Don’t get beat in the market you create!
A new market is a contest of stories, the people that make them, and the products that make them real.
As Summer began in 2015, things were going well at Actifio. The product was maturing, sales was starting to hum, and a growing list of big customers were getting great results. The story we’d been telling for a couple of years — of the “Copy Data” problem, and how we fixed it — was working. Enterprise customers were getting it, established competitors like EMC and CommVault were clambering onto the bandwagon, and analysts who mattered were following suit. We raised a pile of money, and became a unicorn. History beckoned.
Maybe your company is in a market starting to take off in similar fashion, with lots of capital flowing in, and West Coast-funded competition looking to co-opt some or all of the stories you’ve been telling. We have a few in our portfolio right now, and I’m incredibly excited about them, of course. I’m also anxious, and you should be too.
Here’s why, and what happened to us.
Around July 4, 2015 two new Actifio competitors emerged from the West Coast: Rubrik and Cohesity. They’d also raised big piles of money, from prominent West Coast VCs, and seemed intent on spending it fast. Both launched with the fanfare of big press and shiny online video, flogging simple products heavy on promises for the future if light on capabilities in the present. Each told a variation on a story we knew all too well… a story of Copy Data Management.
I don’t think they told it better than us, but they did tell it louder, with more paid media, better production values, grander events, and broader analyst and influencer outreach. They came after our customers with Masters tickets, and our people with boat money. What their products lacked in maturity they made up for in simplicity, at least for a specific kind of customer with a specific kind of problem. They beat us on some deals, all of which turned out to have close ties to their backers. It was an intense time, but we polished up our battle cards and fought the war where it seemed to matter most, in the trench warfare of individual deals.
By the big Gartner show that year we were still the biggest player, but theirs were the bigger booths. I remember making fun of “The Battleships” there with my team, knowing they’d cost more than we’d spend on marketing that year. But I was starting to get nervous.
Actifio stuck to its knitting, plowing capital into sales, engineering, and customer success while keeping marketing on a short leash. We continued adding product features and paying down technical debt, while simultaneously getting to work on a simplified, entirely virtualized, “cloud-first” version of the product. Competition to get on the roadmap intensified, as our own strategic priorities competed with those of a long list of actual customers (an “advantage” we had and the new guys didn’t.) In marketing I continued to lead a small but effective team with a focus on accountability and discipline, prioritizing every nickel of marketing spend on the highest payback in near term sales, as I always had.
Looking back, the discipline that enabled us to create a category attractive to new players needed to evolve when they actually came in. My single-minded focus on the demand generation programs that supported sales — at the expense of investments in brand building beyond good storytelling fundamentals — had gone from a signature strength to a weakness, seemingly overnight.
Meanwhile the competition built momentum, with products that — despite the many deficiencies celebrated by our engineers and solution architects — were easier to try, use, and love.
The game had changed, as it often does when a market matures. But the nature of that change made it hard to see.
There’s a concept called “discontinuous change” which I’ve always found interesting. It’s the idea that incremental change can sometimes have transformative effect, which is hard to spot as it happens. For example… let’s say a person in front of you is short. Add a millimeter to their height, and they remain short. Do it again, same result. Doing it over and over, though — even having proven time and time again that adding a millimeter to the height of short person creates a short person —and you realize, standing before you, is a tall person.
Something similar happens at the inflection point of a new enterprise tech market. You start pushing a rock, with tremendous effort, inch by inch, steadily uphill. As the market gets established the hill plateaus. It feels good, at first, because things get easier for a while. But as progress continues, the peak begins to fall away. Momentum builds. If you don’t react in time, the rock starts to get away from you.
The game changes, and you need to as well. Understanding how starts with understanding how “category creators” differ from “fast followers.”
Companies that create new categories usually end up with broad products, and focused marketing. The products are broad because it’s hard for even a visionary to predict exactly what the market wants, or to know if the edge requirements of early customers are really representative of the market as a whole. Capital is harder to come by in those early days, so marketing tends to be focused, specifically on the more quantifiable sources of immediate value in supporting the sales team with demand generation.
Once a new market breaks the surface, other companies look to capitalize on it. These fast followers are built differently, with focused products, and broad marketing. The products are more focused both because they’re younger, and because the sweet spot of the market has already been uncovered. As money flows, intent on winning share of a proven opportunity, marketing investments broaden beyond what’s urgent (demand gen) to what’s important (brand building.) The result is companies with good stories and “good enough" products. And that’s a formula that can scale fast.
Given this… if you’re a category creator being chased by one or more well-funded fast followers, you need to respond by focusing your product and broadening your marketing in ways that might have seemed crazy the last time you raised money.
