John Goodman, Co-Founder & Vice Chairman of TARP Worldwide and Author

The Rich Niche Group blog interviews and enables you to hear directly from successful entrepreneurs, product managers, venture capitalists and others about the steps they took to grow their businesses/products and how they were able to create, penetrate, and/or dominate their niche.  This week we interview John Goodman.

Interviewee:  John Goodman, Vice Chairman and co-founder of TARP World­wide. 

Why Selected: As a pioneer in the science of quantifying, managing, and optimizing the customer experience, John (and his company TARP Worldwide) gives us the opportunity to glean a little bit of his knowledge on how a start-up, small business or any business can perfect their customer’s experience.  It is not often we have the chance to hear from someone running a company referred to by renowned author and consultant Tom Peters as “(TARP is) perhaps America’s premier customer service research firm.”  John is also an author, and in his new book Strategic Customer Service: Managing the Customer Experience to Increase Positive Word of Mouth, Build Loyalty and Maximize Profits, he shows how successful companies use customer service as a “catalyst,…making the organization more proactive, accelerating responsiveness, and boosting its effectiveness.”  John also points out the financial impact good and/or bad/no customer service can have on an organization.

In the following interview, John takes us through how TARP got started and how the importance of moving customer service from a complaint department to one that can have a positive financial impact on your organization.  The key points you’ll take away include:

1.  The impact of great service on your financials is ten to twenty times the cost. 

2.  Many companies that hire a market research firm to conduct a study read their final reports then put them up on a shelf.  Find ways to make sure your clients use information and the advantages you bring to them.  This will lead to repeat business.

3.  When clients and prospects want to negotiate on price make sure you take out work/services/product accordingly.  Just reducing prices can lessen the perceived value of your offering. 

4.  In order to gain traction in a market dominated by one or few companies , look for ways you can out innovate them and find the one or two people at some of their clients who are the most unhappy and then deliver outstanding service to them.

What drove you to start TARP and how did you plan penetrating the market research niche clearly dominated by the big research houses? 

 TARP was started as a student group doing interesting client research – we were approached by someone in the government who wanted similar research done which then created positive word of mouth about our activities that got us a large contract from the White House Office of consumer Affairs (which no longer exists). We aimed to do government research on a sole source basis so we didn’t have to compete at the beginning. We had a unique enough product that we tended not to compete – we would only take contracts if we were the only company being considered.  Our advantage was that we were small enough that we could survive with low prices due to low overhead. We also had very motivated employees who could directly see the impact of their work on large companies.

 As a pioneer in the concept of tying customer’s dissatisfaction to company revenue, how was the concept initially received by clients and how did you overcome their hesitancy to try a new model?

 We didn’t stress the satisfaction aspects but rather the financial aspects – we said that the revenue implications of great service were ten to twenty times the cost implications. Further we quantified the word of mouth implications which were of great interest to CMOs. We aimed our pitch at the CFO and the CMO.

 What were the biggest obstacles you ran into at the different stages of TARP’s growth and how did you overcome them?

At the beginning it was awareness. We dealt with that by doing papers, publishing articles and giving workshops at conventions. The next challenge was scaling up and still retaining profitability. We made sure our clients actually used our findings rather than putting them on the shelf which often got us repeat engagements. Further, we carefully raised prices with happy clients and made sure we took work out if we had to lower the price to meet their available budget. Our third challenge was competition copying our methods, so we had to keep updating them and answering new questions. We got those enhancements and new questions by listening to our clients and understanding their current and emerging challenges. Obviously we made many mistakes along the way but executing each strategy even 50% gave us an advantage over most MR companies that are relatively static.

After a while TARP, became known as the Customer Experience Measurement niche leader. Once in that position, what did you set-up so that TARP stayed in that leadership position?  What were you doing different than others?

We set up a council of 8-10 clients who met twice a year to push us on the emerging issues. We also used what we learned in one industry and asked how it would apply in another. I have always said that what works for Motorola will often work for McDonalds.

In general, what piece of advice would you give to someone who is either starting a new company or getting ready to launch a new product which they are hoping to either create and/or penetrate a niche?

Get exposure and learn the market by giving speeches and writing articles – often with clients – don’t charge much but do small projects that allow you to learn from the customer and let the customer learn about you. Coauthoring articles with practitioners is great way to both learn and build relationships as well as getting exposure.

What are the key characteristics of companies that have been able to penetrate a niche, even niches dominated by another company?

Specialization with value added that takes the findings through to implementation. Most services have little impact – if you can push the client to use the results you go beyond the standard company that moves onto the next customer and seldom looks back.

When you think of companies that dominate a niche, who do you think of and what do you see them doing to keep that dominating spot?

They tend to be companies that created a new niche – Starbucks or even Chocolate Moose on L St downtown (Washington D.C.). The have wacky gifts and great service and have succeeded where most gift shops fold after a few years. Where else can you buy a Sigmund Freud action figure?

What are the biggest threats to losing that dominating position? I would assume these same threats would be the opportunities for those looking to penetrate a niche?

Getting comfortable and relatively successful. Stop getting critical feedback from customers. No news is not good news.

Finally, which companies come to mind who once held a niche dominating position and then lost them and why do you think they lost that position?

Companies that lost their position of dominance did so as a result of complacency, lack of consistent value and failure to continually innovate.

