Purgatory Part-II

Part one was posted previously.

Getting out of purgatory needs 110% focus. You probably have many, many customers, but they each pay a small amount of your revenue--you may have to fire many of them to focus on a few. If you are in multiple segments, you will need to pick one and focus your marketing and sales efforts on that. Now many say yes but the laser market is a mile wide and only an inch deep, so you can't get enough revenue if you focus.Sure, but what’s the point of being in purgatory? You need to make the bet-the-company decision, and put all your energy behind it.

At Lightbit we could not find a way to make the all optical network happen, let alone create a need for an all-optical wavelength converter, so we switched to blue lasers and JDSU decided to buy us. Then they changed CEOs and stopped all M&A, then we did a biotech product, sold that piece of the business, then used the proceeds to create a wireless product higher up the value chain, and, and, and ... ultimately we took the company public, but that’s another story ;-)

In order to make the segment big enough to feed you, you will need to become more than you are. You will need to provide your customers a whole product solution, not just a component--even if you make a turn key laser system, it will need to do something--Cymer made excimer lasers into stepper systems for SEMI; hard to believe a toxic gas laser could ever get into VLSI but it did, despite the efforts of other companies who had better technology and had been around many years longer. This is a common story.

To get out of purgatory you have to embrace risk--it's very likely that you will not succeed in your first target. You will need to refocus, but this agility is the key unfair advantage of the startup--you can't save your way to success or be stuck forever answering the random needs of a large base of small revenue customers as they jerk you from left to right in search of the killer app. You have to target your own killer app and go make it happen.

Another scary lesson is that customers rarely understand what they really need, so in establishing a new market, gathering large amounts of customer data may fool you into the wrong decisions. Now if it’s a large well-established market you can for sure gather a lot of useful G2 about it, but if you are going in there with a new widget be careful! It's very likely that your new technology is better than what is already being used, but it's also very likely to be irrelevant to the customer’s real problem. We can easily convince ourselves that our technology is better--this inside out approach is common to most tech startups. What’s needed is the outside in. Forget what your technology can do, and start understanding what your customer actually needs to do (despite the fact that they don’t consciously know).

Many tech startups have found gold completely outside their chosen technology. In many cases the company finally gets out of making lasers altogether, as it concentrates its effort on better understanding and developing the applications they serve. It’s a scary transition for you as you give up your unfair technology advantage, but it’s a great feeling to metamorphise from a laser jock into a telecom, or medical device, or semi or whatever vertical market person.

Finally, it's fairly likely that you will kill the company when you make a bet-the-company decision. Get used to it--the alternative is survival at subsistence level waiting until the next killer app comes and you can jump on it. But we have all seen that movie, you get a short term lead but before long your competitors are on it and eat up your lead and you are back to purgatory again. You have to look before you leap, but ultimately you have to leap, and when you leap into the void the outcome is always better than purgatory ;-)