Entrepreneurial Marketing: Learning from High … · Entrepreneurial marketing is both a mindset and a process. ... As a process, entrepreneurial marketing seeks to “reverse engineer

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________________________________________________________________________________________________________________ Professor Joseph B. Lassiter III prepared this note as the basis for class discussion. Copyright © 2002–2007 President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685, write Harvard Business School Publishing, Boston, MA 02163, or go to http://www.hbsp.harvard.edu. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.

J O S E P H B . L A S S I T E R I I I

Entrepreneurial Marketing: Learning from High-Potential Ventures What Is Entrepreneurial Marketing?

Entrepreneurial marketing is both a mindset and a process. The mindset is exemplified by the entrepreneur’s relentless pursuit of opportunity and the assembly of the resources required to seize it.1 The process is one that combines a guiding vision of what the customer will want in the future with measured, iterative experiments designed to test that vision.2 These experiments are staged investments that reveal option values to the entrepreneur as well as the proofs required by the people and partners supporting the venture.3 Individuals—gifted engineers, well-connected salespeople, trend-setting customers, influential distributors, visionary venture investors, and critical suppliers—surround entrepreneurial ventures. These individuals are not nameless entities and the proofs that they require are not abstract constructs.4 Entrepreneurial marketing is all about gathering the specific evidence that convinces a specific group of individuals—those individuals surrounding that specific venture—to act and react, banding together to exploit breakthroughs and overcome setbacks.

As a process, entrepreneurial marketing seeks to “reverse engineer” a path linking two different sets of customers at two different points in time. This process aids the entrepreneur in creating a “product roadmap” (schedules for development and delivery of all required products and services) running backwards in time from those “in-the-future” mainstay customers who are envisioned to deliver the cash flows of the business once it is established to those “in-the-present” early-adopter customers who will be needed to launch the venture. The manager works backwards in time from the “future” that is desired to the “present” that exists by asking what needs to be proven, who needs to believe the proof, and what resources are required to conduct the experiments designed to furnish 1 Myra M. Hart, Howard H. Stevenson, and Jay Dial, “Entrepreneurship: A Definition Revisited,” in Frontiers of Entrepreneurship 1995: Proceedings of the Fifteenth Annual Entrepreneurship Research Conference, edited by William D. Bygrave (Babson Park, MA: Babson College, 1996). 2 This follows the arguments of William A. Sahlman in “Note on the Financial Perspective: What Should Entrepreneurs Know?” HBS No. 293-045 (Boston: Harvard Business School Publishing, 1992); Rita Gunther McGrath and Ian C. MacMillan in “Discovery-Driven Planning,” Harvard Business Review, Article 95406 (July 1995); and Stephen P. Bradley and Richard L. Nolan, eds. in Sense and Respond: Capturing Value in the Network Era (Boston: Harvard Business School Publishing, 1998). 3 For definitional purposes, the term “people” refers to the individuals who work directly and solely for the venture. As a result, these individuals face the full and undiversified risks and rewards of the venture. The term “partners” refers to those individuals who are vital to the success of the venture, yet are not primarily dependent on the venture. As a result, these individuals face relatively diversified or, even portfolio, risks and rewards. These partners can be self-employed individuals or employees in related firms. 4 “Proof” is an idea developed by William J. Hollister of the Strategy Development Group describing the particular information that is required by a decision maker in order to have an advocate’s claim believed. Such a proof may take any form as long as it convinces the decision maker that the advocate’s claim is valid.

803-036 Entrepreneurial Marketing: Learning from High-Potential Ventures

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that proof at the critical points in the journey. “Reverse engineering” helps a manager create a sequenced set of roadmaps—not only for timing product plan milestones, but also for targeting the key customers, identifying the key hires, and developing the key partnerships—that will lead the venture from those early-adopters to the mainstay customers needed to build their high-potential venture into that high-performance business that the entrepreneur envisions.

Figure 1

PARTNERS

PEOPLE

CUSTOMERS &END-USERS

PRODUCTS & SERVICES

A Framework for Entrepreneurial Marketing

Source: Author.

The framework for entrepreneurial marketing comes from a synthesis of ideas used in marketing and entrepreneurial management. (See Figure 1.) Marketing balances an obsession with the customer with the disciplined allocation of a firm’s scarce resources among business processes for product development, customer acquisition, and customer retention. Entrepreneurial management combines Stevenson’s view of the entrepreneur’s pursuit of opportunity with Sahlman’s view that successful entrepreneurs construct the “fit” between the people, the opportunity, the context, and the deals that define the venture such that its likelihood of success is dramatically improved.5,6 The resulting Entrepreneurial Marketing Framework combines marketing’s focus on the link between the product and the customer with entrepreneurial management’s focus on the link between the people and the partners associated with the venture as integrated through the concept of “fit.”

