We can learn a great deal about strategic execution, and the importance of knowing your target customer, from Stewart Butterfield. In 2004, Butterfield sold his first company, Flickr, to Yahoo! for over USD$20 million. At that point in time, he had three things going for him:
First, he had a deep understanding of how to absolutely delight a customer. Second, he had a deep understanding of how to run a software development team. And third, he had millions of dollars that, presumably, gave him a greater degree of security and flexibility than most entrepreneurs have when the set out to start a business.
So, in 2010, when he embarked upon his next great venture, he could afford to make a mistake—and recover from it.
His great venture was going to be a wonderful, massively multi-player game called Glitch. His Target Customer was, obviously, someone interested in playing a massively multi-player game. Several games already existed, and practically all of them involved going on adventures across dangerous terrain full of monsters or enemies.
Butterfield, however, wanted to do something profoundly original. Read More… He wasn’t going to build just another weapon-heavy, conflict-laden world of war. Glitch would be different. Glitch would emphasize, according to Wikipedia, “collaborative crafting.” Teams would perform “gathering activities.” And, most innovative of all, as its users succeeded in cooperating together, the Glitch world would grow and evolve.
See if you can identify his mistake.
What If Your Target Customers Don’t Exist?
Here’s what happened. From a software point of view, Butterfield knew exactly what he was doing. He knew that to create the game in an economical timeframe, he would need to assemble a far-flung, global team of writers, artists, and developers, and get them all working in synch. That way, he could get it out to the legions of fans who, he believed, were just thirsting to escape into a creative world of cooperation, crafting, and gathering. He’d be turning a profit in no time.
So, to develop the game, the first thing he did was create a collaboration platform that would enable his far-flung writers, artists, designers and programmers to synch up.
He knew exactly what he was doing here. He had led a successful company before. He knew how intelligent, creative people worked, and he knew how they thought, and he knew what they needed from a collaboration platform. So he designed a great one that enabled people to form teams on the fly, to share files, to attach discussions to them, to meet online synchronously or asynchronously, to track progress and to come to conclusions collectively.
In his mind, it was really just a tool for creating Glitch. It worked beautifully. And, thanks to the platform, sure enough, Glitch was ready for market in no time. In September 2011, Butterfield threw open the gates to his wonderful world, and waited with bated breath for the stampede of massive multi-players to stream in.
No one showed. Two months later, Glitch folded.
As it turned out, gamers weren’t all that interested in “gathering activities,” whatever that even means. They stuck with their adventures and monsters, thank you very much, and Butterfield was left holding a dud.
What If They Do?
I’m assuming that you don’t have the luxury to make a mistake that big and survive. Few entrepreneurs do.
But, probably thanks to the money from Flickr, Butterfield wasn’t desperate. In classic Silicon Valley style, he looked around at the wreckage of Glitch, and wondered what he might be able to salvage.
And lo and behold, he had this amazing collaboration platform. Where he had misjudged the gaming community just about as completely as one could misjudge anything, he had hit a bullseye with his business teams.
So he named the collaboration platform “Slack,” and he gave away freemium access to it.
A year after his first user signed up, he had half a million people on his platform. Four months later, he had a million. In less than two years, he had 1.7 million. Funding followed pace; his first round raised $43 million; four months later, another $120 million. In less than three years the company was worth over a billion dollars. Today, five years after its release, ten million people use it and the company has a $20 billion valuation.
How To Make Sure They Do
The lesson to learn is this: know your Target Market Customer.
If you have “gathering activities” in mind, you need to be sure you know how many people out there want those, and you need to figure out how to get to them. If it turns out they don’t exist, or that there are too few of them, then you need to question your business strategy.
If you have “adventure and monsters” in mind, then you need to know your competition like the back of your hand. Your Target Market Customer has a refined taste when it comes to monsters, and they are looking for a special kind of adventure. You will know what makes you different, and you will be able to target exactly the right segment of an existing market.
Your Target Market Customer is your ideal customer, and defining them is an essential part of your Strategic Plan. They’re a character in your imagination, but they’re based upon solid market research and real data about your existing customers and your competitor’s customers.
There’s a whole process and method included in our Strategic Planning application, but you can get to the core essence of it by answering this question:
In the story of your business success, how exactly do you appeal to the specific customer who will like you the most?
Know the answer before you spend any money on business development or marketing.