All too many would-be entrepreneurs engage in ‘me too’ entrepreneurship. They see that one or more companies are experiencing success with a specific product or service, and quickly enter the market with a similar offering. This “fast follower” strategy can in some instances lead to triumph. However, in many cases it leads entrepreneurs down the market equivalent of a cul-de-sac.
Wayne Gretzky is regarded as one of the all-time great hockey champions. When asked the secret to his success, his response was “Some people skate to the puck. I skate to where the puck is going to be.”
While most sporting metaphors are overused in the business context, this is a very powerful insight. There are two reasons why adopting a fast follower strategy is dangerous. First, markets are dynamic and constantly moving. In the time it takes you to develop a similar offering, the market may well have moved on (that is, the puck is no longer there).
Second, initial market leaders rarely secure sustainable market positions. Search engine pioneers, like Alta Vista, now stand in Google’s shadow. Early leaders in the social networking space, like Friendster, are losing market share, while late-to-market MySpace and Facebook achieved billion dollar valuations.
There are many reasons why early market leaders trip up. One of the primary reasons is that they allow initial success to cloud their understanding of their true market.
In a previous column, I posited that the easiest path to successful innovation was to identify a significant ‘pain’ experienced by an identifiable market segment, and develop a cost-effective solution to that pain. I stand by this. Yet this, in itself, is not enough to guarantee success.
Your solution may solve the pain (or most of it), and may be initially successful. Still, success comes easy when yours is the only offering available in the market – consumers will buy your product even if they are not satisfied with it, because it is the only choice available. The risk is that early victory will prevent you from continuing to analyse the market to determine whether your solution needs further refinement.
Thorough analysis of the market opportunity requires an understanding not only the nature of the solution being sought, but why it is being sought. What do the motivations of your customers tell you about your product, its purpose, and changing consumer behaviour?
You should spend time talking to customers to uncover answers to the following questions:
- Why did you make the purchase or use the product? – What does the way your consumers articulate the problem they were trying to solve tell you about how to best position your product, and what features it should incorporate?
- How much time did you spend researching and considering the purchase? -The perceived risk or importance of a buying decision is reflected in how much time and information is required to make it. If your product is a mid- to high-involvement decision, this should be reflected in the quality and availability of supporting information and warranties.
- What factors influenced your purchase/usage? – Issues that you may consider significant may not be relevant for the consumer, and vice versa. Understanding the critical factors may help you simplify or better target your offering.
- What alternatives did you consider? – The products that your customers consider to be substitutes for your products will tell you who your true competitors are.
- Do you feel you made the right decision? – It is important to revisit this question at different intervals after purchase, as satisfaction can increase or decrease over time, as the consumer becomes more familiar with the product.
- How would you improve the product? – It is an obvious question, but when was the last time you were asked this by any of the vendors you deal with?
- What kind of activities has the product enabled? and How has the way you work changed since using the product? – The answers you receive to these two critical questions may shed light on how your product is changing the market and/or consumer behaviours. That is, it will give you insight into where the puck is going to be.