Crossing The Chasm – Lesson#1 – Marketing In The Early Days

Where Do We Start??

Initial Assumptions:

  1. I’m going to assume you have a business concept, a strategy, some funding (bootstrapped or otherwise) and a product in some stage of development.  You may have some customers or you may be looking for your first but you are fairly early on in your company’s life but perhaps beyond pure start-up.

  2. I am writing from a B2B perspective but most of this is applicable to all businesses.

  3. While Crossing The Chasm ("CTC") focuses mostly on marketing and selling I will touch on product planning and development as well.

  4. Lastly, I will assume you have read the book and are familiar with the concepts without reviewing and reiterating the great teachings in the book.

Given you can see as clear as day how you are able to solve some of businesses biggest problems and help them save or generate huge amounts of dollars it is only fair to assume that someone closer to that business (the customer) will see your solution as the answer to all their prayers, right?  WRONG. 

Education is one of the single biggest portions of  a sales cycle in the early days.  In most cases you are trying to sell them something that they don’t even recognize that they need yet.  I know in my situation we spent countless hours and dollars trying to educate prospects on the basic NEED for what we do.  We also spent untold amounts trying to build awareness and lead generation marketing campaigns through the years.  In hindsight I would have ENTIRELY cut out these programs.  Money is tight and intuitively you think getting your message out to the masses will build brand awareness and will mass educate the market on your fantastic approach to solving their problems.

RECOMMENDATION #1 – DON’T SPEND WASTE MONEY ON MARKETING PROGRAMS IN THE EARLY DAYS

If I had to do it again (and by that I mean, the next time I do this) I would spend all those efforts on tracking and speaking to established bleeding edge early adopters within the target verticals/customers that have the most strategic value to me as a reference.  Finding bleeding edge early adopters should be the single focus of marketing efforts.   I want to be clear that when I say target early adopters I am talking about PEOPLE NOT COMPANIESPeople lead the early adoption of new technology.  Yes Corporate culture and willingness to take on these types of projects is important but in my experience, even in a let’s say less than progressive industry or company, you can and MUST find people who are visionaries and those are the people you need to market and sell to.  Seems pretty logical but tactically how do you execute against this?  Here’s my lesson’s learned for your consideration:

  1. Regardless of the type of solution you are offering and the functional area of the organization your solution is applicable to it is usually easier to find someone in the IT group than on the business side simply because of their background.  This person will be your sponsor, your advocate and it is important that in the early days you really view them as a Partner more than a Client.  Many of these people can be found using bleeding edge technologies as that is their disposition, so social media tools, SXSW type events is where they will be hanging out to try to get info about the newest and shiniest things happening in their world.
  2. Look for companies that have already crossed the chasm selling into the general space you are in and reach out to them.  They will have lessons learned that will be as and more valuable than what I am telling you here.  The most important thing they will have is the name of PEOPLE that they dealt with at the companies they sold into.  Early adopters typically don’t change, even when unsuccessful.  Finding a person inside a target company that sponsored/led/bought another visionary offering was critical to our success.  This is the person you need to contact, court, and convince that you can help them.  They will understand more than anyone else the problem you are solving and the evolutionary way in which you are going about solving it.
  3. As you look into your target industry for ideal strategic candidates, in my experience the ones who are most likely to be open to your message as Company’s are the ones who are in the Top 20% of the industry and the ones who are in the bottom 20% of the industry.  The top 20% are there for a reason and have a couple things that are very important to you as you look to sell/partner with someone.  First, they probably have access to cash more readily than weaker companies in the space and second they also have an interest in staying ahead of everyone in their space and are willing to invest in new technologies that will continue to push their performance and create further distance between them and the middle class in the industry.  Bleeding edge people are attracted to these types of companies and are given more flexibility to thrive in this type of an environment.  Companies in the bottom 20% come at it from the opposite end but are viable for a different reason.  Finding a bleeding edge person is harder (but not impossible) in these companies but the culture of the company is more open to leading edge change because in many cases they have fallen so far behind the industry leaders they know that they need some game changers to get back in the game and in a lot of cases they have tried all the “non-evolutionary” solutions available to them with little or no effect.  Both of these are good customers for different reasons which I will get into in another post when I talk about “Sales In The Early Days”.  The middle performing companies are much harder to get into when Crossing because the risk of them investing in something new and having it fail from a personal perspective is very high.  The company is performing OK and often the culture of (the risk of) failure in a mediocre company does not support individuals stepping out and taking risks where in successful companies this risk taking and failure potential is accepted and frankly expected!

