Devguy asked a question last week to which I don't have a satisfactory answer:
Question though regarding Business decisions. What if you make what outwardly appears (or even in actuality) technically superior decisions and yet your company loses money to another firm that while its products are less spiffy somehow seems to reach the masses and $$?
or, to paraphrase, why do copies, second rate products, and companies selling out of date products others could not popularize, succeed where original work, first rate products, and the people who originate new software ideas fail?
Although I don't have a general answer, my thumbnail generalization here is that the left half of the normal curve for buyer IQ is much bigger than the right half. Since that's obviously not possible, the more sophisicated formulation of this is first that the market doesn't recognize excellence because it's trained on mediocrity, and second that risk perceptions, most notebly those focused on personal (social) risks, cause many decision makers to devalue rational factors in decision making - thus shifting their apparent business IQ dramatically to the left.
If that's roughly correct (and I'm not at all certain of it), then it follows that innovators just have to deal with it - in other words, if you have finite resources and your product is already better than the other guy's, then it makes sense to freeze development until the market catches up and to focus all of your available resources on reducing customer anxiety about the social and other risks incurred buying your product.
One way to do this to is sell through a company whose name protects the customer from social response: thus almost everybody not selling PC products agrees that Microsoft's products are shoddy and the support worse, yet nobody gets fired for buying from Microsoft and so "partnering" with them to sell your product dramatically reduces customer risk perception and thus barriers to sales.
If your organization is large enough, you can address this issue by effectively indemnifying decision makers against the social consequences of buying your products and services. IBM, for example, does this in its data processing businesses by building a community of users and proving to potential customers that this community is sufficiently large, sufficiently diverse, and sufficiently powerful both to guarantee smart decision makers future jobs and community support, and to punish those who make wrong decisions by removing community support and future job oppportunities. Look at any government or financial agency where mainframes are still used a lot and you'll see this at work - in the government data processing community, for example, you can't tell the IBM, Government, and consulting industry players apart without a current guidebook - and people who antagonize that community simply don't get senior IT jobs.
The best approach, however, seems to be to confront buyer confidence issues head on: converting your brand image from that of risky innovator to premium, cachet conferring, leadership. Apple has done this brilliantly, but be aware it's neither a strategy for the faint hearted nor one likely to survive leadership by committee or management by professionals.
So where does that leave smaller companies with superior products the market doesn't seem ready for? I wish I knew - the best thing I can suggest is that you need to understand what risk perceptions the customers you're losing are responding to, and then find ways to address those.
Unfortunately the bottom line I've found in trying this for various clients is that the fears people respond to the night before they have to formalize a decision are often utterly irrational, deeply personal, and irreconcilable with their own self-images as people who do a professional job professionally - meaning that it would take extensive pyscho-therapy, or social change over time, to really affect them.