Once a product is designed and a strategy is outlined, then comes the execution phase. But how long will that take before other competitors take wind of the same idea and can execute faster? I therefore believe in Speed to Market.
Derived from the Second World War term, Bltzkrieg, to attack quickly, Blitzscale is Silicon Valley’s derivative of that term. Thiel used that term to rationalize why companies must be fueled with considerable capital and seize a dominant share of the market immediately, as noted in the Economist. In other words, startups entering a new market must survive by domination in that sector.
Decades ago, a company would roll out a product locally, then regionally, and then expand nationally. Then came the international markets. Chains like Payless Shoe Stores built such distribution model and were able to establish decent footholds even in the international markets but after 10 or more years. Takes a while for a potential competitor to establish a manufacturing center, distribution, and sales. There are taxes, raw materials, logistics, and foreign regulations to worry about. The cycles were in years. And Payless could take its sweet time in entering those markets.
Groupon followed the Blitzscale formula. It had to. Barriers to entry were marginal. The second player, Lifestyle, attempted to catch up and it failed miserably. Look at Uber vs. Lyft. But Uber has it head turned around in China when it attempted catchup with Didi.
Let us look at Netflix: selling its products in over 190 countries (with worldwide 192 recognized countries.) Many technology products don’t encounter such barriers. In the case of Netflix, wherever the country had some telecom infrastructure with enough bandwidth, it chose to enter that market with a popular product line. It executed this strategy in less than 2 years, in what took Payless to do in 10. It is all about transmission of content, most of which is of U.S. origin, that would attract consumers.
However, as easy it is to transmit content, other competitors could do the same while noting the Netflix success and just replicating the process. In China, even with reluctance to pay for anything on the Internet, already there are entrenched competitors charging a monthly access fee for digital content. Even in China, Uber found strong competition with the local Didi.
Between the Internet and international travels, anyone can see a business and easily replicate it in their own borders. Once a business idea takes some form and gains some traction, one should expect to face competition in whatever form. Speed to market is the only solution to preempt that potential market loss.
In silent acknowledgement of this economic reality, digital companies such as Uber and AirBnB seek substantial funding in billions of dollars for their early stages to attack their markets. And dedicate some of that capital to knock out their incumbents or retain market share. In between this process, branding is critical. Where the model can be easily replicated, something about the company and its service must stand out to consumers.
Even old style brick-mortar companies can face the new reality of speed to market. With the Internet, anyone can get any information to manufacture any product. And the secret formula for today is “know-how” plus “capital” equals manufacturing and exports. Many developing countries have governments with enough generosity to underwrite new products to export. And their financing cost is certainly lower than the private sector. Just look how China became such a powerhouse in manufacturing and exports.
Yet, the basic definition of economics even predicates that capital is a limited good. So, in view of the speed to market environment, how does one go attacking markets with the speed to market philosophy. Well, the first desirable market should be local and then regional. Finally, then one develops a national rollout.
But what about international? I would prefer the biggest markets first. Last month, I was contacted by a Chilean IT company needing some assistance in expanding internationally. I first remarked that their ride sharing app, however successful in Chile, can be easily replicated. Its easiest but largest markets in CALA should be Argentina, Brazil, and Mexico. Why? Those three countries represent 80% of the CALA GDP. To focus on smaller markets would be distracting and might not generate enough revenues, while ignoring the largest markets would impact severely the bottom line.
In one former employer, there was a legal challenge that would lock out the potential revenues from Argentina, representing over 30% of the revenues. I knew the importance and responded quickly so as to not lose that market.
In another technology project, I discovered that the largest market would be Asia, essentially China. But my concerns about how quickly that region can replicate technologies, I suggested expansion in tandem to other international markets with sufficient demand in order to defend any international market share challenged by a Chinese startup. In other words, do a preemptive strike in key markets or lose that market.
Again, the speed to market philosophy is derived to the new competitive realities on how competitors can jump in so quickly. In a recent RSA conference, I noted hundreds, if not thousands, of companies selling cyber-surveillance products. The competition was so keen that various swags and contests were being offered within each booth. In 18 months, most will not survive. And the remaining ones will consolidate into one handful. The only successful ones will be the ones with enough capital and best strategy to survive. Software products are just the results from programming teams.
Therefore, speed to market is a newer philosophy to seize market share quickly and raise capital to effect such strategy. Focus on key markets and execute. Note the billions of dollars Uber has raised. This unprecedented approach is needed to acknowledge the new economic and technology realities in business competition. To quote from the comedy movie Talladega Nights, if you are not first, might as well be last.