SUMMARY-KEY LESSONS

  • DON’T SPEND PRECIOUS FUNDS ON MARKETING INITIATIVES
  • KEY IS FINDING EARLY ADOPTERS…PEOPLE NOT COMPANIES
  • FIND PEOPLE WITH A PROVEN HISTORY OF SPONSORING LEADING EDGE INITIATIVES
  • RESEARCH OTHER TECHNOLOGIES THAT HAVE BEEN ADOPTED IN YOUR TARGET BUSINESSES AND FIND OUT WHO SPONSORED
  • FISH WHERE THE FISH ARE…USE CUTTING EDGE TECH/MEDIA TO FIND CUTTING EDGE PROSPECTS
  • OFTEN EASIER TO LOCATE IN ‘IT DEPARTMENT’ THAN IN THE BUSINESS
  • TARGET COMPANIES THAT ARE TOP OF CLASS LEADERS AND BOTTOM OF CLASS LAGGARDS IN THEIR INDUSTRY

Agree, Disagree, please share your experiences.

Is Your Message Clear?….Twitter Your Business Description

Had an great conversation while attending the conference on the value of simplicity. Many organizations, including mine, can be accused of complicating their message and making it difficult for their employees, their customers, their prospects and their community at large to understand what they do.

An attempt of this for Ivara would be as follows:

“Ivara provides business intelligence software to improve physical asset performance and reliability in capital intensive industrial companies”

While this is a very valuable exercise I would caution against over-simplifying. Twitter is a great tool BUT if it takes you 160-180 characters to appropriately state your message that is not the be all and the end all. The point is be able to articulate to your community what you do in a memorable, repeatable, accurate statement so when you get a couple minutes to introduce yourself in the elevator or at the conference people will get it. Another great exercise is to do this with your Executive team and ask each of them to do this and compare. The variation in what comes forward will provide evidence of how clouded your message may be in the market. By the time the message gets from Exec to employees to customers to prospects, etc, etc imagine what a mess it can be if it is not crisp from the start. It’s like a bad game of “telephone” from when you were a kid!

Couple to-do’s for you as you look to grow your community:

  1. Send me your “twittered” messaging and let me see if I can clearly understand it and would remember it
  2. Ask your co-workers to do this and send it to you via email within 15 minutes. Significant variations will tell you that a follow on meeting to clarify this statement is required.

Send your messaging and let me know how your to-do’s go. Clarity of messaging is key for all stakeholders and community members.

Conferences, Community and Social Media

Had the good fortune this past week to attend one of the premier conferences in our industry (RCM09) and meet with several of the main players in our space, the asset health and reliability space, and with several customers and prospects who are looking to take the next step in their asset performance journey.  Here is a picture of our booth:

IMG00053-20090323-1626

One of the leaders in our community and the conference organizer Terry O’Hanlon is embracing social media as a content delivery, engagement and community building tool.  The conference had it’s own Twitter handle which was helpful in a couple different ways:

  1. It allowed those who were attending to talk up the event and virtually meet new people and set up meetings before even arriving at the conference
  2. It allowed people who were not able to attend to participate with the rest of the participants and hear what was going on and follow along from their office
  3. It acted as a news media source.  During the conference there were major announcements and press releases and conference updates that needed to be communicated and this was a great media to disseminate the information

As you look at how you build your community a few points and suggestions as a follow on to my previous post as you look to take the next steps.

  1. Just Do It! – Be a leader and get started today.  Control the medium, control the message, control the space.  Start distributing content that is of value and point people to where the content resides.  Become the trusted advisor for resolution to their business issues and point them to others when they have problems that you are unable to solve.
  2. You Don’t Have To Do It Alone – who are the leaders in your space and what are they doing online.  Reach out to them and work with them to set up a site, or better yet post to your site.  Talk to your customers and partners and determine how and what will add value to them and work with the ‘gurus’ of your space to deliver it.
  3. Start twittering, blogging, etc at your conferences and let people know you are there.
  4. Consolidate your online contribution and make it easy for people to find you – If you have a website that is your principle communication vehicle is your blog linked to the website and vice versa so they are easy to find?  Is your Twitter handle and link on your blog and website?  What about your business collateral?  Put it on your business card.  Put it in your email signature line.  make it easy for people to find all your contributions and thoughts on your community so that they know where to go and don’t have to search.

Remember that building a community takes time, patience, dedication and is an investment in your company, your community, your customers, your employees and your prospects.

Some math to show the reach of social media.  The Twitter conference handle generated 86 followers in a couple weeks.  Lets assume 1/3 were already using Twitter (my estimate from reviewing the list) and that means that approx 60 new people in my community were reached using social media due to the commitment and effort of one of our respected industry leaders.  Over time if those 60 users add 60 users each in the community (fairly conservative assumption) the community has grown to 3600 in fairly fast order.

