Has a Golden Opportunity Slipped Through Your Fingers Like Mine Did?
This is the one I want back, and what I’d do differently
Sometime after smoke signals went out of vogue, but before cell phones became ubiquitous, the angel capital firm I founded, Capital Insights, made our first investment in Telemessaging Devices. They launched an innovative paging service called Quick Alert for monitoring alarm conditions, such as freezer temperature. When an alarm tripped, an eighty-character notification was sent to the user’s alphanumeric pager. Because these pagers were high margin products for paging companies, the theory was that they were highly motivated to sell this new service to their customer base. In particular, we had our eye on DialPage, a large paging company where two members of Telemessaging Devices management team had previously worked and which had been a client of Peat Marwick, where I worked.
Almost immediately upon launching Quick Alert, the company sold several large accounts. An automotive parts manufacturer used the device to monitor remote chillers that were critical to their manufacturing processes. This required new phone lines be installed, which the customer was willing to do because of the critical importance of the equipment monitored. The customer was willing to pay up front to provide Telemessaging Devices the capital to acquire the needed parts. They even participated in producing the equipment operating manuals. A hospital customer used Quick Alert to monitor life-or-death code blue alarms. A water utility used it to monitor mission critical pumps. In each case an early customer was willing to make an extra effort to use the service.
Telemessaging Devices hired a public relations firm to promote these initial successes. I was ecstatic that we got prominent front-page placements in several trade publications. But then, unfortunately, there was the sound of crickets. The Quick Alert service never gained momentum beyond a few isolated sales. Ecstasy turned to despair. Why couldn’t a company with an initial base of highly credible customers convert that momentum into a large and growing market?
Several months after the company ran out of cash and business ended, I read Crossing the Chasm by Geoffrey Moore. It was as if he had been working in the office next to me. I made every mistake he described in the book. Each of the Quick Alert customers was an early adopter. Word of mouth never started among mainstream customers that the company had a complete solution for a job they needed to do.
In retrospect, we let success slip through our fingers. This start-up company did not have the resources to simultaneously complete the product for very different jobs. The company should have chosen the most compelling application from among its early adopter customers, simplifying a whole product solution that completely solved a problem that frustrated mainstream customers. We could have chosen, for example, the monitoring of critical, remote equipment like chillers in manufacturing plants. The other early adopter applications should have stayed on the shelf until after the first mainstream beachhead was established.
In picking the initial market beachhead, we should have assessed whether Telemessaging Devices or a partner could provide 100% of everything required for the customer to use the product. Telemessaging Devices did provide all of the on-site equipment necessary. Through partnerships with paging companies, an alarm message could be sent to a user’s pager. The company should have been careful to avoid critical exceptions, like a wired phone line necessary to connect the monitoring device to the paging company. Early adopters had been willing to go the extra mile to complete the solution by having a wired phone line installed. Typical mainstream customers would not, which was the Achilles heel of a potential Quick Alert market beachhead.
We should have promoted the initial beachhead application hard. Other potential customers who needed to do similar monitoring jobs would have found our early success compelling for them, too. They could have called our initial customer, who would have been a credible referral from a peer who had a similar problem. As our base of satisfied customers grew, word of mouth would have accelerated our sales. Then we would have had the resources, or would have been able to raise the capital, to complete the solution for the next most compelling application.
Instead, we promoted several disparate applications at once. Big, big mistake! Prospective customers may have found Quick Alert intriguing. They didn’t see how our diverse applications applied to them. So they turned the page of the magazines they were reading and never thought about Quick Alert again.
Telemessaging Devices provided another important lesson. DialPage’s vice president of sales was enthusiastic about selling Quick Alert. He behaved like an early adopter, because he was in line for a bonus or even a promotion if he took a risk on an innovative new product that was successful.
Line salesmen and their direct supervisors did not have the same upside potential as the VP. They viewed the risk/reward trade off much more like conservative, pragmatic mainstream customers. Because early sales are hard to close, the company should have been extremely cautious about launching a sales program for a new product if dinner for the salespeople’s children was not dependent on successfully closing sales. The most rational salespeople we dealt with were soon off to easier sales that could more reliably provide for their families. At best, we should have used an outside sales force to generate leads for our direct sales folks to close.
Today, when I go to dinner at restaurant chains like Outback Steakhouse, they take my name and give me a pager to notify me when it is time to be seated. The company that commercialized this application did what we didn’t, but should have. They narrowed their focus to a mainstream market beachhead and provided 100% of what it took to completely satisfy their customers. Receiving one of these pagers before dinner regularly humbles me.
Telemessaging Devices had everything teed up to be successful. All I had to do was drive the ball into the center of the fairway. Unfortunately, I sliced my shot and lost the ball deep in the woods. Of all the investments I have made, this is the one for which I’d like a mulligan, please.
