Are You Fishing in the Right Pond?

Given these uncertain economic times we are in right now, Blair is asking if some creative firms might need to rethink the market they serve, looking at whether their positioning might be too broad, too narrow, or just wrong.

Links

"The Target Is Not the Market" by Blair Enns on winwithoutpitching.com

Transcript

David C. Baker: All right, Blair. Today, the topic is, Are You Fishing in the Right Pond? I don't really care about the audience today just to make that clear. That's a good way to start an episode, isn't it?

Blair Enns: It's the same as usual.

David: Right.

[laughter]

David: No, I was going to call you today with a specific question like this about a book I'm writing. This saves me a call with you.

Blair: Is this the novel or is it the other book?

David: No, the other one. The book that I know people will buy, not the novel. I'm hoping to get my question answered. I'm really going to take this in a different direction. If it feels like we're losing the audience here and you wonder, that's it. I just don't care.

Blair: Is there even an audience? Do you ever look at the analytics? Is there anybody listening to this?

David: Marcus lies to us.

Blair: My wife still does not listen to this.

David: My wife doesn't either. I'm glad, actually, because I don't have to be careful with what I say. All right, so are you fishing in the right pond? The idea is that you're drawing a distinction between-- Well, the way I say it is the work you look for is not the same as the work you accept, but you phrase it a little bit differently. You're like a real big golf player, so you talk about--

Blair: Do I strike you as a real big golf player?

David: You don't.

Blair: I would play more golf, except the uniforms are horrible. Those shirts are horrible. Actually, I have a really cool golf shirt that no other golfer would wear, but anyway, go on.

David: You pictured it in golf terminology, so start with that.

Blair: The target is not the market. The target is that at which you aim and the market is that which you are happy to hit. I don't golf much anymore, but I assume golfers aim for the flag and are happy to land on the green. Maybe they aim for the green. I don't know, but that's how I think about it. You're on the tee-off box. It's a short Par 3. You reach for whatever iron. See, I'm faking my way through this sport. You're aiming for the flag, but you're happy if you just land on the green.

David: The worse you are at golf, the more this episode will appeal to you. Aim for something, but be happy if you just hit something bigger. Something's happened, though, in doing an episode like this on this topic 30 years ago. Probably wasn't the same as doing it now. The world around us is changing, so this is even more relevant than normal.

Blair: There's two reasons to talk about this. One is if it's just you and I talking here, it's a thinly disguised way for me to talk about something that we're doing differently at win without pitching. Also, it is funny times right now. It is funny economic times. You and I and a couple of other friends who also serve the creative firm market, we check in with each other every day on what are you seeing.

We're constantly putting feelers out, what's going on in the economy. How is our market? Creative firms, how are they doing these days? There are mixed economic messages. There are some firms that are doing well, but I think the way I would characterize it, and I probably have before, is there's a lot of economic uncertainty. It's uncertain times. Money is not flowing freely.

As a result, many of the conversations that you and I have, not just in this podcast but privately, often comes back to the subject of positioning. Are you fishing in the right pond? We're neglecting half of the positioning equation here and that is, "What is it that you do?" I simply wanted to look at the other half, which is the market you serve. Maybe it's time to rethink the pond that you're fishing in.

David: When you look back over your experience at when without pitching, who's a client that we would least expect to hear where you feel like you delivered value?

Blair: Oh, that's a good question. Our target market has always been expressed as the short version of a positioning statement would be sales training for creative professionals. The market being creative professionals, now, that has always been the target. That's been the flag or the pin at which we've aimed. The larger green that we're happy to hit is basically any professional or anybody who sees themselves as an expert first, a practitioner or an advisor, and a salesperson second. The target is creative professionals. The larger market is any kind of expert whose second job is selling. The most unusual? Well, a lot of consulting companies, a lot of financial planning firms.

David: Any doctors, lawyers?

Blair: A couple of doctors, a couple of lawyers, architects, interior designers, staffing companies. We've worked with a couple of SaaS companies. That's not a good fit for us.

