The Press, May 2011

Marketing, especially in the technology sector, seems continually to be obsessed with finding the ‘new new thing’ that everyone wants. Like reef fish chasing, that great ‘blue ocean’ opportunity that will allow you to leapfrog your competitors, build a huge company and enjoy fame and fortune.

The trouble with focussing on ‘everybody’ is that it is usually a tough, competitive space. There are big, ugly competitors and a lot of risk involved in achieving success. In the technology world you are often competing with companies that have an annual turnover exceeding New Zealand’s gross domestic product.

A valid strategy for Kiwi companies is actually to do the opposite. To target “nobody” instead of “everybody”.

Brilliant business thinker Seth Godin put it nicely in a blog post two weeks ago. “Nobody wears a watch any more. Nobody wears a tie either. Nobody shops at a bookstore, at least nobody I know. The market of nobody is big indeed. You can do really well selling to nobody if you do your homework. In fact, most companies selling to nobody outperform those that are trying to sell to everyone.”

Another way of describing nobodies are niche or vertical markets.

This ‘nobody’ market approach can work for Kiwi companies offshore. We aren’t big enough to challenge the huge multinationals head-on, but if we can find an under-served group of customers it offers a way to enter the market.

Companies often find it counter-intuitive to limit themselves to a niche market, especially start-ups. There is that fear you can’t afford to ignore any market opportunities in case you might miss out on ‘the’ big one.

The reality is every company, not matter how large, has scarce resources (at least I’m yet to come across one that has unlimited capital). Focussing down on a vertical, or even a couple of niches, is the best way for small companies to get the most out of limited funds.

In marketing terms the smaller and more linked your market is, the more intensity you can get for any sales and marketing activity. The tighter and better connected that niche, the more likely word of mouth will help you build your reputation and accelerate sales.

Plenty of New Zealand examples of this strategy exist. One of our greatest tech success stories, Fisher & Paykel Healthcare, are world leaders in several very niche areas like obstructive sleep apnea machines. Virtually no-one has OSA, but F&P manage to turn over more than $500 million last year.

Tait Radio Communications of Christchurch, a leading tech exporter for many years, are enjoying a new era of growth by focussing down on several verticals rather than trying to compete with giants like Motorola across every industry sector.

Probably the most notable recent example is Orion Healthcare, who two weeks ago were awarded the company of the year award at the New Zealand Hi-Tech Awards. Orion was also nominated as a company of the decade, in the esteemed company of F&P Healthcare, Datacom, Endace and Rakon (the eventual winner).

Theoretically Orion could have applied its smarts and software to “everyone”. Many large, rich industries could use the kind of system integration and workflow software they’ve developed, but they applied it to a specific niche in health. As a fast-growing, multi-billion dollar market, it is a sizeable one.

This focus has borne real fruit, building a company of 350 people with revenues of almost $64 million and growing. Revenue reported for the first half of the 2010/11 year was 80% up on the same period of the previous year. Orion has achieved global credibility, recently finding a place in a consortium with Oracle and Accenture for a $144 million deal with the Singapore government.

Even within their healthcare vertical, Orion have learnt the power of being single-minded. According to a 2006 interview in Unlimited magazine, company founder Ian McCrae said the company tried to expand too fast in the US health market, entering too many states too quickly. They refocused on a smaller area and grew steadily from there: the US now making up 70 percent of their sales.

Concentrating on nobodies doesn’t mean you are destined to global insignificance. Even the world’s largest companies have grown by focussing on small slices of a market and then expanding.

In his fascinating history of the company he founded, Sam Walton of Walmart described how they started and then grew. Walmart had a strategy of dominating a town and then the towns close-by until they had sewn up a county, before moving onto to the neighbouring county and so on.

From a single store in Walton’s hometown of Bentonville, Arkansas in 1962, Walmart now has almost 9,000 stores worldwide and earns in $US421 billion in revenue.

How can you choose what to aim at? And how can you be sure it is the best opportunity?

The simple answer is that you can’t be sure, but it is better to focus on something, rather than spray your resources around. Once you have achieved some traction and dominated in one niche, no matter how small, you can move on to another with the aim of mastering that.

Don’t be a reef fish, chasing the latest and greatest market opportunity. Choose a bunch of ‘nobodies’ that aren’t being looked after well and you will end up being a somebody.

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