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November 27, 2004 03:33 AM

Categories: Strategy and Leadership

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mitjal

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Joined: 11/11/2004

Hello,

I have read and studied a lot of articles about starting a (software) company and also got a lot of helpful information from this forum.

I am trying to start a new software company, the trouble is I don't want to make the mistake and develop a product that does not help anyone.
I got some ideas but after some Google searches I found the market pretty much crowded in everything.

How do I go about making a search for a market where I can sell sucessfully?

I understand there is a certain risk with any product we would develop as the product is by far not the only factor of selling it sucessfully, but I would like to minimize the risk.

All and any answers very much appreciated!

Discussion:    Add a Comment | Comments 1-25 of 31 | Latest Comment | 1 2 Next »

November 27, 2004 7:53 AM

Mitjal,

A story. Greg Gianforte, the CEO of Rightnow Technologies, which had the best performing hi-tech IPO of 2004, started his firm this way. In the mid-90s, with the advent of the Web, he spent some time on the Web searching for a new product idea. After looking around, he discovered there was a need for a web-based customer support function, one where customers can get their own answers instead of calling an 800# and speaking to someone.

To define his product and determine if there was a real interest in his product, web-based customer self-support, he developed a list of the feature/functions he thought he needed for the product. He then proceeded to call his potential customers, call-center managers. And he told them he had a product which would be out in 90 days and he read told them the feature/functions he had listed. When they said no, he would ask why. And when they told him because of such-and-such feature, he would add it to his list. He called a couple of hundred call center managers.

When he finished from what he called "market research through selling," he had a good product definition and since he was a developer he did create a product within 90 days.

Greg is unusual in that he doesn't mind cold-calling at all, when most of us get in a cold-sweat at the thought. And he is unusual in that he is a technologist who is also great at sales. But regardless, his approach is the right one. Find some problem that is underserved in the market today and then test it with potential customers.

Brian

Brian Turchin CEO/Founder Cape Horn Strategies, Inc. Helping CEOs Increase The Value Of Their Businesses [url]www.capehornstrategies.com[/url]

November 27, 2004 8:08 AM

Thanks for your answer.

Yes I've read Greg's story on the inc.com webpage, I find it very interesting.

I think in the past years there was still more room for new software and it is much more crowded right now, but I think I finally got an idea for a product that would sell.

If I am publically asking many people about the idea, how much chance do you think that somebody would stole it? Am I being too cautious?

November 27, 2004 8:23 AM

Mitjal,

Here are several options. There are probably others.
- Have anyone you talk to sign a Non-Disclosoure Agreement.
- Build a prototype of your software product and then ask those you show it to sign a Non-Disclosure Agreement. This will limit who you show your product to--some won't want to bother getting a NDA signed--but it provides some level of protection.
- You have some network of business associates, whom you trust. Take them through the idea and get their reaction.
- In speaking to potential customers, limit the number initially to 5 or 10, so you limit your risk.
- Put a business plan together and see if you can interest early stage investors in your product idea.

Brian

Brian Turchin CEO/Founder Cape Horn Strategies, Inc. Helping CEOs Increase The Value Of Their Businesses [url]www.capehornstrategies.com[/url]

November 27, 2004 11:27 AM

Mitjal,

You have asked an excellent question! "How do I learn if there is a real market need?" Because without that need, you really have no company at all! I believe Brian┬?s provided some excellent advice! And it sounds like you┬?ve done your homework!

Although this is a huge topic- that one could write a book about - I┬?ll zero in on the last subtopic: How to be cautious, without being too paranoid.

Most technologists make the mistake of being overly paranoid - to the point of not being able to determine IF there is a real market for their idea / product. Product comes out, no one buys, and they wonder why. Asking for an NDA adds perceived value┬? it may also be ┬?too much┬? to ask.

There are three things to think about that - when taken together - should provide you a real edge in bringing the right product to market.

Speed:
Clearly, once you┬?ve defined a real need, that people will prioritize above other purchases and pay for, you will need to bring your product to market as quickly as possible.

Target market:
If you think in terms of your customers┬? needs instead of your product, you┬?ll come to the conclusion that the people who you need to talk with (most likely) aren┬?t product developers, but users. Yes, they can talk with other solution providers, but if your (software?) product solves a problem that is not currently being solved by software, you may have a real competitive advantage - in that your users may not have direct ties to other solution providers. If they do, then you can be choosy with whom you talk.

