Killing The Platform Legend

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By Michael Tanner, Managing Director, The Chasm Group, LLC

The world seems to think there is a well-known process for creating rapid adoption of technology products. This process has been written about in scores of books and articles. It's been described by numerous successful entrepreneurs across a plethora of industries at a host of conference keynotes. My guess is that if you would read 1000 business plans, this process is somehow at the core of three-quarters of them. It goes like this:

  1. Develop an architectural vision for your hardware and/or software.
  2. Sell this vision to technology buyers as a "next generation" solution based on your world-beating new architecture.
  3. Along the way, discover and then develop your next-generation "killer-app." Identify and create a solution for an urgent business problem.
  4. With this killer-application now on hand, now go sell it to line-of-business buyers.
  5. Add salt and pepper, a dash of nutmeg, and then repeat with other line-of-business buyers in the same company to create demand for new and interesting IT application development. Stir violently, and heat until boiling over.
  6. Soon, the IT department sees they have a real mess on their hands. They decide to standardize. Of course, your products are now in the majority of departmental use… so you are the most likely candidate to standardize on.
  7. You now declare your product set a platform, redirect your sales team onto the CIO, and satisfy their insatiable appetite for your new next-generation platform.
  8. The IT department, having nothing better to do except seek out this new infrastructure, now sees the huge ROI gained by adopting your platform quickly as the standard.
  9. Along the way, a host of other integrators and channel partners beat a path to your door as they figure out they can make oodles of money by being your partner, making eight or ten times the service dollars for every product dollar you sell.
  10. Your market capitalization now creates huge currency, which in-turn allows you to acquire other killer-app products and infrastructure that keep this cycle moving ahead faster and faster.

This story would read like science-fiction had it not been loosely repeated over the years by such leaders as Cisco, SAP, Microsoft, Autodesk, Oracle, Peoplesoft, Siebel, Intel, and a host of other popular technology companies. In fact, by hiring successful people from successful companies such as these it can be easy to get the impression that the cookbook above is more-or-less a sure-fire way to cook-up a success. These stories are so firmly rooted in our own Horatio Alger mythology that our brains seem almost pathologically programmed to try and repeat them.

Here is an important truth to think about: history is written by the winners. Think about this for a moment: for each successful fast-growth platform business, there are thousands of unknown companies that went out of business. Some closed-up for all the right reasons. They were grossly miss-managed, severely undercapitalized, had weak teams or hired the wrong people. But others had all the opportunity, money and talent. They did everything they were supposed to do according to the cookbook, but sadly, the market just never took-off. As one investor I once met put it, "we had a fantastic product, but the market was just not ready. We were just too soon for the market."

When ever I hear this statement I immediately think of a one of those high-power consulting words that I was taught years ago.Hoo-y.

If you ever hear that the market "is just not ready" this is just hoo-y. It's like saying you lost a sale based on price (no…you were out-sold…). It is a sort of speaking-in-tongues that translates loosely to this: "we had a really cool product, but we could never identify and answer a really urgent business problem that anyone had." In other-words, they thought they were following the cook-book because they knew all the great things the technology would do. It was obvious to the management team. Unfortuantely, there were just not enough end-user buyers that either understood, or agreed with them.

Why does this happen? While the reasons can be as high as a mountain, I have a hypothesis based upon seeing this screen-play acted out more than a few times in the past couple of years:

  1. The business gets funded based upon a vision for broad-market appeal.
  2. Early founders are completely attached to this vision and therefore sell it heavily
  3. Early-stage investors are fearful of being relegated to a niche with little return, and need to see, and sell a platform vision for investment. Corporate sponsors won't be sponsors at all unless they see that the new business is big enough that it can bring-in substantial new revenue that is material to the parent company.
  4. As a result, management insists upon horizontal, platform positioning at too early a stage of market development.
  5. The business-buyer never really can understand the value proposition of this new fangled technology as it is sold as a platform and not a solution.
  6. Because of an unwillingness to prime the pump with initial solutions, the company never really gains enough domain expertise to create demand at the business-end of the value chain, instead relying on IT and technology buyers, or worse-yet, relying on a service provider or channel to do so.
  7. As funding diminishes, it is increasingly difficult to transition to a solution orientation.
  8. The result: "We were just too soon for the market."

There are of course other options to going down this route, and there is always a risk-reward trade-off in creating any solution vs. pure technology orientation. But few other marketing options besides simply understanding and solving end-user customer problems offer enough clout to ever allow the transition to a platform downstream.

There is of course always the opportunity for luck; being at the right place; having the right partners; closing another round; getting the big deals. Most of the successful companies and people that have been written about have clearly been insanely lucky while most of the unknown companies have not. But consider that most overnight luck comes from doing the right things for a long time to create the opportunity for luck to present itself. Until there is a compelling and urgent business problem that buyers acknowledge with their money, the percentage of success that must be attributable to luck will be high indeed.

Mike Tanner is a Managing Director at the Chasm Group, where he provides advisory and consulting services in the areas of new venture development, market development strategy, operational planning, portfolio investment strategy and market positioning. Mike holds board seats for Apexion and Savi Technology, and sits on the advisory boards of Entivity and Unicru. He can be reached for comment at: mtanner@chasmgroup.com

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