The 9 All-Too-Common Characteristics of Technology-driven Companies (...or why the dot-coms crashed!)

The Burden of a High Potential
Technology companies have a reputation of being "high-flyers" -- that is, they have high potential for rapid and significant growth. Companies like Microsoft, Cisco, Dell, and Google underline that perception. But for every technology company that flies high, there are hundreds of others that can't make it past a sales mark of a few million dollars or can't cross the line to become profitable. Often it's these companies that come to KLynn looking for a way to bust out of their doldrums and realize the high-flyer potential they have. These companies all share certain characteristics.

The Good Idea
The most common characteristic is that they tend to have a really good idea behind their business. Yes. Their problems are not because they have a bad idea, a bad product concept or a bad service concept. Just the opposite. They have a good idea and they know it in their bones.

Solutions Looking for Problems
But too often, what they also have is a solution looking for a problem. They know they have a good idea, true, but they do not know who has the problem. Because the founders of these companies are often technologists themselves, they have the view that a really good idea should be sufficient to draw customers out of the woodwork. If we build it, they will come. (see 'Magical Thinking' below.)

Ambiguous Markets
That type of view complicates their entire business model. If a company hasn't found the problem their solution is for, then they haven't found a market. Without a market, finding customers is difficult (at best).

What often happens is that the company is glib about where the problem is that they have a solution for. "Our market is the Fortune 500" is a phrase I often hear. That's just not good enough. It doesn't mean anything in terms of how the company can get to the market.

In contrast to that glibness, let's take a company like NEBS (NYSE: NEBS www.nebs.com). NEBS' market is small businesses. They have the name and address of every one of the small businesses in their marketplace. As a catalog sales company, they know exactly who they're selling to. They have to. Without a name and address they cannot mail their prospective customer a catalog. So with NEBS, there's no glib description of the market; knowing who their prospects are is a core value for the company.

Poor Understanding of Customers
A poor understanding of the marketplace can only result in a poor understanding of one's customers. Too few technology companies really understand their buyers. Why did they buy? Who made the decision? What other products or services did they consider? What else do they buy? How often do they buy? These are just a few of the questions that most market-driven companies can answer, and most technology-driven companies can't.

Looking at NEBS again as an example of someone who does know their customer, they can answer these questions and many more. They also require their management team, executive and middle-level, to each visit a number of their customers every quarter. Customer knowledge is a vital component to their business and they have incorporated that into their very culture.

Insufficient Measurement of Results
Outside of the lab or the engineering development organizations, technology-driven companies tend to be equally glib about the measurement of results. It's a strange contradiction of disciplines. They will know the number of lines of code that each software component has, but they will not know how well the last advertisement performed. They will know the Mean-Time-Between-Failures (MTBF) of every hardware component they use but they couldn't tell you the average value of an order or the maintenance plan renewal rate for their customers.

Poorly Articulated Goals
This becomes clear in examining the goal statements of technology driven companies. Too often, technology-driven companies have goals like: "Be the leader in... " or "Dominate our markets!". But these are not goals to manage to. Good goals are goals where progress can be measured and good goal articulation includes the measurement criteria; e.g. "Be the leader in network routers as measured by... " or "Dominate the screensaver market as measured by...".

Inability or Unwillingness to Set “Strategy”
To make matters worse, technology companies often have difficulty setting strategy. Generally, this is because the company doesn't know who their market is and has too many good ideas for it. They're all good ideas! Everyone of them deserves to be developed and launched!

Too many ideas, too few markets, and a limited amount of cash make strategy essential. But what is "strategy"? Many managers think strategy is about cleverness. It's not. Strategy is simply prioritizing. Every aspect of a firm's business plan needs prioritizing. The priority of markets is the market strategy. The priority of products and product development is the product strategy. The priority of channels is the channel strategy and the priority of sales initiatives is the selling strategy. Strategy, a.k.a. priority, defines how we may invest in the many opportunities available to us. The term "counter-strategic" then means: we are investing in something counter to our priority.

What's often observed in technology companies, if one looks hard enough, is that there are strategies being executed counter to the priority or there are simply no priorities. Obviously, this is not OK.

Difficulty in Scaling
Well, really... if a company has ambiguous markets, if it doesn't understand its customers, if it doesn't measure results, has poorly articulated goals and won't prioritize, difficulty in scaling is often the least of their problems.

“Magical thinking” (or Dangerous Ego)
Sergeant Friday on the old detective series "Dragnet" used to say: "Just the facts, ma'am, just the facts." But there is something about technology that seems to imbue its worshipers with magical powers and causes them to think that they can defy the laws of marketing physics. Two statements that typify magical thinking are as follows:

"There is no competition."

"I know the market."

Most often, both of these statements are wrong. There is no substitute for facts. Gut feel just doesn't cut it.

Marketing IS a Technology.
The big mistake that may technology companies make is not to recognize that marketing IS a technology. As a technology it is the application of a science. (Yes, Virginia, marketing is a science.) As such, it can be measured and tested and predicted with a surprisingly high degree of accuracy.

So... think about it... Now does the dot.com crash make sense to you?

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