Dharmesh Shah, Founder & CTO of HubSpot, Serial Software Entrepreneur and Startup Blogger 

The Rich Niche Group blog interviews and enables you to hear directly from successful entrepreneurs, product managers, venture capitalists and others about the steps they took to grow their businesses/products and how they were able to create, penetrate, and/or dominate their niche.  This week we interview Dharmesh Shah.

Interviewee:  Dharmesh Shah, serial entrepreneur, author and startup blogger. 

Why Selected:  Dharmesh is the founder and CTO of HubSpot.  HubSpot provides marketing software for small businesses.  The company, based in Cambridge, Massachusetts, has raised over $30 million in venture capital, and has over 1,700 customers. 

He developed grader.com – a free suite of online tools for marketing measurement.  These tools, including WebsiteGrader.com and TwitterGrader.com have won numerous awards and have been used by millions.

Dharmesh is the co-author of the new book “Inbound Marketing: Get Found Using Google, Social Media, and Blogs,” published by Wiley in October, 2009.  The book has been consistently ranked in the top 100 business books on Amazon.

He also authors OnStartups.com, a top-ranking startup blog with over 15,000 subscribers and 100,000 members in its online community.  He is an active member of the Boston area entrepreneurial community and a frequent speaker on the topic of startups and internet marketing.

Dharmesh has a B.S. in Computer Science from UAB and an M.S. in the Management of Technology from MIT.

In the following interview, Dharmesh discusses how he used inbound marketing techniques to help his company’s grow and how any business regardless of the sector it is in can use these same techniques to reach its customer base.  During the interview, Dharmesh provided some great insights on what it takes to launch, grow and sustain a company in today’s market.  The key points you’ll take away include:

1. It is critical for entrepreneurs to figure out a way to efficiently gain access to customers and to really reach people, you need to give them something that is valuable and compelling. 
2. As your company grows, one of the challenges you needed to be prepared for is how to stay on top of rapid growth and ensure that the organization shares a common vision and maintains the culture that has made it successful thus far.
3. Successful companies that enter a niche have a good understanding of how the existing players are failing to deliver sufficient customer value.
4. Companies that dominate a niche find some sort of “network effect” whereby each additional customer adds value to the remaining ones.

In your new book, Inbound Marketing: Get Found Using Google, Social Media, and Blogs, you show how any business can use inbound marketing to help their business drive prospects and clients to them; can you describe how you have personally used these techniques to build the companies you started? 

 My startup HubSpot was built from the ground-up with inbound marketing techniques.  We’ve used several different forms of content to effectively draw prospects in.  For example, in the early days of the company, we started a blog on the topic of small business and marketing.  This blog (http://blog.hubspot.com) is now one of our top 5 sources of leads for the company.  Another example is our suite of free tools, including Website Grader and Twitter Grader, both of which have been great marketing vehicles.

 Many internet and high-tech start-ups use inbound marketing, can you talk about how important it is for other smaller businesses and sole proprietors such as doctors, lawyers, plumbers, interior decorators, etc. to utilize the techniques you describe to help them maintain and grow their businesses? 

Inbound marketing actually works even better for mainstream, non-technology businesses.  The reason for this is that high-tech businesses are often very innovative — and pursuing an entirely new market or creating a new category.  Though inbound marketing can certainly help businesses, one challenge is that in these new, emerging industries, there may not be strong existing demand for the offering (people are not searching for those products, because nobody knows about them yet).  On the other hand, mainstream businesses like lawyers and interior designers often have very strong existing demand.  Inbound marketing is a great way for these kinds of businesses to connect to that existing demand and pull in customers.

 If inbound marketing works best for mainstream companies, how do you suggest they get started?  Most of them have never used inbound marketing and thus could use a few simple steps to get started.

 The best way to get started with inbound marketing is to start getting involved in the blogosphere.  Before writing the blog, it’s helpful to start finding relevant blogs in the industry and start engaging in the existing discussion.  Then, begin engaging in social media sites (LinkedIn, twitter, Facebook) and find relevant people/discussions there.  The idea is to start forging connections with those in the industry.  Then, start producing valuable content (usually a blog).  

 In today’s market business professionals and consumers are bombarded with marketing messages in everything we do, in your opinion, what can a small business and/or start-up do to ensure their message gets through to their target audience and drive them to come to your business to either learn more or buy?  

 The answer is very simple — but not easy.  Product content that is useful and interesting:  One of the common mistakes that marketers make is to believe that their customers are different than they are.  They’re not.  Just like us, our prospects hate cold calls, throw away junk mail, and ignore most advertising.  To really reach these people, we need to give them something that is valuable.  We need to create content that is compelling and will pull them in.  Websites that are nothing more than brochureware just won’t work — people ignore those.

 You are currently on your second start-up (HubSpot), what have been the biggest obstacles at the different stages of each of the two companies? 

 Each company had different challenges.  In my first startup (Pyramid Digital Solutions), the challenge was always one of resources.  The company was bootstrapped and did not raise any venture capital.  This meant that we could only grow as fast as our revenues allowed.  In many ways this was great, but it was tough because there were never enough people to pursue all of our ambitions.  At HubSpot, we have a different problem. We’ve raised significant outside funding ($33 million) and as such, have been able to hire exceptional talent consistently.  The challenge now is — to stay on top of this growth and ensure that the organization shares a common vision and maintains the culture that has made it successful so far.

You talk about maintaining the culture as HubSpot has grown, what specific steps did you take to ensure the culture did not get outstripped by the company’s growth?

