How does a small, unknown software start up find a creative way to compete against “Goliath” competitors? In the 1990s, one small firm faced dual challenges: entering a newly emerging market (on-line analytics) and finding its own market niche. Potential customers had little idea of what “on-line analytics” could do, let alone how to choose among competing firms. So the obvious decision, if they bought the new product, was to go with a well known firm, like Microsoft, that could offer reliable products, as well as training and support.
That was the dilemma facing ProClarity, a member of The Gang - high performing, highly creative organizations from very different fields (from software to football, theater to law enforcement). Its resources (people, money, time) were nothing compared to established giants. By throwing millions of dollars into development and marketing any product, Microsoft consistently squashed small firms trying to establish themselves in the new market space. Microsoft could offer thousands of potential customers a chance to try out a product for free; those users were then likely to ask their corporate purchasers to buy this product rather than another they’d not tried out. Or, Microsoft could send its worldwide marketing staff directly to corporate buyers. In contrast, ProClarity CEO Bob Lokken felt that, in some ways, he was the marketing “staff,” visiting potential and current customers. But as one person, he couldn’t compete with Microsoft’s might, as well as many other competitors. So he found a way to turn the disadvantage of being a smaller, “resource-less” firm into an untapped advantage.
Lokken can’t talk without drawing. He has a notebook or white board in arm’s length anywhere he is. So to explain how ProClarity turned its disadvantage of size into an advantage, he drew three concentric circles on a white board.
The outer circle - #1 - represented potential users of any piece of software – a huge, diverse marketplace of people worldwide. This is where Microsoft and others could throw millions of marketing dollars and smother any other entrant into a market. The middle circle (#2) represented software purchasers within those potential user companies. Again, larger firms like Microsoft often targeted the purchasers who made the final decisions on which software packages to buy. Once again, that group was large, and a small firm like ProClarity simply lacked the money and staff to visit those purchasers in a systematic way.
But Lokken saw another way to “get around” the might of Microsoft and larger competitors. He tapped his black marker on the white board, pointing to the inner most circle.
“Those are the ‘thought leaders’ in an industry. That’s the group we had to win over, not the potential users, not the buyers. That’s where the little guy could have an impact.”
At the time, the “thought leaders” were relatively untouched by direct marketing, and instead responded to more high touch, focused efforts. They wrote for trade journals and magazines about upcoming products. They also acted as “guinea pigs,” beta testing new products, and so could influence potential users’ choices to try and buy new products.
That was the advantage that ProClarity used, focusing limited resources in a guerilla approach. Lokken went after the industry thought leaders. In a deeper, more focused manner with this smaller audience of thought leaders, ProClarity could match and even exceed the resources of competitors, even with fewer people. That was certainly not the case with the huge potential user market.
Taking what some people saw as a disadvantage and flipping it over to become an advantage, ProClarity became one of the fastest growing, most successful companies in the field. Six years after it started, the giant Microsoft bought it….and Lokken, the serial entrepreneur, moved on. Maybe another David story for later!
Copyright © Nancy K. Napier
To listen to a podcast about The Gang, a group of diverse high performing, highly creative organizations, please visit Boise State University's Beyond the Blue podcast series: http://beyondtheblue.boisestate.edu/blog/2012/01/03/nancy-napier/