Value:
There is another way that I have found very useful: Describe ┬?the value they derive,┬? not ┬?what it does.┬? In this way, you don┬?t need to get into details about your product┬? you can focus on how they benefit. In fact, this is a VERY important point┬? because this is how your customers will ultimately value it┬? and how you will determine the price you should charge (Which I submit needs to be done BEFORE you ever design a product! Look elsewhere in these forums for the process.) In this way, you won┬?t need to describe your product at all!

Hope these ideas help!

Mark

November 27, 2004 11:41 AM

I come from the school of "measure three times and cut once".

Determining not only whether there is a market need, but essentially how you will address that need is the key part IMO. Spend the time researching and figuring things inside and out.

Some people are sometimes in the fortunate position of "being in the loop" such that they see market trends, new technologies and can get a good idea if they fly or not (I think a lot of VC players are in that position). Most of us are not, so the grunt work of market research will take longer but is very necessary.

---

Robert Dubicki

November 28, 2004 12:03 PM

Thanks for all your answers, I found them very informative...

About my idea - I have researched if anyone has done this particular product and after a long search found a company.
My solution would be a bit different, with some (significant) added features.

Now I am going to ask some companies that this product is targeted to if they would find it interesting and then I will decide whether should I enter the market or not.

What do you think?

November 28, 2004 5:28 PM

What you want to do is get to know people in those companies really well. That's how we build our products. We build it to specs of a subset of our market and they help us solve their problems. Then, we know that it is built around their business process and by using multiple companies we are sure that it is flexible for the marketplace.

You will want to learn how they do business, what details are important to them to track, what the software MUST do, what it would be nice to have it do and what is shouldn't do. For example, if they already use an accounting solution in the marketplace, then it might not be feasible to add the accounting side to your product, but an interface to their accounting system would be nice, etc. You also use them to learn what the market will bear for pricing.

Then, as you build your solution, you continue to work with them and ask for feedback. Obviously, they get a drastic discount on your first release and they become your first customers and they are compensated for helping you. They also become your biggest referral sources and promoters.

Meeting a vertical niche is a great plan and it is a lot easier to build a successful and viable solution using this strategy.

I don't know if you're like me or not, but I pick my ideas up as I go about my day. I'll be engaging in some type of interaction and it will be obvious to me that there is a product or method that would work better than the way it is being done. It's where my six successful ideas have originated from and I have several more, sitting in my head ;). I'm really excited for your venture and to hear the details as you progress.

Lisa

November 30, 2004 3:40 AM

Consider that you have a technology and not a product. What you need are some systems integration clients who can in turn be used as reference customers when you take the application you build for that client and turn it into a product. Then, you will have a product and a market.

Traditional market research is the deathbed of software companies, particularly when the technology is discontinuous. So don't do any market research. And, don't expect to go vertical without the systems integration client. And, while you are at it, don't spend a dime of your own money on developing the product. Find a client willing to pay you to develop the product.

In Christensen's newest book, "Seeing What's New" there is an interesting figure in the preface. Here the authors separate out continuous, discontinuous in existing markets, and discontinous in new markets innovations. Even cooler is that the difference between the last two type so innovation is the notion of ontology in the philosopical sense. You have to have new sortables. That means that you have to have new metrics and new words, or at least new definitions for old words.

Who best to define this ontology than the customers themselves? That's why you let people with money define them for you as you express those definitions via software. It's not so much teaching the market as learning from it. But, it isn't market research, again in the traditional sense.

The other interesting thing about this graph is that as you move from continuous to discontinuous in existing markets to discountinous in ne markets, the risk decreases, while at the same time the opportunity and its upside decreases as well. So traditional market research will support a reclassification of your discountinuous, new market technology such that it fits as a continous technology. Being discountinous is about positioning. So most technologies can be either. Traditional market research works for companies with promo dollars selling corn, but fails when you want to talk about real market share and real market dominance. You can't come to dominate an existing industry. Forget it. Amazingly, it's right there on that simple graphic.

So you might want to think of systems integration gigs as market research, of software development as market research, and software development as learning rather than teaching.

David Locke

November 30, 2004 3:46 AM

There was a paper a few months ago in a strategy magazine, not the typical ones you see at B&N or Borders. The article explained Christenson's results in a different way, but was not written by him.

The article discussed the difference between customer intimacy and customer heterogenity. The former were good at continuous innovation, the latter discontinuous innovation.