 Several things:  First, we make “cultural fit” one of the key hiring criteria.  You’d be surprised at how many companies don’t have this in their list of priorities when recruiting.  We try to maintain an environment of “passionate and fun” in the office.  It’s a good work environment and it’s not possible to spend 15 minutes in the office without hearing someone laughing.  We have regular work-but-not-work activities that help people come together.  This includes a live weekly web TV show on Friday afternoons where we invite anyone from the outside to be part of the studio audience.  The idea is not to be overly serious, but not be frivolous either.  It’s not just about free beer on Fridays.  It’s about recognizing that HubSpot occupies a large part of our people’s lives and we’d be silly not to recognize that and make the environment as pleasant as possible so great people can work with other great people and do spectacular things.

How have the two start-ups differed and what key piece of knowledge from your first company (Pyramid Digital Solutions) helped you the most when launching your second business?

 The two companies were very different.  Pyramid was focused in a very niche (but lucrative) market whereas HubSpot is in a much broader and bigger market.  The big lesson from Pyramid was that in order to build a very big company, there needs to be a market opportunity to support it.  Though Pyramid was very successful, there were intrinsic limits to how big it could grow. Though I learned a lot from the experience, I always felt that I wanted to pursue larger opportunities.  So, with HubSpot, I made sure that the opportunity was large enough that I could potentially build a big, successful business.

When the CEO of a start-up and/or small business is putting together their Board, what advice would you give them and how often they and the company’s executive staff should be interacting with Board members? 

 This varies a lot based on the situation.  A common board meeting schedule is usually once every 2-3 months — particularly if the company has raised capital and has investors as board members.  The key to a functional board relationship is to ensure that there’s a good balance between standard “governance” and strategic decisions.  The board and executive team should be able to have candid discussions around company issues and opportunities.  Done correctly, the board can bring great value to the management team because there’s often a wealth of experience and wisdom.

How often do/did you interact with your Board and how important are/were they to the success of your business?

 When we first formed our board, we met about every 6 weeks.  Now we meet every 10-12 weeks.  Our board has been extremely helpful with some key issues — particularly during the early stages.  Areas where we received the most help were around marketing, sales, finance and strategy.

In general, what piece of advice would you give to someone who is either starting a new company or getting ready to launch a new product which they are hoping to either create and/or penetrate a niche?

 Today, it is critical for entrepreneurs to figure out a way to efficiently gain access to customers.  Most of the startups that I talk to don’t have issues with building a reasonably good product, they struggle with marketing and sales.  As such, my advice would be to start very, very early with inbound marketing efforts (the topic of my recent book, Inbound Marketing: Get Found Using Google, Social Media, and Blogs.  The idea is to start creating content and building a network within your target community.  This should happen well in advance of a product launch (and in fact, done correctly, can help you figure out what product to build). 

What are the key characteristics of companies that have been able to penetrate a niche, even niches dominated by another company?

 Usually, successful companies that enter a niche have a good understanding of how the existing players are failing to deliver sufficient customer value.  The key is to figure out what’s wrong with what’s out there now, make sure the problem is worth fixing and talk to as many customers as possible to figure out a viable solution.  It also helps to find industries that are going through a transformation whereby the existing offerings are becoming less and less effective.  The important thing is to be realistic as to whether or not your solution is *significantly* better such that some number of customers are willing to take the risk and adopt a new product.

When you think of companies that dominate a niche, who do you think of and what do you see them doing to keep that dominating spot?

 They generally deliver a fair amount of customer value (or at least they did in the early days).  They leverage this be deepening the relationship with the customer and making switching costs higher.  Often, they find some sort of “network effect” whereby each additional customer adds value to the remaining ones.  This kind of effect can act as a major barrier to entry for new market entrants.  (NOTE: for more on this see the earlier blog interview with Ara Bagdasarian and how this “effect” played an important role in his company).

What are the biggest threats to losing that dominating position? I would assume these same threats would be the opportunities for those looking to penetrate a niche?

 The biggest threat to a dominant player is to have the level of “unhappiness” in the customer base exceed the switching costs.  If customers are unhappy enough, they will consider switching, regardless of the level of vendor “lock-in” that might exist.  The other big threat (discussed in depth in the “Innovator’s Dilemma“) is that a new market entrant can focus on a different dimension of performance than the existing players.  A good example would include Southwest Airlines.  Often, a simpler, easier product will beat out existing players (over time) despite being much worse on a primary dimension of performance that historically was important and defined the industry.  But, a new class of customer often has different needs. 

Finally, which companies come to mind who once held a niche dominating position and then lost them and why do you think they lost that position?

 One example that jumps to mind is Siebel.  They had a dominant position in the CRM industry.  However, salesforce.com entered the market with a much simpler, lower risk option.  Despite the fact that salesforce.com was not nearly as powerful and had a fraction of the features (when it launched), it was “good enough” for many companies.  Over time, the product got better and better, and salesforce.com wedged its way into significant market share. 

Please let others know about the blog and our Entrepreneurs & Small Business Leaders group on LinkedIn.  The larger we can make the group, the more helpful it can be to everyone. We are also always looking for new topics and/or people to interview for the blog, please send any recommendations to Ken Balog at ken@richnichegroup.com

The Rich Niche Group blog interviews and enables you to hear directly from successful entrepreneurs and product managers about the steps they took to grow their businesses/products and how they were able to create, penetrate, and/or dominate their niche.  This week we interview Barry James Folsom and we’ll come to understand how he has “focused” his companies in order to grow more quickly:

Interviewee:  Barry James Folsom, serial entrepreneur. 

