I was at BlackBerry’s analyst event this week and one of the most interesting parts of the event was from Geoffrey Moore, whose book, “Crossing The Chasm”, I’d read and found compelling a few decades ago. He, evidently, is one of the firm’s leading consultants and he provided some rather interesting insights on both BlackBerry and how a small company can do well in what is a massive technology market. Two that stand out to me are his concept of “Fish to Pond ratio” and what appeared to be a version of Maslow’s Hierarchy of needs but applied to a company (with, thankfully, a ton less layers).
Let’s take each in turn.
Fish to Pond Ratio
Now I’ve heard and argued a variant of this myself over the years, but this was the most succinct presentation of the concept that I’d yet heard. What he was talking about was this: there is kind of a survival of the fittest thing going on in the market and as you look at the market there are, in effect, different sized ponds of competitors. There are huge ones like the kind of markets that look really lucrative but are dominated by big brands, and then you have the more tightly focused markets where the total revenue is smaller but so are the players.
He argued that companies need to look at this fish to pond ratio and only go into ponds where they can compete with—or be—the biggest fish in those ponds. So, if you have a choice to go into a pond where there are focused players that are much larger than you, much like a fish that enters a pond with larger fish, you’ll likely be fish food for those monsters. But if you go into a pond—a market segment—where they are equal to or, better yet, smaller than you, then you can become the predator rather than the prey. And, I don’t know about you, but the idea of being fish food isn’t that compelling for me (well neither is eating fish food but this is a metaphor after all).
So, you want to target markets where the fish to pond ratio makes you the predator and avoid those that make you the prey. Thus, BlackBerry competing with phones no longer makes sense because firms like Apple, Samsung, and Huawei would eat them for lunch, but areas like operating systems for cars where the players are far weaker (automotive Linux) or not that focused (Microsoft) are far more attractive—thus QNX. (The Microsoft thing is dubious, but Microsoft has just never been that focused on cars and their efforts in that market have generally ended badly).
OEM Pyramid of Needs
The other concept was an OEM Pyramid of Needs kind of modeled after Maslow’s Hierarchy of Needs. (I know the latter really well because it was a great deal of my graduate and undergraduate work). But at the base of his pyramid was OEM solutions, followed by joint solutions with customers, followed by joint solutions with the help of third-party developers.
Just like Maslow’s chart, if the foundational levels aren’t complete the top of the pyramid (Self-Actualization with Maslow) isn’t achievable. He argued that too many companies rush to the top without finishing the lower levels and the result is that the effort fails. I immediately thought of Samsung, who has repeatedly tried to lock-in developers too early and failed with things like their mobile phone OS and IoT hub.
The reason for the failure is that before the developers get involved you need a relatively robust market—otherwise they won’t see revenue and will abandon the effort, killing it. The path is to first build something that works so you have a solid proof of concept and some customers, then you work with those customers (and others) for focused solutions increasing the market size, and finally once you have an installed base, open the platform to developers so they can sell into the already installed base and you have advocacy from existing customers to expand that base. Thus, the developers make money and the effort then succeeds.
In three relatively simple paragraphs I was able to convey, using Geoffrey Moore’s method, what most seem to take a book to describe and almost nobody gets.
You can see Moore’s influence in BlackBerry’s strategy. They are mostly focused on markets where they are one of, if not the, biggest player (focused security) and have almost abandoned the market where they are the small fish (smartphones). And they are largely building it by first presenting a defined offering they have created then working with big customers for custom implementations and will, eventually, bring in developers to expand them further. This systematic approach has resulted in vastly improved financials, positive cash flow, and far happier investors and customers. Government loves them, Verizon loves them, Bain & Company loves them just to name a few.
I have to admit Moore’s presentation was one of the most interesting I’ve seen outside of a TED Talk.
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