Weirdos and nobodies: finding your niche

The trouble with focussing on ‘everybody’ is that it is usually a tough, competitive space. There are big, ugly competitors and a lot of risk involved in achieving success. In the technology world you are often competing with companies that have an annual turnover exceeding New Zealand’s gross domestic product.

A valid strategy for Kiwi exporters is actually to do the opposite. To target “nobody” instead of “everybody”.

Brilliant business thinker Seth Godin put it nicely in a recent blog post “Nobody wears a watch any more. Nobody wears a tie either. Nobody shops at a bookstore, at least nobody I know. The market of nobody is big indeed. You can do really well selling to nobody if you do your homework. In fact, most companies selling to nobody outperform those that are trying to sell to everyone.”

Closer to home Victoria University professor of physics and 2011 New Zealander of the Year Sir Paul Callaghan articulated the same concept in a recent NZ Herald article, saying Kiwi tech exporters should focus on the ‘weird’, and be the best in the world at it.

Being successful as a Kiwi tech exporter is about doing the weird stuff, he wrote recently. Sir Paul says New Zealand firms will be successful by picking small, unexploited niches and being the best in the world in those segments.

The niche market approach can work for Kiwi companies offshore. Kiwi companies aren’t usually big enough to challenge the huge multinationals head-on, but if we can find an under-served group of customers it offers a way to enter the market.

Companies often find it counter-intuitive to limit themselves to a niche market, especially start-ups. There is that fear you can’t afford to ignore any market opportunities in case you might miss out on ‘the’ big one.

The reality is every company, not matter how large, has scarce resources (at least I’m yet to come across one that has unlimited capital). Focusing down on a vertical, or even a couple of niches, is the best way for small companies to get the most out of limited funds.

Take trying to penetrate the United States (US), a market that more than 20 percent of Kiwi tech exporters sell to according to the 2011 Market measures study.

The US is big with a capital B. Big cars, big hair and a big economy. If New Zealand was a company we would only rank 13th in the 2011 Fortune 500, slightly bigger than financiers JP Morgan Chase but smaller than telco At&T. So how can our technology entrepreneurs market to a country as large, diverse and well-developed as the United States?

The potential of a multi-billion dollar market (‘healthcare’, ‘agriculture’, ‘fast food’) in the US can be alluring: “we only need to sell to 0.05 percent of them to make a fortune – let’s go!”. But it doesn’t work like that. You only have scarce resources in a white hot competitive environment where everyone is bigger and stronger. There is no way you can realistically cut through.

Tightly targeting segments of those markets with buying needs closest to what your product offers is the best approach. For generalists like the typical New Zealand entrepreneur this can be frightening, but the more you can concentrate your scarce resources the greater likelihood of success.