Learning from High-Potential Ventures: Entrepreneurial Marketing
Professor Joseph B. Lassiter III's research explores entrepreneurial marketing in high-potential ventures. He describes entrepreneurial marketing as a mindset and a process, one that involves gathering specific evidence that convinces a specific group of individuals to act and react, exploiting breakthroughs and overcoming setbacks. New Business publisher Mike Roberts recently met with Professor Lassiter to discuss his work.
New Business: As one thinks about a new venture moving from product development to actually marketing and selling, what are the keys to success?
Joe Lassiter: I have tried to look at high-potential ventures that actually realize their potential. In these high-performance ventures, entrepreneurs leading the ventures look ahead and say, "Two or three years from now, this is exactly the customer and exactly the product, and this is exactly why they're going to be compelled to buy." They have a keen idea at the very beginning of the venture who their ideal customer is and what the ideal product is that they need to deliver. Then, they work back from that point in the future to the present, picking the customers who will buy and the subset of that ultimate product that they can actually build. They move from that initial starting point to their ultimate objective with remarkable efficiency.
"Visionaries buy on the promise of a product; pragmatists buy when the product's benefits are proven."
These entrepreneurs understand both the ultimate mainstream customer and the immediate customer, because the bulk of the orders are going to come from the mainstream customers. Therefore, a key issue is who do you do business with initially who lets the venture start moving down the "right" product road map? Who do you do business with initially who can help you on the path of having the right product for that mainstream customer?
Visionaries buy on the promise of a product; pragmatists buy when the product's benefits are proven. But pragmatists usually control the bulk of the money. Understanding how a specific set of pragmatists and visionaries relate to one another in the application that the venture chooses to pursue is the key to rapid revenue growth; because, if you do business with the "wrong" visionaries, they'll lead you away from the very pragmatists you will need to turn a high-potential venture into a high-performance venture.
It's very important not to think about adoption as either solely a selling problem or solely a product problem. If you try to sell what you can't deliver, you get in trouble. If you try to deliver what a mainstream buyer will not ultimately buy, you get in trouble. So the issue is how to get started as you go to market. Many of these ideas are explored more fully in Geoffrey Moore's book, Crossing the Chasm.
NB: Why do so many companies have a hard time getting traction during this phase?
Lassiter: The art in this process is recognizing how you get from "today" to the mainstream market of "tomorrow," because you can't create that whole product at the start. Very often, that customer you would ultimately like to sell to is very reluctant to buy new, still-evolving products. So you have to get started with customers who have a desire for experimentation and who are not only willing but driven to try new things. If you think in terms of best practices, it's understanding the path to the mainstream market and being smart enough to, A, pick a good mainstream market and, B, assemble the people and partners who give you a disproportionate likelihood of getting there.
NB: I imagine that doing a good job of picking that mainstream market is a function of the entrepreneur's own experience in an industry and his or her intuition about the future.
Lassiter: Certainly in the cases I've studied, people who have deep knowledge about the world they're going after do a better job at picking fertile places and understanding which markets can be successfully attacked. Sometimes the entrepreneur can conceive of a compelling market, but in fact can't get there. So there is an iterative process of determining if the opportunity isgoing to be worth it, and can I get there? Somebody who has worked in a space gets a sense that the future is going to be moving in a particular way and understands how technology, customers, money, and marketplace dynamics will come together to create a compelling reason to buy.
At the start, an entrepreneur usually has an idea of a product and a customer and the kind of features—usually technical or product features—and the operational advantages they'll convey to that customer. The entrepreneur either understands this opportunity from the product side of things—a kind of feature/advantage/benefit view of the world—or understands it from the customer's point of view—the customer really needs a particular benefit. The entrepreneur asks, "How can I accelerate the rate at which my product moves into the marketplace?"
NB: How does this help in choosing an initial set of target customers?
Lassiter: The answer is usually by recruiting the right people and partners around the core idea.
NB: Can you give us an example that might provide a concrete picture of this process?
Lassiter: I'll be teaching a case this year where an entrepreneur does this beautifully, selling, of all things, wool underwear. A young entrepreneur in New Zealand named Jeremy Moon created a company called Icebreaker. Everybody knows that wool underwear is terrible: it's itchy, it smells bad, it gets oily—just a whole bunch of problems. So Jeremy Moon runs across a pair of wool underwear made not out of everyday sheep's wool, but from the merino sheep, whose long, fine wool is used for suits and ties at the high end of the market. He sees that a product can be created that's light, not itchy, and captures no odor. Of his first $200,000 in seed financing, he spends a $100,000 creating a "brand blueprint," an architecture for what the brand needs to look like some day to exploit this advantage in natural fiber. He then thinks "backward" to identify what he can do to get started building a global brand.
Again, he sees the technology, what's available from the wool. He understands what outdoor athletic people or design-conscious people might want. He makes assumptions about how these are going to fit together over time, and in the end, he turns that strand of wool into the tapestry of a brand. You see that way of realizing the core product-customer link, and then going out and building an alliance with merino suppliers, so that he's got a steady supply of a rare product, and with machine providers so that the product can be spun and worked into outdoor gear. He builds up a worldwide supply chain by recruiting people who want to gamble that there is a customer need not being met by polyester.
NB: For prospective entrepreneurs, what are the key lessons to be learned here?
Lassiter: The key lesson is you need to have enough awareness of product alternatives that come from the technology, and of customer needs that come from pressures in the marketplace, to see where opportunity will emerge. What that means is that most MBA students should go to work in an area they think is going to be hot—and they've got to anticipate where it's going to be hot—and then build up a deep knowledge of who the good engineers are, who the interesting customers are, what the right channels are, and who the essential business partners are. So, when they go out on their own, they bring a rich and relevant Rolodex along with them on the journey. Turning high-potential ventures into high-performance ventures is always an elegant combination of know what, know-how, and know who!
Professor Lassiter III bio link