David: They're selling their product. They're not selling expertise.

Blair: Right.

David: That has to be the common thread is that they're selling expertise.

Blair: Right.

David: Recently, you've worked with another firm in the professional services space and there was certainly enough overlap. They're selling different things, but it's still expertise. There's enough common threads there. When they hear you talk, they may not feel like you have a camera in their office the same way a creative does, but they hear you explain the principles behind how you think. Then they're nodding their heads and it's like, "Yes, that's us."

Blair: When I think of the books that I've written, I'm writing to a designer or a small or independent design firm. That's my surrogate for other creative businesses, so it could be an ad agency, a marketing agency, or some other kind. Historically, for 20 years anyways, when I wrote, I wrote to that audience. It's counterintuitive. When you aim for the pin, you aim for the smaller target.

The larger market, they're not idiots. They will see relevance in what you do for them. My intuition has always been to stay small and narrowly focused. If I look back over 24 years, it's one of the things that I'm most proud of is I've resisted the urge to broaden out. Because as you craft messages and services to a narrow, specific audience, you should hear from tangential markets.

Some of those people in those tangential markets, they look at what you have and think, "Well, that works for us too." They will try to persuade you to broaden out your message and your services through a broader audience. We'll get into this. There's a time when you should pay attention to that advice. Early in your business, that's advice you would be better off to ignore.

David: It's like there are two different segments in a restaurant next to each other, tables next to each other, and you're at the table with your exact fit audience. "This is the flag, people." You're having this great conversation and the people next to you are in a related field, but they're more on the green. They're not at the flag. They're overhearing the conversation and they're thinking, "We don't hear that sort of insight in our space."

Then they scoot over here and say, "Can we talk?" That's okay. I'm afraid people are going to run away with this in the wrong direction. The way you organize this feels good to me. You're talking about three main market problems. The first is too broad, too narrow, and just wrong. What you and I have been chatting about for the last few minutes is the too narrow thing, but we don't want to start with that because too broad is a really dangerous thing too, so let's start with that.

Blair: Three market mistakes. You could be going after too broad a market, too narrow a market, or just the wrong market. The most common one by far is too broad a market. You get distracted by the size of the market and you delude yourself into thinking that, "Oh, if I can just get a small piece of that big market, then I will be better off." I went looking for a quote from Peter Thiel in his book, Zero to One, on this. I ended up making all kinds of notes, all kinds of quotes. I'll quote him numerous times throughout this episode on the subject.

Here's what Thiel has to say on the topic of being too broad, "It's always a red flag when entrepreneurs talk about getting 1% of a $100 billion market. In practice, a large market will either lack a good starting point, or it will be open to competition, so it's hard to ever reach that 1%." It's counterintuitive, but what Thiel says is you should look to dominate a small market first. Once you have a dominant position in that small market or that small pond, then you should think about branching out.

David: Right. I think that probably is how people are thinking, "Surely I can get 1% of that market." I'd be interested in your feedback on this. I wonder if there's something else really that's a little bit more philosophical at work here. They're going after a really broad market. This is the mistake we're trying to correct with this first of three points, too broad. They're going after a broad market because they love the variety and because they don't have a marketing plan. They're like, "We've got to be open to everything. The last thing we need to do is to close our market down a little bit because we barely have enough work as it is." That plays into it too, would you say, or not?

Blair: Yes, it's a big part of it. Somebody looks at, "Oh, we're only getting a tiny, little business from this pretty big market. We need to go bigger. We need to go broader." The reality is you need to go smaller. There are two dimensions here when you're thinking of your positioning. One is relevance, your TAM, your total addressable market. Two, what size market are you relevant. The other is differentiation. In some ways, they're opposed to each other. The real question you want to answer is, what is the largest market to which we are meaningfully different?

David: Could you also ask, what is the biggest market that we could realistically dominate?

Blair: Yes.

