Software Executive Magazine

February/March 2018

Software Executive magazine helps software executives grow their businesses by showcasing the business best practices of our readers, executives from established and innovative software companies.

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See that KFC? They could use it. And look next door — that Shell station could use this." It was the start of my awareness of "We Can Sell This To Anyone" syndrome. After some probing, I discovered that the software was already being used in a handful of hotels in the United States to ensure that fire extinguishers were current and compliant with local laws. It solved a pain point for hotel engineering management by document- ing when the extinguishers were being checked and provided visibility into their audits. The potential fines (up to $25,000 per violation) were large enough that they needed a way to ensure compliance. With that information in hand, we did basic research and determined that there were approximately 50,000 hotels (many being managed by a hotel management company) in the U.S. facing the same problem. The potential for millions of dollars in fines from the fire marshal was tremendous. Forget the KFC and the Shell station. We had a core target identified with sig- nificant and solvable pain, and we knew that with the right sales and marketing they would be clamoring for our solution. START SMALL AND OWN THE SPACE Now, I know some might be thinking that this problem would exist at any type of building, so why limit to ho- tel management companies? Here's why: People like to buy products designed for them. Every time I went on a prospect visit, the hotel management leaders would tell me, "We like you because you only focus on the hotel in- dustry. There are other building maintenance solutions out there, but they don't really fit our needs." The result? Over a few years, the solution was imple- mented in thousands of hotels and eventually became standard at large, global hotel management companies. To recap, here's why our solution was successful: ▶ SMALL NICHE (MVA) : Hotel management compa- nies (about 1,000 in the U.S.) ▶ BIG PAIN POINT : Millions of dollars in potential fines for unchecked fire extinguishers ▶ TARGETED SOLUTION : Aim at the core audience, and become high-demand experts in the space ▶ SCALE : Maintain focus, and continue communica- tion of commitment to this niche And this type of focus will work for your software company, too. Start small. Identify a big pain point. Own the space. Be aware of opportunities for growth, like ex- tending capabilities and solving even more problems in your space; but don't pursue them all at once. Stick to your niche. At some point, you will hit the ceiling in that industry. Then, and only then, will you be ready to take the next growth step and target that next niche. S success. To build the critical mass of new customers you need, you must cross over the chasm. The problem is that many software businesses devel- op "We Can Sell This to Anyone" syndrome before they hit critical mass with the original target. They fizzle out when they start to scale because they try to grab as many customers as they possibly can, and they lose the ability to both communicate and deliver unique value to their potential customers. Moore describes this phenomenon beautifully in his case study about software company Documentum. As a spin-off of a larger company, Documentum languished for several years at about $2 million in revenue during the early 1990s. But then something changed. Instead of selling to anyone and everyone, Documentum focused on a seemingly small market of the top 40 pharmaceu- tical companies. The result? Over a four-year period, Documentum grew to $75 million in revenue, and even- tually the company sold for $1.7 billion in 2003. THE SOLUTION: FIND YOUR NICHE How did this turnaround happen? Documentum suf- fered from a "chasm" problem. They needed to find a way to scale the company and generate more revenue, but they were spread too thin because they were trying to be all things to all people. Only when they found their niche did they achieve explosive growth. Seth Godin has recently begun referring to this idea as developing your "minimum viable audience," or MVA. Godin advises companies to stake out small markets they can serve extremely well: their MVAs. Documen- tum's MVA of 40 potential customers sure seems like a yawner to an outsider, but the solution was worth tens of millions to these 40 customers because of the tre- mendous pain it alleviated. The takeaway: Don't try to engage everyone, or you will engage no one. WHY SCALING DOWN IS THE WAY TO SCALE UP Focus on a tiny niche seems counterintuitive, doesn't it? After all, if you want to grow, you need more expo- sure, not less. But the truth is that if you want to create a groundbreaking solution, you have to be really good at solving a specific problem for a specific customer type. Here's a personal example of how this worked. In the early 2000s, I joined a $4 million system integration company. The company had been successful reselling bar code labels, printers, and mobile scanners in ware- house environments, with some proprietary software. On the day that I started, the CEO, who was a terrific salesman, said, "Look, our chief technical officer creat- ed this application on Palm OS-based mobile devices. We need to develop a piece of sales collateral so we can promote it." Then the CEO said something I will nev- er forget: "Anyone can use this. Look across the street. 39 SOFTWAREEXECUTIVEMAG.COM FEBRUARY/MARCH 2018

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