The Case
In 1996, Engdahl, had just sold his business, Digital Video, a subsidiary of Antec Inc., that sold specialized file servers to hold commercials and shows for TV stations.
In the process, he saw an opportunity to electronically replace Fed Ex's role in the delivery of commercials to the stations. With VC backing from US Venture Partners and Alliance Technology Partners, he began market research.
Although there was interest in his original concept, he found pain in an eight-step paperwork process to take orders for commercials, get them to the right people on time, and to invoice them. This process was slow, time intensive and cumbersome.
The biggest broker in the industry drove the point home in a critical meeting. Further customer research confirmed the pain point.
With a clear picture of the pain point, Engdahl and his team at Video Networks Inc. envisioned the solution, and then sold it while the software and hardware were being developed.
As planned, six months later they began delivering. Of course the automation of the eight-step process eliminated most of the pain, but the automated, electronic delivery of the commercial naturally followed as a part of the package.
The door opener was the solution to the pain, which generated some profit, but most importantly, it uniquely positioned Engdahl's firm to provide the transmission of the commercial, which was the primary profit generator.
The Analysis
You have likely noticed that some businesses work hard selling and marketing, and get just enough business to survive while other businesses have a vortex of demand from their customers and spend all their time trying to keep up with orders.
The key, as Engdahl eloquently preaches, is finding the customer's pain point and bringing an ideal solution you uniquely can provide.
The Steps Are Clear
1. Listen carefully to the customers. Encourage them to honestly share their pain, even if it is not exactly the reason you got the meeting. The greater the pain the better for you.
2. Figure out how to solve the problem completely, and if you can't, don't bother starting a business that goes half-way.
3. Position yourself to be the unique solution provider. That may be with intellectual property protection, but more often it's with speed to market and establishing a decisive lead over anyone trying to follow. That takes money, an action bias and a very talented team.
4. Run like the wind, build revenue and profits, and then look for liquidity. Innovative probem-solving companies often add their greatest value in the first few years. Once the sting of the pain begins to fade and the solution dominates the industry, it may be the ideal time to sell and find fresh pain elsewhere.
If your service or product makes your customer's life easier, you have an edge. Avoid offering "me too" products. Make it a habit to talk deeply with your customers about what wastes their time, or what needs are unfulfilled. Why do they have "bad days"?
When you start to hear the same issue over and over again, it's a sign you have found some industry pain. Solve that issue, and you will have an edge for growth and margin, at a minimum.
Most of us in business can think of the pain those changes bring us, and in weak moments we whine about it.
But business leaders with courage and speed see the pain caused by change as an opportunity for new goods and services. Rather than choosing to be the patient, they choose to be the doctor.
Robert Sher is the CEO of Bentley Publishing Group in Walnut Creek. Contact him at www.ceo-observer.com.
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