Now maintaining those new community members and growing that community is dependant upon the continued flow of VALUE ADD content.  I and all of us at IVARA will do our part to contribute and lead this great community and care and feed for customers, partners, employees and prospects.  For now we have our IVARA BLOG, our IVARA TWITTER  and many webinars, etc that link through our website.

What are you doing in your space?  Are you investing in and giving to your community, if you don’t someone else will…step up and make the commitment, get started today.

Please comment on your thoughts, experiences, successes, failures so we can all grow our communities together.

Product Planning

There have been a number of great posts lately on the importance of creating an excellent user experience with your product. While a detailed look at a product planning cycle would be a full article I thought touching on the main points may be helpful.
Peter over at Tech Capital Partners in KW has a good post on the topic where he articulates thoughts on “The experience IS the product” and the importance of establishing and maintaining a superior user interface.
Mark MacLeod over at StartUpCFO does a great job at nailing the importance of staying focussed on the product at ALL stages of a startup (early-late) and how it is a critical component of company growth.
As your company grows and the footprint of your product becomes larger and larger it is critical that you have a process in place (Product Planning Process) that allows you to:
  1. Capture all the required data to build a plan.
  2. Ensure that you are considering your architecture in lock step with the plans for the product. (A lesson Twitter has been learning)
  3. Validate with Market and document requirements.
  4. Plan timelines and resources required to complete

Capture all the required data to build a plan

There are many inputs into what the next shiny thing is for your product or what the next new product should be and it is important to collect data from various different sources so you have perspective and as close to full information as you can get. Any decision related to your product must come with input from customers and prospects. Get the good the bad the ugly. Don’t wait for this info to pour in, go out and get it. User groups, web 2.0 tools, hosted onsite sessions, webex’s, basically any way you can make it easy for the customer to provide their thoughts, suggestions and feedback…..just make sure you get it. In addition to customers talk to your sales people, your technical support group, your call centre, your development group. Get as much data as possible. Lastly make sure you are looking at what your competition is doing and what new entrants to the market that may be on the periphery of your product are doing.

All of this data collection is not event based. This is a continuous process that must be working every day in your organization. Make it part of everyone’s job to collect this info and have a formal central repository where it is easy for people to dump their info as it is collected.

Ensure your underlying architecture will continue to support your plans

This seems to go without saying but it doesn’t. Time and time again I see companies whose product evolves to a point they never imagined it would and it creates significant problems if the platform is not supportive of the type and pace of new product releases you want and need to do. Validating this regularly will allow you to not get too far down the path before having to make a possible switch. No one wants to have to switch something significant midstream but the reality is that with the best forethought and planning things can change in the marketplace so fast that you may eventually have no choice.

Validate with the Market and Document Requirements

Once you have defined a roadmap for the product validate it with the group you collect data from. When building the roadmap and communicating back to your group it is best if you can lay out for them your thoughts (based on what you know today) for the next 2-4 releases and where you see the product going, with the caveat that there may be a fair amount of change given the time horizon you are presenting is long.

Plan the Timeline and Resources

Now the execution. Build the plan to deliver what has been scoped, look at resource gaps and ensure you have a plan to secure the help required and that timelines are built for delivery to customer that are reasonable with a fair amount of buffer in them for….well…you know.

Summary

Everyone agrees that customer experience and the continued velocity of product development is critical for early startups and for more established companies with a start up culture. To successfully manage this it is important that you build a process to inform you and allow you to plan your way through to improving the experience. the above contains a brief example of the major requirements and this process will be very different depending on the size and scope of your company and product. the important message is HAVE a process that is part of your company’s daily pulse and you will stay in tune with your customers, the market and success.

Doing Business in Russia, what I’ve learned so far…

One great way to start (and perhaps stay long term) in a new geographic market is through your channel parteners. We have several really good ones that assisted us in our journey into Russia. here is what I’ve learned so far……..
When you think about selling software and then you think about Russia as a market, we finance types probably tend to screw our faces up and take a step backwards as we dread the amount of work and headaches that we will be toiling through in the upcoming months and years to deal with this strategic imperative.
What about the VAT implications, the customs problems, the withholding taxes, the FX risk, the IP risk and so on and so on. The thing is it’s really not that bad if you focus on the details and ensure you set things up properly. To detail the steps and conversations of this would be more like a feature articles than a blog so I will summarize and you contact me if you want to discuss further or find out more but here are some of the highlights.
IP Aspects
There are certain civil codes and rules that must be followed when executing a “valid” license contract in Russia. I am told that taking shortcuts or omitting some, any or all of these points can cause significant problems and not wanting to test that hypothesis I (and I suggest you) complied. I won’t list them all but they include things like:
  • including a detailed scope of the rights being licensed
  • identifying the software in more detail than we usually do
  • the term of use (and perpetual doesn’t work it has to be tied to something or it will be deemed to be 5 years so you have to get creative here)
  • the type of license (ie non-exclusive, non-transferable, etc)
  • the territory (if applicable)
  • any reporting requirements of the agreement

Under the law registration of your software with the Russian patent office is NOT mandatory however, fighting infringement cases without it is near impossible without it I’m made to understand.

