The Haphazard Development of People in Early Stage High Tech Organizations

Many entrepreneurs start out giving little thought to how they will grow their embryonic technology business in the long run. They are totally focused on designing and releasing the first product, or making that first sale. This focus is usually a very positive thing in a new company, since grandiose plans of startups have a way of getting derailed by the harsh realities of trying to survive.

Other more organized and contemplative entrepreneurial types have a master plan all laid out, including the steps on how they are going to grow their company all the way to the happy exit they have planned. This approach can be of great benefit as well; even though things won't go exactly as planned, it's great to have a road map that you can adjust as conditions change.

One thing that many younger organizations don't do so well, is in planning the development of their staff. Don't misunderstand; there are a lot of development opportunities for employees of newer and smaller companies. But this development often just "happens"; there is little thought that goes into it. A job needs to be done--and a particular body is more available than any other. The fit may not be ideal--and the amount of training given minimal. But the person is thrown in to sink or swim, because like the old saying "necessity is the mother of invention". It needs to happen, and it often works out well a surprisingly large amount of the time, given the haphazard way in which this "personnel development" often occurs.

But is this optimal, even within the constraints of a hard-charging software or hardware company? Most of the time, with a bit of foresight and a strategic pause, you can increase the odds of successfully stretching your current staff, into areas where expertise or experience are lacking. Below are five simple steps that may greatly increase your success rate in growing

Consider Psychographic Profiles Of Candidates In Your Hiring Choices
Like most things that are done in company development, if you hire the right people, things are likely to turn out better--no matter WHAT curves the marketplace throws your way. So try to think ahead when hiring that next entry-level employee, to fill the open clerical or support role. What other activities may need to be done in the near future? In what areas could this new employee be grown? Are you hiring the most flexible candidate, the type that will be most comfortable when you try to "stretch" them into an unfamiliar role? Will they freak out at being asked to perform a new and challenging activity, or will they embrace it as an attractive career growth opportunity? Try to think ahead, and the answer to your next personnel crises might be right down the hall.

Plan Ahead As Much As Possible
As mentioned above, it's really useful to try to think ahead to what functions will need staffing in the next 3, 6 or 9 months. This type of strategic thinking is difficult for many early stage managers, who are focused on getting through the end of the month. Unfortunately, this mentality often leads to hiring the person that will save a few nickels in initial salary, or has the most experience for the immediate position--therefore "hitting the ground running" with the least amount of training. But if you factor the medium and long term needs of your business into your hiring decisions, you may hire different candidate--who may add much more to the growth of the business over time.

Train At Least A Little--Don't Just Throw Them To The Wolves
Startups have a tendency to "throw people in the pool and see if they'll float". Many times managers will ask an employee to get started, and just do the best they can in the short term. It's often a crisis situation, and the manager intends to come back and train them when things settle down a bit. Unfortunately, in early stage companies, the situation NEVER settles down. As a result, you end up with an employee that fails, feels abandoned and neglected, or develops bad habits that become hard to undo. While it's hard to find the time or resources to provide training, for most people, it's an important factor in ultimately achieving success. So make it a priority to give the person in a new role some basic training, no matter what it takes.

Supplement And Train Using Consultants As Mentors
One great way to provide training and support to employees in new roles is to get some outside help. Many smaller companies don't believe that they can afford consultants, because their price tags for providing expertise and short term work are much higher than permanent employees. But that is usually "penny wise, but pound foolish". Most jobs that need doing, also need to be done right. If there isn't the expertise or senior management bandwidth available to train and support the employee in the new role, the job may not be done the way the manager intended--costing the company far more than the amount that outside help would. In these instances, an outside consultant is actually a very cost-effective way to prevent costly early mistakes, as well as putting the employee solidly on a track to long-term success in their new role.

Allow Room For Errors
Margin for error is usually less in early stage companies, with a resulting amount of high pressure to "get things right the first time". But it's unrealistic to think that someone new to a job, with minimal experience and support, will do everything perfectly the first time. Startup managers need to factor this into to their expectations, and plan for results to be a bit uneven at first. It's especially important that the demeanor of the manager makes the employee feel comfortable to take educated risks in the company's best interests, without feeling like any missteps could cost them their career.

SUMMARY
It's true that early stage tech companies can't afford to engage in the same type of organizational planning and personnel development that occurs in most giant corporations. However, that is somewhat offset by the vast opportunities for development that are found in these fast-changing, non-bureaucratic environments. Early stage tech companies are well served if they force themselves to engage in just a fraction of the planning done in larger corporations. Post a comment and let us know what you think about organizational development in startup companies.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/

Business Models in the SMB Market

The SMB market is typically a very popular topic for hardware and software companies. Every one wants to sell to the Enterprise market; as a result, competition is fierce and standards are very high. If you get to the Enterprise market early, with an innovation that creates a new category, you can find success if you are truly making a contribution to the market. But late entries into a market segment, as well as early stage companies competing with larger, established companies, often have a very tough go of it. In these situations, attention often turns to the Small and Medium-Size Business, or SMB, market.

