Ever been to a talk on start-ups? The usual war stories, nuggets of business wisdom and formulae. You get the picture: it is something you can duplicate in some 1-2-3 sequence and become equally successful. In particular, the repeated stress on being 'new' or if not new then somehow novel that makes the jaded listener more than a bit wary of the pitch that he knows must comes next.
How many times do we have to hear the term Business 2.0 or some other new 2.0 for us to realise that being new is somehow of itself valuable and will be the primary selling point for our continued attention? Once in a while however, someone goes against the grain and admits that there is no entrepreneurship gospel; that starting a business, and especially a tech-heavy business, is complicated and quite tricky.
If we thought marketing isn't easy then the marketing of technology is even harder, said Moris Simson, President and CEO of WaveNet. Before founding WaveNet - an advisory firm that helps other companies identify, select, and implement business and investment decisions - the Harvard Business School graduate held various senior executive positions at companies like Nortel Networks, Bell Mobility, Mitel Corporation. He was speaking at a recent talk organised by SMU's Institute of Innovation & Entrepreneurship.
Pitching your value-add
According to Simson, it is important to understand, clearly, what sells; and then frame it around real customer benefits as opposed to what the inventor-stakeholders think it is worth. We need to understand not just who benefits, which just about what any MBA student has learnt to ask, but who benefits when? he quips. And why [buy] from me?
As an example, the Global Positioning Systems (GPS) was already a proven technology more than 20 years ago as far as positioning accuracy was concerned. However there was no corresponding change in the marketing position of the companies that claimed they could profit from such a technology.
Why is this so? The GPS devices could not proliferate till maps were readily available for in-car GPS devices. The whole business of geo-location and other location-based services like proximity-based advertising and so on were all predicated on the content. Without that being readily available and licensed to providers to build applications on, the value chain did not emerge to any extent that made sense to the consumer.
The total potential value to the customer was only to be realised some 25 years later after the initial GPS inventions were made and protected. In this case, you cannot have the 'If I build it, they will come' mentality, said Simson. You've got to find some way to convince people there is value in what you are trying to do.
Finding value in all the wrong places
Making mistakes is not the exclusive domain of wet-behind-the-ear start-ups. According to Simson, even experienced entrepreneurs make some pretty basic mistakes. Some of the most common include unchecked assumptions about the real state of market needs, ignoring substitutes or alternatives and the 'abstraction' of payment. What makes you think you can sell something when people have been conditioned by the Internet culture to expect it for free?
Citing another commonly heard assumption of budding business start-ups, Simson cautions that many say they want to make a better and cheaper gadget. He notes that in most circumstances, no start-up can be a cost leader for that typically requires massive scale - something that tilts in the favour of the established players. So while 'cheaper, better, faster' may sound like a nice slogan, it does not usually work out in practice.
The entire issue of value chain assembly is essential to the marketing of technology. No technology can exist or create value in isolation from its applications. By extension, many inventors and their backers who claim they have invented disruptive technology will find it doubly hard to articulate their value proposition in ways that the market will appreciate.
For Simson, the issue has never been about the technology or even the platform that many technologists claim they are riding on (think 'cloud computing' and other current buzzwords), but rather, the ability to deliver value to the end user in an irresistibly compelling fashion.
Referring to Google, the dominant search engine, the speed for monetising an invention is the ultimate indicator of value, said Simson. The ability of Google to identify and occupy an unique niche in the evolving Internet landscape; to capitalise on search as a way to deliver value for the seeker while having sellers fund the whole thing; to transform advertisement from a passive to an active medium - that speaks volumes about entrepreneurial brilliance.
For a bigger bite, fix your teeth
Technology, according to Simson, is rarely the core of any real business. It always starts as an enabler on which other elements need to be added before the whole has value.
Dell, one of the largest and most famous computer markers, had no defendable position in technology for desktop computers when it first started, said Simson. In essence, Michael Dell had one great idea - eliminating the middle-man (distributor) to deliver the benefit of reduced costs to customers. By allowing mass-customisation of computers from a pre-defined list of available options, a new business-model was born.
While Dell is an exception of a technology company winning without a technologically-induced competitive advantage, most successful companies excel through having unique technology strength and capitalising on that to splendidly market the benefits of its application.
To illustrate this point, Simson shared a detailed case study of a company that seemed to have gotten its balance right: Align Technology Inc, a US company that deals with dental malocclusion, in other words, the fixing of crooked teeth. They had technology that could measure a person's dental misalignment, and through computer modelling, predict the changes required to realign the teeth to the desired state.
Their software would then build 3-D models, showing the series of progressive steps that a set of teeth would have to go through between the current and desired state. These 3-D models translate into a set of wireframe instructions that can programme machines to custom manufacture a set of transparent plastic braces. Next, as the braces are issued to the patient, a set of instructions on how long to wear each one in sequence before moving to the tighter one is provided. This means no more back-and-forth trips to the dentist for brace-tightening procedures.
Additionally, the transparent plastic braces resolved an issue long faced by orthodontists: it offered an alternative to ugly metal dental braces - something which would usually prevent people from even considering the procedure. [They] figured out a way to get people who were never going to use braces to consider using them, Simson noted.
To drive sales, Align Technology tapped on a network of dentists. These dentists had to be certified by the company in order to use the patented technology. With all future upgrades licensed to these dentists, they were motivated to use and to recommend its use to patients. The technology also allowed dentists to save time on each patient while charging a premium for the convenience.
Simson believes this is an example of a mix of factors crucial to understanding how successful businesses worked. Clearly, the company got its priorities right when it patented not just the technology but the field of use in aligning teeth and basically ended up owning the field of application for what patent lawyers call freedom to operate. It is fashionable to talk about 'breaking the rules', but rules must only be broken for a valid reason. Any business must deliver value to the customer in ways that others have not done before to be successful, he said.
However, it is important to be highly selective of the problem, he cautioned. All the innovation and openness and technology out there cannot help if you don't choose the right problem to solve as a start-up company - a timeless nugget for all budding entrepreneurs itching to hear the latest and greatest.