The article points to a way to resolve your market research problem and that is to contact many diverse businesses. While you are doing this, you need to avoid accidental segmentation caused by self selecting offers. The more random the companies seem the better. The point here is to increase your customer heterogenity.

It is much easier to talk with an existing customer base. But, if you do, you are looking at continuous innovation and lower returns.

David Locke

November 30, 2004 9:59 AM

Traditional market research is the deathbed of software companies, particularly when the technology is discontinuous.
Wholeheartedly disagreee.

Furthermore, few products are truly discontinuous IMO, and if they truly are, your market research should tell you that. I'll quote another sage, Warren Buffet: Risk is not knowing what you're doing.

Study the game to develop a game plan. Do the market research. Talk to prospective customers as part of your research. Talking to prospective customers is an extremely important part of market research. Find a compass. But don't fly by the seat of your pants.

---

Robert Dubicki

November 30, 2004 10:24 AM

Hello,

Yes, I will am currently planning to do at least basic market-research...
But how do I get input from companies that our product is suited to?
I currently do not have any contacts with them so it is a bit hard.
Maybe I should not be so cautious and just cold-mail some companies that our product is suited and might be interested.Is this a good idea?

November 30, 2004 10:43 AM

Yes, cold calling is going to be part of your "market research". Its tough, but you have to seek out your market at the early stage, it is not going to find you.

Approach these companies by saying that you have been working on a product that solves XX and XX business problems. Identify how you solve those problems thus saving them time and money. Go from there ...selling your concept will help flush out your marketing messages, positioning, product features, etc... feedback is golden.

---

Robert Dubicki

November 30, 2004 11:11 AM

Dave,

I'm confused.

You say "Don't do any market research" (which I totally disagree with... unless you're talking about something else), and then you say "Who best to define this than the customers themselves?" Um... isn't that the goal of market research?

Cheers!

Mark

November 30, 2004 12:17 PM

Mark,

The problem is one of customer intimacy vs. customer heterogenity. The inventors dilemma is due to listening to the customer. Listening to the customer will always get you continuous innovation rather than discontinuous innovation. The payoff for discontinuous innovation is much higher.

The typical means of doing market research is picking an existing category and trying to figure out how much of it you can get. Your research will lead you down the wrong path, because the numbers you generate will be more than some fraction of 1%. With an existing industry structure, a late entrant can't get more than that fraction of 1%. I used to scoff at the guys that wanted 5% linear growth every year, because that growth is always going to be at the expense of someone else's customer base.

The other way to do market research is via demographics profiles. That has never worked for me, because I'm not in a consumer market.

To me market research is something you do within a short, defined period of time. You put together a survey. You send it out. You get your responses. You analyze the results. Then, you do what you were going to do anyway. If you have customers, great, ask them. But, if you don't, who are you going to ask?

Doing SI gigs is a long-term process that doesn't fit into my definition of market research. It comes down to being a learning company. Call the difference short-term and long-term memory, both involve market research in different ways.

David Locke

November 30, 2004 2:09 PM


The typical means of doing market research is picking an existing category and trying to figure out how much of it you can get.

Only in examples textbooks Dave so that young undergrads can grasp the concept. But let's get real, in real life, market research is rarely so narrowely defined IMO. Market research is essential, but its not only looking at numbers. The more you know, the better off you will be. Talking to prospective customers is part of market research too.

---

Robert Dubicki

January 18, 2005 7:53 PM

Mitjal,

he doesn't mind cold-calling at all, when most of us get in a cold-sweat at the thought.Brian


The sales process is, IME, often ruined by focusing on the SALE. Think about how you'd feel as a customer if the sales person is focused on "how can I sell this person XYZ?".

In fact, that's why I always thought I'd hate sales: it's always done wrong. If the focus, instead is "how much can I help this person, with the constraint that they can and are willing to pay for the help (solution, etc.)?"

Likewise, in the above example, if you let the goal be "let me find out what it would take to sell to this company (what features, etc.)" you can NOT fail.

It's kinda like the scientist doing an experiment: the goal is to answer a question. In that regard, every properly executed experiment is a success, regardless of the outcome.

If you call 100 companies and none of them are interested in buying, you may have saved yourself a lot of time and money developing something no one would buy.

And it's amazing how many people work very hard at a worthless product. We've been approached by therapists with speech therapy software that was pointless (couldn't be used by the patient independently, etc.). So much passion and effort, but now focus on the OUTCOME: AM I MEETING A CUSTOMER'S NEEDS.