And why not? At first blush, the SMB market appears to be huge, as well as underserved. It looks like a perfect haven for an early stage or turnaround company with a solid product, but not quite enough differentiation, brand name, or marketing muscle to push out the big boys in the Enterprise space. So the decision is made to focus on SMBs.


What's Wrong With This Decision?

There is nothing wrong with this decision, per se--if it's done with eyes open, for the right reasons. But too often, it is done to run away from a problem (the inability to penetrate enterprises), rather than run to a great opportunity. A lot of times, companies see the SMB market as easier turf; simply a larger, less competitive market than the Enterprise market. Major problems can result from this type of mentality, and I see it quite often in my consulting practice. Companies that enter the SMB market from this perspective usually aren't fully prepared to do what it takes to be successful, in what is a very different type of market than they may be familiar with. So where are the land mines in the SMB marketplace?


What's Not Obvious in Marketing to SMBs

The first thing to consider is that customer needs are often quite different. A lot of this depends upon what technology and market segment you are in, and whether your product is aimed more at the "S" (small) segment, or the "M" (medium) segment of the SMB space. For example, if you are selling a single user productivity tool which is useful staff accountants, you may not see much difference. If on the other hand you are marketing a company wide, networked application of some complexity, the differences may be huge. Like everything in technology marketing--the devil's in the details. Every situation needs to be evaluated closely, and treated differently on its individual merits. The most important thing is TO NOT ASSUME THAT THINGS ARE THE SAME BETWEEN SMBs AND ENTERPRISES IN YOUR CATEGORY. Do the work, evaluate the situation--don't assume. Assumptions, without verification, are what get you burned in this transition. Below is a list of some of the major differences in the SMB market:

IT Departments are small and less of a factor--if they exist at all.--In Enterprises you may be dealing with persnickety CIOs that want thing just so. In SMBs, if there is a CIO at all, he will be looking for an off the shelf SOLUTION that will "just get the job done". Or you may end up struggling to figure out how you can sell your complex solution, to a company that has NO IT DEPARTMENT AT ALL.

There is less money to spend--It's harder to make money with big ticket hardware and software, let alone customization and expensive services. Your products better have value - and margin - right out of the box.

Ease-of-use is even more critical--There probably is no training department or other corporate staff, and people are busier overall. If they can't figure out how to use it quickly, you're going to have a hard time selling it.

There is much less time available to purchase products--Even the sales process may be compressed, in terms of how much time the prospect spends reviewing your marketing literature, or talking to your sales people. The actual TIME ELAPSED during the sales cycle could be EVEN LONGER due to lack of time available to the prospect, but the INTENSITY of the purchasing engagement is often much less.

How Do You Need To Structure Your Business Model Differently?

Lower prices-- They just can't, and won't pay the same prices that you can get in the Enterprise space, in most cases. So you'd better come into this segment with a price and value proposition that makes sense to these price-sensitive customers.

Marketing vs. sales--The SMB market is more marketing intensive, with respect to marketing/sales ratios, than the Enterprise market. There are many more customers; the average sale amount is much lower, and much less face time available for direct sales. While in many respects Enterprises are the most demanding customers in the world, you've got to be a better marketer to succeed in the SMB space than you need to in the Enterprise world.

Low cost sales force-- With much lower average sales amounts, and much less time available on the customer side, it is usually impractical to have a large, high-cost field sales force. Inside sales forces are the general rule in this market. If you have a product that demands customization and hands-on support, VARs are a good adjunct to consider. The more they are taking orders generated from marketing, and the less they are cold calling prospects, the better.

Better usability and reliability-- You'll need many more units being sold to get to the same level of Enterprise revenue, across a much larger customer base, with much less (if any) maintenance revenue to fund a large support staff. Your product better work when it's installed and better be very easy to use over time. Unless you have a highly customizable solution and are using VARs as a channel, SaaS is a great platform for delivering software to this market.

Little or No IT support--The good news is that there is no prickly IT committee or staff that you have to "go through" to sell to the real users. The bad news is that if even the littlest thing goes wrong, there's no one internally at the customer to pick up the slack--you're going to hear about it directly from the user--over an over again.

Summary

The SMB market is actually a simplistic catch-all phrase for a large, heterogeneous group of markets. But it is a useful abstraction, as a starting point for understanding how to penetrate and thrive in B2B marketing to smaller companies. I hope this short introduction is useful--feel free to pitch in and post a comment adding to this topic.

Phil Morettini
PJM Consulting
http://www.pjmconsult.com/