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Reinventing your marketing exchangeKay Plantes
Linn Roth, former CEO and owner of Locus, an electronics company, faced four critical junctures in Locus' marketing exchange. Why they arose and how they were solved (or not) sheds light on the pitfalls in designing a winning profit-growth strategy amid rapid technological and market change. Juncture One: When Roth joined Locus in 1990, it was an engineering consulting firm specializing in wireless radio frequency (RF) with a niche in biomedical applications. Revenue flow was unstable. Roth's solution was to shift from selling consulting advice to designing, producing (with external manufacturing partners), and servicing wireless RF-based components and products. For example, Locus developed solutions to wirelessly read utility meters for American Meters, which sold these meters and other labor cost-saving solutions to water and electric utilities. Juncture Two: The new strategy increased and stabilized revenue, but any intellectual property (IP) belonged to Locus clients. To create proprietary IP, Locus leveraged its competency in interpreting light wave signals by creating antennas and receivers for Loran communication systems (low-frequency, high-power time-and-location transmission systems). At the time, it was thought that Loran was likely to become the "redundant" signal to GPS; therefore, Roth expected huge market growth. Locus won attractive orders from customers such as Motorola's cell phone business unit. Juncture Three: Delays in the government's agreeing to provide long-term support for Loran communications created an increasingly risky financial picture for Locus. To diversify its revenue base, Locus focused on a niche market -- high-end industrial radio components -- to improve existing wireless communications in tough environments like utilities and factories. Revenue growth did not come easily. "What I did not understand was how hard it would be to break into new markets," Roth says. "We had the best radio components in every case, but we too often picked the wrong sales people and channel strategy." Junction Four: Technology maturation threatened to eliminate Locus' radio niche. As technologies matured, more and more capability became integrated into individual products and components. In Locus' case, customer companies were backward-integrating into Locus technology. When Locus' major customer offered to buy Locus, hire Roth's employees, and take over his long-term lease, Roth elected to sell. The risk of finding a new niche without the skills or calendar time to move into higher-level products using radio technology appeared too risky. Locus' experience raises tough questions for leaders in rapidly changing markets. At each juncture Locus reinvented itself, leaving behind relationships and reputation in a market that might have created growth momentum. What if Roth had been able to build a range of offerings for synergistic target markets? Did placing big bets on one-dimensional strategies at each juncture in the end reduce the ability of his company to survive independently? More importantly, what will you do when your company reaches its next "marketing exchange" juncture? Does your company possess the skills and market understanding required to traverse these junctures successfully? If you explore and act upon these questions now -- and not when the juncture arrives, you'll be on the road to building a more sustainable profit stream. Kay Plantes is a Madison economist, strategy consultant and executive educator. You can reach her at plantes@execpc.com with your best practice or question. plantes@execpc.com madison.com ©2009 Capital Newspapers. All rights reserved. |
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