SuperMac War Story 4: Repositioning SuperMac – “Market Type” at Work

With insight into our customers, the first part of our strategy was to understand what kind of positioning problem we had.  Was SuperMac attempting to introduce radically new products and create a new market?  No, not really. 74HGZA3MZ6SV

Was the company attempting to be a low cost provider by introducing cheaper products to an existing market?  While we sometimes cut the price of graphics boards, it was only because we offered our customers no compelling reasons to buy one that was priced equivalently to the market share leaders.  And we lost money when we did so.  Therefore, no, we weren’t really equipped to be the low cost provider.

Was the company attempting to introduce faster and better products to an existing market?  On first glance this was exactly what we were trying to do. But with a little bit of thought it struck us that if we attempted to do that, our competitors had a pretty substantial advantage, since they held nearly 90% of combined market share.  If we tried to match them on their playing field we’d never catch up.  They had more than enough dollars to outspend and out market us.

We knew from back-of-the-envelope calculations that I would need 3 times the combined marketing and sales budgets of the incumbents for a head-on assault. (I had found that the numbers 1.7x and 3x kept coming up time and again in attacker/defender ratios when I gamed out our market entry strategies.  It wasn’t until I found the extremely obscure Lanchester Strategy for market share that I realized that these ratios had their basis in operations research and the Lanchester’s Laws.)

So if we couldn’t be new, cheaper or attack our competitors head-on, what was left?  The real answer seemed to lie in attempting something a bit more difficult.  We needed to redefine or resegment the playing field (the existing graphics board market) so it favored us.  We needed to negate our competitors’ existing advantages and hopefully turn their strengths into weaknesses.

market-type

When we looked at the color graphics board market, our competitors had defined the market as one measured by technical metrics: screen resolution, number of bits of color, screen refresh rates, acceleration, etc.  We had been attempting to compete by their rules with the same types of technology messages.  I had a marketing department spending $4m a year trying to do so against competitors spending $20M year. The 3:1 Lanchester Laws said I would need $60M in marketing and sales spending to win.  I didn’t have it, wasn’t going to get it, and we needed to stop thinking that our path to success was just to “try harder.”

We needed to come up with a playbook with completely new rules, then execute relentlessly and with urgency. Up until now all the graphics board companies supplied “technology”, and it was up to the customers to figure out which of these arcane specs was best for their business.  Our first radical move was to redefine the market from SuperMac a company that sold graphics boards, into SuperMac a company that provided desktop publishing professionals with better color publishing tools.  We were going to be the leading supplier of color publishing solutions for the Macintosh. Our strategy was to resegment a hardware business − the graphics board and monitor market − into a desktop color publishing market.

To say this was a radical notion at first was an understatement.  I lost several very good product marketing people who couldn’t/wouldn’t get it, or who couldn’t/wouldn’t move with the urgency I needed.  But an 11% market share company wasn’t one I wanted to work in.  We were gearing up to go from status quo to relentless and continuous execution, and everyone needed to be on the same team.

Next, we needed to focus our messages away from technology and onto what the customers told us they needed – performance solutions for four key publishing applications.  Our company’s graphics boards were designed to speed up a key part of the Macintosh graphics operating system called QuickDraw.  All the marketing materials, data sheets, advertising, press releases, trade shows, etc. focused on the technical fact that we accelerated (made much faster) this arcane piece of computer code.  Technically our positioning was correct, and with an infinite marketing budget (my back of the envelope calculations said $60M) and time, we might have made this technical fact (QuickDraw acceleration) something a customer understood and cared about.  But we didn’t have infinite cash; we had just emerged from bankruptcy, and unless we could get customers to quickly understand why our products were great, we were headed there again.  Yet the customers not only had told us who they were – color desktop publishers – but what they cared most about – graphics performance when running their four key applications.

It didn’t take much imagination to realize that what we had to do was to tell our story around one key metric performance − performance for color publishing, performance on the applications that mattered.  And paradoxically we had to raise our prices.  Why?  Because if we were going to be the high performance color graphics company, we were going to have to stop competing on price and start building a perception of a high-value, high performance color solutions company.  Customers had already given us permission to do this, when they said they were price insensitive.

