8 Reasons Tech Companies Fail

There are many reasons that technology businesses falter or fail. To improve your management decisions and practices, seek help from a Business Advisor to address your specific needs.

Here are 8 primary reasons that tech companies falter or fail:

1. Lack of Market Focus
Growing tech companies often do anything possible to generate revenue, and in the process, try to be all things to all people. Worried about missing out on new business they avoid segmenting the market and refuse to focus on one to three key vertical markets and one or two main products or services. As a result, the company is unable to effectively serve any market segments effectively. Management is suddenly faced with sales and support problems, lack of funds and strained profitability.

2. Undifferentiated Products
Most of the technology products and services that fail lack clear differentiation. Successful companies differentiate their products and articulate these differences in all marketing and selling. Differentiation is critical on the bases of five fundamental factors: function, time utility, problem solved, price and positioning. These five elements are key to uniquely positioning your products and services to achieve increased sales and profits. By emphasizing benefits and value enhancements, you come from a position of strength.

3. Poor Market Research
Your research doesn’t have to tell you that your new products and services are first to market or completely unique, but your products and services clearly need to be valuable, in demand and sellable. Many companies routinely perform the wrong type of market research. Statistical surveys of customers alone do not provide the qualitative information that is needed. Because your target audience often relies as much on perceptions as on facts, qualitative research intended to identify existing needs has equal or greater value in assessing, planning and executing a company’s marketing strategy.

4. Miscalculated Product Improvement or Lack of Product Management
Tech products and services are generally used over an extended period of time, are integrated with complementary products and impose learning costs on customers. Customers require time to implement and recover their investment in technology products. The rapid introduction of new and improved versions are important, but can also make a customer regret a previous purchase, delay all new purchases, and agonize over similar purchases in the future. Additionally, the time and costs related to excessive or miscalculated product development can delay product launches and delay sales opportunities and revenues.

5. Lack of Quality and Support
Customers view products very differently than the technology companies that create or supply them. Technology companies tend to try to sell products on the basis of price, special features and technical specifications. These technical factors are often favored by the engineers who typically run most tech companies.

The problem is that most customers consider factors such as benefits, training, product support and company reputation to be more important. The feature rich products created by engineers are seen as overly complicated by many customers. Rather than competing on features alone, tech companies should focus on the “intangible” factors that are mostly attractive to customers, such as benefits (how does this product increase sales, reduce costs, save time, etc.), quality, lack of bugs, training and U.S. based support, etc.

6. Poor Planning and Marketing
Marketing is both an art and a science. Positioning, pricing, sales strategy, target vertical markets and other factors contribute to the success or failure of your products and services and the corresponding sales. Proper planning and a well-crafted marketing plan and budget is critical to success. Improper marketing or lack of marketing can be a product killer or cripple your company’s sales as a whole.

7. Using Price Alone to Drive Sales
It is easy to misinterpret the role price plays in the market. And it is a mistake to believe that a technology product or service would be widely used and purchased if its price was low enough. Price is a function of value and utility, and products and services should be positioned and marketed accordingly.

8. Sales Mismanagement
There’s more to sales management than most companies realize. Specific skills are required to effectively manage both direct sales and the sales channel. These skills must be developed internally starting with an effective direct sales force. Unique management challenges exist for each type of sales channel: direct sales, online sales, dealers, manufacturers “reps” or agents, OEMs, value-added resellers (VARs) and referral partners. Seek a business advisor to assist you in optimizing your sales strategy as a critical factor in your success and for preparing for and hiring the proper sales management.

To further evaluate your management decisions, grow your business to the next level and increase your sales, margins, profits and value of your company, contact Mark Hartsell, MBA, President of CEO Advisor, Inc. at (949) 629-2520, by email at MHartsell@CEOAdvisor.com or visit us at www.CEOAdvisor.com for more information.

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