At MTI² we are deep believers in the importance of customer focus. Especially when launching new products or services, it is imperative for firms and brands to choose and to focus on a clear “beachhead customer”. The absence of a clear focus on a primary customer is, more often than not, a barrier to the success of a new venture.
A recent article published by Robert Simons in the Harvard Business Review emphasizes precisely this point. As Simons put it: shying away from choosing a primary customer “may allow companies to survive for a while” but “they risk being pushed aside sooner or later by competitors who clearly identify a primary customer and create a business model designed to satisfy that customer ahead of all others”. At MTI², we often use the “jailhouse call” metaphor and ask innovation teams to imagine that – just as an inmate about to be locked in a county jail - they are allowed only one phone call to a potential customer that can help them make their case… We ask them: Who would you call? Who will most likely be the primary customer for your novel solution?
The idea is counterintuitive. Why would a team restrict the potential applications of their solution to a narrow customer group early in the idea development? Don’t economics and finance 1-on-1 courses advise us to diversify our investments to reduce both risk and volatility? While in financial investments, diversification may indeed reduce risk, the same does not apply to new ventures about to embark on a “go-to-market” journey. On paper, an innovation team can always state they will target as many customers as possible with their solution. Theoretically such diversification (or low customer focus) may even increase the likelihood that the team finds a good match. In practice, however, targeting many customers leads to lack of focus, to excessive (customer acquisition) costs, and to reduced energy to support the launch of the new solution for different customer segments, each of which with its own specific needs and access channels. The result is typically a poor performance that is, at best, average and often mediocre.
Targeting many customers leads to lack of focus, to excessive (customer acquisition) costs, and to reduced energy to support the launch of the new solution for different customer segments.
Take the case of Google’s decision to venture into laptops in 2011 with its Chromebook line. Google launched its first laptops in partnership with Acer and Samsung in June 2011. Chromebook are laptop-like internet terminals that Google developed to support its shift to cloud-based computing and storage. Originally Chromebooks simply accessed the internet and everything was stored in the cloud. The assumption was that people would be always connected and, as such, such a laptop-like internet terminal would appeal to a large variety of customers and become a mass market product. The original launch of the Chromebook was, however, much less rosy… As discussed by CNBC, Google Chromebooks’ original launch resulted in a “a rocky start, leaving reviewers wondering why Google developed these glorified netbooks.” By November 2011, Google had to announce price reductions on all Chromebooks, with options starting at $299, compared with the original prices between $349 and $499…
Fast forward five years and the story is very different. Around 2013, Google started noticing an uptake on Chromebook sales mainly driven by "heavy internet users within educational institutions" (source: Wikipedia). It soon became clear that the time to use a “jailhouse call” had arrived. It was becoming clearer and clearer that education could be a great beachhead market for the Chromebook. Lo and behold, Google started targeting the education market and winning contracts school after school… By 2016, Chromebooks were outselling Macbooks thanks mostly to their popularity in US classrooms. In 2017, the New York Times published a piece on “How Google is Taking Over the Classroom” and more recently CNBC declared Google as the winner in the $43 billion US education-tech market, indicating that by 2018 “Chromebooks made up 60 percent of all laptops and tablets purchased for U.S. K-12 classrooms, up from just 5 percent in 2012.”
In sum, as we also sometimes say in our workshops, it is important to avoid believing your product or solution is a “Nutella jar” (that everyone likes). The market is literally littered with the remains of innovations that promised to be everything to everyone. We believe you are much better off by starting with a clear focus and leave additional applications as promising developments for the future, after conquering your beachhead market.