Damn - The Incumbent Vendor Woke Up

At some point, as you gain market traction, the large companies that you are "displacing" are going to recognize you as a threat. It is important to understand the range of responses you may need to be prepared to deal with:

In a perfect world - the reaction is slow because the incumbent vendors are distracted with internal politics and other threats.   Data Domain attacked the tape market - most of our competitors, which were tape library vendors, sucked and were completely distracted by mergers, competition between each other, and just generally not being very smart.

Gaining momentum quickly is very important - having a critical mass of clients and resellers is critical to your success when the market wakes up... they (customers and resellers) will be you best defense for what is coming.


These are a few examples of what we dealt with:

1.  XYZ is a feature (Deduplication) - We (the incumbent vendor) will have that in 6 months so just wait...in the mean time why don't I loan you a few of these other products so that you don't waste your money.   (Stall game)

2. We have that feature and it works just like theirs!  Buy our product -- if you aren't happy you know that we will do "right by you".   By the way ours is lot cheaper so don't spend a premium if you do buy from the upstart -- effectively bringing down the margin. (Result = Stall with a trial to prove difference and margin erosion).

3. We are willing to give you x+y+z so that you can maintain your status as one of our premier customers.  Don't you remember (the CIO's name) the award we gave you and the flight on the private plane to NY to join us for dinner.  (Result - Executive bias may equal deal getting undone late in a cycle)

4. Free  (what CIO does not like free?)

5. Free + decreased cost of other products they buy from the vendor.   (Free with a bonus?  Wow...why not... I often told IT Executives that if they wanted to get a lower price on all storage to leave my business card out when the incumbent visited as it would result in a larger discount than they already received).


We were lucky our product was truly better than any of our competitors and we knew it...we tried hard to prove value and educate prospects... but at times the incumbents were victorious.

You need to have confidence and be respectful...if we lost a deal we would explain to a prospect that we were disappointed with their decision but respected their choice.  If however, when they struggled with their chosen solution we reassured them that we would be there to help...this often resulted in us parachuting our products in to help save the day when they realized they had gotten screwed.

Losing sucks but ripping out the piece of crap that the big vendor stuck on one of their largest customers was really fun.

Be prepared for everything!  The big incumbents do not fight fair!



 

Product Quality and Positioning - Tell it like it is!

Winning as a start up is hard – very hard!  Don’t make it impossible on yourself.

All to often, I have seen young companies struggle to gain traction in a market.  One of the most common reasons is that the Quality / Completion of the product does not match with the market needs or the internal training being provided for the sales force.

It would seem like an obvious statement that product quality is important to a start up company. 

A quality product:

•         Works predictably – you know what to expect on performance, and reliability
•     Features that are defined by Product Management as fully functioning are in fact, fully functioning at release (not partially complete)
•          Must have a minimum functional feature set that an early adopter customer would buy (ok if for a specific use case).

It would also seem like an obvious statement that packaging is well thought out.

•            Most of the time you must fit into existing architectures and infrastructure.  “Ask yourself how much disruption does a prospect have to take on to adopt my solution?” (Avamar and Diligent were potentially good product technologies – the packaging made it easy for Data Domain to reposition).
•            Simple is good – easy for you, your client and var to support.  This typically means that your engineering team must think about how someone would use and deploy the system as they architected the product.  (In my past life I competed with Corba technology to provide distributed computing infrastructure - J2EE servers from Weblogic proved that easy and simple + reliable was better than Corba and moved the market)

 What happens when quality problems occur? 

•           Initial clients are luke-warm references (at best) and won’t likely buy again
•            Sales people and SE’s spend a disproportionate amount of time working support issues. This results in decrease in sales productivity and the alienation and a lack of confidence in the company that the salesperson just joined (not good).  
•     Sales person will be slow to help recruit others to join the company.
•          Engineering must focus on customer remediation issues rather than building / completing their vision of the product (product family).  Now competition is going to come even faster! 
•           Large Vendors get to point at your company and tell their clients how we screwed up…creating fear and doubt into the market place that a young company has little ability to overcome.
•            The Board of Directors wants answers – if you are a technical founder or  team -- will you own up to the actual problem or will you simply say “we need a new sales team”? 

Please do yourself the favor of thinking of your company as one team!  You must trust each other! 

Don’t lie or overmarket your solution -- communicate accurately to the client and the sales team realistic performance.   (I watched this happen at EMC – PM and Engineering would declare that the new “xyz” product was now ready to beat the market – reality was it was still feature incomplete and put the customer / sales person in harms way)… sales team sold the new product for awhile then started to focus on selling the “old” product as they trusted it.

If you are in product management or engineering don’t sell your salesforce…treat them as a partner and tell them the good, bad, ugly as well as get them excited.  The entire company is your family – don’t change the truth in an effort to make yourself look good.  

Finally, you will never be able to test your product well enough prior to shipping to your first client....problems happen.  Solve them and move on! 

Hire the best people and keep them focussed on building for a phenomenal client experience.  

Make your standards high and aim to beat them.