The High-Growth Conundrum: Marketing at Hyperspeed
arketing is an important function at any time, but it’s perhaps most crucial for a company entering a hypergrowth phase. The product might be selling well, but can be killed by any number of missteps: create demand faster than you can fill orders, and the market may turn away from your brand, never to return. Move too slowly and a competitor may elbow you aside. Target the wrong market and in two years, your product may be obsolete and unable to meet the needs of the emerging market.
Experts say that it’s not easy to get it right, but with careful management, it is possible for executives to dodge some of the most common mistakes.
Eyes Off the Prize
The most common problem is a lack of a strategic plan, according to Joseph Lassiter, Senator John Heinz Professor of Management Practice in Environmental Management at Harvard Business School. “Nobody has a plan and so every day in the company, you draw the play in the dirt and run, and you keep wondering why you don’t get where you want to go. The usual problem is not that the competitor beats you, it’s that you don’t have a goal in mind… you kind of squiggle off to the side of the road.”
One way in which companies lose their way, ironically, is in strong sales. “The opiate of the order and the money that comes from the orders and the drive to satisfy the customer just overwhelms your ability to manage the situation,” he says. Strategically, the problem is that it can stop the company from developing in the way it needs to if it is going to reach the broader market and stay competitive down the line.
Marketing theorist Geoffrey Moore (See ‘Helping Companies Cross the Chasm’) famously describes this challenge as “crossing the chasm”–making the jump from marketing for early adopters, who have a particular set of requirements, to reaching the larger market, which typically wants a somewhat different product.
Chinese companies face an additional marketing chasm too, according to Ben Cavender, Associate Principal of the China Market Research Group. Often, they need to get away from the price-based competition that they used to gain market share to competition based on quality.
At the other extreme, but just as fatal, is maintaining a view of the future even when it keeps bumping up against an inconvenient reality. “In the end, companies that do well react to the world as it is, and particularly in smaller companies, you really don’t have the choice to wait for the world to see your truth as truth,” Lassiter says.
Making the situation still more difficult is the fact that at precisely this moment, the founder is often shown the door and replaced by someone the board believes better suited to handling the marketing challenge of fast growth.
In a 10-year study in which he interviewed more than 10,000 business founders in technology and the life sciences, Noam Wasserman, Associate Professor of Business Administration at Harvard Business School, found that more than 50% of founders are replaced by an external CEO by the third round of financing.
“A lot of times fast growth is sparked by your bringing on rocket fuel from investors, outside parties who, as they are investing, take board seats so they can make sure that they are able to monitor their investment,” says Wasserman. “Often, at the same time, the demands on the CEO are going from a technical or a scientific need where it’s developing the product to functions that you’ve probably never worked in and that you aren’t familiar with.”
The company has to be showing great promise to survive to a third round, but ironically, that very promise frequently leads investors to send the founder packing. “At the same time as the company’s growth is starting to outstrip your capabilities, the people on the board have a very different read on whether you, as the founding CEO, should continue leading it, not only despite the fact that you have been succeeding smashingly until now, but almost because of that success that you’ve had,” Wasserman says.
For the founder, it’s a frustrating situation. In his book The Founder’s Dilemma, Wasserman sums up the dilemma by saying, “If the company tanks, I’m gone. But if it’s a big hit, I’m also gone. If I want to remain CEO, should I only aim for middling success?”
Common as it is, most companies aren’t prepared for the event. Replacement at this fast-growth stage tends to end traumatically: 73% of those who are replaced have to be fired, according to Wasserman’s data. But even those CEOs who say they are prepared for a shift in control and intend to stay on tend to find the shift wrenching. As one executive told Wasserman, the CEO tends to be prepared for a title change, “not a tidal change”.
Merrill R. Chapman, in his book In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters, is blunter: he argues that many companies, particularly tech companies, kill themselves through self-inflicted wounds suffered after spectacular initial success.
The New York-based software analyst sounds a bit facetious, but he makes a good case. Often, Chapman writes, it’s not Tom Peters-style excellence that wins in technology but simply competence. His irreverent look back at the growth of the US software industry in the 1980s and 1990s notes that nine of the top 10 software firms in 1984 had disappeared by 2001, and that all of them flopped because they did something stupid. Microsoft alone survived–and took 69% of the entire software market–less because of Bill Gates’ genius than because it didn’t bungle anything important.