Why Selected:  Barry James has over 37 years of executive management and strategic marketing experience with a successful track record of growing divisions and companies rapidly into category leaders. He has played pivotal roles in the creation of 4 major market categories: PCs, Workstations, Internet Data Centers and Web Conferencing.

As a respected company leader, Barry James was Frost & Sullivan’s 2002 CEO of the Year.  He is also a frequent speaker, e.g. Ad:Tech, Media Summit, Digital Hollywood, & Digital Connections.

Barry James is CEO of Twirl TV. Twirl TV is a Social TV gateway experience to online TV for the 30M 16-to-24 year old YouTube on-demand Generation whose PC is their TV.  Twirl TV viewers have choice – from over 400 shows/6000 episodes –  as well as camaraderie with their Twirl TV friends, including chatting and watching together on their respective PCs.

I had the pleasure of partnering and working with Barry James when he was the CEO of PlaceWare (now known as Microsoft Live Meeting) which he sold to Microsoft for $200M. 

In the following interview, Barry James provides you with some insights on how he was able to come into PlaceWare and implement some changes and processes that enabled them to grow faster.  In addition, he gives us a look inside his new company, Twirl TV, and how it is changing the way young adults access, watch and interact with their favorite TV shows.  During the interview, Barry James brought up several points and ideas about what it takes to solidly grow your company.  The key points you’ll take away include:

1.  Look for the pain points of your target market and how your solution can solve them.

2.  If your target market is already in the customer base of an established business, leverage that business to reach and gain customer acceptance.

3.  Know what your adoption cycle is and look for ways to decrease the time it takes to get a “sold” client using your service/product.  This will have an impact on everything from customer satisfaction to cash flow!

4.  Focus, focus, focus…by being narrowly focused you can get to know your prospect’s and client’s needs better and deliver a product/service they highly value.

You are now on your 2^nd start-up, how has the start-up Twirl TV differed from when took over at Placeware?

Twirl TV and PlaceWare are different in three ways. Twirl TV is 1) a raw startup focused on consumers, specifically 16-to-24 year old viewers; 2) leverages Facebook to gain viewers; and 3) Social TV collaboration aka chatting about the latest TV episode. Whereas PlaceWare was 1) had 30+ employees and revenues as a B2B business, 2) had a direct sales force and 3) business collaboration aka how are we going to close the sale. 

What drove you to start Twirl TV and what made you believe you could evangelize the concept to end users, investors and partners? 

We saw two major trends to jump in front of and we saw major pain points for our initial target segment (16-to-24 year olds).  The two major trends are 1) episodic primetime TV is readily available online/on-demand and the content library is growing daily; and 2) advertisers need smarter ways to gain access to, and engage with, the highly coveted 16-to-24 year old demo.

For our initial target viewers of 16-to-24 year olds, they have major pain points we at our age (older adults) don’t relate to, nor grasp.  And those pain points are that their PC is their only TV screen and they have a hard time discovering relevant entertaining content to chill out to with their TV friends.

Internet/Mobile TV (ITV) is a new concept for much of mainstream America and thus getting consumers to notice Twirl TV vs. the competition has to be difficult, what is Twirl TV doing to set itself apart from the competition?

As you indicate, first there are several ‘spaces’ and thus it’s all very confusing.  There is trying to get online video content to the TV (Internet TV), there are those trying to get video to the mobile phone, and finally there are a few of us working on delivering the TV experience, and in our case a new Social TV experience, to the PC/MAC.

So how do we set ourselves apart from the competition?  First, by being very focused on our initial target market of 16-to-24 year olds, we can leverage Facebook in many ways to deliver a Social TV experience with the few friends that are into TV with them.  So out of say 500 Facebook friends, we only expect our viewer to have 3 to 7 Twirl TV friends that they share their passion for say ‘Family Guy’ with.

Of course we will be compared to Hulu as our competitor, yet we actually focus on who are meta-competitor is and that is user generated content.  Why?   Because that’s where our target spends most of their video viewing time!  At a higher level, the entire TV industry has to come together collectively to help deliver compelling entertainment to this demo so they start watching more TV, not less, than the prior generation did.

In the end what really sets up apart is that Twirl TV has nailed what this demographic loves to do – socialize around their favorite TV episodes with their Twirl TV friends and that we are the only ones ‘who get them’.

When evangelizing the business, I have found many entrepreneurs have the same pitch for each audience.  Can you share your experience and the need to different pitches for each target audience (investors, partners, end-users)?

At the end of the day, the pitch has to answer for each audience “what’s in it for me”????  For business end-users, does it improve productivity, increase revenues or decrease costs?  For partners, does working with you gain us any competitive edge, increase our servable markets or open up a new market we can’t reach? For investors, if the opportunity really exists, can this team execute on winning major market share both effectively and efficiently so I get a 10X return on my money?  (And it’s worth noting today, many financial investors see today’s stock market having the potential to deliver a 5X return at much less risk than venture investing).

What were the biggest obstacles you ran into at the different stages of Placeware’s growth and how did you overcome them?  Are you seeing any of these same issues at Twirl TV?

There were three stepping stones (or obstacles we climbed) to get to success.  First was converting the emphasis from technology and features to nailing the experience and having a rock solid service.  That was a major change in values! Second was really understanding our sales cycle AND our adoption cycle (two vastly different loops).  Make sure a senior person is assigned full time to owning the adoption cycle of your users/consumers. Our analytics on our adoption cycle lead to major process/structural changes that improved adoption immensely as well as increased our sales!  Third, as you grow, the sales team collectively will ‘justify’ going off in several different directions.  It’s important to remember your size – we were $35M on the way to $50M in revenues, and we kept our focus and did not start a second product line.