Focus Your Product
Focusing your product means making explicit decisions about which customer segments, technical architectures, use cases, and geographies you are not going to serve. I know it’s hard, since every one of those things has passionate internal and external constituencies. But that’s what it’s going to take to win.
Market selection comes first. Which segment of the market do you want to focus on, and which are you willing to cede to competitors? Remember the competition was under serious time pressure to get into the space, meaning the “sweet spot” for their 1.0 product is probably the easiest nut to crack technically, rather than the one most worth cracking.
Your competitive vulnerabilities are going to be on the quick and easy stuff, because that’s where new entrants are going to focus. Are you willing to cede that ground to them? Doing so gives them an entry point into the larger market, of course, and that’s often a good enough reason to invest in shoring up your flank. But is there money to be made in that segment, if the barriers to entry are so low? Perhaps not, in which case you might want to vacate that space, to focus your finite engineering capacity on a segment where you can build the kind of differentiated capability that supports a great business over the long run.
Once you decide on a strategy to focus on some parts of the market at the expense of others, it’s time to move from the theoretical to the practical. What are the implications of this strategic shift, across the business? If they’re not significant for everything from your product to your people, that’s a sign you haven’t *really* made the hard choices to focus your strategy.
Start with the product itself. What new features are priorities now, and which are no longer necessary? What knobs can go away in your UI, and what dials will no longer be required? If all this means a painful architectural refresh, get to work. It sucks, but it’s not even the hard part, given the fresh capital you’re about to have access to. The hard part is going to be parting with customers and people who no longer fit the new model. That early customer, running a mission-critical COBOL app in their Sioux Falls data center? Maybe it’s time to part ways there, as hard as that phone call is to make. Is the person running Engineering the right person to move the product in the direction it needs to go, regardless of how essential they were to getting it to where it is? How about Sales? What about HR, and Finance?
Marketing in particular needs a closer look, to see that the right people, processes, and posture are in place to win a new kind of fight.
Broaden Your Marketing
Broadening your marketing is really about moving beyond the mathematically manicured lawn of demand gen into the scary, overgrown forest of brand building. If that sounds impossibly expensive, relax. In the case of enterprise technology, it means something very specific.
Building a consumer brand like Coke takes billions of dollars and decades to do, which is why entrepreneurs sometimes think it’s not for them. But you can build an enterprise tech brand by convincing a very small group of important people — as few as 20 or 30 thousand, worldwide — that what you’re doing matters to them. You don’t need to spend like Coke to do that, or for anywhere near as long. But you do need to understand the game you’re playing, and what it takes to win.
Start by trying a few things, to see what works building awareness and excitement across that small group of people. Beef up your PR effort, and your analyst program, and extend it to include influencers in the space. Who do your customers follow, read, listen to, respect? Make yourself visible in the social networks and blogs, not by barraging people with ads, necessarily, but by participating in ways that bring value to the community. Upgrade and streamline your web site. Invest in design, freshen up your identity, improve the frequency and production values of your audio and video content. Reach out to influential people, offer them inside access to new product features, and ask for their help refining your content or producing it themselves. Offer to pay for it — gracefully — if you need to, that will always get someone’s attention. Be willing to spread some money around at the big trade shows, which turn out to be an incredibly efficient way to reach people in your sweet spot, especially if the quality of execution in your ground game matches the growth of your budget for air cover. Don’t feel compelled to respond to new entrants, but consider picking a fight with one of the big guys. It works wonders sometimes.
Expect to fail a few times, and focus on learning from it. Listen, and always ask new prospects you come across how they heard about you. Keep going.
If this makes you uncomfortable, that’s good. It’s different from what you’ve been doing, and change is hard. If your discomfort rises to the point of squashing the effort, that’s usually the sign of a people problem. It might mean you need to change out the person leading your marketing, to put someone in there you can trust enough to defer to their experience. Failing that, it’s time to look inward. Are you willing to do what it takes to win this new game? If not, you should talk to someone you trust on your board, and figure out what to do.
In the end, Actifio got to a pretty good outcome, being acquired by Google this year. Among the companies who embraced the Copy Data narrative… Rubrik and Cohesity (along with Delphix and Veeam) remain independent companies, at least for now. EMC — who stole Copy Data first, then tried to sabotage our deals by telling enterprise accounts we’d get “taken off the table” in some acquisition— got taken off the table by Dell (#karma.) Same for Zerto, which was just acquired by HP.
Looking back… it was the best of times, and it was the worst of times. If I had it to do again I’d have done more to focus the product and more to broaden the marketing, just as I’ve described here. If you’re in that position right now, don’t squander this moment, and set yourself up for regretting you didn’t do enough.
Change is the only constant in enterprise technology. To win, sometimes you need to change as well.
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