The tools and techniques used in entrepreneurial marketing are designed to be applied directly by the entrepreneurial team, not some external market-research group. The intent is to merge the minds of the customer and the developer, allowing tacit learning of latent needs. These tools and techniques focus on small sample sizes, qualitative data obtained from in-depth interviews, and fast cycle-time, low-cost experimentation. While these tools and techniques prove to be very effective in building a product, they demonstrate even greater value in building a team of people and partners that is committed to action in the face of incomplete and contradictory data. And, it is the people and partners that prove to be the most powerful levers in entrepreneurial marketing. The entrepreneur’s prior knowledge of the venture’s markets and the entrepreneur’s ability to rapidly assemble people and partners with specific relationships and know-how are what really drive the venture’s new products into the market and enable key customers to provide timely input into the venture’s product-development process. 7

5 Hart, Stevenson, and Dial, “Entrepreneurship: A Definition Revisited.” 6 William A. Sahlman, “Some Thoughts on Business Plans,” HBS No. 897-101 (Boston: Harvard Business School Publishing, 1996).

7 The biases of “a priori” assessments are discussed by Dan Lovallo and Daniel Kaheman in “Delusions of Success: How Optimism Undermines Executives’ Decisions,” Harvard Business Review, Article R0307D (July 2003).

Entrepreneurial Marketing: Learning from High-Potential Ventures 803-036

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Finally, as the venture evolves, the “fit” between the product, customer, people, and partners must be continually managed. The implied dynamic Entrepreneurial Marketing Framework can be used to proactively identify the key sales/marketing tasks required in new ventures and integrates with Sahlman’s Dynamic FIT Management Framework.8 (See Figure 2.)

Figure 2

A Dynamic Framework for Entrepreneurial Marketing

PRODUCTS & SERVICES

PARTNERS

PEOPLE

CHANGE (GOOD AND BAD NEWS)

ANTICIPATION RESPONSEEXPERIMENTS

ITERATIONLEARNING


Source: Adapted by author from William A. Sahlman, “Some Thoughts on Business Plans,” HBS No. 897-101 (Boston:

Harvard Business School Publishing, 1996).

Entrepreneurial Marketing and High-Potential Ventures To improve our understanding of the marketing tasks in entrepreneurial ventures, we use a

program of field-based case development and student projects structured around a second-year MBA elective course focused on high-potential ventures.9 Typically, these ventures are start-ups and buyouts in high-technology and consumer markets. For purposes of this research, a high-potential venture is defined as one having the objective of building at least $50 million per year of new product sales in five or fewer years. The high-potential setting is used because problems and opportunities tend to stand out clearly under the stresses of such an environment. These stresses are observed in the conflicts between the expectations of employees and investors, as the management confronts the constraints of time, cash flow, and financing. In addition, we focus on high-technology and consumer products (and services) because these categories tend to have relatively short, intense product lifecycles, allowing the business results obtained and the managerial methods used to be observed before the evidence is either lost or forgotten. To date, some 40 primary field-based case studies and well over 500 student team projects have been used to probe this population, extracting observations about what managers actually did and how ventures actually performed in high-potential settings.

Reflecting its bias, the course is named Entrepreneurial Marketing: Learning from High-Potential Ventures. The course consists of four primary modules and a summary lecture, totaling some 18 case discussions, 2 laboratory exercises, and 2 interactive lectures, as well as a 40-hour-per-student, team-

8 Sahlman, “Some Thoughts on Business Plans.”

9 Thomas J. Kosnik, currently consulting professor of management science and engineering at Stanford, first introduced the Entrepreneurial Marketing course at HBS in 1995. I began building on his work in 1998.


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based project designed to allow students to apply the tools of the course to a real-world problem. (See Appendix 1 for a sample of the cases and readings used in the fall 2007 Entrepreneurial Marketing course offering at HBS.)

The four primary modules and summary lecture include:

1. Planning the Business—Mindset and Process

2. Building the Product and Building the Team—Tools and Techniques

3. Customer Adoption and Company Adaptation—People and Partners

4. Applying the Thinking and the Tools

5. Capturing the Learning

Planning the Business—Mindset and Process The Entrepreneurial Marketing course’s opening module, Planning the Business—Mindset and

Process, describes companies that are “discovering” the pattern of customer adoption as they go to market. The “OfficeTiger” case contains a debate between the firm’s founders, Randy Altschuler and Joe Sigelman, as to the role of action based on vision versus action based on analysis.10 The case probes the particular factors that play roles in explosive growth: vision, events, chance, and choice. The “OfficeTiger” case raises a series of questions that will continue to resurface over the life of the venture:

1. How does the entrepreneur resolve his image of what the world will value with the images held by high-potential, prospective customers?

2. Which customers should drive the venture’s product development program?

3. Which customers should drive the venture’s selling effort? 4. Which people need to be recruited to capture the potential of the venture?

5. And, in particular, how can the entrepreneur move the venture’s team to action in the face of known-to-be-inadequate and contradictory information?

The OfficeTiger venture exemplifies entrepreneurial marketing as mindset and invites observation of Altschuler’s and Sigelman’s implicit process as they match their vision to the realities of the marketplace.

The key strategic choice in most high-potential ventures is matching the “right” subset of all possible customers with the “right” subset of all possible products in such way that the likely value of the venture is, in some way, maximized. This “right” subset of customers and products is easy to recognize in hindsight but is quite difficult to recognize at the time the actual selection is made. In most, but not all, of our case studies, those high-potential ventures that actually turn into high-performance ventures ultimately find those “right” customers to be Geoffrey Moore’s “pragmatists” and face Moore’s dilemma of “crossing the chasm.”11

Moore defines pragmatists as those buyers who will only buy based on “trusted references” and only then after an innovation is a “whole product” whose value is “well-proven” through usage. (See Figure 3.) Typically, these pragmatists are individuals who are responsible for the effective operation of the mission-critical business processes of their business. Moore observes that these pragmatist buyers control the bulk of the orders in most (but not all) technology infrastructure markets. However, until a new venture’s products are “well-proven” and “trusted references” are established, 10 Joseph B. Lassiter, III and Johanna Blaxall, “OfficeTiger,” HBS No. 804-109 (Boston: Harvard Business School Publishing, 2004). 11 Geoffrey A. Moore, Crossing the Chasm (New York: HarperBusiness, 1995).


