Intellectually we all acknowledge that if it was easy, someone would have already done it, but our ego often tempts us to believe that we are the first to have some unique insight or solution to the problem. Initial contact with the target market is therefore often a surprisingly painful and uncomfortable experience for most entrepreneurs, creating challenges to their ego and often disillusionment. The mirage of a big fat market that is just dying to get your product, is replaced with a long list of new local challenges (often the very reasons that previous attempts at market entry by others have failed). If the CEO’s can weather the initial blows and roadblocks, and creatively re-focus his/her attention – innovative solutions can emerge.
Here’s three good examples:
Bremont (product – luxury watches)
Founded by two bothers as a fruition of their life’s passion for watches. Three years ago they started selling their distinctive aviation related designs and established some brand recognition in the UK market. So far they have invested over a £1.5M into building the brand. India is one of the fastest growing economies in the world, with a 300 million large middle class, and more per capita millionaires in Mumbai than anywhere else. Bremont seeks to become more global and expand into India’s upscale watch market.
Culture shock: Most Indian luxury watch customers prefer gold, gold plated and gold tone watches instead of the stainless steel like Bremont’s watches. Indian market penetration with a new product requires a celebrity endorsements, instead of the planned air force or other reasonably priced endorsements. Moreover, Bremont pricing strategy was unrealistic: seven different taxes and duties totaling over 75%, customer expectation haggle 30-40% of the retail price, and the dealer cut together more than doubled the expected watch price from the already high £6,500.
Resolution: Bremont listened to the customer feedback, and deciding to start very slowly with only one or two displays at shops in India before they can do proper advertising and marketing.
Regenatec (product – biodiesel converter kit)
Regenatec, a five year old start up company’s £500,000 in R&D produced the RG100 – converter that lets any diesel engine run on biodiesel. also sells “ethical” biodiesel (no food oils). India is the biggest diesel market in the world, also the fastest growing oil market.
Culture shock: Jatropha plantations in India are still in the experimental phase, with no regular commercial volumes available. Indian government heavily subsidizes standard diesel bringing its cost per liter down to 35 rupies, while jathropra biodiesel is at an economically uncompetitive 50 rupies per liter. With no reliable supplies of reasonably priced biodiesel, there is no way that Regenatec can pursue its business model in India. Finally, the conversion violates Indian vehicle type certifications, and needs to be recertified after the conversion – a bureaucratic headache.
Resolution: Field trial stage with one bus and one generator, and seeking $2 million to continue entry into India’s market.
Marmite (product – English spread for toast)
Small (£40M sales) subsidiary of food giant Uniliver, Marmite is a century old UK company that got popular during WWI (cheapest way to get vitamins added into peoples diet) as a replacement of jam on toast. Marmite has started to internationalize, and has had success in countries like Sri Lanka where they have 30% market share. Marmite seeks to target India’s very large middle class of moms that make the meals for their families.
Culture shock: Focus groups showed that Indian moms thought that toast with Marmite tasted strange, smelled funny and reminded everyone of medicine. Most Indians simply did not like Marmite on toast.
Marmite refocused, and pitched the spread as a cooking ingredient, a type of flavor enhancer. Marmite consulted with Indian chefs to create some dishes for new focus groups and testers. Turns out the potential customers really enjoyed the yeasty and tangy flavor that the spread added to Indian food.
Resolution: Marmite was able to approach the Indian market from another angle by pitching their spread as a cooking ingredient. They also understood that market entry will require a robust marketing strategy with an initial investment of £500,000. Marmite decided to get a local celebrity chef, advertising, in-store displays and sampling, recipe campaigns and other targeted promotions. Marmite does not expect to turn a profit for 3 years, plowing all revenues back into marketing, but remains optimistic about the prospects of success in India.
Paphitis is an experienced entrepreneur that started out as a tea boy and filing clerk, but now is on the Sunday Times Rich list of the wealthiest UK residents. He made most of his fortune with the £100 million sale of Canadian underwear retailer La Senza.
Much of what he has to say seems simple and obvious – but very difficult to actually carry out – as most true things in life. Theo’s commentary is available here.
In 2006 he founded a free Danish newspaper that quickly grew to be the most widely read paper in Denmark with half a million circulation. Nevertheless, the top spot did not deliver sufficient revenues and despite help from his frends at Draper Fisher Jurvetson, money ran short. To keep the project going Lund commited DKK 105 million in funding for the project (backed by personal guarantees. However, with the collapse of the advertising market the paper lost its life blood and was forced to close in 2008. [colorful description by Lund of the sinking ship can be found here and here]
As a result of the personal guarantees and facing a severe liquidity crisis Lund was forced to declare personal bankruptcy in 2009.
Despite the stress and emotional drain of the government sponsored “re-boot” Lund seems to have re-discovered his mojo and is back at it. Inspiring example of true entrepreneurial spirit! (Oh – and this should be a lesson learned for everyone regarding the net effect of personal guarantees).
Here is the message that he wrote to his fans and devotees:
This picture reflects UPSIDE DOWN TO ME
- and the WORLD IS 100% UPSIDE DOWN WHEN:
The Banks Are Out Of Money,
AIG got 180bio$ in Gov Aid – market cap today 5,3bio$
Im Bankrupt but feel better then ever.
Climate change has made Danish summers AMASING.
