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Bogus Assumptions Can Buffalo New Business Development Are faulty assumptions undermining your technology business plans? A top management consultant discusses fallacies and risks associated with common assumptions, and suggests some creative alternatives. Part I. By Richard A. Siegel How costly have invalid business development assumptions been to your company? I don't mean to be negative, but the sad fact is that too many companies have been assuming too much for too long. Here are two assumptions often made by upper management of industrial, technology-based companies when attempting to create and commercialize new products from their technologies. While they pertain primarily to a business-to-business environment, such as technology-based suppliers to OEMs, executives of government and university labs should take heed. Are they the only bogus assumptions that can buffalo new business development? Heck no. We can discuss more at another time. Assumption
#1: It may seem logical, but it's often wrong! Why? Let's start with the premise that if we develop new technology-based products that the market needs, we're moving in the right direction. I'm not talking about incremental changes to existing products, but bona fide, unique products that can produce significant new revenue streams. Here's where the logic breaks down: Good salespeople are successful because they make lots of sales. Their incentive is primarily financial. Sell more, make more is a concept that works for both the salesperson and the company. Have you ever heard the expression, common in the retail business, that "you can't sell what you don't have"? It's also true for every business and salesperson. If you spend time talking about products you don't have, and can't sell, you rob precious time from selling what you do have. So why would your salespeople take time away from servicing these customers with the very best products and services your company can offer? Fact is, they don't, won't and shouldn't! Sure, they learn what modifications customers want you to make to your current products ? incremental changes that can add value to your products and deliver new economic or performance benefits. But do the salespeople learn what entirely new products you might develop and produce for these customers that are feasible with your current or early stage technologies? No, that takes much more time, and in fact, the customer contacts with whom your salespeople are in constant touch usually don't know what new innovative products you might produce from your technology that could benefit them. These people are often a number of levels away from the individuals in these organizations who have this kind of vision, particularly if the customer contact is a purchasing agent, even the head of purchasing who has an entirely different responsibility. If you could secure this type of information from your customers, via your salespeople, you could more effectively direct your and product development efforts. Just don't count on it happening this way. Here are some alternate ways of securing insightful direction from your key customers. Technologist to technologist. Encourage your salespeople to introduce one of your more creative technologists to some of your key customers' creative technologists so they can explore new product possibilities. It won't take much time from your salesperson and can be considered a service to the customer. The dialogue could produce improvements to that company's products, or entirely new lines. Get the right people talking to the right people. Technical executive to executive. Or do it yourself. Look, you're a technically savvy, influential person in your company, right? You're the head of R&D, technology, or new business development with a solid technical background. Why not arrange some of these types of meetings yourself? They would be exploratory meetings with your counterparts at key customers ? with the people who, like you, are technically savvy and also influence their companies. These people have a depth of knowledge of not only their own companies' needs, but those of their customers and the markets they serve. The combination of your knowledge and your customers' knowledge can lead to interesting new product and process insights. And since you're working with your customer's upper management, both can make quicker decisions and agree on concrete actions, such as a joint development project that uses some of the customer's resources. Value-add to this concept by bringing to the meeting one or more of your 'creative technologists.' And, why not invite your counterpart to do the same? The more technology and product knowledge, and organizational influence that is face-to-face around the table, the better. If you can, select customers who are among the innovative market leading companies in their fields, since they are often the early adopters of new technologies, products and services and often have a higher tolerance for risk. They should appreciate the time you're offering to explore their problems in search of new product directions that can directly benefit them. In fact, since they are innovative market leaders, they could be setting the trends in their industries or markets. So, this investment in time can not only lead you to new innovative products for these customers, it can lead you to entirely new business opportunities in the market as a whole. Your best salespeople could identify the right contacts for you, or you could do it yourself. Assumption
