It’s a heartbreakingly common scenario — the technologist with the great idea, whose first instinct is to rush into product development without first testing the market. Notions such as market size and suitable price points are often neglected in the race to get a product out ASAP. It’s a scenario that so often leads to the creation of a better widget, but one whose asking price is too high for its market, or whose market is too hard to reach. Just think of Bullant (not to be confused with AA’s regular column — page 34). The revolutionary Australian software platform soaked up millions of dollars but couldn’t find a market to call its own.
Michele Levine is in the enviable position of having one of Australia’s best sources of commercial and consumer research at her fingertips. As CEO of Roy Morgan Research, Levine has had numerous entrepreneurial companies approach her seeking guidance.
“Sometimes we see people who are very, very focused on their product, and they are so unquestioningly convinced that they are right that there is almost no open mind to the fact that the market isn’t ready yet,” says Levine.
Many entrepreneurs get sucked into believing that things are happening faster than they really are. The dot-com bubble was a case of this phenomenon writ large. The stampede of early adopters to services such as e-commerce was misinterpreted as the vanguard of the entire population. Another common problem is tha people will often work from one example — their own private example — and interpret that as applicable to the rest of the world.
Levine says these mistakes don’t necessarily mean that the entrepreneur will fail, so long as they realise that their fi rst job is market education.
“Many wonderful new things have been things we never dreamt we needed, but someone had to go out and do the ‘entrepreneur bit’. Someone had to go out and bring in the business and do the deal.”
In a paper for the Committee for Melbourne’s Future Summit 2005 — Investing in our Future event in May, Levine described how too much of the debate around innovation was taken up with academic discussion. She says the real debate is more dynamic and thus, more fundamental; rooted in society’s needs, wants and expectations, and moving beyond technology and innovation to embrace entrepreneurship.
A privately held family company, Roy Morgan has had to reinvent itself with an entrepreneurial culture in order to survive. Nearly ten years ago, Roy Morgan made an acquisition that went sour, while at the same time losing a court case with the Federal Government that led the garnisheeing of clients. Levine says the business was staring down the barrel of closure, but rather than give in, it set the ambitious goal of selling $400,000 in additional research every week — something unheard of in a company that was better used to taking inbound work.
“It changed our whole focus and created a much more entrepreneurial culture. Tough times or adversity can create amazing creativity and entrepreneurship in an organisation.”
A second challenge came in 1996, when Roy Morgan decided to market its internally-developed software system, Asteroid, to other companies in the research industry. Like many technology developers, Roy Morgan had a great product but, ironically, had not done the research necessary to market it correctly. This was a huge change from just selling research, requiring the sales team to understand an entirely new market dynamic. Levine says the key was not to dwell on what the company thought was fantastic about the software within its own context, but listening to the market to determine what its needs were.
Roy Morgan failed to understand the new market it was entering, but was able to survive the transition. Most start-up companies that make the same mistake won’t be so lucky.
Brad Howarth is a journalist and author of ‘Innovation and the Emerging Markets: Where the Next Bulls Will Run’, a study on the challenges facing small Australian technology companies.
You can read his blog at lagrangepoint.typepad.com
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