Big Hat No Cattle vs. Big Fish Small Pond
Actionable Market Segments for Growth
By Will Shook
If you are a growth ready company, there’s a choice you have to make. Do you want to be the company with a big hat and no cattle, or the one that is a big fish in a small pond? What matters to you more, ego or results? One choice places a premium on impression and one places a premium on discipline. When you are in the weeds, that decision doesn’t seem as clear cut as when it’s presented as an easy A/B choice.
We’ve seen companies from each camp. The ones that care about brand, image and flexible/opportunistic approach to market development spend an enormous amount of talent and treasure before the revenue wheels begin to grip, if ever. They indeed appear to have a big hat, and in fact have very few cattle. Those that are meticulously selective about markets, disciplined to pursue and serve them, and concentrate their energies create meaningful beachhead markets as a foundation for growth. They definitely play in a small pond, but they have real customers, are capital efficient, and have the money and customers to attack the next market segments.
What gets in the way of making the right choice? While it’s taught in B School and incubators that you need to pursue market segments, in practice this proves elusive. First off, it implies hard choices – ones that could end in failure. Who wouldn’t shy away from that? Better not to commit. Another issue that gets in the way is sales-driven cultures. They are opportunistic by nature and the team wants to be able hunt and land anything that looks like food – they don’t want anything getting in the way of the commission check. Finally, it’s hard to line up needs, customers, markets, product features and corporate energy. The systems and discipline need to be in place to make these core decisions.
While there are several elements that contribute to true breakaway growth, the main principle of creating market domination is foundational. It’s all about creating power, and more specifically relative power. You have to concentrate your energies in such a way that you serve customers in a superior fashion to all their other alternatives. The question you have to ask yourself is, can you dominate a $15B market and serve all those customers in a unique and superior fashion? That’s an elephant, and elephants can’t be consumed in a single bite. Can you dominate a $250M market? Which one do you have the resources to dominate? The key is to establish a very strong beachhead and then leverage the heck out of that to get your land grab rolling.
Revenue Acceleration through Actionable Segments
The pathway to dominating markets and generating huge gains in customer acquisition rests on several principles, all designed to get you early market traction and keep it going. Here’s a summary:
1. Job to be Done – Market demographics, statistics and characteristics matter. What matters more is the customer “job to be done.” Each of your customers has a mission and there are many jobs that must be done to fulfill it. In the business world this boils down to value creation, and each and every employee is chartered with creating value in their role. There are then numerous tasks or jobs they must perform to create that value. Your objective is to understand these tasks and to find out what gets in the way of accomplishing them at peak performance. By the way, this is at the crux of your solution or “problem solved.” Ultimately, your markets are made up of companies/individuals with similar jobs to be done and similar blockades to performance. Market characteristics serve to help you identify groups of these future customers.
2. Big Fish/Small Pond – In his seminal book Crossing the Chasm, Geoffrey Moore laid out this underlying marketing principle to go from nascent company to industry player. Find a need in a niche market (small pond), and serve it in a superior fashion. Then annex adjacent ponds – the ones that either are the same industry with different “jobs to be done,” or different industries with the same “job to be done.” This has been the path to meteoric growth for companies from Microsoft to Oracle to Documentum. The point is not to stay a big fish in a small pond, but to use that as a confident first step to continued growth.
3. Actionable Segments – Once you have nailed the job to be done and have gained comfort with the big fish concept, the next step is defining actionable segments. Actionable segments are groups of potential customers with similar characteristics, the most important being the “job to be done.” A market segment becomes actionable when you can identify members of it, access them, and serve them in a superior fashion. Serving them in a superior fashion means you know how they are underserved, you have the competencies and IP to serve them, and you have the resources to go after them. Market characteristics serve in helping this happen.
4. Market Characteristics – The qualities and methods that can be used to define your market segment are boundless. This is the beauty of markets as well as a great place to tap your team’s creativity in defining markets you can access, serve, and dominate. In my past life, we evolved our actionable segments every few years to stoke new growth. We started by role type in a select group of related industries, and then went broad in those industries. We also at times segmented (and aligned) our resources by vertical markets, solution functions, customer size, and by customer potential value. There are many, many others you can choose:
• Behaviors; desires; location; preferences; needs; commodity/specialty; price/quality/speed/features; early/late adopter; how and when they buy; where you have traction and don’t, etc. This list is endless and you get to choose the ones that allow you to identify, access, and serve them in a superior fashion so you can dominate that segment.
5. Align and Act – Once you’ve identified the job done/problem solved and defined the groups of potential customers that create your actionable segments, you need to align your energies behind them. You have to make choices of which groups you’re going to support and truly go after. Making choices, aligning resources to them, and sticking with all of it are at the core of strategy. Make these choices and be sure your talent and capital is in lockstep with them. These segments become your mission, and your organization must support the mission.
The concept is simple – put all the wood behind one arrow and know where you want to point that arrow. Understand a ‘Day in the Life’ of your customer. Take the time to make the choices on problem solved and segments. Have the willpower to align your resources behind it. Execute like crazy. Reap the rewards.
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