Last in a series with Victor Cheng, a San Francisco based business coach, and author of the Recession Proof Business.

Tom:
It’s expensive to create a new product or engage new customers in a new service. How does a company make those decisions without getting spread too thin?

Victor:
Start small. Take baby steps.

In the software industry, companies “invent” new software technologies that exist only in the minds of the management team. First, they create a PowerPoint presentation describing the software (that does not yet exist). Then they market the product as if it existed.

This is known as “slide-ware” (software that does not exist in a form other than PowerPoint). Critics of this process call the product “vaporware” because it doesn’t yet exist in physical form.

In the direct marketing industry, this is called a “market-test”. They create a marketing promotion for a non-existent product, send the direct mail piece, and count the corresponding orders — then promptly refuse to take the customer’s money.

The idea is to see if the product will sell, before committing R&D dollars to actually creating the product.

Find the cheapest, easiest way to “market-test” demand. If you can present “slide-ware” and get a large purchase order out of it, that’s a very favorable sign the product is worth investing in development.
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You can download a free e-copy of Victor’s book, The Recession-Proof Business. This concludes our series with Victor Cheng. He’s a bright guy, check him out.

Fourth in a series with Victor Cheng, a San Francisco based business coach, and author of the Recession Proof Business.

Tom:
How can a company best determine whether a new product or service is something their customer cares about?

Victor:
If the product or service is one that’s easily understood by customers, the easiest way, is to just ask them.

If the product or service is highly innovative, then this approach is unreliable. It’s like asking people who have never seen a mobile phone what they think of it. The cannot grasp the value of the innovation.

In this instance, the better approach is to ask yourself “What problem does this product/service fix for my customer?” and then ask customers how much they care about this problem.

So if I were market-testing the iPod + iTunes combined service, I would ask customers the following:

Q: “How do you find new singers/artists or songs that you might like”
A: “I listen to the radio at work/home”

Q: “And when you listen to the radio and come across a song you really like that you’d like to hear more often, what do you do?”
A: “I drive across town to go to the music store.

Q: “Do you buy the single or the whole album?”
A: “The whole album.”

Q: “Why do you buy the whole album, instead of just the song you like? How do you feel about this?”
A: “It’s the only way they sell the music. $15 for the one song I like. Expensive.”

Q: “How long does the whole trip take?”
A: “1 – 1.5 Hours.”

Hopefully you can see where I’m going with this line of questioning. If the breakthrough innovation is based on fixing a specific problem the customer is very familiar with, be darn sure the customer really cares about the problem a lot… and if they do, that’s a favorable sign that you’re on the right track.
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You can download a free e-copy of Victor’s book, The Recession-Proof Business. Our conversation continues tomorrow.

Third in a series with Victor Cheng, a San Francisco based business coach, and author of the Recession Proof Business.

Tom:
As companies expand their product and service offerings to fill holes in the market, created by retreating competitors, or even retreating suppliers, what should companies think about to increase their odds of success?

Victor:
Two things.

First, customer intimacy is a major competitive advantage in this kind of environment. The better you know your customer’s current (emphasis on the word “current”) situation and needs, the more likely you will win.

Our economy is going through massive change. This creates massive change for the consumer and businesses within the economy. You have to assume everything is different, take nothing for granted, and learn what your customers are up to, as if you’re meeting them for the first time.

Second, bring something unique or different to the table. If you’re going to fill the space left by a departing competitor, how will you distance your company from the remaining competitor? If you don’t differentiate enough, you have no assurances that your company isn’t the next one departing the marketplace?

Finding the competitive edge is much easier, when you know the customer really well. The two go hand-in-hand.

You can download a free e-copy of Victor’s book, The Recession-Proof Business. Our conversation continues tomorrow.

Second in a series with Victor Cheng, a San Francisco based business coach, and author of the Recession Proof Business.

Tom:
In an attempt to scratch out precious points in market share, what changes should companies design into their operating strategies?

Victor:
One pattern I’ve seen in the company’s I’ve worked with is that often the easiest market share gains are made in secondary market segments. Assume a business consists of Product lines A, B, and C or customer segments A, B, or C, where A is the largest revenue producing segment, and C is the smallest one.

In a number of cases, I’ve found the easiest way to grow a business and expand sure is in segment C. This is not to say that one should always look at the smallest segment for the most growth. However, I’ve seen this pattern of the “neglected”, smaller segment can sometimes have a counter-cyclical demand and less competitive aspect to it.

So, don’t just look at the biggest parts of your business. Examine the smaller slices too.

Finally, from an operations standpoint, the big thematic change that needs to be made is the willingness to experiment with growth options. If you’re not deliberately willing to seek out and tolerate many low-risk “failures”, it’s highly unlikely you’ll stumble upon the pockets of demand that always emerge in major structural shifts in demand such as the one we’re experiencing now.

You can download a free e-copy of Victor’s book, The Recession-Proof Business. Our conversation continues tomorrow.

I spent some time with Victor Cheng, a San Francisco based business coach, and author of the Recession Proof Business: Lessons from the Greatest Recession Success Stories of All Time. It was an interesting conversation.

Tom:
As we make this slow turn from recession to recovery, what are the biggest mistakes companies make attempting to re-engage their old markets, the ones, by necessity, they have contracted away from?

Victor:
This big mistake is assuming that what used to work pre-recession will work post-recession. The magnitude, severity, and duration of this recession has been significant. It’s my view that the contraction was not merely a correction to an otherwise robust growth trajectory, but rather a structural shift in demand.

The problem with structural shifts in demand is they tend to have far reaching cascade effects that are difficult to spot in advance, and only obvious in hindsight. If a company’s clients have gone away, it’s not a given they may come back. If one product line is no longer relevant in this new economy, it’s quite possible a different product line is now more relevant.

One has to be looking qualitatively and quantitatively for these shifts. The early “clues” that reveal these trends are often either passing remarks clients make about their situation, that foreshadow shifts in spending or unusual shifts in revenue mix across products, services, or customer segments.

It is difficult to reliably extrapolate these small early signs to find the longer term trend, but those who are willing to tolerate getting it wrong sometimes, will have a major first mover advantage to capitalizing on how a re-structured customer demand is expressing itself in the new economy.

You can download a free e-copy of Victor’s book, The Recession-Proof Business. Our conversation continues tomorrow.