Try Peanutbuttering

Last week while I was coming back from a board meeting I ran into Andrew Duncan, a serial entrepreneur, and SVP at Scalent, a data center virtualization company.   We were stuck at an airport, watching realtime the last Obama-McCain debate streaming on our computers' broadband cards (how fricking cool is that!), and got to talking about the debacle our country has gotten itself into. 

Then we got to talking about business strategy in these times.  Andrew mentioned that Scalent not that long ago realized they couldn't rely on one industry vertical like the financial sector, and began  "peanutbuttering" into other adjacent verticals that have similar application or service requirements, like government and education.    Peanutbuttering is about spreading into other somewhat similar industry verticals that don't require much retooling of the technology or application or service itself.

It's probably a bit too late for some companies to peanutbutter into other vertical industries.  Too much momentum, or commitment of resources and sheer inertia.  I remember back when I was running a newspaper tech service that aggregated classified ads, that the sales cycle to newspapers was so slow that we'd burn up all our cash before hitting breakeven unless we took drastic action, perhaps abandoning newspapers and go after other media companies or direct to the consumer.  Our board, and our VC backers, didn't have the stomach for that and we ultimately sold to a group of newspapers.  In a lot of ways, I wish we did change direction.   As we started in '95, if we did retool, we might have been an eBay contender, as we would have had a headstart with 500+ newspapers and media companies' promotion power.  Needless to say we didn't choose that route.

But for nimbler startups, it's not too late.  Now might be a great time to embrace the turmoil, sit back, cut their burn rates, and rethink their business.  There are quite a few companies out there sitting on $3 or $4M or even $1M burning it up, thinking "we are doomed" or not realizing they are doomed, when they could be retooling and peanutbuttering.  These companies should embrace the turmoil, and come out stronger by refocusing and deeply and honesting thinking about their business.  This is what makes for great companies.  

Here's another example of peanutbuttering. Contrary to popular misconception, Google's venture backers didn't immediately embrace the ad model, and instead wanted to continue focusing on selling search engine technology.   If management didn't stand up and say, "we're doomed" going in that direction and retool by into the advertising sector and selling AdSence ads as Overture had done, Google wouldn't have become GOOG!

Retooling into a sector or a subsector might seem scary, and risky.   But refocusing on an industry that has been hit a bit less hard, or offers a better opportunity that the current sector, might be just the ticket to turn around a company.  That might mean making some difficult bet the farm decisions on staffing and marketing, abandoning sunk costs and investment in old approaches.   Crisis makes it possible to reexamine your business premises, so revel in this opportunity-- that's what the great enterpreneurs do.    Ironically, the worse the crisis the more likely you will get buy in from the appropriate stakeholders (managers, board members, partners, etc) that action is needed. 

So, whether you know it or not, as a startup, or even a mature tech ompany, it's likely that a meteor has just struck your part of the world or will soon; its time to evolve or you'll be dinosauring it soon.  Try peanutbuttering instead!