5. Can you systematically target the early adopters in your market? Today Wayne Miller of MicroVoice Applications (#5), in Minneapolis, sells voice-mail software to all kinds of newspapers to automate their personal ads. But when Miller and his partner, Steve Lazar, started the business, in 1989, only one type of newspaper would buy: small weeklies. Larger weekly and daily papers were too conservative, Miller found, to try a system that different, but the smaller weeklies that competed with them were often more aggressive. Miller's first client, a weekly newspaper, was willing to give MicroVoice references to similar newspapers around the country, and the business began to take off. "We moved through that industry like dominoes," Miller recalls. Still, the company couldn't break into the large dailies. MicroVoice had to use its track record at the weeklies to finally make a sale at a small daily; it then gradually built up credibility with larger papers, which Miller estimates now constitute about 80% of MicroVoice's customers.
6. Ask yourself: how can I gain stature in the marketplace? Stature is the missing ingredient for many new products and services. Miller, for example, originally ran a small personals-by-phone service and realized that his business needed credibility to flourish. By forming partnerships with papers, MicroVoice has been able to grow rapidly, from sales of $168,000 in 1989 to $25.7 million last year. In exchange, of course, MicroVoice has to make its partnerships worth the newspapers' while; the company installs its software without charge to the papers, and takes a cut from each call made through the personals system.
Another route to credibility in a developing market is public relations. The very novelty of your product or service may make it newsworthy: M2, for example, was featured in Tom Peters's Liberation Management for its innovative approach. Afterward, the company got inquiries from as far away as South Africa.
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Growth in a Growing Market
Satisfy Your Customers or Someone Else Will
With any luck, a market won't stay in the development stage forever. Once a market begins to grow rapidly, it is -- for a little while -- everybody's dream: growth and profits come easily in a market in which everyone's growing. But rapid growth of a market quickly attracts new competitors, causing a decline in each company's profits. More competition and demand lead companies to expand their product lines in an attempt to satisfy consumers with more-customized wares. By the end of the growth phase, the winners can be quite large -- and the losers can be out of business. The challenge: to make customers choose your brand.
Pluses: Enormous growth opportunity
Minuses: Increasing competitive pressure and turbulent markets
If you see opportunities in a growth market, consider these thoughts from Inc. 500 CEOs:
7. Are you as visible as possible in the marketplace? Perhaps one sign that a market is shifting from the development stage to the growth stage is that it starts making more sense to advertise. For Van Dalsum of Oasis Imaging, that shift came in August 1990, when his industry established its first trade journal and he suddenly had a logical place to take out ads. Since then, Oasis's market has become far more competitive, but in the idyllic early days of the growth stage, Van Dalsum's biggest marketing challenge was answering all the phone calls his ads generated and filling the orders.
8. Is your company structured for growth? This is your chance to become a big player, if that's where your ambitions lie. Dutton of Resolute Systems wants to do just that in ADR, so the company is opening branch offices in new regions and raising additional private capital.
9. How will you respond to new competitors -- particularly when they compete on price? Have you explored ways to tie customers or suppliers to you? If your market is truly growing, it's inevitable that many new competitors will surface. They can take a toll on existing companies in the marketplace by offering improved products and services or lower prices. Resolute Systems found that out the hard way. The company had spent a lot of time and money recruiting retired judges as mediators. Then, Dutton says, new companies entered the market, signed contracts with the same judges, and offered a lower price. His solution? Resolute now signs exclusive contracts with its judges.
10. Are you too late? As Rosenfeld of Legal Information Technology learned, it's tough to be a me-too competitor that enters a rapidly growing market in the late, ultracompetitive stages of growth, when the easiest profits have come and gone.
If you're late, sometimes it's best to try to cut your losses -- and move on to a newer market. When George Archuleta took over the failed San Jose-based Alantec to turn it around, he looked hard at the company's technology in bridges that connect computer networks and decided it was too little too late. Archuleta restarted the company by developing a newer switching technology. Alantec's sales rose to $ 13.6 million -- compared with sales of a mere $647,000 just two years before. Alantec, #85 on this year's list, went public last February. "It was a total switch in market sectors," Archuleta says.
11. Have you thought of ways to broaden your line of products or services? If you don't give customers precisely what they want in a growing market, someone else quickly will. In addition, a growing market has more complex needs than a developing one. Just one example: Van Dalsum recalls that when he first entered the cartridge-remanufacturing supply business, he needed only five or six products. Today his business offers its remanufacturing customers about 400 products, as well as services like ad design.
