Tuesday, January 19, 2010

Microvision: “What’s Your Business Growth Strategy”?

From the looks of it, Microvision stock seems to have stabilized and margin call related selling has subsided after 6 days of trading below the $3 mark.

Have to agree with you, that it hasn't been a walk in the park investing in Microvision. But then again, good things come to those that have the patience, knowledge, analytical fortitude and the power of belief to stay the course.

When it comes to Microvision corporate management, you have to cut some slack to these folks. They have been managing so many tough technological innovations to come together; for PicoP to come this far and become a reality. A few more months will not break the corporate treasury [with over $50 million in cash] or put the company out of business. The pico projector market is huge and the race to market has just begun.

After listening to CEO Alex Tokman interview again, this is my reaction for whatever it is worth...

Microvision: What’s Your Business Growth Strategy?

Every business has to plan for growth and executives should make sure their growth plans are consistent with their dynamic business plan. A dynamic business plan is an updated version that is kept current to reflect the ever-changing business-operating environment. Especially in the technology and DOT.com businesses, where the product cycles are so short and consumer preferences are mostly dependent on the next hot product or service.

When it comes to growth plans, the two ends of the spectrum are, for example, should a company grow quickly and unprofitably, like Amazon and Hotmail [before it got acquired by Microsoft for $480 million], or slowly, with a careful eye on the bottom line, like Ben & Jerry's ice cream parlors? It all depends on what the competition is doing.

This report focuses on the challenges of growing a business and the importance of picking the right growth model that is consistent with your business plan and positions you for whatever your ultimate goal is. As the author sees it, there are three possible scenarios:

Number one: you want to be the gorilla of your industry in a hurry like Amazon.
Number two: you want to ramp-up your business fast and position for an acquisition like Hotmail.
Number three: you want to be a brick and mortar company producing steady profits like Ben & Jerry’s.

Regardless of what your business model is, the CEO and the CFO of the company need to formalize their business growth strategy and evangelize to the man in-charge of running the day-to-day operation of the business. Building a company is no small task? You've got one very important decision to make, because it affects everything else you do. No matter what else you do, you absolutely must figure out which camp you're in, and gear everything you do accordingly, or you're going to have a disaster on your hands.

Whether to grow slowly, organically, and profitably, or whether to have a big bang with very fast growth with lots of capital spent in a hurry, that is the question?

The first model, popularly called "Get Big Fast" (a.k.a. "Land Grab"), requires you to raise a lot of capital, and work as quickly as possible to get big fast without concern for profitability. I'm going to call this the “Amazon”, because Jeff Bezos, the founder of Amazon, has practically become the celebrity spokes-model for Get Big Fast.

The second model is called "Hotmail for Sale or Fail". Please note that Hotmail, before its acquisition by Microsoft, is the subject of our discussion here. And as for the name of our model “Hotmail for Sale or Fail”, I just made it up to make the point. This model requires you to raise only a small amount of capital, position for acquisition, and work as quickly as possible to build momentum to show there is promise of getting big fast… without concern for profitability. I'm going to call this “Hotmail” model, because Hotmail fits this model very well.

The third model, organic growth model, is to start small, with limited goals, and slowly build a business over a long period of time. I'm going to call this “Ben & Jerry’s” model, because Ben & Jerry’s fit this model pretty well.

The worst thing you can do is fail to decide whether you're going to be a Ben and Jerry's company, or a Hotmail company, or an Amazon company.

If you have the capability to raise tons of money, and you're going into a market with no existing competition, have lock-in and network/viral effects, you better use the Amazon model, or you're going the way of Wordsworth.com, which started two years before Amazon, but nobody's ever heard of them. Or even worse, you're going to be a ghost site like MSN Auctions with virtually no chance of ever overcoming eBay.

If you don’t have the ability to raise tons of money, and you're going into a market with no existing competition, have lock-in and network/viral effects, you better use the Hotmail.com model. Or you're going the way of the 95% of Amazon copycats, with weak capitalization, that have landed hard on their thin ass-set and nobody's ever heard of them.

If you're going into an established market, getting big fast is a fabulous way of wasting tons of money, as did BarnesandNoble.com. Your best hope is to do something sustainable and profitable, so that you have years to slowly take over your competition. You should start in one area, offer competitive prices, differentiate your services or offer variety of choices to create your customer base by getting customers to switch over from established competitors.

In closing, we should ask CEO Alex Tokman: “Microvision: What’s Your Business Growth Strategy?”

Anant Goel

PS: This post is based on a management report titled “… Technologies Business Growth Strategy” published by the author [Anant Goel] for a multi-million dollar company that was recently sold to a multi-billion dollar public company.