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how does the new venture sell its products? Who will buy from the new venture? And, what will these early buyers accept as a useable product? How does a new venture with a new product even get started?

Figure 3

Visionaries and Pragmatists are People� not Firms� not Segments

NO. OF NEW

CUSTOMERS

TIME

Moore�sChasm

Visionaries Pragmatists

Pragmatists Endure Operating Pain, Demand Proof, Only Buy �Whole Products� and Calculate

Economic Payback

Visionaries Crave Competitive Advantage , Accept Promises, Will

Buy Prototypes and Demand Development Control

Source: Adapted by author from Geoffrey A. Moore, Crossing the Chasm (New York: HarperBusiness, 1995) and Inside the

Tornado (New York: HarperBusiness, 1995).

Moore addresses this by introducing an additional category of buyers, labeled “visionaries.” In Moore’s model, visionaries buy much sooner than pragmatists. Moore defines visionaries as the true revolutionaries in businesses who are seeking a dramatic competitive advantage through the early adoption of innovation. Moore’s visionaries are powerful individuals who have the ability to push new ideas through reluctant organizations. But, Moore goes on to observe that these visionary buyers bring their own set of problems. Visionaries tend to control relatively little of the buying compared to the pragmatists in most (but not all) technology infrastructure markets and visionaries tend to demand onerous levels of customization/support in exchange for accepting unproven and typically incomplete products.

It is the mismatch between the buying behavior of visionaries and pragmatists compounded by the limited rate at which the new venture can complete its embryonic product/service offering that creates Moore’s chasm. In the Entrepreneurial Marketing course, the “Documentum, Inc.,” case is used to explore Moore’s chasm phenomenon in a technology start-up as well as to study Moore’s suggested methodology for organizing to cross the chasm.12 Some two years after Documentum was launched, new CEO Jeff Miller was brought in to get Documentum growing. Miller used Moore’s chasm crossing methodology to select a specific market segment for attack and then totally focused the company on rapidly dominating that selected market segment, avoiding any potential for distraction even to the point of refusing to accept orders from customers outside the selected market segment. The sales growth at Documentum was spectacular and was seen as a direct result of applying Moore’s chasm crossing methodology by Documentum’s management.

In a number of the high-potential ventures that we have studied, entrepreneurs have employed an important variation on Moore’s basic methodology for crossing the chasm. From the very beginning of the venture, these entrepreneurs attempted to identify market segments where they believed there would be intense pressure to adopt their envisioned products, usually anticipating hyper-competitive markets or technology shifts. Though as Moore observed, market segment size was rarely an issue as long as the potential segments were “big enough.” These entrepreneurs then identified a specific subset of the pragmatist customers in those specific market segments (whom we will call the

12 Rajiv Lal, “Documentum, Inc.,” HBS No. 502-026 (Boston: Harvard Business School Publishing, 2001).


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“desired” pragmatists) as well as a specific subset of the visionary customers in those same specific market segments (whom we call the “relevant” visionaries) who had a history of shaping the buying behavior of the “desired” pragmatists. (See Figure 4a.)

Figure 4a High-Potential Ventures �Recognize� that Each Market

Ultimately Will Consist of Multiple Segments Defined by its own�Desired� Pragmatists and their �Relevant� Visionaries

NO. OF NEW

CUSTOMERS

TIME

Moore�sChasm


1. Who watches Who?2. What have they done in the past?3. Who do they �Know�?4. Who do we �Know�?5. Assembling the Needed �Proof�?6. Assembling the �Whole Product�?7. Raising the Cash��.Filling the

Chasm with $$$$$$

Differing Segments or Applications




First, these entrepreneurs tried to anticipate specific applications/segments where Moore’s chasm would be the “narrowest” when the time came for their venture to cross it. They were betting where the chasm would "narrow" because of the combined effects of pressure on that segment’s “desired” pragmatists to adopt, lower costs in assembling the “whole product” required by that segment, and the entrepreneurs’ self-assessment of their own teams’ ability to execute the required sales and “whole product” programs. (See Figure 4b.)

Figure 4b

Crossing the Chasm at its �Narrowest� Point By Portfolio Selection or Placing Their Bet

A

B

C

D

Greater Pressure to Adopt

Lower Cost of �Whole Product�

Greater Abilityto Execute Total

Source: Author.

Second, these entrepreneurs—some quite intuitively and some quite methodically—“reverse-engineered” a “product roadmap” that when completed would satisfy the “whole product” requirements of their “desired” pragmatists.13 These entrepreneurs attempted to “narrow” the chasm by finding relatively efficient product roadmaps that were acceptable to the segment’s “relevant” visionaries, while efficiently laying the technology and operations foundations for meeting the future

13 This approach is somewhat related to that described in Ruth Gunther McGrath and Ian C. MacMillan, “Discovery-Driven Planning,” Harvard Business Review, Article 95406 (July 1995).


