Don Dodge (of the Microsoft Emerging Business Team) hits the nail on the head for creating a successful position from which to sell your start-up:
“It comes down to this; if the company in question has a product that is squarely in the domain of an existing Microsoft product than the valuation is some multiple of the internal development cost. If the company has market leadership in a new product space or market segment than the valuation goes up significantly.
…
Entrepreneurs should remember this. The “barriers to entry” are most often market position, not technical brilliance.”
I come from a background of working in an environment of technical excellence. I’ve worked in software dev teams where the code doesn’t get released until it’s perfect (well, almost perfect).
That dev team was part of a department whose strategy has been to concentrate on the quality of the propositions they build to the detriment of staying ahead of the competition. They’ve focused on technical brilliance and not market position.
Looking back on some recent projects, that’s bitten them on the arse. Yes, all their existing products and services are nice and shiny. But they lack one or two propositions that the competition are already offering – and that they should have been offering first.
It’s easy for us geeks to get hung up on the quality of what we are building and forget that there maybe others out there who are more than happy to put out poorer code in return for market position.
In a start-up environment, this is critical – and is why we have so many “perpetual beta” services floating around (but you don’t need me to tell you that). The point is we’re now seeing how this plays out into the end-game, when it comes time to flip your start-up.
I’ve come to realise over time that it’s simply not about having the better product – it’s just as much about the market position too (which as a geek is pretty depressing).
I call it the Starbucks effect – your local café can have the best roasted coffee in the world, but people will still walk to the Starbucks around the corner because Starbucks have market position. And they could always buy in your better coffee if they really wanted to anyway.
Geeks and coffee connoisseurs (often overlapping demographics) will assess which RSS aggregator and latte house is best based on the quality of the product.
But the world isn’t full of geeks. Most people will make their choice based on what is popular, what they’ve heard of and what their friends are already using – and that’s something us geeks need to remember.
Which is fine Ben until (and I’m assuming a service here) things go wrong on the scale front.
The problem with ‘good enough’ software and a concentration on features and whizzy stuff is that ‘scale’ gets forgotten. Maybe not in your organisation but it certinaly did over at 6A – along with – so I’m told – I number of other ‘Web 2.0’ businesses who are wrestling with the problem like Bloglines etc.
Now it may be that the platform providers have a specific problem – you tell me -you’re the geek…?
Hah!
Glad you made that realisation Ben. Unfortunatley the quality of the code or cleverness of the developers behind a solution is almost entirely irrelevant in the real world.
I wish I could give you some real world examples of my experience but take my word for it, shocking things happen.
Business is all about sales, marketting, positioning etc. You are just damn lucky if you work in an environment where quality gets the preference in the quality-features-deadline trade off.
The same applies to blogs.. mostly fluff.
Maybe, but you keep on returning Photar… 🙂
[…] New pricing models By Dennis Howlett Harvard wallah Nick Carr nails the argument about the new world of utility computing we’re living in. Discussing Oracle’s convoluted pricing model , he says:"Oracle’s certainly not the only software house jumping through hoops to retrofit traditional (and lucrative) pricing programs to a world of multicores, virtualization, commoditization, open source and software-as-a-service. At some point, the industry will arrive at a more rational basis for charging (or not charging) for software, one that truly reflects customers’ actual usage and value received. But as the old model goes through its death throes, expect to see more such contortions." (My emphasis added)I think I’ll just float this past the AccountingWEB team who can’t believe Microsoft can’t be toppled any time soon. I’ll also float it at mainstream media, which has been engaged to do SAPs dirty PR work on its behalf on the topic of help SAP explain ‘business integration .’ Good luck boys. Idea to press: Instead of sucking up the corporate Kool-Aid, (Jeez, the advertisers are the Kool-Aid dispensers aren’t they?) how about listening to what’s happening in the market as told to us by people who are working in it at or on behalf of customers? It might provide a different perspective. Oracle+pricing, SAP+integration, business+integration Marketing New business models Technology This entry is filed under Marketing, New business models, Technology. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site. Leave a Reply […]
I’ve been thinking about this a lot recently: “Geeks vs Markets”.
or… “Geeks vs Marketers”…
By that I mean, it isn’t actually that hard to make great coffee (you buy some great coffee beans, then add boiling water). But then you have to find someone who is going to give you £2 a cup for it. Oh, and then find some other people to pay your staff, and your rent, and your wife’s Knightsbridge shopping habit etc etc.
Then the equation moves away from tech problems (how to make coffee) and closer to markets (people… and how to get them paying for your schtuff).
I don’t find it depressing. I just find that at the end of the day, everything is primal and ruled by human nature.
Maybe I like fluff.