Monday, February 19, 2007

DD Part2 - Stay focused, Create value

Note: This is a continuation of my prior post, DD Part1.

So, at this point (shortly after joining DigitalDeck), I convinced the rest of the board that we had a feature/market issue. We needed to modify our product offering or we needed to change our market strategy.

In addition, we were trying to do a lot as a small company. And, much of it was not unique or differentiated enough to create significant value for the company. We had a dedicated server which was really just a pre-configured Windows PC. We had a media adapter which ran an embedded, Linux OS. And, we had a central software application which ran the whole system in the home, providing all of the network DVR functions, network stream management, file I/O, etc. This control software communicated with our backend service software which was located in a co-location facility.

As part of the market strategy, we needed to take a hard look at everything we were doing and identify which things were critical to building long-term value and which things were more of a distraction. This kind of focus is critical to a small company trying to build sustained, differentiated value. It's easy to be distracted by cool ideas, or be tempted to build something that others have already done. Don't let this happen to you!

We were able to quickly come to a few important conclusions - First, the really hard part of what we were doing (the secret sauce) was the network DVR software that ran on the dedicated PC server. And, since PC hardware has been mostly comodotized, it didn't really make sense for us to be building PC hardware. In order to focus on what really mattered, I recommended we discontinue the MX1000 server and build a software installer so that our server software could be installed on any Windows XP computer. It could be self-installed by a technically capable consumer or setup by a professional installer.

The second part of the decision was in the area of our target market. If we wanted to sell the hardware we had already designed, we needed to target the appropriate channels of distribution. The high-end market was very focused on HDTV deployments and our products were mainly SD. So, we decided to scale back on our efforts to sell through the custom installer channels and focus instead on direct-to-consumer sales (online & retail).

On the HDTV (hardware & software) front, we knew that the general consumer market would eventually demand HD support. However, the rights management issues for streaming HDTV around the home were still being worked out, and it was looking like many of the things you could do on a home network with SD programing were going to be restricted in HD. This could end up delaying market adoption and make it difficult for competitors as well. At best, we felt that a completely secure DRM solution would be required (i.e. Windows DRM) and possibly the Vista operating system as well. So, we decided to pursue HD as a longer term part of our strategy rather than make it a condition of our short-term success.

Now that we had decided to simplify our product offering and sell them direct to consumers, we had to make sure we delivered the right feature set for today's market requirements.

more to come in part 3.

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