Now we needed to act.

What did I learn so far?

  • Deep and detailed understanding of the customer is the only way you can understand your “Market Type” choices
  • Market Type choice drives Positioning/differentiation strategy
  • Positioning/differentiation drives communications strategy
  • If you are resgementing into a niche in an existing market make sure it’s into a space that customers care passionately about and will pay for

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21 Responses

  1. Great story, Steve. Glad to see you blogging! A key lesson is that as an entrepreneur, you get to choose your segment. The question is, what characteristics do you weigh when making the choice? Clearly, your Market Types model is a huge factor.

    I like to talk about the fact that choosing your segment determines how you will reach your customer, what you will to say to them, and what the sales process will look like (since it depends on the buyer’s process). I need to look at working in Market Types, however, since the cost of market share acquisition differs drastically, even if the cost of customer acquisition were the same.

  2. I love the redefinition of the market. I am starting to execute an eerily similar approach in the Big Data analytics market.

    Instead of focusing on “technical specs” like the rest of the category, we are redefining to Information Delivery as the category with time/cost to Actionable Info as the metric, which is something we can compete on very well.

  3. [...] SuperMac War Story 4: Repositioning SuperMac – Market Type at Work « Steve Blank (tags: strategy) [...]

  4. Steve,

    Could you please write about the execution aspects of the business either with relation to SuperMac or in general (even better).

    Thanks!

    • Prakash, hold on to your seat because you’ll be getting more execution stories than you ever wanted. For now they’ll come out on Thursday’s with the “Secret History” posts on Monday’s.

      steve

  5. can’t wait! thanks :-)

  6. Steve, is this blog in addition to the book or instead of it?

    What part of this blog should I read if I am also reading the book?

    Thanks.

    • Denis,
      Over time the blogs tagged under the “customer development” category will build up a narrative of illustrative stories of how customer development evolved in practice. Very much in addition to the text.

  7. Steve,

    I want to buy your book but its not available on amazon.ca and it would be outrageously expensive to order it from amazon.com. Would you sell an ebook version on this site for all the rest of us trying to incorporate your model in our startups?

    That was a piece of customer feedback right there for u :)

  8. [...] Steve Blank has started a blog. Add this to your must read list. Steve is going to write about customer development and execution aspects of the business — maybe more stories than I ever wanted [...]

  9. Mahmoud,

    Here’s a second on the electronic version, but per Steve’s tip, I just bought it from Cafe Press and it only cost $6 to send it to me here in China.

    Hope it gets here quick and in one piece!

    Calvin

  10. [...] most (interesting) startups you’re either doing something completely new or you’re resegmenting an existing market. What you are not doing is competing in a known market on a known basis of [...]

  11. [...] VP of Marketing, we now understood who our customers were.  We had thought really hard about “market type” and decided to reposition the company from a technology provider to a solutions provider. Now we [...]

  12. [...] Type and Sales Teams If you remember from a previous post, startups fall into four Types of Markets. You need to hire the right type of sales people for the type of [...]

  13. [...] Type and Sales Teams Startups fall into four Types of Markets. You need to hire the right type of sales people for the type of [...]

  14. [...] Type and Sales Teams Startups fall into four Types of Markets. You need to hire the right type of sales people for the type of [...]

  15. [...] has changed the positioning of the iPod Touch twice. First, it was a multitouch iPod. Then it was a “game machine”. [...]

  16. [...] has changed the positioning of the iPod Touch twice. First, it was a multitouch iPod. Then it was a “game machine”. Now [...]

  17. [...] testimonials, and products that really work — that anyone can use. (You can also take the opposite approach on the “products that anyone can use” [...]

  18. Can customer segment awareness determine ‘Market Type’ within Steve Blank’s model?…

    Short answer is yes, it’s still a New Market. Just because two companies are struggling in a market where customers don’t know or understand their product concept it doesn’t make it an existing market. (It does prove the axiom misery loves company.)…

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