Tuesday, January 9, 2007

Consumers create demand, not business

In the past, companies designed products to satisfy the largest and juiciest market first. They had a very specific priority list: First satisfy Service Providers, then Financial Institutions, then the Enterprise Market, and finalize with Consumers.
The logic was very simple: Go for the big bucks.
The interesting thing about today's economy (post Web 2.0) is that priorities have shifted dramatically. Now the big bucks are not in the SPs and Financial Institution just because they are large institutions with huge amounts of cash flow... it's not even in the public sector or the military.... It's the consumers who drive product development. The list has turned into: First Consumers, then Service Providers (because they serve consumers!), and at the remote end Financial Institutions and the Enterprise Market.
For a company whose main focus is the enterprise market or SMB, this is bad news. It's important to understand that this phenomenon affects their market tremendously. And it is not due to the "Internet Boom". It's more than that.
People ultimately look for cheap prices. It is the ideal of an almost perfect economic market. The bigger the universe of people that want to buy something, the more perfect the market is. Therefore, as we lower the communication costs with things like "Triple Convergence" or "Unified Communications" or "Skype" and "Google Earth", the more people will be attracted. And this produces huge demands, but also huge development!. That's why Skype is such a good service, or why YouTube is being able to ramp up in popularity so quick, or why Google is so big and used today.
For an Enterprise-oriented company to survive, it has three options: (1) it either changes to a consumer market, (2) it understands why would a company pay premium prices for a product/service (telephone service, for example, when any human being can use skype to call for free across the world), or (3) do both.
That is why it's so important to understand your customer and know how to respond to questions like "Why would I buy that?". The standard "Because it is enterprise level, so it is of better quality" answer, no longer applies.
For Example, think about Linux vs. Windows. Why hasn't Linux been adopted as the main Operating System if it's free? - Because it is not yet simple enough for the average Joe. Therefore, Microsoft is safe (for now). There isn't enough interest in the consumers. The barrier of entry is not so low. But what about Skype, for example. These is the type of questions that you should be thinking about... after all, the customer is always looking for the best deal.

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