier than you think.
The real trick is to be certain of the status
of what intrigues you. Is
it:
·
An idea
·
A test
·
Something in a pre-production stage
·
A shipping product
It is true that you can try things out early
and influence their design by being a pioneer.
It is also true that you can invest a lot of your time and
your company’s resources without actually having anything useful
happen.
Companies have different ideas about how much
risk they’re willing to take on and why.
·
Some user organizations are real space cowboys.
They’re willing to try anything, any time, for the
slightest potential advantage.
It’s what makes them happy.
Managers are judged by how many risks they’ve taken.
This is the kind of company that says “If you’re not
making any mistakes you’re not taking enough chances.”
·
Other organizations are very conservative and risk
adverse. They never want to be the first to try anything.
They believe in only using tried and true solutions.
They prefer old-line, trusted vendors and solutions with lots
of satisfied (and very similar) references.
They’re willing to give up competitive advantage for
safety.
·
Most organizations are somewhere in between.
They want to achieve competitive advantage where they can,
but they don’t want to take on too much risk.
That means avoiding companies that are unlikely to endure
long enough to implement and support the project.
It also means containing risk by selecting early use of new
concepts and products for places where failure might be unpleasant,
but it won’t be disastrous.
Beyond investigating and validating the status
of an appealing product or concept, there’s more you need to know:
1.
Is the company properly funded? If it’s not yet making money (revenues and profits), it
needs to have enough money in the bank to run for at least six to 12
months into the future, preferably more.
Otherwise, the management of the company will be spending all
of its time looking for money and very little of its time focusing
on products and customers.
2.
Is the company well managed?
You need to look for seasoned managers with relevant
experience. Be
particularly careful of companies where everyone comes from the same
place (they may be very inbred) or where all the management is
technical or non-technical. A
balance is best.
3.
What’s the company focus (product and customers)?
You want to be right in the middle.
If you have to significantly change the focus of the company
to get what you need, keep in mind that the next good prospect that
comes along may be able to do it, too.
4.
Are there satisfied customers or will you be the first one?
If there’s no track record to go on it’s hard to know
what kind of expectations are realistic.
It helps to know where the management comes from since their
experiences will flavor their notion of how customers must be
treated.
5.
What happens if this doesn’t work. You need to have a plan
for various back-out and recovery scenarios.
These might include non-payment, penalty payments, escrowed
code, arrangements for support from other knowledgeable sources, and
so forth.
Timing
Timing is very important.
Technologies have natural times to succeed in marketplaces
and they can easily be too early (as well as too late).
·
The mouse-and-window interface was first shown in the
mid-seventies by Xerox (on prototypes of the Star), but it took its
popularization first as proprietary bundled hardware and software in
the Macintosh (1984) and then as the Graphical User Interface of a
de facto standard operating system, Windows 3.0 (1990) before it
reached a commercial market. It
required the personal computer to reach a certain power and price
point to enable that market.
·
Voice Processing has been kicking around in vendor
laboratories for more than 25 years (we’ve been looking at it at
least that long). From
time to time, a little piece of it would surface, but it was too
fragile and expensive to make a commercial market.
Again, it was progress in software and Natural Language
Processing, together with changes in PC power and pricing in the
mid-nineties that finally made the timing “right” for voice to
start appearing in many types of commercial environments.
·
Apple’s Newton (and many other products before it)
failed completely to establish a pen computing market.
The Newton eve had the distinction of being ridiculed in the
popular press in the cartoon Doonesbury.
But just a few years later, taking advantage of advances in
processor technology, design, and better human engineering, Palm
Pilot found its market.
That is the task of hardware and software
vendors, looking for partners, and user organizations, looking for
competitive advantage in the next round of technology.
It’s very hard to
tell when the time is ripe and when you’re looking at something
that will be recorded in the history books as an interesting (but
failed) predecessor. Always
look to the opportunity. The
issues are
·
Who is it for
·
What does it do
·
How well does it match the target customer’s
perceptions of what he’d like to do or buy
·
Is it priced so that the customer will be readily
willing to buy it, in volume
When you can confidently answer all these
questions, the timing may be right for the market to run.
And then you can run, too, right at the front of the race.
