Saturday, September 17, 2005





Breaking the Growth Barriers in the Information Technology and Software Sector








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Breaking the Growth Barriers in the Information Technology and Software Sector

Author: Ash Seha

There's nothing automatic about corporate growth, particularly in the information technology industry; build it and they will come is a myth. In the real world there is either a structured, process-driven growth cycle, or stagnation�and stagnation is automatic. Inherent to growth cycles are barriers, real-world business challenges that put some software companies out of business and spur others on to break through those barriers to higher levels of success. Overcoming those barriers is the very definition of growth; when you break through a barrier, you've achieved growth.

You're a software or information technology company, prosperous in 2005, which means that you have a good product, you've made some smart decisions and you've already broken through some growth barriers. You're successful. Now what?

Any company, regardless of age or size can experience barriers to growth: if you find it hard to develop and maintain market momentum; are tied to your entrepreneurial management style and unable to scale; have reached a level of revenue or income and stagnation is settling in; or if your revenue is generated from one product, service, client, or industry, then you're at the next growth barrier, you need to be able recognize it, and you need to prepare to cross it. This overview discusses the typical growth barriers that confront many IT and software companies, and how external consultants can be used effectively to break through those barriers.

Strategy Constrained

At this point your company or product is in the early stages of its evolution. You've landed a handful of key accounts, and you're encouraged by your early success. Now you need a plan, a strategy, a concrete agenda that will move your information technology company from being a collection of talented people with a common goal, to being a team with a common goal and a battle-tested strategy for achieving that goal.

This stage is characterized by:

    � Perpetual realignment of company strategy

By delivering guidance on corporate strategy, a marketing strategy consultant may be able to help a company like yours to:

    � Define untapped solution areas
    � Make technological platform decisions
    � Select appropriate geographic markets
    � Write actionable business plans

Capital Constrained

You've taken your software company or product as far as you can on your savings. Or perhaps you've made a few key sales that have kept you afloat. In order to move your company on to the next phase of development you need an infusion of capital to hire skilled employees, make key acquisitions and fuel your growth. Technology is your specialty, not prospectus writing for venture capitalists.

This stage is characterized by:

    � Inability to fund business strategies
    � Decision-making based upon short-term cash-flow issues rather than long-term strategy

Through road-show ready business plan development and introduction to network of VCs and angel investors, a strategy consultant may be able to help a company like yours to:

    � Author compelling investment prospectuses
    � Define immediate and long-term financial requirements
    � Execute successful finance road shows

Skills Constrained

Typically a company finds themselves at this stage of development with a great product built on sound technology aimed at a particular industry, and their first round of financing secured. They also find themselves with a weak or non-existent positioning statement, a reactive product management process, exhausted or ineffective sales skills, and a strictly opportunistic business development strategy. Company growth is limited in part by the notion that the product will sell itself because it is superior to any other on the market�indeed, it may be the only offering. Revenue growth is limited because the product is defined in terms of its functionality, not its value to the customer.

The offering, and by extension the company, is still being defined by technologists; it has yet to be married with a solid business development plan, marketing or sales acumen. More worrisome is that the very success of your company has brought you to the attention of major players who do have personnel and strategies dedicated to driving you out of the market; they view you as a threat. Your days of flying under the radar are over.

This stage is characterized by:

    � An attractive market
    � A compelling product
    � Adequate financial resources
    � An inability to develop market momentum

Through sales, marketing, product management and business development acumen, a sales and marketing strategy consultant may be able to help a company like yours to:

    � Recruit and manage skilled personnel
    � Craft compelling product and company positioning
    � Create effective sales vehicles and sales strategy
    � Recruit and manage appropriate and motivated alliance partners

Process Constrained

A company at this stage of development is typically successful, no longer a start-up, is being run by a management team, has been accepted in the market, and is competitive. However, fundamental product development and sales and marketing management processes have not yet been accepted within the foundation of the corporate culture. This means that the solution to most situations are human-based, usually hand-crafted by the management team; the foundation of proven processes is absent.

This stage is characterized by:

    � Market acceptance
    � Ability to compete with established players
    � All actions are hand-crafted, typically by the senior management team

By introducing repeatable, best-of-breed processes for sales, marketing and product management, a sales and marketing strategy consultant may help a company like yours to:

    � Introduce effective and repeatable product management, marketing and sales processes
    � Reduce day-to-day reliance on senior management resources

Innovation Constrained

Organizations at this stage of development have achieved a great deal of success; processes are ingrained, product development is streamlined, and sales and marketing systems are in place. But by definition the market keeps shifting: your product is being eclipsed by younger companies with products that perhaps even capitalize on your R&D and experience; your market may be saturated to the point that the double-digit growth rates your investors have come to take for granted are a thing of the past. You need a new product or a new market or both.

This stage is characterized by:

    � The management team no longer involved in all decisions
    � Stagnation beginning to creep in with respect to products and markets

By introducing fresh thinking about new markets, products, and channels, a business strategy consultant may be able to help a company like yours to:

    � Author innovative channel strategies
    � Leverage existing products into new vertical and geographic markets
    � Capture requirements for nascent product lines
    � Embrace change as the source of competitive advantage

Ash Seha is a partner at The Launch Factory LLP, a consultancy specializing in marketing, sales, and product management strategy for software and IT companies. Their expertise, garnered from such IT highflyers as i2, webMethods, SAP, and Baan, is focused on breaking the growth bariers that stand between high-growth software and IT companies and their revenue and marketshare goals.

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