The Hedgefunds forgot to HEDGE.
56% of all twitter users follow no one.
Obama came out of NO WHERE because he made a deal with the weapon industry and therefor he can challenge doctors and pharma to on a HEALTHCARE REFORM.
People talk much more to each other during crisis – we suddenly have something in common.
Wireless power seems to be a consumer facing reality soon
I have been thinking lately – (to twitter or blog or video) – I wanted to write a story about how upside down the world is now – how much I have learned from my bankruptcy situation and how my world has changed again. Only for the better. In very short – I’m much better, sharper, ore alert and happier in this situation. I feel like I’m home and I feel richer then ever – since 90% of my friendships showed out to be non related to my wealth – and people still buy into my visions… BASICALLY: I started with NOTHING – and here we go again – Nothing + A Network that beats even the wildest imagination for a dyslectic from suburbia + a bag of experience that NOW consists of things NEARLY NO ONE ELSE ON THE PLANET HAS TRIED.
To entrepreneurs: TIME IS NOW
Other development houses such as Brighthouse Labs have also capitalized on the strategy of releasing a flood of cheap simple apps, with over 2,000 apps available at $0.99. Together these two companies’ apps accounted for about 5% of all applications for the iPhone.
Shaikh’s revenue model was simple – develop simple apps such as news readers targeted at every major niche topic -“US Army News” (military) “WWE Updates” (wrestling), “Skin Care Updates” (cosmetics),”iSoaperStarsUpdates” (soaps) etc. The price of the app was $4.99, and their only function was to pull news feeds for internet sites with keywords for that target niche.
Over the course of 9 months and 900 separate reviews and approvals, Apple did not detect what it now asserts to be hundreds of Shaikh’s apps using copyrighted images without permission. Clearly this shows that enforcement was not overly stringent during the past year. The mere volume of apps being published over such a short period of time under one developer name should have triggered some additional scrutiny.
The decision to ban Shaikh appears to signal Apple’s strengthened enforcement of its developer policies. Now that Apple has reached 50,000 app milestone, enforcement of application quality will likely go up the priority list. Even though the price of the apps is 4.99 or less, customer expectations are surprisingly high and buyers feel cheated when they realize that all they get is a second rate RSS feed.
It is important to note that Apple did not ban Shaikh because it sold applications with poor quality and low value to the customer (such a termination would be contractually very difficult to defend), but it had to premise the termination on the alleged IP violations. To improve customer experience Apple is certainly willing to enforce it’s developer agreements, and updated restrictions seem likely in the future.
Unlike the usual outrage by developers against Apple’s ban decisions, the Shaikh’s license revocation has been greeted with a modicum of support. Everyone agrees that iTune’s customers in general are willing to tolerate only a handful of purchases gone bad and cases of buyer’s remorse before considering switching to other providers – whether that is going to push customers to look for big brand and/or famous studio apps (read EA and ), jail-broken apps or downloading free apps from torrents.
Regardless of which of these three options diverts customers, it is not good for independent developers. Shaikh was an easy target, but the diffult task is still ahead – it is in the interest of Apple and all indi-developers to resolve the issue of perceived value and transparency in application quality.
To pace my almost obsessive need stay up to date on the daily flow of business blogs, reports, news, analysis and other data streaming through the internet – I relax by reading modern fiction. The FT story sounded like some of the plot lines I have read in my favorites works by Chuck Palahniuk,
The crime plot sounding eerily similar to these authors’ books -
Sergei Aleynikov was about to receive a $1.2 million paycheck for allegedly hacking into Goldman Sachs’ computers and stealing 32MB worth of proprietary HFT trading code (technology behind 10% of the daily world total of equity trades). The information was related to Goldman’s proprietary equities electronic trading strategies. He had been clumsy covering up his tracks and was caught by the Goldman IT people who handed the matter to the FBI.
FT described as follows:
Aleynikov claims to have created a tarball – a Unix aggregate of a number of files (like a .zip file) – on June 5 to transfer some open source stuff on the Goldman server to the XP-Dev.com server. He says he encrypted the files, then erased the encryption software, the tarball and the bash history — which is basically a back up of the Unix commands used to amalgamate and transfer the files. Goldman’s security server, however, apparently prevents or at least alerts the company to bash deletions, which appears to be how Goldman found out about the alleged theft.
The epidemic spread of the information age has ensured that there are far too many good articles on the web to comment on. Even skimming through them all has become a considerable challenge. Therefore I decided to take a short-cut and just start posting our favorite picks from the endless fountain of information.
Stay tuned, more to come …
When writing my March6 blog entry I wondered when we would the United States be added to the list of countries resorting to printing money to boost the economy. That day has already come.
In the words of Goldman Sachs analyst Jan Hatzius, the Fed is going to the “kitchen sink” strategy of throwing everything it had to jolt the economy out of its downward spiral.
The Federal reserve is dropping a $1.15 trillion money bomb into the bond markets to boost lending. Yes this money will literally be eased out of the printing machine in major quantities (official term being “Quantitative Easing”). Ok maybe I am not using exactly the proper description they teach in the MBA program.Wickipedia defines QE as follows:
The term quantitative easing refers to the creation of a pre-determined quantity of new money ‘out of thin air’ through open market operations by a central bank as the start of a process to increase the money supply. It can, more simply, be understood as an indirect method of printing money.