January 18, 2005 11:23 PM

Most version 1.0 software gets written with not a single customer in sight. No, it is a productized technology that is faster, better, ..., comparative, comparative, comparative. And, that is what gets sold. Later, they hire a product manager and listen to the customer.

That said, a disruptive technology doesn't have customer. A disruptive technology can still have contributors, the more diverse the better. They may become customers later. But, given their diverse nature, you probably will sell only a small group of them, because you are going to want to focus.

It seems like the sales person has to change with each technology adoption lifecycle phase.

David Locke

January 18, 2005 11:31 PM

Dubicki, I've done qualitative research on trends and such. I just never knew that that I could call that market research. Thanks.

RonPaul, when I say don't do market research, that is mean for disruptive positioning that doesn't have an existing market. If you only do productizations after a client pays you to do so, then your market has been selected for you. You might want to ask if that market is big enough. If it isn't, don't take on that client. Keep looking for a client until you find that they are in a market thats large enough to launch a vertical product into it.

I know that most people don't like the risk of a disruptive position.

David Locke

January 19, 2005 9:12 PM

We started our company litte more than one year ago with a product idea in mind and we went through the same set of questions you have posted. We did the thing that makes the most commonsense to us, i.e. ask the people whom we think are potential customers / prospects. But, in implementing this idea we took a slightly different approach - decided to do a Primary market research.

People think it is difficult, time consuming and costly. I beg to differ it is not. It is hard to get an external agency who can understand your idea and do this successfully for you. You have to be sitting in front of your subject to make sense out of the research. We prepared a questionnaire and kept in our mind, instead of paper. Senior people don't like to fill out a form. We setup a appointment with our likely prospects and told them and we are doing research (and not trying to sell anything) and we would need their input. We put the questions across like a conversation and we audio recorded where were possible.

During the interview we (I went on these calls personally) worked hard to resist our anxiety to sell. Most CxOs / VPs in large global companies gave us appointments. This is was surprising, as we thought they are typically inaccessible. While it is not very easy, it is not difficult at all. Myth broken. We meet around 30 people in total. This gave us enough input for us to see the needs from the customer angle.

Also this gave a good list of prospects that we could use 6 months later once our product is ready. In fact, when went to one of old prospect who participated in the research, he recognized us and it made things little easier for us to move to the next level. Hope this helps.

Suresh Sambandam - OrangeScape W: www.orangescape.com

January 20, 2005 8:53 AM

Suresh,

Great insights. Couldn't have explained it better myself.

January 20, 2005 9:45 AM

Suresh,

Excellent post. The process you laid out is great for gathering customers' insights. Well done! If other companies followed this, they would be far better off!


Regards,

Mark

PS: The only comment I would make is - there are people out there that can also perform this type of research AND understand your product. To think otherwsie is an assumption. Also, statistical analysis of the open-ended responses could provide further insights. (There are ways to do this, which can yield some pretty incredible results. Do some web search on the term "affinity diagram.")

January 20, 2005 10:27 AM


PS: The only comment I would make is - there are people out there that can also perform this type of research AND understand your product. To think otherwsie is an assumption.


I agree with you, that there will be 3rd party consultants/agencies who can do this. However, the time and energy required to find such good people is high and also they might be quite expensive. On the other hand, during the early stages of your idea how else you could spend your time in a best way instead of talking to potential prospects to understand their view point. Also there are lot of things you stand to gain like developing a face-to-face relationship, understanding their body language, etc. The advantages of doing it yourself far out weigh hiring someone externally, IMHO.

Suresh Sambandam w:www.orangescape.com

January 20, 2005 10:58 AM

On the other hand, during the early stages of your idea how else you could spend your time in a best way instead of talking to potential prospects to understand their view point. Also there are lot of things you stand to gain like developing a face-to-face relationship, understanding their body language, etc. The advantages of doing it yourself far out weigh hiring someone externally, IMHO.

Suresh Sambandam w:www.orangescape.com


I agree. We've always done our own marketing and so we really understand our customers much better than our competition.

What you MIGHT do is use a marketing research person to teach you a bit about how you'd do that. Or get a really good book on it. AT the early stages of the game, I think sweat equity is vital.

Perhaps having a marketing person attend some of those meeting with you to help direct things might be a good use of both your time and thiers.

May 8, 2012 3:59 AM

Thanks a lot guys, u r actually helping a lot of us out there. Im still kind of a newbie in this field, so i dont have much to comment on.

View unverified member's comment - posted by RAKI

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