It is ironic in the world of high tech marketing that the cleverness of your innovations can sometimes be a disadvantage. That’s one of the problems besetting local company Syft Technologies, who announced a disastrous result two weeks ago, and is now looking at major change in direction to realise their considerable potential.
Syft announced a $4.9 million loss for the year to March, $1.3 million worse than the previous year and the result of revenues well short of forecast. Only months before then CEO Geoff Peck had confidently predicted they would crack $5 million by 31 March, even though their half year was only $1.2 million.
In December 2008 he was quoted in the National Business Review as saying the year was going to be a ‘game of two halves’. Unfortunately it was a half like that of the current All Blacks teams when Syft needed to be more like the Boks. Their final revenue figure was $3.7 million.
When you look at their annual report the picture looks even worse. $1.1 million of their income came from government grants. And with only 25%, or around $500,000, of their sales being achieved offshore, a business based on world beating technology is clearly underperforming.
Why has it started to smell a little peculiar at Syft?
Syft’s technology is reportedly outstanding. Their super-sniffer machines (for some reason called the ‘Voice’100 and ‘Voice’200), based on pioneering work done at the University of Canterbury, are bloodhounds to the mongrel pups sold by many other companies. Based on a more advanced method of detecting volatile organic compounds (VOCs), Syft’s technology enables faster, more accurate and more detailed ‘smelling’ than competitive technologies.
The company has invested a reasonable amount on sales and marketing. At around 20% of their total spend according to their annual report, it is relatively modest by aggressive tech company standards, but still significant compared to the average Kiwi exporter.
Syft also has good people with solid international experience in key positions, and lots of technical expertise.
But still they are struggling, recording what chairman Ruth Richardson characterised as an ‘unacceptable result.’ The core of the problem was hinted at in Ms Richardson’s statements about the loss - the need to become more sales oriented and narrow its market focus.
Syft’s achilles heel may have been that it’s technology was so advanced that it could be applied to solve all kinds of problems in all manner of different industries. By choosing too many industry problems to solve Syft has spread itself too thin and been unable to gain enough traction in any particular niche.
According to its website Syft has been focussing on five distinct sectors – container air analysis; food, flavour and fragrance; medical research; environmental; and oil and gas exploration. And across three main geographies – Australia/New Zealand, Europe and USA.
Selling into a wide set of markets at the same time is not the fastest way to build a technology company. Intuitively it seems like you have a wider market opportunity, but in fact it just means you are spreading your resources too wide to be effective. Concentrating on a tightly defined niche, dominating that and then moving on is a far more effective way of growing.
Focussing is important for two reasons. One is that all markets are different, with variations in promotional channels, buying processes, regulations, pricing sensitivity, support requirements, competitors, size and so on. Selling one product into six different markets is actually more like selling six different products into six different markets.
Second is that focus gives you momentum. Rather than trying to mount sales and marketing campaigns into multiple markets, you can focus limited resources on a narrower set of customers. That means they are more likely to learn about you faster, and there is much greater degree of referencing between customers.
Deciding to choose a market is not easy. The question people often ask is what market should I focus on? How do I make such a momentous decision?
Although you can do a lot of analysis to assess what markets are most attractive, and which you are best equipped to execute in, at the end of the day you just have to make a choice and get on with it. Simply giving it a go, concentrating hard on a specific market, is more important than being assured it is the perfect opportunity.
Syft has huge and exciting potential. But the challenge of the future is not a scientific or engineering one, which they have largely meet already. It is a marketing and a sales challenge, which involves just as much effort, discipline and process as the technical. It won’t be some magical sales or marketing tactic that will ignite them, it will be hard, focussed effort on tightly defined markets, with a strong product offering.
Having the courage to focus is what will realise the undoubted potential of Syft’s super-smart technology.