David: If you come up with too big a target and you think, "Ah, I can't really see us dominating that," then you make it a little bit smaller. It's two questions asking the same thing.

Blair: We talk about, "Would you rather be a big fish in a small pond or a small fish in a big pond?" The answer is we all want to be big fishes in big ponds, but we all start out as small fishes. If you're going to start out as a small fish anyway, you might as well start out as a small fish in a small pond and do what you can to become the big fish in that small pond. In fact, I think a better way to think about it is not ponds but bays.

Think of a massive lake. I live on the shore of a 100-mile-long lake. Think of a massive lake and a small bay. You want to start out in that lake. You start out as little fish. You want to be in a nice, safe little bay. You want to grow to the size where you are the dominant fish in that bay, and then you want to start reaching out. This idea of the target as the market, think of the bay as the target. That's what you're aiming at. My metaphor starts to get mixed and break down a little bit here. Golfing and fishing. [laughs]

David: Pretty soon, there's going to be flags in the water.

Blair: Pretty soon, there's a fish playing golf.

[laughter].

Blair: Oh, my wife would love this episode. She's a mixed metaphor. You want to start out small. Aim at this small target, the target to whom you will be most meaningfully different. Then once you have some dominance there, once you have some size there, then you start to broaden out to the larger market.

David: Okay, so I'm going to be the principal asking this question. I've dominated this little bay here. I'm tired of these other people. I'm ready to get bigger. You're suggesting that I should look for some adjacent relevance. What about just expanding the things I do for these people?

Blair: I'm purposefully leaving off that side of the equation. Maybe it's just such a straw man argument because of that because that is the other thing you do have to consider hand in hand. Fast forward a few years and you quickly become dominant in this tiny, little bay, and you think, "Okay. Well, we've outgrown the bay. We've got to move." You look at adjacencies.

The adjacencies are in both market and discipline or you can think of it as discipline or problems that you solve or tools that you use to solve the problems that you solve. Let's keep it simple and think of, "There's your discipline, what you do, and there's your market for whom you do it." On both of those dimensions, you are pretty small at first. Then once you become the big fish in the small bay or the small pond, the way you look to expand is adjacencies on both of those two dimensions.

David: Right. Okay, so we'll keep it back to this topic of toying with your market versus your target and so on. This first of three points is we're trying to fix the too-broad problem. One of the ways that people fix this is faking narrowness. You're advocating against that as well.

Blair: Yes, so here's another Peter Thiel quote. He says, "The fatal temptation is to describe your market extremely narrowly so that you can dominate it by definition. I'll add the word "by definition" alone. You dominate it and market in theory. In reality, it's not a distinct market. He makes the use of the metaphor of a restaurant on Castro Street in Palo Alto. When he was in a startup mode with PayPal, he said he could walk down the street.

There are all these South Indian restaurants, North Indian restaurants, Korean restaurants. He says like a fake distinction, a fake narrowness would be saying, "We're going to open up a British food restaurant," if there is such a thing. I guess it's fish and chips. "We're going to totally own that market. We're going to dominate that market." He said, "The reality is I and these other people in the startup, we're walking down the street looking for food."

David: Your market is hungry people, not people looking for British food.

Blair: Yes, so it's a false distinction. We are going to dominate. We're going to completely own this market. I see this among creative firms, agencies all the time. These ridiculously narrow distinctions, definitions of the marketplace. We've probably talked about this before, but you narrow one dimension. You have to go back and look at the other dimension. If you narrow your market to health care, but you're still a branding agency, branding for health care, that's a meaningless distinction in my mind.

David: Well, if I can add something to that, meaningless even just in terms of words. If it doesn't come with real expertise, it's also empty. I should be able to hear some things from you. How is branding different for health care? You ought to, without hesitation, be able to talk for hours and hours. I'm nodding my head, learning all kinds of things. You don't have to have that right away. Boy, it better be true. It better not just be a stated focus. It better be really substantive too.

Blair: What is it about branding for health care that does not apply to branding for aerospace or retail or automotive or anything else?