The governing law of your license agreement can be anywhere in the world that you would normally use. The caveat is that where there is difference between the governing law of that country, province, state and that of Russian law, Russian law will prevail. This principally applies to some of the specific items listed above and I would still recommend you use a governing law outside of Russia.

VAT, Withholding Tax, Customs

In Canada we have a double taxation treaty with Russia which means that assuming you provide your custome with proof of your company’s residency when you sign the contract there will be no withholding tax requirements (otherwise it is 20%) associated with the License, Maintenance and Support and Services revenues/billings.

License fees are exempt from VAT tax but training, installation and support services are not. All are subject to an 18% reverse charge VAT assuming your company is not a resident of Russia. It is really important that you agree and document with your customer that you are going to “gross-up” your invoices for these VAT eligible services. They will then be responsible for self collecting and remitting the VAT to the Russian agency and you then receive the same payment you otherwise would have net of taxes. This also prevents you from having to setup and be a VAT filer in Russia.

Support is a little tricky and you must be careful that new versions of your product that the Russian customer would receive while on Maintenance and Support do not contain any “new software product” or and plug in type releases that can be run seperately from the software originally purchased. Enhancements are fine but there is a grey area that you should review depending on your software, release cycles, etc. If you are deemed offside on this it will result in a number of tax risks that I won’t detail here.

Customs is not really an issue unless you physically ship your software to your customers. If you are like us this is not really an issue as most software can be delivered electronically through FTP download or other means.

There are a myriad of other tax issues for your Russian customer on the other side of these comments that I haven’t detailed but suffice is to say it can be very punitive to their books if they intentionally or accidentally misstep along the way.

Call to Action:

The Russian market is a huge opportunity for us and we are continuing to expand into that space carefully learning and asking for help each step of the way. I would encourage you to spend some time researching and understanding what is happening with your target vertical market in Russia and scoping out the opportunity, weighing the risks and evaluating the use of your limited resources in this market. There are plenty of well known established North American businesses operating resident in Russia who would probably be interested in partnering with you. Once you make Russia successful this may open up your relationship with them in other areas of the world as well which will help drive significant growth in your business…….good luck and let me know if I can help!

Ivara Commercial…stay tuned for your regularly scheduled program

Just to provide you with more background on what I do and where I work now I thought I would blog a little information on my company, Ivara. I am the VP Finance and Admin at Ivara Corp (parent company of Aladon LLC).
Ivara is an asset reliability software company located in Burlington, Ontario just outside of Toronto. Our target market is large fixed plant, continuous manufacting facilities principally in the metals and mining, pulp & paper, power generation and utilities and CPG verticals.
Our value proposition is that our software coupled with our implementation and maintenance methodology improve business performance by preventing industrial equipment failure while increasing production and lowering costs. Ivara was started in 1996 and is backed by two VC’s (Almasa and Propulsion Ventures based in Montreal, Quebec).
As in any growing business our customer’s success is directly correlated to our success. Success means different things for our customer depending on their strategic and competitive position in their market. In some cases we have worked with customers to reduce maintenance expenses as they try to make adjustments in their cost structure. In some cases we work with customers to drive more throughput with the same asset base through improved uptime and productivity of their assets. In all cases we strive to reduce the maintenance cost per unit of production whether they can sell as much as they can produce or they are slowing down production.
By analyzing why, where and how a customer’s equipment fails, Ivara’s software drives the right work at the right time.

Ivara has a proven solution and I am thrilled to be part of what we all see as a huge opportunity in an expanding and still underserviced space in the software landscape.

If anyone would like more info on what we do check out the website, contact me directly and I would be happy to set up a time to discuss more in a one on one setting or with a larger group at your organization.
I now return you to your regularly scheduled business and finance updates…..

Welcome!

Welcome to my blog on all things finance and business related in SME’s. I specifically live in the software world but many of the topics and comments are relevant in any industry. Early stage companies have a whole host of day to day issues that must be dealt with, avoided, managed and planned that are unique from those of some of our larger friends. I have many years (and scars) invested in attempting to navigate the landmines and pitfalls along the way. As many of you will know, heading up Finance in a small or medium sized company is a role that requires flexibility, creativity and the ability to wear many hats. In the upcoming posts I will blog on (hopefully) areas of interest and relevance to others in this space. I hope you enjoy my thoughts and insights please send comments, argue my positions, call me out, debate and we will all learn from each other.