The 9 most common reasons why so many high tech companies and products fail

The technology industry is characterised by failure. High tech product and company launches are high risk and high adrenalin, but the rewards are great when you get it right!

So let’s take a look at the 9 main reasons for failure, and maybe it’ll help you avoid them.

1 Lack of market focus (aka Segmentation)

Emerging high-tech companies often do anything possible to generate revenue and in the process try to be all things to all people. Worried about losing business they avoid segmenting the market and refuse to focus on one or two key segments. As a result the company is unable to adequately serve any one market segment and management is suddenly swamped with support problems and competitors.

2 Fast pace of product improvement

High-tech equipment is generally used over an extended period of time, is integrated with complementary products, and imposes learning costs on the end user. As such, customers require time to digest and recover their investment in high-tech products and the overall systems in which the products are used. The rapid introduction of new and improved versions can make a customer regret a previous purchase, delay all new purchases, and agonize over similar purchases in the future, none of which are in the long-term interest of the producer.

3 Incomplete products

Customers view products very differently to the people who create or supply them. In technology-based companies the tendency is to try to sell products on the basis of price, special features and technical specifications. These technical factors are often favoured by the engineers and scientists who typically run high-tech companies. Unfortunately most customers consider factors such as product support and brand to be more important – remember the line ‘you don’t lose your job for buying IBM’? So the feature-rich products created by techies are seen as incomplete in the mind of the customer. Rather than competing on features alone a company should focus on the “intangible” factors that are especially attractive to most customers.

4 Undifferentiated products

Most high-tech products that fail do so because of a lack of differentiation. Successful companies differentiate their product from all other products on the market. Differentiation is possible on the basis of five fundamental factors: function, time utility, place utility, price, and perception. These five elements can be mixed into an almost infinite variety of patterns.

5 Channel mismanagement

There’s more to channel management than just matching distribution to your target customer or segment. Specific skills are required to effectively manage each type of distribution channel and those skills must be developed internally before significant selling can begin. For example, success with a dealer channel requires a top-flight C-level sales leader who can guide account or market development, and can introduce dealers to key buyers. And once leadership skills have been developed, it is then necessary to overcome the inherent weaknesses of the dealer channel:

The manufacturer has no control over the dealer’s priorities;
Loyalty is a function of the dealer’s interest in a given product which is determined by demand and the economics of the marketplace;
Sales coverage is limited to the dealer’s circle of contacts;
There’s no motivation for the dealer to penetrate key territories or accounts.
Unique management challenges exist for each primary type of distribution channel: direct selling, dealers, VARs, manufacturers “reps” or agents, OEMs, alliance partners, and inside sales.

6 Failure to establish the right competitive barriers

Traditional barriers to competition, as defined by economists, are of little relevance in high-tech. They tend not to work in technology-based business. The most effective competitive barrier in high-tech is the perceptions held by customers, prospects, and the supporting infrastructure. So that can work against you, or in your favour, depending on where you are now.

7 Using price alone to drive market transformation

It is easy to misinterpret the role price plays in market transformation. And it is a mistake to believe that a high-tech product would be widely used and adopted if its cost was low enough. Price reduction alone does not guarantee mainstream market acceptance. Getting your price right is a vital element of a marketing campaign, and it should be set in line with the complete marketing strategy.

8 Inappropriate promotions
More money is wasted on advertising than any other marketing activity. A company cannot establish credibility or create a position in the marketplace with advertising. Advertising is also a poor choice if your target audience is sceptical or if the message you are trying to communicate is complex. Think of advertising as a way to reinforce positive differentials that already exist. You can do this by broadcasting emails, exhibiting at trade shows, talking at conferences, writing blogs and getting your website seen with search engine marketing and social media.

9 Irrelevant market research
Companies routinely perform the wrong type of market research. Statistical surveys of customer demand do not provide the qualitative information that is needed most. Because the judgments of your target audience often rely as much on perceptions as on facts, qualitative research intended to identify existing perceptions has much greater value in assessing, planning and executing a company’s marketing strategy.

Of course, you can avoid all these pitfalls by talking to an intelligent agency like Marcom, who’ll help guide you through the minefield and de-risk the process. Do contact me if you would like to discuss your own plans.