At one point Placeware became known as a leader in the web conferencing/webinar niche. Once in that position, what did you set-up so that you stayed in that leadership position?  What were you doing different than others?

PlaceWare definitely owned the large scale webinar segment of the market.  Our competitor WebEx did a great job in the Small/Medium Enterprise market around small meeting collaboration.  We extended our lead in the F1000 niche with a strong secure service that the financial services industry came to deeply trust in time.

 Ken:  Having worked with PlaceWare from almost its inception, I want to add a little to what Barry James has pointed out:  When PlaceWare first came out of Xerox’s Parc Research Lab, it was an extremely feature rich web conferencing application, over time PlaceWare narrowed the features to the most widely used and earned their customer loyalty and new customers by providing a great experience coupled with exceptional new customer training and support.  This last part was a key factor during this time as web conferencing and webinars were still a new concept for most companies and individuals and the training was a key to getting client/partner buy in.

In general, what piece of advice would you give to someone who is either starting a new company or getting ready to launch a new product which they are hoping to either create and/or penetrate a niche?

Simple to say, very hard to do in practice:  The more narrow you focus your initial market, really really narrow, the larger your market actually is!! Yep, re-read that.  Counter-intuitive you bet.  Because when you are narrowly focused, you drill down 3 to 5 layers of detail in knowing your customer to really deliver specific value to that target vs. being generic (and feature rich) but not delivering the core – if you take this away, I will do you bodily harm – VALUE to that target.

Thanks for the insights Barry James!

The Rich Niche Group blog interviews and enables you to hear directly from successful entrepreneurs and product managers about the steps they took to grow their businesses/products and how they were able to create, penetrate, and/or dominate their niche.  In addition, we also interview those that provide services entrepreneurs and small businesses need in order to help them build their companies.  This week we interview Roy Cammarano:

Interviewee:  Roy Cammarano, former President of three INC. 500 companies, business consultant, public speaker and author of Creating Do-It-Yourself Customers and the award-winning book, Entrepreneurial Transitions.

Why Selected:  Having had the pleasure of working with Roy at two different companies, I can attest to the fact that Roy’s perspectives and insights into helping entrepreneurs, entrepreneurial organizations and businesses of all sizes grow themselves and their companies is invaluable.  I would encourage every entrepreneur to read Entrepreneurial Transitions, it is one of the very few books that can help you move from being an entrepreneur to a leader.

In the following interview, Roy discusses how starting and running a business is analogous to starting a family, helping it grow and some of the mistakes to avoid along the way.  As you read the full interview, here are some points that stood out to me:

1.  As a company grows, the founder and/or leader of the company must transition from being the “entrepreneurial genius” to visionary leader.  One key to this relies on the leader of the company building a strong executive team and then enabling them to run their departments.

2.  Entrepreneurs need to realize that at some point in order for their company to reach its full potential, they may need to bring in someone to run the business.

3.  When times get tough, focus everyone on a common goal and use that to rally the troops by celebrating small wins and build positive momentum. 

4.  When hiring outside consultants, only hire those that provides the skills the company needs and does not already possess.

5.  Companies that continually dominate their niche are always asking themselves, “how would I compete with me” and then building the barriers to keep them competition at bay.

In your book Entrepreneurial Transitions you compare the life of a company with that of a human (Birth, infancy, toddler, adolescent, etc.) can you elaborate on that and why it is important for a business leader/entrepreneur to the stages?

I think it is important to create an analogy that most people are familiar with and this one allows significant latitude to address the “growing pains” than an organization goes through. For instance at some point a discussion will take place as to whether the founder has the necessary skills to grow the company: The skills of impregnating are different than the skills of parenting and those skills are different than teaching skills.  A child needs all and so does a company.

Additionally, as a company grows new skills and processes become necessary and often perfection is expected at these new skills and process and little tolerance exists for on the job learning. I liken this to a crawling baby learning to walk. The parents and virtually anyone seeing this struggling acquisition of new skills and process offers encouragement and by providing a helping hand they create a safe environment whereby they can pick the child up and provide comfort when the inevitable fall happens.  Rarely do companies provide this type of learning to take place, so I like to ask them what would have happened to the baby had they been treated to a negative, critical impatient process?

There are very few founders who have made that transition to lead and grow the company as it gets larger, how do you suggest other executives & board members start this conversation with the founder and many times the majority share holder?

In my book “Entrepreneurial Transitions” I describe 4 phases that an entrepreneur goes through, Entrepreneurial Genius, Benevolent Dictator, Disassociated Director and Visionary leader. Unfortunately very few ever become Visionary Leaders.  Most actually vacillate between Benevolent Dictator and Disassociated Director and this is very frustrating and painful for the entrepreneur and the organization.  The ability to acquire the skills to be an effective CEO is as difficult as an average singer becoming a great recording artist.  Some of it is God given talent and much of it is hard work and dedication at “constant improvement” and growth. Unfortunately many entrepreneurs as their companies become more and more successful fail to acquire the next level of skill sets to continue to lead the organization instead they rely on the skills that got them to where they are. Professional athletes still practice and get coaching in order to improve. Often entrepreneurs do not. If you have the opportunity to influence an entrepreneur make sure you: 1) respect what they have accomplished; 2) provide them with an illustration so they can see what has worked for others; 3) ask them to play to their strength; and 4) provide a safe environment to help them acquire the skills they need.

