Success is still possible despite the GAFAM superpowers
It’s getting harder for tech companies to experience success in the era of GAFAM (Google, Apple, Facebook, Amazon, and Microsoft) dominance. The latest news is littered with examples of failed startups, aborted IPO’s, and further reluctance from investors. It’s all exacerbated by the COVID-19 crisis. What still looked like a good recipe for success one year ago is now questionable at best.
Is there still hope for tech companies that don’t leverage one way or another the ecosystems created by the BIG Five? Is it better to avoid the categories covered by the BIG FIVE?
Common sense would make you think it is. However, even if you identify a specific domain that’s relatively free of current risk from the BIG FIVE, there are a few conditions to meet to ensure success.
Find your happy niche
The times of “We’re going to change the world” are over and switching to “We’re going to change YOUR world.”
More than ever, tech companies that want to thrive should focus on a specific segment of the overall market and serve these customers much better than anyone else to make the difference.
Every market can be further sliced by taking a different look at the preferences of your target audience. Some of the classics in segmentation include demographics, expected quality, or price. Yet the most impactful way to identify your happy niche is to focus on the psychographics (values, interests, attitudes) and dig deeper—more on that in the next section.
Tech companies still thrive across the board because they found their happy niche. They provide superior value to the specific target audience they go after than any of the BIG FIVE. One classic example is Garmin succeeding with serious athletes, golfers, trekkers, sailors, who are not content with the Apple Watch’s more generic features. Yes, a one billion dollar market opportunity looks like a tiny niche to the BIG FIVE and might make perfect sense for you.
You’d better narrow your focus and try to master a segment of a market rather than compete head-to-head with established brands in the overall market. Good prospects can be on the horizon too, as “Today’s niche is often tomorrow’s mainstream product, it’s all relative.
Truly understand your target customer
Your chance for differentiation is in the unique ways you dig your customers’ psychographics. Now is the time to invest in in-depth, qualitative research. The goal here is to fundamentally understand what others don’t about your target audience. Build a level of intimacy that’s unrivaled. That’s your best chance to be disruptive within your niche.
How can you do it?
I’ve written a few articles on this topic, like “Focus on your customers’ problems for product success” or “The five proven principles to get your persona creation right.” The bottom line is to ensure you adjust your research to adequately capture what’s on your customers’ minds. Let your customers tell their stories and express their problems in their own words. Identify common concerns along with the right psychographics (values, interests, attitudes).
As you gather your data and look for insights, just remember to focus on issues worth solving. Going incremental will likely not move the needle far enough. Once you’ve identified the big hairy problems you are uniquely positioned to solve, run another series of qualitative research. This time, focus on sketching your idea and put it in front of these same customers. It doesn’t have to be your finished product, but a little more validation will go a long way.
Focus on cash flow
Gone are the days with investors looking for growth at any cost. If you want to stand a chance of funding, get ready to demonstrate how you’ll build a profitable business sooner than later. The trick though is to be very specific about the kind of profitability you need to succeed.
Most companies fail because of cash flow. This is an important nuance: profit is NOT cash. You cannot pay bills with profit, but you can with cash. Get your cash flow under control.
You genuinely need to understand how your balance sheet works, the state of your accounts payable and accounts receivable. The most effective way is to watch a few critical metrics:
- “Collection days” (or how long you wait to get paid)
- “Inventory turnover” (or how long your inventory sits on your working capital)
- Payment days” (or how long you wait to pay your vendors).
Beware of “unexpected” growth. It is what has killed more than one startup that simply wasn’t ready to scale. We all want to grow, but what actually matters is to keep an eye on your working capital. Growth requires investments. The faster you grow, the more you will need proper financing.
Rethink your definition of success
With everything happening in our world, now is actually a great time to step back and rethink our definition of success against GAFAM. You’re not alone. Investors are struggling with it too, as they very well know that the big tech firms have brought their dose of challenges. They can’t sustain high growth with such relative respect for workers’ rights (think Uber), privacy, or disinformation (fill in your preferred BIG FIVE). Customers are becoming more educated and demand sustainability vs. growth at all costs.
And despite all the inequities surfaced again by the COVID-19 crisis and the relative collapse of the “American Dream,” success more approachable than you might think. It starts with tech companies in the private sector, with all these businesses producing growth and prosperity. It’s up to you, though. I dare to say that too many tech companies are being held hostage of their shareholders. They should focus on their stakeholders. Yes, I know, it sounds like stakeholder capitalism, maybe I should call it “innovationism” like Whole Foods CEO John Mackey!
The critical notion here is that as a business leader, you want to find the right balance between all your key constituents and optimize for each of them: the customer, the employee, the shareholder, the corporation itself, the environment (think climate change), and society.
There’s growing evidence that the most successful businesses, by financial performance, are the ones that optimize the interests of those six critical stakeholders, so why wouldn’t you?
In conclusion
Driving sustainable success in Tech and living in relative harmony with the GAFAM is absolutely possible. Once again, the fundamentals are about defining your “happy” niche and demonstrating a superior understanding of your target audience. From there, keep the right metrics in mind to monitor your business health AND watch your definition of success!
I’m genuinely interested in getting your feedback on this topic! How successful have you been with your own customer empathy efforts? Which other considerations worked for you? Just comment on this blog or drop me a note on The Product Sherpa site!