David: Yes, exactly. The first mistake we're trying to avoid is being too broad. The second one is being too narrow. This was where it gets really interesting. I think people expected to hear what they heard in this first section, but this second one's going to be newer.

Blair: There's two reasons your market is too narrow. One, the rare one is it's a mistake. You've just mistakenly decided to focus on too small of a market. As I've already said and we've discussed, you're better off starting with a small target, small market, trying to dominate, and then growing up from there. The second reason your market is too narrow is you have become that big fish.

You've grown. You've taken whatever share of that market you're going to reasonably take. Now, it's time to expand. It begs the question, here's the million-dollar question if your market is too narrow. How do you know? How do you know when it's time to leave the bay and move into an adjacent market? The obvious answer is your market will tell you. Your market will tell you that it's time. When without pitching, we open a public workshop by saying, we talk about, "Well, the target isn't the market."

The target is that at which you aim, the markets that which you're happy to hit. We do, as an example, sales training for creative professionals. That's the language we take to the marketplace, but we actually do more than sales training. Some of you aren't creative professionals. Now, as the years go by, some of you became most of you. At some point, we had to open our eyes and say, "It's time to broaden the language. It's time to move into a broader market."

David: That was the marketplace telling you that. How do you know when you're too narrow? You just said your market will tell you, right? Now, that market, that's the adjacent relevance that you have. They're telling you that your market could be bigger, but you don't want to listen to them about your target changing or am I wrong?

Blair: That's not how I think about it. In our business, the target was creative professionals. The larger market is anybody who sees themselves as an expert first and a salesperson second. When we woke up recently and realized, "Okay, this is now the majority of the people who are buying training from us," we now describe the target as any practitioner or advisor who sees themselves as an expert first and a salesperson second. What was the larger, broader market is now the target.

David: Oh okay, so you would disagree with the way I said that. You would listen to your market when they say you should change your target?

Blair: Yes, the way I think about it is the broader market becomes the new target, which implies that there is an even broader market still. Now, the way I'm thinking about it and the way I'm asking the listener to think about it is not the only way to think about this, but that's how I think about it. You can pursue adjacencies without actually doing much in the way of changing your language or even your marketing for a period of time. The assumption is that if you keep delivering value and you keep growing, you're probably going to have to keep expanding.

David: See, I've thought of it as the opposite over the years that, okay, you're a broadly positioned firm right now. What I'm asking you to do requires a lot of courage. I recognize that. Let's just get it narrower. There are two reasons why we wouldn't go really, really narrow right out of the gate. One is we have the courage. We just don't have the information. We just need more time to figure that out, or we're just not sure if the market is big enough. There's not enough opportunity in something.

I want to ask something just to make sure I understand. When you're saying that we should listen to adjacent markets and maybe change our target, are you saying to actually enlarge the target so that somebody is more likely to see themselves on their website when they come? How do you balance that with a marketing plan? Because now, you have a more complicated marketing plan.

Blair: Well, you could have a more complicated marketing plan. You almost certainly do, but you don't necessarily have to. You can think about these as distinct adjacent markets or you can think of a broader market. The way I've just described our new target, that's a pretty broad market, in fact. Now, you've got financial advisors, designers, marketers, or software engineers all in the same target market. The language that these people would resonate with them if you want language that's going to resonate with everybody, you're going to have to water it down a little bit or, to your point, you're going to have to create distinct marketing plans for each of these sub-markets.

David: People are so good at one marketing plan. I'm sure they can kill three of them, right? [laughs]

Blair: Well, they both come with trade-offs and dangers, right? You just alluded to one is you're already horrible at one marketing plan. Now, you're going to do three or four. I've heard you say that numerous times and I've used that line myself many times citing you. Then the other danger, the one that I just cited, is when you broaden out too broad, same message, broader audience, you start to water down the language so that you're not speaking exactly the same language to everybody.

David: So many interesting trade-offs in all of this. We can't just come up with a policy without adjusting it every couple of years because the world is changing in ways that we just have not predicted.

