‘All I want is .01% of this huge market, it is billions and billions of dollars big’ – is a very common fallacy. If you aspire to 0.01% of anything, you will get 0.0%. Why? Because, in most markets, the top 2-3 players take up most of the market share and leave nothing for the rest.. If you wanted a soft drink, would you really look beyond Coke and Pepsi? If you wanted a cloud hosting service, would you really look beyond Amazon and Azure?
The aim, then, should be 20% market share. How is that possible? What you need to do is define the market such that you can aspire to 20% of it..If you want to be, say, 100 crore, define the market to be 500 crores, then you can be 20% of it.
A few examples will help make this clear.
- A small company one of us spoke with, was in the business of real estate. Well, real estate in India is a big market, and people struggle to make money in it, as did the person we spoke with. It was only when he decided to focus on building and managing hostels for students that he began to grow.. and grow and grow.. now he is eyeing the US market..
- Another company one of us spoke to, wanted to excel in open source software. Which is well and good, but open source is a big, big field and there are many big companies in it.. we advised him to focus on one open source software, and he decided to focus on Drupal – pretty soon, he has established himself as a leader in Drupal software, was able to hire a team to master Drupal – now, anyone who wants to build anything on Drupal or maintain or upgrade systems on Drupal, thinks of him.
- This company was in tourism – also a big and competitive space.. on our advice, he focused on US universities sending students on study tours and exchange programs to India – now, any US university who wants to do it, and many do, call him first.
What does focus do for you? Very simply, it makes you the one to call.. and you can build up expertise in it, and keep increasing your lead over everyone else, as you continue to learn more and master the issues and challenges of the domain.
We always bring up the lesson from Shivaji, who chose to fight the Mughals, not in the open plains, where the infinitely superior numbers of the Mughals would have overwhelmed him, but in the hills of the Sahyadris, where numbers don’t matter, since only a small troop of soldiers can get through any given path, and where his knowledge of the terrain was infinitely greater. Choose your battlefield wisely, to suit yourself.
A cursory survey of Inc’s fastest growing small companies list will show you that focused companies grow the fastest – from companies that provide a platform for coffee growers to sell directly to end-users, to mattresses, to companies devoted to buying back your e-waste and recycling it.
The example of Documentum discussed in Geoffrey Moore’s Crossing the Chasm, is worth studying in this light.
Documentum was a company with a solution for document management. Now, who doesn’t need document management? Everyone needs it. So they were sitting on a good product in the proverbial ‘billion and billions’ sized market. Trouble is, they had hardly any revenue, or traction.
Until they chose to focus on the department in pharma companies that deals with regulatory filings.. not even pharma companies, the specific department that deals with regulatory affairs – they handle millions of documents, and put them together in a proposal to win approval from the FDA, for instance. It can take months just to put together the documents, and every day’s delay is costly – not only does it delay the launching of the drug itself, but as soon as you file for your drug, everyone else’s goes to the bottom of the pile. If you delay, it will take you years to get to the top of the pile again, by which time the market will be saturated by someone else.
By focusing on this special need, Documentum was able to grow from $2 million in revenue, where it had been struggling for years, to $8 million, then $25 million the next year.. spreading like wildfire, not only from pharma company to pharma company, but downstream and upstream as well, to vendors, to shopfloor systems, eventually to the derivatives trading desks of financial giants!
By focusing, you can demonstrate to your clients that you understand their specific problem, are committed to solving it, and will get better at it.
Frequently Asked Questions:
- But isn’t it dangerous to focus? what if the market goes away? what if some large player enters the market with much more marketing muscle?
Yes, it is risky.. all these things could happen. You should grow as quickly as possible so you can fight off these intruders, and put your roots down deep enough that these storms cannot topple you.
Anyway, what choice do you have? Do you think you can compete with Microsoft (who, by the way, is probably the only company to actually be the solution for everyone.. nobody else has achieved this feat before or since..). You are struggling anyway, isn’t it better to take a chance and dive in?
Second Orbit 