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“whole product” needs of their “desired” pragmatists in the specific market segments that the entrepreneurs sought to dominate. (See Figure 4c.)

Figure 4c

High-Potential Ventures Narrow the Chasm By Betting on the Future �Whole Product Needs� of the

Pragmatists in Key Segments and Then�Reverse Engineer� their Product Roadmaps

NO. OF NEW

CUSTOMERS

TIME

Moore�sChasm




Figure 4d

High-Potential Ventures Cross the Chasm By Knowing How to �Identify� and �Sell Advantage�

to the Specific �Relevant� Visionaries

NO. OF NEW

CUSTOMERS

TIME

Moore�sChasm


1. Understanding our Unique Value2. Capital Markets?3. Staging the Investment?4. Assembling the Specific �Proof�

and �Whole Product� Partners?5. Knowing where the Visionaries

are located TODAY!6. Knowing what the Visionaries

are seeking TODAY!7. Crafting and Packaging the Dream



Third, from the very beginning of their ventures, these entrepreneurs sold only to the specific visionaries—those “relevant” visionaries—who were believed to be the “trusted references” to (often actually “feared rivals” of) the specific “desired” pragmatists in the specific market segments that they sought to dominate. (See Figure 4d.) These ventures then worked on meeting the “wants” of those “relevant” visionaries so long as doing so did not force material deviation from the product roadmap that they believed would ultimately be required to meet the needs of the segments’ “desired” pragmatists. The entrepreneurs then launched their attacks based on judgments about their own fledgling organizations’ ability to execute the required product development and selling efforts as well as the potential downsides from failing to execute the attack. (See Figure 4e.)


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Figure 4e

Selecting �Specific� Visionaries �Relevant� to the �Desired� Pragmatists at This Narrowest Point

A

B

C

D

The �Desired" Pragmatists Determine Who Is �Relevant�� not Entrepreneurs, not Publicists, not even other Visionaries

Greater Influence on Pragmatist

Greater Fit toProduct Roadmap

Greater Abilityto Execute Total

Source: Author.

The benefits of rapid transition could be seen in the “Sycamore Networks” case in which proven company builders, Desh Deshpande and Dan Smith, assembled a team of people who were well-known within the telecommunications industry.14 The “Sycamore” case is used to explore the applicability of Moore’s model of customer adoption as well as his methodology for crossing the chasm in a business-setting. Even this superb team benefited from the contributions of a partner, a highly respected venture capitalist named Paul Ferri. Ferri introduced key technologists from MIT’s Lincoln Labs to Deshpande and supported Smith in recruiting key telecommunications sales personnel from AT&T. Yet, even Sycamore’s initial product offering was not what a key early-adopter customer was willing to buy. So, guided by that customer, Sycamore redesigned its new optical network switch, penetrating the key account before established competitor, Nortel, took the fledgling venture seriously. Sycamore then raised a $1.5 billion war chest from the public markets before the industry’s IPO window closed. The venture’s speed-of-advance was due both to Deshpande’s compelling technology vision and to Smith’s certain knowledge of, as well as his credibility with, the precise set of buyers who could drive company adoption and influence industry-wide adoption.

In the “Icebreaker: The China Entry Decision” case, founder Jeremy Moon knew from the very birth of his venture that he wanted to create a global outdoor sports apparel brand built around the unique properties of New Zealand merino wool.15 The “Icebreaker” case is used to explore the applicability of Moore’s model of customer adoption as well as his methodology for crossing the chasm in a consumer-setting. Using more than half of his initial $250,000 in seed capital, Moon constructed a rolling three-year “brand blueprint” such that his customers and his capabilities would co-evolve together. Moon grew his business to more than $50 million per year in less than 10 years.

Moon targeted specific product-evaluators whom he believed would be necessary to establish the credibility of his product offering to the next step in the evolution of his retail distribution network. He forecast which characteristics mainstay customers would value in his new merino “category,” reverse-engineering the necessary timing for these product capabilities. Then, he identified and recruited the sequence of product-production and distribution partners who would be necessary to

14 Joseph B. Lassiter, III and Daniel J. Green “Sycamore Networks,” HBS No. 801-076 (Boston: Harvard Business School Publishing, 2000). 15 Joseph B. Lassiter, III and Dan Heath, “Icebreaker: The China Entry,” HBS No. 806-006 (Boston: Harvard Business School Publishing, 2006).


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augment Icebreaker’s own internal product-development program to allow phased delivery of that complete product line to his hoped-for, world-wide customer base.

At Documentum, Sycamore, and Icebreaker, the ventures advanced rapidly by hiring people who knew precisely how to carry their new product offerings to a specific set of identified buyers. ( See Figure 5.) While the implementation varied, the managerial solution was the same. The firms that grew rapidly “adapted” by either hiring or empowering an individual who “knows and is known” in the segment that they are attacking.

Figure 5

High-Potential Ventures Become High-Performance VenturesBy Hiring People that Know �The Needs and The Path� Linking Specific Segments, Pragmatists, & Visionaries�Often Recruiting With the Help of a �Visionary� Partner

NO. OF NEW

CUSTOMERS

TIME

Moore�s Chasm�Relevant�

Visionary

�Desired� Pragmatists

1. Who are the �Known� Visionaries2. Who are the �Known� Pragmatists 3. Where are they NOW?4. Who �Knows� who?5. Who do we �Know�?6. Which Industries are

attracting/recruiting Visionaries?7. Who are the Partners used to assemble

�Whole Products� for the Pragmatists in that Industry ?