Blair: Thiel has got this great quote. He talks a lot about monopolies. In that book, Zero to One, he really is talking about how to build a monopoly, not a government-protected monopoly but, basically, where you create a category. He has this famous line, "Competition is for losers." Within that framework, if you said to him, "Hey, I'm going to launch an ad agency or a design firm or any other firm where we would recognize by the language exactly what it is that you do and we can imagine what you would sell and how much you would charge, et cetera," he would say-- Again, coming from the startup world, he'd say, "Why waste your time? There's already 100 or 1,000 or 10,000 people doing that. Go do something that doesn't exist yet."

That's what he means by a monopoly. That's one of the reasons why I think owners of creative firms should really read this book because it will force smarter thinking from you. It will cause you to build less of a me-too business. It'll get you thinking about building something that doesn't already exist. Again, he's referencing startups. He's starting this new entity. He's holding in his mind this idea of a monopoly, creating something that doesn't exist.

Here's the quote, "Every startup is small at the start," so that's the small fish. "Every monopoly dominates a large share of its market. Therefore, every startup should start with a very small market. Always err on the side of starting too small. The reason is simple. It's easier to dominate a small market than a large one. If you think your initial market might be too big, it almost certainly is."

David: First problem, too broad. We talked about that. You need to have some positioning in this equation to slightly vary from. Second market problem is too narrow, which is what we've just been talking about. The third is the wrong market entirely. Things change. The world that you're addressing like the NAICS code, well, it didn't even exist 20 years ago. Like the SIC code today doesn't look like it did then because entirely new industries have come along and others have dropped out.

Blair: Yes, that's right. Some of the listeners are in the early stages of their business. Maybe they're struggling and they're wondering. Maybe they haven't even stopped to wonder like, "Am I just going after the wrong market?" Then some of our listeners have been doing this for 10, 20, maybe 30 years. Maybe things have changed in the market they served recently or maybe things changed years ago. They just never bothered to think about fishing in a different pond.

An example, I'm not the originator of this idea, but we are in a software recession. I think AI is making it worse. I can't prove this. Anecdotally, I'm pretty convinced that most of the creative firm world is in one of a few different ways overly dependent on the software market. SaaS is getting eviscerated for all kinds of reasons we can talk about or not. I'll skip over them here, but SaaS is getting eviscerated.

There's no real sign that the margins and the money are going to be in SaaS moving forward that they have been historically in the zero interest rate, scale-up environment. AI is making it worse. Many firms are overly dependent on SaaS. If you are explicitly focused on a SaaS market of some kind or you look at your market and you realize you've got a lot of exposure to SaaS, you might decide it is time to look for a different pond. I guess fish aren't fishing. Fish are just growing in the pond. Back to the metaphor. It might be time to look for a different pond.

That's where you ask yourself about adjacencies. Well, what are the adjacent markets that aren't SaaS but are like SaaS? What are the markets that may be, on the surface, aren't anywhere near close to SaaS but actually share a lot of the same characteristics? I'm just using SaaS as an example. It might be property development and real estate is hit hard in a lot of segments. You've got skills as a real estate marketing firm. What might those skills translate to?

David: Just four years ago, travel and tourism was hit pretty hard. 15 years ago, Fortune 5000s were still paying $250 or $500,000 to do beautiful annual reports. If that was your focus, that's changed currently, where would you say, "Oh, I'm not sure I would start a firm right there now because that's something that's under unusual pressure or changing"? For me, it would be the content space. SEO, I would say earth-friendly communications materials makes me nervous nowadays with the backlash against that. What would you say? Anything else you'd add or disagree with there?

Blair: I think the AI trend, it's the new disruptor. It's like mobile. It's like the internet before that. Maybe it's not as big as the internet, but it's as big as mobile. It's bigger. We don't even know what we're dealing with yet. That's got me excited and nervous about so many things. I came to the realization that I'm glad I'm not in a business where I am building new technology because I think anybody who's building new technology right now is so vulnerable to disruption from AI, but I don't know beyond that.