#2: Really? Well, don't bet the farm. There are lots of folks running companies, divisions or departments who believe this about a technology their organization developed and perhaps patented. First question: Was this technology developed to meet an identified market need that, if filled by products enabled by the technology, can offer at least sufficient revenue and profit potential to warrant investment in development and commercialization? No small question. If your answer is yes, you've used a 'market-driven' technology commercialization approach. Bravo! (Perhaps you can tell where I'm headed here. While you've got plenty of work in front of you before making deposits at the bank, you're on the right track. If your answer is "no," read on.) "No" is the far more common answer among industrial technology-based companies. You may have also answered "no" if you developed the technology in connection with a government contract and now you're free to explore commercial 'dual use' opportunities for it. If you developed the technology without knowing whether the market needs it, you've employed a technology-driven approach to new product and business development. If you developed it under government contract, as far as the commercial market place is concerned, it's still technology-driven. The difference is that you may have recouped your development costs. In either case, don't spend another dime on commercial development until you can answer these fundamental questions:
There are many more questions. You've got serious, but manageable, work ahead before you can feel confident that your technology will have tremendous commercial value. Answer questions first A technology-driven approach can be just fine, provided you know when to stop investing and go get answers to the fundamental commercial questions. If you have at least proven that you can replicate the material, system, component or whatever, stop now! Cease further development until you can characterize the commercial opportunity. Simply having unique, protectable technology in no way assures you of a commercial success. You shouldn't make this assumption. You know this, of course. Yet how many companies pursue development of a technology without really knowing where in the market -- indeed, where in the world -- it's going to fit? There are plenty of unique, protectable technologies sitting on shelves that have never found a home -- and millions of dollars of write-offs on the books. Don't commit too many resources to continued development of a new technology without knowing what its commercial opportunity can look like, and how you'll need to shape your technology, products and business model to best capture value -- make enough money -- in the market place. This applies to a dual use program as well. There may be a tremendous opportunity, but you're really at the same stage as the technology-driven developers as far as commercial market opportunity is concerned. You too should make it your business to answer the fundamental commercial questions before moving forward with new development investments and the selection of alliance partners, if needed for commercialization. Opportunity assumptions based on a technology's novelty and patent protection alone can be very risky and costly. You don't need to make these assumptions and risk driving down an expensive dead end. Let the market help you determine if and where opportunity exists. Do your homework. If it turns out that insufficient market opportunity is projected, which is to say, estimated value creation potential does not justify your further investment, you can save yourself a bundle and shelve it, try to license it, or sell it. It might be an acceptable, even attractive, economic or strategic opportunity for someone else in a different situation, but it's not an opportunity for you. If you're a tech-driven developer or a dual use pursuer, you could consider initially taking some of the same steps suggested for assumption #1. Technologist to technologist, or technical executive to executive exploratory meetings. Personally, in the case of assumption #2, I'd recommend the latter. But it works differently here since the people you need to meet may not yet be your customers. You should be able to hypothesize various markets where utility of your technology may exist and where it might bring value. Starting with hypotheses is fine. Now determine who the innovative leading companies are in these markets in the region in which you do business. If you're global, identify such companies wherever they are. Determine the individual in those companies who has the highest level of technical expertise to explore attributes of your technology as they may provide commercial benefits to their products, along with the organizational influence to organize a commercial effort. Expertise + influence = opinion leader. These are essentially the same kinds of people we looked at in assumption #1 -- the technical opinion leading executives. But in this instance, if this person is not your functional counterpart, then you'll want to bring his or her counterpart to an exploratory meeting, along with one or more of your 'creative technologists' who are expert in the technology and its potential commercial applications. Set up these meetings. If you've selected the right people, your initiative and candor will be well received. Some of these people, and companies, could become your market entry customers or alliance partners. This kind of high-level exploratory meeting can be an excellent start to determining commercial opportunity, but it should be used in conjunction with a well-balanced and structured business development, technology commercialization process for maximum effectiveness. In any case, "let the market provide the direction." Richard Siegel is founder and CEO of ISIS International Inc., a Connecticut-based international consultancy specializing in strategic planning, new business development and international technology commercialization. He can be reached at 203/261-5300, Fax 203/261-4911 or rsiegel@isisusa.com. Article republished with permission of Technology Business Magazine. Copyright © 1999 Richard A. Siegel. All rights reserved. |