�Nervous� Pragmatists Watch Specific �Relevant� Visionaries�Often in their Same Segment, but at

times, not. High-Performance Ventures Hire People Who �Know and Are Known� by the Specific

Customers - the �Desired� Pragmatists and their �Relevant� Visionaries .

V VV V V

P P PP P P P P

P P P P P P P

Source: Adapted by the author from Geoffrey A. Moore, Crossing the Chasm (New York: HarperBusiness, 1995) and Inside the


These cases show that the venture team, which gains an in-depth understanding of the customer and then quickly translates this understanding into an agile development path, can make remarkably rapid progress. These cases also show that even the most expert team still faces significant problems, such as market timing or lengthy learning curves. Yet, the team that keeps iterating makes commercial progress. The keys to success appear to be a collective sense of where to go and, at the same time, a realization that short, iterative cycles or staged investments should be used to manage the risk of misjudging the end-point. The entrepreneurial marketing process used by these teams demonstrates “the scientific process in business application” described by Shiba, disciplined by the entrepreneurial imperative “never run out of cash,” described by Sahlman.16,17

Building the Product and Building the Team—Tools and Techniques The second module of the course, Building the Product and Building the Team—Tools and

Techniques, looks at the product planning and team formation process in new ventures using the “Massive,” “MarketSoft,” “Juice Guys,” and “Room for Dessert” cases. 18,19 This module is designed to train students on the agile use of specific TQM-based tools and techniques for understanding customer needs, prioritizing their sales efforts, prioritizing their product developments, and, above

16 Shoji Shiba and David Walden, Four Practical Revolutions in Management (Portland, OR: Productivity Press, 2001). 17 Sahlman, “Some Thoughts on Business Plans.” 18 Joseph B. Lassiter, III, et. al., “Massive Incorporated,” HBS No. 806-126 (Boston: Harvard Business School Publishing, 2006). 19 Joseph B. Lassiter, III and Diana S. Gardner, “MarketSoft,” HBS No. 800-069 (Boston: Harvard Business School Publishing, 1999).


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all, getting internal commitment to execute before going to market.20 The MarketSoft case carries this overriding message as well as detailing the steps of the process.

In the “MarketSoft” case, Greg Erman and Nancy Benovich-Gilby translated their vision into a specific plan, identified the mainstay customers who they believed would make their Web marketing software company successful, and then reverse-engineered a path to serve them. They identified the product that they believed would ultimately satisfy those pragmatist buyers and the more limited set of capabilities that would satisfy the early-adopter, visionary customers in the near term. Benovich-Gilby then staged the product development plan according to the MarketSoft team’s ability to execute what those customers would value while Erman identified the specific set of accounts for which Web marketing software would become “mission critical” the soonest, targeting specific buyers within those accounts.

This case illustrates that “reverse engineering” is a powerful technique for simplifying the task of anticipating the specific products and customers that will become important at each stage of a market’s development. This, in turn, helps the manager identify the key people and partners who need to be recruited into the venture in anticipation of actual need in order to accelerate its growth. Throughout the reverse-engineering process, each venture team made choices in the face of incomplete and speculative descriptions of what would be needed, as well as their own ventures’ limited and incomplete abilities to meet those needs. This process was dominated by qualitative verbal data produced during interviews and internal meetings. The interviews were held with prospective customers in an effort to understand both their stated and latent needs. The internal meetings were held by the venture team as its members expressed their own visions of potential product solutions and reacted to the constraints surrounding the venture.21 In the “MarketSoft” case, group participation in the collection of customer inputs and group analysis of the meaning of the interview data promoted both effective and efficient problem solving and individual commitment to timely action in the face of inconsistent and judgmental data.

This case identifies a series of tools and processes that can be used to develop a deep understanding of what the customer values and of the potential solutions. The process consists of separate stages for collecting the interview data, analyzing the resultant language, and coming to agreement as to its meaning. This shared experience yielded group commitment to specific product-development and sales plans in spite of incomplete and conflicting data. In many of the stages of this process, the venture teams used tools, such as Hollister’s Logic Chain™ (a cause-effect tool), Shiba’s Language Processing/LP™ Diagram (an affinity diagram tool), or Burchill’s Concept Engineering™ (a QFD-type process), designed to distill verbal data and to capture both group and individual interpretations of the data’s meaning.22 This process and these same tools were well-matched for use with the staged commitment processes used in venture investing. (See Figure 6.)

20 For additional background on TQM-style tools and processes, refer to the Center for Quality of Management’s The Language Processing Method, Document ML0060 and Concept Engineering, Document ML0080 obtained through www.cqm.org.

21 This is similar to the process described by Anthony W. Ulwick in “Turning Customer Inputs into Innovation,” Harvard Business Review, OnPoint Article 858X (January 2002). 22 In 1989 and 1990, I was part of the original group of Boston-based senior managers who went to Japan with Shiba to study TQM methods in product development and company management. Our companies founded the Center for Quality of Management (CQM), a worldwide mutual learning organization, which worked to adapt and systematize Japanese TQM techniques for broader use under the leadership of Professor Thomas H. Lee, the Center’s first president, and his successor, Gary Burchill, Ph.D. I was a member of the Steering Committee of the CQM’s Cambridge Chapter from 1997–2006 and continue to use its tools in the Entrepreneurial Marketing Course at HBS (see www.cqm.org for more information).