You’ve worked with and run several small businesses and some large ones, what key traits have you seen in some that make them more successful than others? 

Like watching small children play soccer as they grow and mature they learn to transition from “bunch ball” (everyone around the ball or in the corporate world – decisions) to positions and then ultimately strategy. When the positions are understood and the strategy in place, tactical skills (specific to positions) can improve. Going to a Saturday morning soccer field can teach you about the proper growth and maturity of the organization as it transitions through the age groups to eventually look like the pros.  Often entrepreneurs think they are David Beckham and can always carry the day.

When evangelizing the business, I have found many entrepreneurs have the same pitch for each audience.  Can you share your experience and the need to different pitches for each target audience (investors, partners, end-users)?

Often listening to entrepreneurs is like listening to a tape recorder repeating what they say and know regardless of the audience.  Be careful of the single pitch as it means that they may have only one way to get what they want.  I believe that you can always have your way provided you have more than one way.  Unfortunately entrepreneurs often have a story pitch because it worked at one time and people reacted favorably so they continue to do what had worked before. Have them read “Who Moved My Cheese.”  It is especially important to understand that people listening to what you are saying can only understand what you are saying if they can relate to what you are saying.  Audiences are made up of many different types of people having only one way to tell your story ensures that only a limited number of people will understand and relate.

What were the biggest obstacles you’ve faced at the different stages of the companies you’ve run and how did you overcome them? 

Working with an entrepreneur who has gone from hero to villain within their organization is always tough.  The parenting skills they had do not transition to the educator and then coach roll they need to play so they are angry.  Often the organization has rebelled and battle lines are drawn.   The employees suffer, the entrepreneur suffers and the customers get frustrated.  I again use analogies to help everyone understand that this is normal (like adolescence) and we begin to look for common ground we can work towards as opposed to focusing on what we disagree on. Take on small problems solve them celebrate and continue to gain positive momentum.  Never take on the big problem that no one thinks can be fixed and never allow people to criticize an individual’s focus on the necessary results.

If you avoid ever taking on the big problems that will likely haunt the company, are you suggesting they break the big problems into smaller components and tackle each component one at a time, or something else?

I think I was specific about the BIG problem that no one thinks can be fixed. Take on the big problems that you think you can fix after you have success with the problems that are easy to fix.  Problems in organizations will always come up and having a team of people that can work together is critical to solving them.  In many instances entrepreneurs believe that they are the only ones that can solve the problems and they have done it so many times that they have trained their employees to not even try to fix something because they know that the entrepreneur will only want it solved their way.  Big problems often happen because people do not handle the little ones.

What do you see as the most common mistake leaders of start-ups and small businesses are making?

They think they have to be in control of every detail and that the only way to solve a problem is their way. It destroys people’s willingness to contribute and the entrepreneur never teaches anyone they just tell them what to do.

Describe how you suggest leaders of start-ups and small businesses interact and utilize outside consultants? 

Carefully! Only hire for specific skills that the company needs and does not possess. Never take operating advice from a lawyer and realize that most accountants are historians and risk averse. Check the references and be careful if you meet them on a plane. It seems most entrepreneurs (most people) seem to open up to strangers on airplanes, I think it is breathing the pressurized air that makes everyone susceptible to listening to a complete stranger and take their advise while ignoring what your top employees are telling you. Also never attend a one day seminar and think you have the necessary perspective and skill to implement what you learned.

In general, what piece of advice would you give to someone who is either starting a new company or getting ready to launch a new product which they are hoping to either create and/or penetrate a niche?

Two very different questions and each depend on the maturity and previous experience of person and the complexity of the offering.  Know it is going to cost you way more than you think it is and take more time.  A rule of thumb is two time the money and three times as long or three times the money and twice as long.

What are the key characteristics of companies that have been able to penetrate a niche, even niches dominated by another company?

Niche penetration means that the other company did not protect itself by asking the key question how they would compete with themselves.  And then doing it or creating barriers for others. Often we like to glamorize the one company or product that makes it.  We ignore the ones that failed miserably and cost people their life savings. Learn before you take action but when you take action go for the gold.

When you think of companies that dominate a niche, who do you think of and what do you see them doing to keep that dominating spot?

Most often we think of big companies that are dominant and we loose sight of the growing pains and the mistakes that were made as they grew.  Jim Collins in his book “From Good to Great” did a good job of sharing the learning’s that these companies went through.  I think what they do is adhere to a core set of beliefs and create a culture of always getting better.  I like asking Peter Drucker’s questions; “What business are we in? What business will we be in? What business should we be in?”  Intel is the most notable example of asking and answering these questions.

What are the biggest threats to losing that dominating position?

Fail to ask Drucker’s questions and think that the market will never change.

Finally, which companies come to mind who once held a niche dominating position and then lost them and why do you think they lost that position?

SONY (the walkman vs. the IPod)

SONY created the take your personal music where ever you want to go.  IPod now dominates that market. SONY had too many battles on too many fronts (beta max vs. VHS) etc. but the market was made by SONY and they did not stay on the edge and adapt to the new technologies till it was too late.

The Rich Niche Group blog interviews and enables you to hear directly from successful entrepreneurs and product managers about the steps they took to grow their businesses/products and how they were able to create, penetrate, and/or dominate their niche.  This week we interview Ara Bagdasarian:

Interviewee:  Ara Bagdasarian, this is Ara’s second start-up. 

