Selling into Disruptive Markets: The Use of Market Information to Determine and Establish Product Values

The Cheshire cat said to Alice, “if you don’t know where you are going, any road will get you there – and when you get there, there’s no there, there” – Lewis Carroll, Alice in Wonderland

Which way to go







The Cheshire cat could have been talking to some embedded vendors. If you don’t  understand or track the broader marketplace and what your customers and potential customers are doing and experiencing,  then how can you possibly develop the best strategic plan?

Historically, new and more forceful markets that redefine economic demand replace markets that create economic downturns. Today we are at a transition point in our economic recovery that will redefine markets, and we are currently witnessing an irrevocable upheaval in the marketplace for software design and development tools, components and services. There will be winners and losers. How then does an embedded vendor mitigate against uncertainty and find direction? We believe that market intelligence is the antidote to market uncertainty.

Let me suggest from the get-go that the true value of market intelligence is to assist companies in recognizing emerging (and disruptive) markets as they begin to crystallize. I hope that the following will make my case and affect your thinking. Whether you are a developer, a manager or a company executive, the survival and growth of your company is a priority. It is sometimes difficult for those of us trained in science to relate to non-deterministic market dynamics – yet, like it or not, we live in a market driven world – not a technology driven one.
Competitive markets are defined and exploited by matching product features to customer requirements. What is seldom recognized is that when competitive products exceed what the market demands, customers can no longer base their choice on which is the higher performing product.
This is when disruptive technologies take root, only to emerge later when they completely change the product landscape. Remember Hayes modems? Remember DEC/Compaq/HP? Remember Motorola Computer Group? It happens to small companies all the time – we just don’t read about their demise. They all read a lot of self-serving market research (which validated their view of the industry – not the realities) yet they are all gone now.

I am shocked more than amused when vendors wishing for me to write favorably about what their product can do fail to answer my question of “what do your customers think they actually need?” I am usually told that “once they see how cool our product is they will change their minds” or “we ran this past a couple of our customers”. Many, many moons ago in a universe far away (that’s 1969 for you young-ins) I built several medical companies and I ran clinical research and marketing. Every time a physician told me what he/she wanted I asked for a PO. We got really good feedback that way.

I was recently at a breakfast which included very senior industry representatives and industry analysts. I was given the opportunity to set the initial discussion and I spoke to the challenges that major reductions in DoD discretionary funding would create within the mil/aero marketplace. I was politely ignored while others gushed about the exciting future for their industry –offering glowing growth estimates as high as 20%.
As I was leaving a kind gentleman approached me and said “Jerry, you won’t sell any of your research if you continue to be so negative”. I was very taken back by the remark which he intended as a helpful hint. The role of market intelligence is a two way street. The supplier and the user have to have the same goals and define the appropriate questions that need to be answered.

This brings me to the point of this discussion. The real question that market intelligence needs to answer is how can vendors of embedded products minimize risk while enhancing their prospects? And how does solid market information support this.

Harvard Business School professor Clayton Christenson in his landmark book “The Innovator’s Dilemma” first described and coined the term “disruptive technology” to describe a new technology that unexpectedly displaces an established technology. Christensen separates new technology into two categories: sustaining and disruptive. Sustaining technology relies on incremental improvements to an already established technology. Disruptive technology lacks refinement, often has performance problems because it is new, appeals to a limited audience, and may not yet have a proven practical application.

Linux was a classic example; when it first appeared it was a lower quality OS that was promoted as being free (the tools weren’t), addressed users that lacked substantial funding and had a total market value south of $5 million annually. What established vendor needing to grow their business by $20 million annually would consider such a technology – and given their cost and accounting structure, could not see a profit if they garnered the entire world market. A similar story is told regarding modems and the demise of world leader Hayes.

So how does a vendor measure the value of their product and how do they monitor the growth of potentially disruptive competitive technologies?

Be one an RTOS/IDE vendor, or one that markets communication middleware, modeling technology, management requirements or static analysis tools, etc. one must consider their current competitive market status.

1)      How does your product compare with the express needs of your current and potential customers? Does it contain competitive features that not many of your customers use?

2)      How does your closest competitor’s products compare with yours? Do both your products offer more features that your customer’s require? Do they only cover some of their needs?

When competitive market forces result in product features that surpass customer requirements, don’t expect them to make choices based on a comparative analysis. Understand that if you don’t have definitive ROI data based on comprehensive market intelligence surveys of appropriate users, then the basis of product choice evolves from functionality to reliability to convenience to price and your competition may very well come from initially underperforming products that are usually less expensive, lower quality, and initially lower gross margin.

By the time that your customers decide that they are more willing to use underperforming technologies rather than to pay a premium for features that they won’t use, you may find yourself far behind in the newer emerging market as these vendors have been upgrading the quality of their offerings while you have been battling your competitors for who has the best features.

Only companies that carefully measure trends in how their mainstream customers (or the industry at large) use their products will be able to catch the points at which the basis for competition will change in the markets they serve. 

Our subscribers use our data files and Dashboard to monitor trending, competitive use, design outcomes and ROI. When done on a year-over-year basis this is very effective. Annually we ask our subscribers to share with us questions of importance to clarify and track their markets and customer values.

We encourage you to use a reputable firm to gather and monitor market intelligence – and we suggest that you look for data handling capabilities that empower you to analyze the data yourself without limitations on the number of crosstabs you can personally perform.

 Given the monies that most firms spend on sales, lead generation, sales support and marketing, the cost of subscribing to a comprehensive market intelligence program is actually short money.

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