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Figure 6

Entrepreneurial Marketing � Staged Resource Commitment, Risk and Marketplace Information

Seed. Target Customer Interviews/Selection & Logic Chains & LP Diagrams��Segmentation/ Value

Stage 1. Construction of Prototype or Simulation, even an Acquisition��Verification

Stage 2. Beta Site/Early Adopter Selection & Installation��Influence Gathering

Stage 3. Intense Customer �Mapping� & Logic Chains & Targeting�..Niche of the Niche v. Mass

Then Accumulation of Target Segment Reference Account...References that matter to the type of Customers and Partners you need�the Recurring Requirements are Interviewing (Discovery)�and Qualification (Product Capability v. Customer Need)...and Getting Orders for What You Have

CASH FLOW, $

TIME

Seed Stage 1 Stage 2 Stage 3

IPO/Partial Sale/Recap

Source: Adapted by the author from William A. Sahlman, “Some Thoughts on Business Plans,” HBS No. 897-101 (Boston:


Customer Adoption and Company Adaptation—People and Partners The third module of the course tracks the choices that entrepreneurs make as they confront the

challenges of going to market in three different types of ventures: those where the underlying science is still evolving, those where the “whole product” needs of customers are unclear, and those where new types of customers are sought within well-established product categories. In particular, using the Entrepreneurial Marketing Framework, we urge students to develop their own (and we will suggest a series) of questions that the entrepreneur may use to increase the likelihood that a high-potential venture will actually become a high-performance venture.

All entrepreneurial ventures must be analyzed in two ways. First, what are the abilities of the people in the venture to manage the connection between the product and the customer? It is the real workers—not the board, not the investors, not the friends of the firm, but the people working in the venture every day—that need to both understand and have the skill to solve the problems and opportunities associated with the product-customer link. Second, do the people in the venture have the proven relationships to secure the essential business partnerships that will accelerate product sales to and the development input from the right customers? Successful high-potential ventures have people in them who know how to define a product development path in the face of uncertainty and who know how to use their personal credibility with early-adopter customers and their knowledge of the mainstay customers’ needs to place the products in the key accounts. It is the people—and the partners that they know how to recruit—that turn a high-potential venture into a high-performance business.

This leads to a set of questions that an entrepreneur, a manager or an investor can use to access the robustness of his venture at any point in time and to identify actions that will increase the likelihood and magnitude of successes and/or decrease the likelihood and magnitude of failures as the venture moves forward into the market. (See Figure 7.)


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Figure 7

PARTNERS

PEOPLE


PRODUCTS & SERVICES

The Questions Asked in Entrepreneurial Marketing�Who knows and has delivered successful products to the �desired� pragmatists in the past?�Who has sold to the �desired� pragmatists in the past?�Who knows and is known in the industry?

�Who knows and has sold successful products to the �relevant� visionaries in the past?�Who has sold to the �desired� pragmatist in the past?�Who knows and is known in the industry?

�Who are the �necessary� whole product partners that the �desired� pragmatist have valued in the past?�Who does our competitor require to supply specific �whole product� expertise?�Which partners have the most to gain or lose by allying with us?

�Who can help us supply specific �whole product� advantages valued by our �desired� pragmatists?�Which partners can we deny to our most feared competitor?�Which partners have the most to gain or lose by allying with us?

�What are our �necessary� whole product advantages relative to our �desired� pragmatist�s alternative?�What is the compelling advantage that we offer the �relevant� visionaries?

�Have our people worked with the �relevant� visionary partners in the past ?� Can our partners help us �lock-up� the �key� people in the business?

Source: Author.

The primary lesson learned from studying these high-potential ventures was the importance of the key people (and the partners that they knew how to assemble quickly) for accomplishing rapid transitions from early-adopters to mainstay customers. The importance of key people, who are well-known within an industry and who know exactly how that industry operates, is a repetitive theme in the work of Stevenson, Sahlman, and Hart.23,24

People and Partners—Change Risk/Reward, for Better and for Worse The assembled case studies show that the addition of new people and partners transforms most

ventures. But, the transformation can be far from purely positive as it changes the odds and the payoffs for better—and for worse.

The barriers to rapid transition between customer types in established categories were well-illustrated in the “RelayHealth” and the “Ducati” cases.25,26 In both companies, in-place attitudes and fears limited experimentation, even in the face of stagnant markets for traditional products. In both cases, new products were ultimately launched to meet the needs of new customers when a new management team rejected the status quo.

These case studies show that the addition of the right people and partners changed both the likelihood and the magnitude of favorable outcomes in high-potential ventures. The addition of new people and partners as these ventures evolve tends to be driven by changes in the firm’s objectives, brought on by changes in the types of customers that the ventures need in order to grow. This leads the owners to ask the same set of questions identified previously, except now the questions are asked in anticipation of the changes in customer category resulting in key people and partnerships being recruited proactively. (See Figure 7.)

