One of the reasons that pushed me do this this summer start-up tour was that I had a business idea around smart mobility. I thought having a comprehensive system offer would make my product user-friendly and thus easier to sell. But after having met many start-ups, I realized that focus was one of the most common factors of success. One word to summarizes this learning element is “Beachhead”.
Beachhead concept comes from the military strategy. The term refers to the 1944 invasion of Normandy where allied troops focused their attention on the Normandy beaches. The idea is to win a small border area (Beachhead) that would become a stronghold from which you would advance to the rest of the territory.
In business, the idea is to focus your resources on a small market area (such as a product category or smaller market segment) to turn it into a stronghold before advancing to a broader market. Beachhead strategies are often critical for bootstrapping new businesses and help finding the right compromising approach between:
- Go too wide with the risk of drowning the product through lack of differentiation.
- Go too narrow and not reach enough customers to breakeven.
By identifying your beachhead strategy, you can smartly defined niche, expand, and conquer. You can focus limited resources on quick wins and increase tour chances of market success
A beachhead can be defined as a small market with specific characteristics that make it an ideal target to sell a new product or service. The choice of the market is based on the compatibility between the resources available, the product, and the market itself. The market should help the business serve specific goals that will help it advance from its infancy to other markets.
Key questions to define your beachhead are:
- Can you be sustainable by reaching this market?
- Is your idea enough relevant in this segment to offer you stable market shares?
- Can you reach efficiently customers of this niche market with your network, sales force etc.?
- How fierce is competition?
- Can you leverage this segment to enter additional segments?
- Does the initial segment fit with your values and mission?
- Are you ready to spend the coming years dealing with this niche market?
Beachhead strategy requires segmenting the market based on:
- Geography: Pick an entry market where you have a network, a decisive advantage by responding to a specific need, a fit with the local culture and minimized costs of distribution.
- Industry vertical: Enter the market in a segment in which customers can truly differentiate your product from competitors. Entering the Smartphone market in front of Apple or Samsung might be tough but entering in a premium or low-cost market might give you better chance to penetrate the market.
- Customer profiles: Early adopters customers waiting for your solution is the ideal context. Your beachhead should comprise early adopters and customers seeking specific solutions that would be more receptive to your offerings.
Thinking in terms of your beachhead will help you to find those people who have the problem your product can solve, who are looking right now for a solution, and who are ready to buy.
Important advice when communicating to future investors
When presenting a beachhead strategy, make sure make sure that you include the follow-up idea of broadening your approach later on. Otherwise, it might look like that you are focusing too narrowly and missing the larger markets that the beachhead should lead to. Make sure you provide the big picture with the appropriate timeline. It will demonstrate your structure, ambition and realistic approach.
Beachhead from an M&A perspective
Beachhead is also used in Mergers and acquisitions when companies acquire other businesses in different fields or locations in order to enter a new market with important growth potential. Beachhead acquisition enables a company to test the acceptance of the company’s products in the new market and decide whether to invest more capital into the market or abandon the whole plan if the market is unreceptive to its products.
Purchasing minority interests is another approach that enables acquirer to assess if the target is an ideal investment since it will get a better view of the company’s operations. Beachhead can be perceived as a good way to mitigate risks of implementation, test the market and minimized investments.
What other alternatives of growth strategy for companies and start-ups?
The most opposed alternative to the beachhead strategy is the spray and pray technique which involves spreading a generic message to a wide market of prospects and relying on sheer numbers to make wins in that market. This strategy is capital intensive and is often used at B2C level.
Other alternatives that we often see in more mature companies are vertical or horizontal leveraging of current portfolio of services which respectively mean starting from your existing offer and enlarging it either with price discrimination strategy or with through new branding. Last but not least, “No leverage” strategy is very common in niche market when a company has identified a specific need and is efficient at preserving its competitive advantage or network. The below graph illustrates the different alternatives.
Michel Noujaim – Green Tech Explorer