Finding a Niche
How Nelson Gonzalez and Alex Aguila created and grew a niche in the computer market
"The truth is out there, and the truth is that in the late 1990s, many computers couldn’t handle sophisticated programs and games.
As avid gamers, Nelson Gonzalez and Alex Aguila recognized this and decided to create a niche in the computer industry. With $10,000 of their own money and a passion for gaming, they founded Alienware Corp. with a mission to build high-performance computers. Gonzalez, Alienware’s CEO, says that passion has driven them from the very beginning.
“It is the single biggest quality you can have to start a business,” Gonzalez says. “I think that justifies any crazy notion that they may have by being very passionate.”
Their passion for the business is paying off, as Alienware has grown from $80,000 in revenue in its first year to an estimated $250 million last year.
Smart Business spoke with Gonzalez about how he and Aguila determined a market niche and will continue to grow the company.
How do you determine market capacity for a specific niche?
We didn’t do any research to justify the investment. Traditionally, there needs to be some sort of formal research, but what we did was create a niche. That’s a little bit different than identifying the niche.
What we knew was there were a lot of PC gamers because we were gamers ourselves, but not that they were building machines, buying machines or upgrading them themselves. There was nobody doing that then.
How do you differentiate what you do from what your competitors do?
We have clear messaging: If you want a gaming PC, you need to come to us. We’re the experts in building gaming PCs. Our approach is in our ads and marketing. It’s all about quality. It’s all about performance. We don’t do anything different than that every time we advertise.
How do you stay focused on your niche?
The notion wasn’t only about gaming. The notion was about high performance. The whole thing was, a lot of graphics power, a lot of storage, a lot of memory, a lot of the latest, the greatest, leading-edge technology put into your machine.
We have high-performance systems for all of these different segments, not just gaming. We’re about high performance, and we’re about quality, so it’s natural.
How do you hire the right people to continue growing your company?
Our criteria in the beginning was, ‘Are you a geek?’ Business savvy was secondary. We were looking for the same characteristics that we, ourselves, had — Are you a gamer? Are you of high-quality performance? Do you understand quality? Are you technically adept?
Since then, we have much broader criteria. We’re looking for more seasoned professional people that can take it to the next level. We have an interesting mix of people that are professional and people that have been home-grown.
How did you foster camaraderie between those two groups of people?
One of the other characteristics we look for other than being a little geeky and technically adept is, ‘Do you like to win? Do you like to compete? Are you aggressive? Do you rest on your laurels?’
We’re competing with the likes of Dell, the likes of HP. These are multibillion dollar organizations, so we have to be very self-conscious of the fact that we’re competing against these folks. The makeup of people we’re looking for has to be, ‘Are you willing to commit and to compete knowing full well who you’re competing against?’
One of the biggest characteristics we look for is, ‘Do you have a winning attitude?’
How do grow in your market?
As we grow, we’re able to scale. If you don’t make the appropriate investment to scale, then you’re going to stagnate your own growth. We operate on a razor-thin margin.
This is a highly commoditized industry, and it requires a good deal of planning, a good deal of supply chain infrastructure and manufacturing infrastructure, so what we’re doing is making sure that infrastructure is such that it can scale, so that we can grow the business but at the same time, reduce costs.
We’re pretty fanatical about reducing costs and being efficient. The way to growth is passing that value to the customer, which will drive more demand.
How do you accommodate growth?
If you get to an inflection point, it’s already too late. Before you get to that inflection point, you should have planned out already what we need to do to accommodate for the growth.
That’s very hard because that talks to strategy. That talks to being able to look out two or three years from now. It’s very challenging because in our industry, it’s all about change — what’s here today is gone tomorrow. Growth is, in my opinion, the hardest thing to manage.
When you’re making money, it’s pretty easy to manage, but what’s tough is when you’re managing growth. You need to take that money and reinvest it so you can accommodate the growth.
It’s easy to say, ‘I’m going to take this money off the table and enjoy the fruits of my labor.’ That doesn’t mean you’re going to grow your business.
A lot of it is willpower and discipline and being able to look into the future."
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