Firms that recruited new people and partners in anticipation of changes in the patterns of customer adoption outperformed those firms that did so in reaction to the unfolding problems and/or opportunities that resulted from changes in the pattern of adoption. These case studies show 23 William A. Sahlman, et al., ed., The Entrepreneurial Venture, (Boston: Harvard Business School Publishing, 1999). 24 Hart, et al., “Entrepreneurship: A Definition Revisited.” 25 Joseph B. Lassiter, III and Liz Kind, “RelayHealth,” HBS No. 805-021 (Boston: Harvard Business School Publishing, 2004). 26 Giovanni Gavetti, “Ducati,” HBS No. 701-132 (Boston: Harvard Business School Publishing, 2001, 1999).


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that there was nearly always a change in the management team and the partners; these changes are regarded as key to the success of the venture as the dominant customer category served by the venture transitioned, usually from early-adopters to mainstay customers in new firms or from mainstay customers to some new set of early adopters in an new category in established firms.

In both new ventures and established companies that were attempting to reposition themselves or even reinvent themselves in the face of changing market conditions, there was incredible difficulty in repositioning the thinking inside the firm. This was evident at RelayHealth, Ducati, and even earlier in the course at Massive. As was seen in each case, eventually a new leader was either recruited externally or empowered internally to attack the new market. The new leaders who moved fastest passed the tests imposed by the questions surrounding the Entrepreneurial Marketing Framework as shown in Figure 7. In established firms, the speed-of-advance was slower than in start-ups because there seemed to be so much to lose if the existing business was somehow disrupted. Yet, even in established firms, change emerged most often when catalyzed by someone relatively new to the firm, free to challenge its historical convictions and determined to re-invigorate the firm’s prospects.

Figure 8

People and Partners Change the Risk/Reward �for Better and for Worse!

Probability of Occurrence

+25%

Decreased Proability of Status Quo Return

Increased Probability of Downside Return

-100%

Increased Probability of Upside Return

Return onInvestment

+100%

Source: Adapted by author from William A. Sahlman, “Some Thoughts on Business Plans,” HBS No. 897-101 (Boston:


This leads to the observation that while the new people and partners brought additional resources, they also brought additional performance objectives that stretched the fabric of the firm, challenging the existing management power structure and often disrupting in-place customer and partner commitments. This level of change appeared to increase the extremes facing the firm; and, while the probability of a significant upside was increased, so was the probability of a significant downside. This same pattern appeared true in well-established companies and start-ups. (See Figure 8.)

Applying the Thinking and the Tools The fourth module of the course emphasizes “learning-by-doing” and is structured around a 40-

hour-per-student, team-based project designed to allow students to apply the primary tools of the course to a real-world problem. The broader question of the role of mindset and process in the entrepreneur’s “relentless pursuit of opportunity” is then re-emphasized in the final case of the course.


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In the “TH!NK” case, CEO Jan-Olaf Willums and his Norwegian partners buy the remains of what was once Ford Motor Company’s Oslo-based electric vehicle venture.27 Betting more than $15 million of their own money and raising another $78 million from professional investors, he and his partners want to up-end the way cars are “made, sold, owned, and driven.”28 Would long-simmering environmental, economic, and security concerns of being “addicted to oil” finally lead consumers to adopt and regulators to mandate new forms of transportation? Willums faced the decision of when, how, and even if TH!NK should enter the North American market. He wondered what, if any, analysis should guide him. The “TH!NK” case closes the course reminding us that the entrepreneur always faces evolving opportunities and threats calling for decisions in the face of known-to-be-inadequate and contradictory information.

Capturing the Learning The Entrepreneurial Marketing course seeks to provide entrepreneurs a process to identify the

products, the customers, the partners, and the people that they will need to pursue their opportunity. (See Figure 9). The steps used to prepare these roadmaps appear practical in most settings, consumer

Figure 9

� It is �Reverse Engineering� with your vision translated to your goal and matched to your model of customer adoption yielding:

� Product Roadmap� Customer Roadmap� Partner Roadmap� People Roadmap

� Moving in anticipation and evolving against the realities of your venture & your Rolodex.

So, What is �Entrepreneurial Marketing�?

Source: Author.

or business.29 The steps are supported by tools and techniques. (See Figure 10.) But, the objective of the Entrepreneurial Marketing course is not to prescribe any specific process. Rather, it is to equip those with the entrepreneurial mindset to create their own process, unique to their own vision and their own model of customer adoption.

27 The “TH!NK” case is being written at the time of this note. 28 Todd Woody, “Have You Driven a Fjord Lately?” Business 2.0, (August 2007), p.56.

29 It often appears more straightforward to segment requirements in business markets than in consumer markets. And, hence easier to reduce the upfront investments required to launch experiments in business markets than in consumer markets. However, it is increasingly possible to use special-purpose distribution channels and specialized production capabilities to create low upfront-cost experiments to test the viability of consumer products and services. This is illustrated in the Idea Village case series, HBS Nos. 806-005, -006, and -007.


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Figure 10 Entrepreneurial Marketing as a Process

Entrepreneurial Marketing as a Process

1. What’s your prior opinion about the risk/reward curve for this class of venture? What is your 3-5 year revenue target? What is Moore’s “elevator pitch” (positioning statement) for the top-three “likely, major, mission-critical applications/segments” as well as the associated “desired” pragmatists and their “relevant” visionaries?