Why Selected:  Omnilert (www.omnilert.com) was one of the first companies in the unified mass notification systems business (urgent text messages) for colleges and universities.  Ara and his partner started Omnilert in 2003 and have since become a leader in the space.  I had the pleasure of working with Ara in the past and he is one of the most innovative and customer-focus individuals I know.  In addition, he is very active in his community of Leesburg, Virginia serving on many non-profit boards and as the Chairman of the Town of Leesburg’s Economic Development Commission.

In the following interview, Ara takes us through the concept for Omnilert, how it changed based on feedback, and then managed the hyper-growth caused by the shootings at Virginia Tech in 2007.  As you read the full interview, here are some points that stood out to me:

1.  If your initial concept does not resonate with your target audience look for others where it might

2.  Innovate in all areas of your company, not just with technology

3.  Publicize every new client you get and get existing clients to tell your company story  

What drove you to start Omnilert and what opportunity did you see that was not being served at that time? 

As with any innovation, there must be a pain that needs to be remedied.  The initial pain arose when my wife and I were looking for homes during the incline of the insane housing market in Northern Virginia.  By the time we received a listing; the house was either under contract or sold.   It was getting beyond frustrating!   The initial concept was to allow a Realtor to broadcast a new listing to their group via text message even before house was listed on the market.   We ran the idea by a few Realtors, and the response was lukewarm.   There clearly was a market opportunity in instant dissemination for time-sensitive information, however the real estate market would have to wait. 

Several months later, I was reading an article about a female college student who was brutally raped and murdered in her dormitory room in 1987.    Her family investigated the situation and formed a non-profit to support campus safety enforcement.   They determined that the information about the rapist on campus was not distributed quickly enough to the campus community.  This information could have saved her life.   At that moment, it became crystal clear that there could be no better application for mass text messaging than for campus emergency alerts.   Some quick market research revealed that over 90% of college students carried mobile phones, and there was no service that provided campus alerts.   I called my partner and the wheels went in motion to start Omnilert with the vision to create a new standard in campus communications.

You actually launched Omnilert prior to the Virginia Tech shootings how difficult was it evangelizing your concept and how did that change post that event?

Prior to the VT shootings, it was a challenge evangelizing our concept to schools.  It was such a new concept at the time.   Most people over the age of 25 had little familiarity with text messaging.    We started to gain traction in the 6 months prior to the VT shootings as some key customers signed on for the service.  We noticed a direct relationship between posting a press release highlighting a new customer and the amount of incoming leads and started closing a new customer almost every week.

After the VT shootings, the demand tsunami began as the market was exposed e2Campus (our service brand) as the solution to the campus emergency communications pain.   As Malcolm Gladwell notes, that experience was the “tipping point” – a market suddenly sees value in the service that we are offering.    We went from one customer per week to over 10 per day.  CNN, USA Today, ABC World News, MSNBC, and most importantly our existing customers became our evangelists at that point.

What were the biggest obstacles you ran into at the different stages of Omnilert’s growth and how did you overcome them? 

In the early stage, the biggest obstacle was finding the visionaries in the market.  We were fortunate to find one in our first prospect, however it took time to find others.    Once we went into hyper-growth mode our biggest challenge was dealing with the rapid spike in demand and customer acquisition.  We overcame the challenge by implementing highly-scalable processes and systems that allowed us to be responsive to all inquiries and be timely in delivering new service accounts.   By using CRM tools such as Salesforce.com, a hosted telephony system, desktop-sharing software for demos, and creating an easy account creation tool in our application, we were able to successfully operate in an intense environment.

Also, suddenly after the VT shootings, hundreds of new competitors instantly appeared in the marketplace.  Most were offering a lower-cost and technologically unsafe service and they started aggressively selling into our market.  What this did was create the perception that Emergency Notification Systems were unreliable and did not work “as advertised”.   Administrators from colleges would speak at conferences and share their unsuccessful stories about emergency messages taking hours to get delivered, and only half of the registered population even received the message.     With all of the heavy evangelizing by the media and parents demand, there began a “this text alert stuff is not all it is cracked up to be” movement.  Our system really DID work- we invested heavily into our infrastructure to ensure this, however many third-tier providers tainted the overall market perception.

We overcame this obstacle by launching a comprehensive education campaign.  The campaign was designed to allow our customers to share their success stories, best practices, and educate the market that not all Emergency Notification Systems were created equal.  We sponsored a webinar series “Best Practices in Emergency Notification” and we launched e2Campus.org which was a peer-forum for our customers to share best practices.   Over the last 2 years, most of the new competitors dropped out of the marketplace as their customers upgraded to the more reputable providers.  That also helped with this negative perception.

Omnilert was one of the first unified mass notification systems and services companies, my question for you is did you find more collaboration between you and the other pioneers in your industry or was it more of a competitive nature between your companies?

Immediately after the VT shootings, we had several companies contact us to partner since they were not providing mass text messages (just voice messages).   Since that brief exchange, it has been more of a competitive relationship.

Omnilert is known as one of the innovators in your niche. What are you doing so that Omnilert stays in that leadership position?  What were you doing different than others in the niche?

