Market Opportunities

Confusing Interest with Value

A common fallacy of many high-tech “marketing” efforts is to confuse interest with value. Engineers, with an interesting idea in hand, will ask if prospective customers are interested in hearing about it. In most cases the answer is “yes” but what does that mean? At a further meeting, the idea is presented and discussed, and the prospective customer’s interest sampled again. It’s often high, but what does it mean? Often it means simply “You are right! That’s an interesting idea. Clearly you’re a bright person, and you know much more than I do about this area. I can’t find any flaw in your reasoning.”

IRG’s methods go a simple but important step beyond. We ask our interviewee to fit the prospective solution into their current budgeting categories. We believe that there is no better measure of real interest (and value) than to study where someone is spending money today. Where the fit is high, it shows in the budget. Early caching adopters found the value in network scaling, and typically network scaling was their largest budget item. But you can pass all the tests above, and still only be in the curiosity category. Most technology-driven companies never ask this vital question – how much will you pay for it, when push comes to shove?

Dealing with Disruption

A lot of our work has to do with what others have called “disruptive” technologies or business models. Some use “disruption” as a mantra. We tend to think of it as an important but specific marketing problem. Something is disruptive if it doesn’t show up as a natural refinement of existing businesses. The PC was clearly disruptive for IBM. The problem with disruptive opportunities is that straightforward marketing processes often don’t identify the value. Christensen’s seminal work on disruption (“the entrepreneur’s dilemma”) was built on a study of disk drives. New generations of disk got physically smaller, but the new generations were rarely an improvement for existing customers. There are lots of examples of important disruptions all around us on the Internet. The wireless Internet is clearly disruptive. If you like browsing on a broadband connected PC, you’ll hate the comparable wireless experience because the bandwidth is lacking and display awful. That’s not to say that the wireless Internet won’t be big business, just that the opportunities aren’t obvious. Streaming is another disruptive opportunity. The IRG methodologies are well suited to attacking disruptive opportunities. When we interview people, we talk about values and problems, not just about the fit or applicability of a specific product or technology. Identifying and sizing disruptive opportunities will always be more challenging than evolving an existing business forward. IRG’s methods have proven very effective for attacking these problems however.

The Internet

The DOT.COM collapse has left a lot of confusion about what the Internet revolution really is and where it stands. In brief, here’s the IRG perspective. First of all, the Internet is a very big deal. We believe, like Peter Drucker (in his Atlantic Monthly piece) or Don Tapscott (in Digital Capital) that we are in the middle of an information technology revolution that will ultimately be comparable in importance to the invention of moveable type and the industrial revolution. To a large degree, the Internet catalyzes these changes. This revolution has little or nothing to do with trying to sell pet food or even on-line advertising. It’s much bigger. It has to do with how you structure and run enterprises. It has to do with how you develop and deliver software and information systems. The Internet is driving ongoing and rapid change, but the timescale is certainly years and sometimes decades, not 12-18 months ahead. We’re clearly in a hangover and reevaluation period, compounded by macroscopic economic uncertainty. But all this will stabilize and everyone will realize the Internet train is still chugging alone.

So we clearly believe that the Internet is immensely valuable. We also think in many respects it is a practical disaster, barely usable. Much of our work to date has been right in this area: how can one cleverly leverage what the Internet can do and avoid the liabilities, in order to move forward in this revolution. The opportunities and values can be huge, as the content delivery network use of caching technology clearly showed.

These problems would be exciting if everything else was standing still. They are compelling given the parallel developments of new applications that leverage the Internet, and new application models (e.g. Web Services).

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