2. Who is the “perfect customer”? How urgent is their need for our product/service? What is the Logic Chain ® (value propositions and associated proofs) for the “desired” pragmatists and for their associated “relevant” visionaries? Do the people in your venture have a proven track record of doing business with these individuals?

3. Do you know what the customer really needs, not just what he wants? What is the “whole product” the “desired” pragmatist must have? What is the LP Diagram™ (the tacit outcomes valued) for the “desired” pragmatists and for their “relevant” visionaries?

4. What’s your prior opinion about the pattern of customer adoption? What is the “backwards” path from the “desired” pragmatists to their “relevant” visionaries? How does this path fit with your product and partner roadmaps?

5. Who are the people and partners you need to pursue the venture? Which partners do you need to assemble and deliver the “whole product”? Do your people have a track record of doing business with these partners?

6. What are the different scenarios for pursuing the market? What are the different 3-5 year revenue targets? What are the odds? How can the resources/investment be staged based on which future unfolds?

7. What are the cash flows associated with the different scenarios? What problems and opportunities do you anticipate? What actions can be taken now in anticipation to exploit and to survive? Who is on your people roadmap? Who should “pre-hire”?

8. How do the cash flows and the odds change as a result of anticipating what might happen? Which are the scenarios you can raise the cash to pursue? How many “less than perfect” pragmatists, visionaries and partners can you support? What is your “best” fit? Which people and partners should you “pre-hire” or “retire”?

9. What experiments can you launch to determine which future is unfolding? How long will the experiments take to unfold? How likely are the experiments to be valid? Who has to believe/interpret “inadequate” results?

10. Is the resulting “updated” view of risk /reward show a “Game You Want to Play”? Act, observe and then return to Step 1.

Source: Author.


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Appendix 1 Entrepreneurial Marketing Course Outline Fall 2007

Texts: CQM Quality Improvement ToolkitMoore Crossing the Chasm ISBN 0-06-662002-3Moore Inside the Tornado ISBN 0-88730-824-4Hollister Logic Chain User Guide

Class # Assignment Case # Date Industry Protagonists A/VCase

Supervisor

1 OfficeTiger 9-804-109 04 Business Process Outsourcing Randy Altschuler video Lassiter

2 IdeaVillage (A) & [(B) in class] 9-806-005/8 05 Infomercial Products Andy Khubani, Jordan Pines video LassiterCrossing the Chasm, Chapter 6 Moore 99

3 Documentum 9-502-026 01 Document Management Systems LalInside the Tornado, Chapter 2 Moore 99

4 Tropos Networks 9-806-201 06 Metromesh WiFi Dana Callow,?Ron Sege video Lassiter5 Sycamore Networks 9-801-076 00 Optical Network Equipment video Lassiter6 Icebreaker: The China Entry Decision 9-806-195 06 Merino Outdoor Clothing yes/video Lassiter

Logic Chain Users' Guide HollisterSponsored Projects List Posted@3p

7 Massive Incorporated (A) & [(B) in Class] 9-806-126/127 06 In-Game Advertising Katherine Hays video LassiterQuestionnaire Design and Development 9-590-015 90 Silk

8 MarketSoft 9-800-069 99 Marketing Automation Software slides LassiterQuality Improvement ToolKit CQM/ Shiba BurchillRed Auerbach HBR 87201 87Seeing What's on Red Auerbach's Mind 9-804-160 04 Lassiter

9 Juice Guys (A) - Shad Gym 9-800-122 99 Fast Food Products & Services Craig Pynn, ?John Petrolini lab Lassiter10 [Juice Guys (B) in Class] - Shad Gym 9-800-123 99 Fast Food Products & Services Craig Pynn, ?John Petrolini lab Lassiter

11 Room for Dessert 9-899-008 98 Restaurant & Food Services Paul Conforti, Kim Moore video Lassiter/ Roberts12 Initial Project Plan - Due@5p - No Class Lassiter

13 Surface Logix 9-802-050 01 Nanotechnology Platform Carmichael Roberts ppt Lassiter14 Codon Devices 9-806-198 06 DNA Synthesis Samir Kaul, John Danner, Lassiter

15 Millennial Net 9-804-173 04 Embedded Wireless Networks video Lassiter16 RelayHealth 9-805-021 04 Web-based Health Services Gio Collela webvisit Lassiter

17 Ducati 9-701-132 01 Performance Motorcycles video Gavetti18 Pine Ridge, LLC (A) 9-806-060 06 Premium Wines ?Ian Cumming Lassiter

19 TH!NK New 07 Electric Cars Jan-Olaf Willums video Lassiter20 Learning from High-Potential Ventures Lecture 9-803-036 07 Entrepreneurial Marketing as a Process slides Lassiter

21 Entrepreneurial Marketing Final Lecture Entrepreneurial Marketing as a Mindset slides LassiterFinal Project Due - Rock Center 319@5p

Planning the Business- Mindset & Process

Building the Product and Building the Team -Tools & Techniques

Customer Adoption and Company Adaptation - People & Partners

Applying the Thinking and the Tools

Capturing the Learning

Source: Author.

Documents

Entrepreneurial Marketing: Learning from High … · Entrepreneurial marketing is both a mindset and a process. ... As a process, entrepreneurial marketing seeks to “reverse engineer