Market development: horizon or mirage?

The recession has sharpened the points of a dilemma that technology vendors were already facing: Do cleave closely to our existing customers, or try to expand outwards? Do we try to sell more into existing account in familiar markets, or do we look for new markets where people are struggling with business problems that look congruent with the ones we're solving for our existing customers?

With no obviously correct choices, vendors experiment, to the point where they see real opportunity, or decide that the exercise is going nowhere. But how do you know if you've invested enough into the experiment to get a reliable result?

Adobe runs a good business, but its stock still takes a dive
A good example of a technology company that could stick closely to its existing customers, or fan out to find new ones, is Adobe.  Having long ago identified its core market, creative departments and web site teams, Adobe might not have an obvious place to go. However, maybe it doesn't need to. As long as Photoshop remains the standard for image editing, Dreamweaver remains the web developer's tool of choice, Acrobat is the default cross-platform document format, and Flash retains a strong position against threats like Silverlight, Adobe will continue to get license renewals and accrue new customers.

Unfortunately for Adobe, Wall Street doesn't see the world through the same lenses. Even positive coverage from market observers failed to keep Adobe's stock from plunging from a high of approximately $45 per share last fall to under $20 per share in March. Since that nadir, the price has bounced back a bit, to around $30 a share today.

Here's how positive the coverage was, during this collapse of Adobe's stock price:

At this point, the management of a company in Adobe's position might conclude, "Holy moley! If we can't get our stock price up by making smart business decisions, and holding on to a reliable customer base, we have to find new customers!"

How big can the application development circle be?
Undoubtedly, new customers would be good, but where to find them? Adobe has at least one idea of how to expand its customer base: get more people who actually contribute to web applications to be users of the tools. Flash Catalyst is designed for the web designers who are not coders, but who build the application flow, user experience, and general UI conventions. After creating the basic application framework, a developer can add the necessary code to enforce business rules, handle weird edge cases, and other tasks.

That's great, but maybe it doesn't go far enough. Perhaps Adobe should be pushing to go further, involving not just the people who build prototype applications, but the business users who have to live with the results. Give that butcher, baker, or candlestick maker a cleverly-designed interface for specifying what kind of application to build, and the tool puts together the pieces. Voila! You've just expanded Adobe's licensed user base to include a whole lot of people who might have spontaneously combusted if they had come into direct contact with tools like Photoshop or Illustrator.

Or, perhaps, this user-generated application is a pipe dream. After all, vendors have tried before, but you wouldn't necessarily give Microsoft Access or even Intuit's QuickBase platform to any random business user. Maybe this kind of tool is possible, but the cost/benefit ratio of building one isn't really there for Adobe. Extending a development tool to include non-coders is already an impressive achievement, so it might be a bit unfair to Adobe to ask them to do more. On the other hand, it's just that kind of push to do more than originally planned that leads to some of the best inventions.

Whatever the ultimate answer may be, the first step into this direction, adding web designers to the mix of rich application developers, is not in and of itself a good measure of how far the idea might go. Who knows, web designers might be wholly unenthusiastic, but end users might be overjoyed to be included. Enthusiasm and adoption might not proceed along a straight line with an unvarying slope.

Herein lies the chief peril of market development. Invest too little, and you may miss important opportunities. Invest too much, and you may discover that you've been chasing a mirage.

[Cross-posted at The Heretech.]

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re: Market development: horizon or mirage?

When 50% of an organizations markets have been consumed, it is time to look around for another technology. That technology will create an income stream that will grow for a period of time.New technologies are the means for wealth creation. Market expansions are only a means to increase cash capture. Wealth creation increases the stock price. Increased cash capture lets the organization live another quarter.When more than 50% of the market has been consumed, listening to the customer can be a death sentence for the organization. The customers become increasingly pragmatic and risk adverse. The customers are far from those where the product beachheads were established. Keeping a new technology in the pipeline prevents the loss of those that sell to that beachhead, as the rest of the organization moves away from that beachhead.