First things first: Know your market

From biogenetics to emerging networking technologies, the pace of scientific and technical discoveries and applications can be intimidating.

Facing a flood of unfamiliar terms, many investors, bankers, business attorneys and job seekers never consider the Madison area's burgeoning high-tech economy.

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It's easy to assume, therefore, that technology companies win solely on technical mastery and scientific excellence.

This assumption would be wrong.

"Technology leaders want to focus on the science and technology. But to succeed as a business, they must understand the marketplace," said Dick Leazer, principal of a Madison angel investment group.

Leazer formerly headed the Wisconsin Alumni Research Foundation (WARF) and, before that, large medical technology companies.

In technology markets, Leazer said, there are options for developing technology. Successful companies study the potential customer base and divide it into segments, each with different needs.

They then focus on a single segment, one where the company can offer more value than competitors and overcome barriers to adopting technology.

"It's a waste of time and money if the company doesn't get its offering right from the start," Leazer said. "Segment-ation lets them carefully specify the first product they produce, so it succeeds."

Segmentation also prepares startup companies for investment pitches. "They can explain what they're doing, why they made the choices they made, and what their customers will value," Leazer said. Scientists can't delegate or outsource this work. Their expertise is needed to interpret what has been said in interviews with potential customers.

"All new companies have the will to win, but very few have the will to prepare to win. But the will to prepare matters more," Leazer said.

"Unfortunately, segmentation is most challenging to those who come from a science base. They think they know the answer or that three interviews provide the answer. Chasing interesting technical options is far more exciting than learning about the market," he said.

It's not just high-tech startups that under-invest in understanding the market. Almost all companies capture financial data (such as invoice and receivable information), interpret it to create financial information (such as profit-and-loss statements) and then use it to make better decisions.

Yet few companies have a rigorous process for understanding the market and the company's market position, even though market information is as important as financial data.

When there is no well-defined process to regularly collect, interpret and ensure that market insights are used in leaders' decisions, many decisions are inappropriately made from an internal perspective. Or, decisions rest on largely anecdotal evidence, collected haphazardly. It's no wonder that new product offerings often fail or that the root cause of revenue shortfalls usually can't be explained.

Leazer asks, "Why is it that scientists, who are experts in experimental design in their labs, completely forget about design when they think of gathering information from the market?"

Leazer's thinking applies to other types of business leaders as well. Why do they invest in accounting systems to understand cost and inventory variances down to the dollar, yet rely on inadequate information to understand a complex market?

Whether your company is high tech or low tech, a startup or fully established, better market information will advance your company's success. Who owns the market-understanding process in your company?