David: Coding is going to change for sure. It's not like that need will go away, but some of the basic coding stuff, humans will just be looking at the work. That's going to be disrupted for sure.

Blair: I have a kid who just graduated from a software development program. Basically, he's going, "Oh, great. Perfect timing."

David: Buggy whips no more.

[laughter]

Blair: You and I have a mutual friend who basically said, "The era of US dev shops is over." They cannot compete. It's all moving overseas. That's a strong opinion. I think he's largely right. I don't know how right it remains to be seen, but that space makes me nervous too. The reality is all marketplaces make me nervous right now.

David: You know what I was doing 35 years ago? I was managing a bookstore in Warsaw, Indiana when Amazon first entered the scene. As you note here, Amazon started as a bookstore, right? They wanted to dominate a market and they expanded. I remember telling my boss. His name was Jim and I said, "You got nothing to worry about, Jim. This is not a thing, right?" Every single thing I said about Amazon changed.

Now, that particular bookshop is still flourishing because they're very tightly focused. Wow, not only do things change, they change so much faster than they did. You could set up positioning and you could put it on autopilot for 15, 20 years, then that came down to about five years. Nowadays, I'm thinking, "Three is the outside area where you need to--" Don't write it in ink. Write it in pencil.

Blair: You and I have another mutual friend who's humming along beautifully 12, 18 months ago as business like the envy of everybody who knows him. Then it's completely disrupted almost overnight. Back to your Amazon reference, I remember when Amazon came out. I remember hearing when they were getting into CDs, moving from books into CDs thinking, "Well, that's stupid. Stay in your lane." I hate that line, but I remember thinking that. It turns out I've become quite a student of Amazon as a lot of people have in the last 20-some years.

Jeff Bezos' vision was always to be the everything store. That was always the vision. They simply started in books. That's an example of pick a small niche. Then once you dominate, move on from there. Thiel says, "The most successful companies will make the core progression, to first dominate a specific niche and then scale to adjacent markets, a core part of their founding narrative." Just like Bezos said, "I want to be the everything store on the internet, but I can't do everything at once. I'm going to start with books."

You should think about your targets and markets similarly. I don't think this is widely understood. Marc Benioff at Salesforce did the same thing. Early on, I believe right from the beginning, he saw way past CRM. He saw Salesforce as being enterprise-wide software. People who don't use Salesforce don't realize how broadly it stretches into an organization. There was a time when we ran all e-commerce and all kinds of other functionality on Salesforce.

It was the dominant platform in our business. That's no longer the case. I know people. I have a friend who's built a massive business using Salesforce, installing Salesforce into large Fortune 500 companies to do far, far more than CRM. CRM was simply the first market that Benioff wanted to dominate. You should think about that similarly when you're thinking about playing in a small pond or, as I prefer, a small bay in a large lake. Think about where are you going next once you gain some sort of the dominance in the small bay.

David: That kind of decision, I think, is fun actually because it doesn't take nearly the same sort of courage that it takes to go narrow first. Thinking back over these three segments, the first mistake was too broad. That's the one that trips people up because it takes so much courage. You're suggesting that they be a big fish in a small pond at that point so they can dominate it. Second problem is too narrow and then the third is just getting the wrong one. This is going to prompt a lot of people to not sleep well tonight. Should I just repeat your email address for them? You've done that to me before.

Blair: Well, I think we've done our job if we're giving people things to think about. I don't know how often we're wrong. It's pretty often.

David: Who's we?

Blair: [laughs] More often, it's not a matter of right or wrong. It's a matter of being provocative and choosing to think about things different ways. I hope there's enough meat to think about. Really, what I want the listener to take away is I think we get a little bit comfortable in our business. Even when we're running into trouble in certain domains, I think very often, we don't rethink our choice of the market we serve enough.

David: All right. Thank you, Blair.

Blair: Thanks, David.