Completely satisfy each customers needs
The first two customers, Boeing and Syntax, were challenging customers. Documentum learned that although their application was functional, it needed to be reworked to completely satisfy each customers needs. Documentum was selling more than just an application; they were selling a process to enhance efficiency. In addition, for each customer, Documentum had to work with partners to complete the solution. Documentum needed technology partners to fill in the product holes, and system integrators that could put together the multiple pieces of software and help customers integrate this into their business processes.
Should Documentum accept the Marsh & McLennan deal? Based on the criteria identified in the Chasm Group study for potential target industries, Marsh & McLennan would fit within the five identified groups. Although Jeffrey Miller went through the exercise with Chasm Group to focus first on one industry and build from there, building the business in two industries simultaneously may be a less risky proposition.
Based on the Scenario Rating Worksheet the first target industry would be the Pharmaceutical NDA, not only do they rate the highest, it would be an easy transition as they had just completed work for Syntax off of which they could build easily. At the same time, the sales team is skeptical of the new vertical approach; the Marsh McLennan deal came through their horizontal sales efforts. In essence the product does not change, just the name and focus its being given. Obviously the fact that Marsh McLennan is interested is a strong factor for consideration.
It is a company that is in the mainstream and could generate the “buzz” that Jeffery Miller is looking for. Although ranking fourth on the Scenario Ranking Worksheet, the insurance industry is one of the targets that Documentum plans to focus on. Change cannot occur overnight. Employees need time to adjust to the new focus in order to embrace it. For the sales representatives who have already built a pipeline and are working their contacts it would be most costly to just veer on a different course, the leads they already have should be worked and evaluated.
The evaluation could be within the context of the new vertical approach the company is taking, but cannot discredit the work done and the potential revenue that is there. The secondary consequence of forcing a new path is that the sales force becomes extremely unmotivated and does not produce the necessary results within the new framework. The early adopter is buying a change agent, something that will give them a jump on the competition through lower product costs, faster time to market, or some other comparable business advantage.
The early majority are buying a productivity improvement for existing operations, minimizing the discontinuity with the old ways through evolution and enhancement of current systems, not a radical change from the way things are done now. In order for Documentum to bridge this gap effectively they need more experience in developing and implementing solutions to shorten transition times and make this a more painless process for the early majority. Starting the Insurance market with Marsh & McLennan is a good way to gain the experience and keep the momentum going.
Marsh & McLennan came to them, which means that they may be the market. (See next question for discussion on selection of target market. ) What is your reaction to Moore’s method of selecting the target market? Moore’s method to selecting the target market involves the whole organization and is a very inward looking approach to selecting a target market. The first step is to get application proposals from the entire organization. In essence this puts together the leads that the company has acquired and enables an organization to identify its core competencies as perceived by the entire organization.
The second step is to select the most compelling application. In Documentum’s case they identified certain market criteria that would be important for the project to be a success. Because they were dealing with organization changing processes, their target market needs a compelling reason to change (i. e. get ahead of the competition, gain time to market speed, cost control through efficiency), the company also needed to be a well-funded buyer, and had to have the potential to influence other companies to buy the solution.
Other criteria used, related more to Documentum’s fit and ease with which they could execute distribution and sales. Once the market is determined the focus is communicated to the company and organizational changes are made swiftly in order to implement the new market strategy without loosing momentum. There are a couple of issues with this approach. First it is a very inward looking approach to selecting a target market. It is based on what the creators of a product believe others can use it for and not what the potential customer thinks it can use the product for. Secondly, this approach was adopted mid-stream.
The marketing team and the sales team had already been working at converting leads into hot prospects, asking them to drop all the work they had put into this would at the very least cause resentment, and if the sales team is commission based (which often it is) would be downright angry about the sudden change. This could cause problems down the road in implementing the new strategy as some team members had already expressed. Finally, the product that Documentum is trying to sell is a very broad, implementation intensive project. The full pipeline takes 12 to 18 months, which makes the organization less nimble to make quick changes.
What is the difference between a horizontal and vertical strategy? Horizontal specialization is product specialization, whereas vertical integration is market specialization. In horizontal specialization the firm will sell its product to several segments possibly customizing its product slightly for each segment but building a reputation in that product area. In vertical specialization the firm will concentrate on the many needs of a particular market. Through this approach the company gains a reputation with this market group, possibly becoming the channel through which additional products are also sold to this group.
What are the key success factors in pursuing these two strategies? The key success in product specialization or a horizontal strategy is having a product that can be widely needed across segments. By becoming a product feature or product-line specialist the company would create a niche for itself. The key success factor in a vertical strategy or horizontal strategy is knowing the market, all its players and it needs very well. By defining itself with a market a company may more easily overcome the gap between early adopters and the early majority more easily as the product will be perceived as directed at that market specifically?
What does it take to implement the two strategies? In a horizontal strategy the company focuses more on improving the product, highlighting product features. Implementing such a strategy means the company needs to have a solid product, good technology and find the market that is ready for it. In a vertical strategy the company is focused on what the market needs. The company needs to be flexible to adapt its products to these needs. It also requires an efficient sales team that can identify and translate these needs to technical teams.
