Steve Blank

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.

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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Filed under: Customer Development, Market Types, Marketing, SuperMac | Tagged: Steve Blank |