By Michael Woloszynowicz

By Michael Woloszynowicz

Saturday, January 8, 2011

The Niche Market Software Squeeze

Every year we see a growing emphasis and rapid improvement in the user experience and innovation of consumer based and broad market enterprise products. Niche market products however have not fared so well. As I look at numerous products aimed at niche market consumers or businesses, the majority still exhibit poorly designed interfaces, interactions, and lackluster execution of their core functionality. There are a number of reasons why this situation exists. First off, the highest talent individuals strive to make as large an impact on society as possible, thus pursuing markets that are large in size and highly visible. Secondly, VC's primarily back business that pursue large target markets, thus driving funding to those business and leaving niche market providers to bootstrap their ideas. And lastly, niche markets are harder to identify by outsiders as they require an understanding of their inner workings and processes. Two of these factors are also strong reasons why more technology entrepreneurs need pursue these markets. There are fewer competitors in the market, and those that exist are doing a fairly poor job of invoking user loyalty and passion into their products. As a result of these disappointing products, it's not always necessary to create disruptive innovations and form new markets, it's simply a matter of providing the services that already exist and delivering them in a way that instills customer loyalty through joy of use. The greatest challenge in many of these markets is the reluctance to change that users exhibit, as they are forced to use products that don't work the way they should, and rarely deliver on their promise. Success in these spaces is not just about servicing a need, it's about servicing it well and doing so with an understanding of the end user, their limitations, and their goals. It's not about force feeding them a generic product targeted at several industries but one that does the specific job they've hired your product for.

Although an entrepreneur may not gain the same level of notoriety as one who develops the next big thing, your chances of success are much larger as needs are easier to identify and products are easier to monetize. The funding problem sadly remains, but with the rise of communities such as Y Combinator and the explosion of open source tools and cloud services it becomes less of an issue every day. There's lots money to be made in these markets and there are millions of users who are begging you to create software products that rival the consumer products of today. Find people that work in these markets and ask them about their daily challenges. Start with a small and focused product that delivers a minimum level of functionality in a market that has potential for numerous additional offerings. Observe and measure frequently, and use this feedback to refine your product through continuous deployment. Resist the urge to add functionality to satisfy a small set of potential clients, and always maintain focus on the job your product was initially hired for. Try to design your products as services rather than standalone offerings so that as the number of products grows you design an ecosystem that can be easily integrated, or incorporated with third party solutions. Use each of these smaller offerings to grow your reputation in the market and springboard to new offerings. An in depth discussion on strategies requires an entire book so I will simply say that principles and theories such the Lean Startup, Crossing the Chasm, and the Innovators Dilemma all apply and should be studied by those who decide to pursue these markets. Niche markets are not without their share of problems, but what startup is? Forget about the masses and concentrate on changing the way an industry works.

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