Tom Engdahl

The Pain Doctor

February 24, 2005

Case categories include: Entrepreneurship   Strategy & Planning   

By Robert Sher
Tom Engdahl is the pain doctor of business.  Just like a pain doctor, he looks for pain in an industry then develops the cure.  He’s done it over and over again, each time with a business success and a liquidation event.

The Case
Engdahl had just sold his business, Digital Video, a subsidiary of Antec, Inc., in 1996, selling specialized file servers to hold commercials and shows for TV stations.  In the process, he saw an opportunity to electronically replace Fed Ex’s role in the delivery of commercials to the stations.  With VC backing from US Venture Partners and Alliance Technology Partners, he began market research.  While there was interest in his original concept, he found pain in an eight-step paperwork process to take orders for commercials, get them to the right people on time, and to invoice them.  This process was slow, time intensive and cumbersome.  The biggest broker in the industry drove the point home in a critical meeting.  Further customer research confirmed the pain point.

With a clear picture of the pain point, Engdahl and his team at his previous business, Video Networks, Inc. envisioned the solution, and then sold it while the software and hardware was being developed.  As planned, six months later they began delivering.  Of course the automation of the eight-step process eliminated most of the pain, but the automated, electronic delivery of the commercial naturally followed as a part of the package.

The door-opener was the solution to the pain, which generated some profit. But most importantly, it uniquely positioned Engdahl’s firm to provide the transmission of the commercial, which was the primary profit generator.

The Analysis
You’ve likely noticed that some businesses work hard selling and marketing and get just enough business to survive, while other business have a vortex of demand from their customers and spend all their time trying to keep up with orders.  What’s at the heart of the difference?

The key, as Engdahl eloquently preaches, is finding the customer’s pain point and bringing an ideal solution that you can uniquely provide.  In age-old salesman lingo, the message is to sell what the customer really needs, not what the salesman arbitrarily decides to sell.

The steps are clear:
1. Listen really carefully to the customers.  Engage them to honestly share their pain, even if it’s not exactly in the area for which you got the meeting.  The greater the pain, the better for you.
2. Figure out how to solve their problem completely, and if you can’t, don’t bother starting a business that goes half-way.
3. Position yourself to be the unique solution provider. That may be with intellectual property protection, but more often it’s with speed to market and establishing a decisive lead over anyone trying to follow.  That takes money, an action bias and a very talented team.
4. Run like the wind, build revenues and profits, and then look for liquidity.  Innovative problem-solving companies often add their greatest value in the first few years.  Once the sting of the pain begins to fade and the solution dominates the industry, it may be the ideal time to sell and find fresh pain elsewhere.

While Tom Engdahl has made a career out of positioning new companies to solve big, industry- wide problems, the concept is valid in every business.  If your service or product makes your customer’s life easier, you’ve got an edge.  Avoid offering “me too” products.  Make it a habit to talk deeply with your customers about what wastes their time, or what needs are unfulfilled.  Why do they have “bad days”?  When you start to hear the same issue over and over again, it’s a sign that you’ve found some industry pain.  Solve that issue, and you’ll have an edge for growth and margin, at a minimum.

The pace of business and the rate of change today is faster than ever.  Most of us in business can think of the pain those changes bring us, and in weak moments we whine about it.  But business leaders with courage and speed see the pain caused by change as an opportunity for new goods and services.  Rather than choosing to be the patient, they choose to be the doctor.

Takeaways:
• Where there’s industry pain, there’s opportunity.
• Dig into what truly bothers your customers, then find a way to solve their issues – completely.
• Sell what your customer really needs, not what you really need to sell.

Robert Sher is principal of CEO to CEO, specializing in assisting CEOs and business leaders as they navigate critical passages.  He is the author of The Feel of the Deal; How I Built a Business through Acquisitions.  He may be reached at Robert@ceotoceo.biz.

Company and Case Facts:

Company: Work Force Logic
Person: Tom Engdahl, CEO
Alliance Member since: 2001
Annual Sales Volume: $35 million
Service: Communication and transmission of TV commercials
Typical Customer: TV stations, cable TV providers
Written: February, 2005