We are very cognizant and almost obsessive about keeping and widening our leadership position.   To do this we constantly innovate – not just from a technology perspective, but also from a customer experience, and operational perspective.    We choose not to enter the “feature war” game with our competitors- instead we find better ways to accomplish our customers’ objectives.   It is about offering the “right features” not just “more features”.   I know it is tempting to want to check every feature box on an RFP response, however too many features can sacrifice usability and the effectiveness of the product.    For example, the iPod had considerably fewer features than most mp3 players on the market.   Any standard mp3 player had tons of buttons and features included FM radio, voice recorder, preset locks, and other functions that should accommodate any consumer requirements.   The iPod came out and it had one button and a circular dial!   It made it incredibly easy to manage the user’s music library, purchase new music, and the user interface was far superior to any of its predecessors. The iPod offered the “right features” not just jam-pack the unit with “more features”.

If others are doing something in our niche, we will not do it.   If there truly is a pain for a feature, then we will find a better way to realize that feature’s outcome.   We will not simply just add the feature as already defined.  When a feature request arises, we always ask “What is your objective?” and then come up with the best solution to that objective.

We invested heavily in the most important features in our niche- speed and reliability.  While competitors may add more bells and whistles to their systems, we maintain a reputation for being the most reliable and trusted in the marketplace because we constantly innovate on making our network the best.   You can have all of the bells and whistles in an ENS service, however if it does not work when there is an emergency- that does the customer no good.  Don’t get me wrong- our platform is very feature-rich; we just have different features that enable our customers to be successful when there is an emergency.

In general, what piece of advice would you give to someone who is either starting a new company or getting ready to launch a new product which they are hoping to either create and/or penetrate a niche?

Today, we have an unprecedented opportunity for entrepreneurship.   With the advent of the Internet and all of the technologies that are associated, an idea can become a business quickly and efficiently.  Here are a few points of advice:

                     A. Visualize the Outcome.   What does the world look like after your product is well-adopted and in use?  Now, with that in mind, how are you going to get there?  That outcome needs to serve as your decision making beacon on attaining that goal.  When new “opportunities” arise (partnerships, markets, etc) you can decide whether or not that “opportunity” is a true opportunity, or if it is a distraction.  You can do this ONLY if you know what direction you are headed in.  If you have your outcome defined, every action your business takes must be a step in the direction of that outcome.   For Omnilert, our outcome was to become the new standard in campus safety communications.  Every college would be using e2Campus to notify students, faculty, and staff of a time-sensitive emergency situation.   Our decisions leading up to that point were made towards realizing that outcome.  Today, most states, and even the federal government are mandating Emergency Notification Systems for college campuses.  We now have a new Outcome as our beacon:  to evolve all campuses into utilizing multiple communication end-points (their single message reaches text messages, voice mail, public address systems, desktop alerts, email, digital signage, and other technologies) to keep campuses even safer.

                    B. Tell your story.  Use your website, press releases and the media to communicate your message.   People want to be a part of a movement, part of a solution.  To build momentum for a new product or company, it is important to build a story around the product.  As early customers adopt the product, let the marketplace know – make a big deal about it.  Make it newsworthy.   When Penn State was featured in USA Today for their text alerting usage, we quickly signed up several new customers who wanted to be a part of this new movement.   You can tell your story with little investment as well.   By utilizing press releases, web sites, email newsletters, webinars, and speaking engagements your story can be spread on the smallest budget.    Rather than hiring a Marketing Director, you are better off hiring a Chief Storyteller.

                    C.  Be “tech frugal”- utilize technology to give your business the same customer experience as a Fortune 50 company.  You can outsource anything that is not a part of your core business.  Also, it is best to start with a prototype of your product/service before investing in fully developing the product.  Many entrepreneurs I speak with believe that one of the first steps in launching the business is raising millions of dollars to build their product.   They write a lengthy business plan with wishful projections and market analysis.   I suggest the opposite: if you can design a prototype or even a “mock up”- you can begin selling the product immediately and then re-invest the sales revenue into the development of that product.   There are so many resources today that allow a new company to prototype a product with little or no funds (do-it-yourself).

                    D. Trail Blaze – never create a competing product, instead innovate in a niche where a remedy to a pain has yet been created.  I have often heard “how can you compete with the big players in the market?” from young entrepreneurs.  The answer is simply “do not compete with the big players in the market!”    In 2004 there were a few ENS providers in the market, and they were all focused on federal government, military, or corporate markets.   There were no providers in the higher education space, so it made even more sense to forge forward in that niche.

                    E. Make lemonade from lemons – Look at problems as opportunities.  Problems are opportunities to innovate.    This is not only true for your product, but it should also apply to the way that your business thinks and operates.   When presented with a problem in sales, operations, marketing, or any other process, be sure to turn that problem into an opportunity to improve and innovate.  If you lose a customer, hit a roadblock with sales, or lose power at a trade show, rather than write it off as a problem, you can find ways to improve and become even stronger.   If there is a problem in the marketplace that has yet to be met, turn that into an opportunity!  If you and your company think from this context, you will constantly improve, constantly innovate, and constantly lead.

Ara, thanks for the advice and for sharing the Omnilert story.  Starting and running a mission critical service presents great challenges and I am thrilled to see you and your company doing well.  Let me provide a quick summary to Ara’s interview:

1.   Solve a particular problem and be sure your solution resonates with your target audience.

2.  Create a vision for what your product/service will look like in the market place and NEVER lose focus of that and the solution it provides. 

3.  Implement highly scalable processes and systems as you never know when a catalyst for hyper-growth will come along and having processes and scalability will enable to you surge while your competition ramps up.

4.  Be overly responsive to inquiries and delivering new service accounts. 

5.  Don’t copy what your competitors are doing, create better solutions. 

6.  Use existing clients as company evangelists and use PR and press releases to get your story told.