[I am taking a quick break from blogging on cybersecurity to do a blog post on another blog category of mine: Entrepreneurship]
I was recently asked to do a guest video lecture and Q&A for a Stanford Continuing Studies business course entitled “How to Build Successful Startups: Learn Lessons Straight from Silicon Valley Entrepreneurs.” I gladly accepted the invite by the instructor John Kelley, who I have known for 20+ years, and I look forward to being videotaped tomorrow (11/7/2019).
My overall presentation is called “Scaling an Enterprise Software Startup”. By “enterprise software” that means organizations who sell software and/or cloud-based services to businesses that are typically larger in size (e.g. Fortune 500 or Global 2000). The first topic I was asked to present on is “Identifying potent enterprise software problems to solve” so I decided to use this blog post to share the slides I created for that agenda item. I will use other blog posts to cover the other topics in my lecture.
In looking at the topic of “identifying potent enterprise software problems to solve,” I decided to not be prescriptive and suggest actual problem areas in the enterprise that need solving (elimination of passwords!) or technologies to leverage to deliver those solutions (blockchain! AI!). I figured that many of the students may have their own ideas for their startup, and if I truly had any great ideas for the next big startup I would probably not share them (aka go into stealth mode myself) 🙂
Instead, I decided to present some common strategies (aka playbooks) that startups have utilized on formation to find eventual success in the enterprise market. I then ranked the strategies based on the easiest to hardest to implement, with the assumption that the harder strategies involve more risk and difficulty to pull off, but could have a bigger payoff. With a view of what strategies are possible, the student can map whatever enterprise startup ideas they have had to the various playbooks I spell out and makes sense for their idea, and they can then determine if their idea + playbook is a potent combination that will be able to create a scalable enterprise software company..
But first, and to level set, and probably in the “goes without saying” department, your enterprise startup company needs to have some of these as core DNA:
- be in a truly large market (aka Carl Sagan’s “Billions and Billions”)
- have clear, significant and multiple product differentiations to existing solutions
- be a pain killer vs an aspirin (i.e. must have vs. nice to have)
- show clear product / market fit (or a clear path to it)
- have a low barrier for your startup’s entry into the market
- have a great team with domain knowledge
I will cover this stuff in a future blog post (and in my lecture), but assuming you have these DNA strands as part of your startup, here are the various strategies / playbooks you can attack the enterprise market, with my approximation of difficulty of implementation from Easier to Harder:
1) Disrupt existing market or incumbent leaders with a new model. By “model” that could be a different way the software is developed, e.g. open source vs. a closed / proprietary model. A good example of that is Red Hat with Linux vs. UNIX and/or Microsoft with Windows Server. Or it could be a different sales model, e.g. maybe the incumbent vendors relied on perpetual software licensing and you are offering comparable technology but via subscription. Or direct sales vs. indirect sales or buy off the web. Or it could be that you focus greatly on out-of-the-box experience that lets the customer just go ahead and download and use (i.e. frictionless), vs. having to have an army of consultants to deploy and sales reps to deal with. That is in part the basis of Atlassian’s success. Or it could be a different architectural model, e.g. relational database and Oracle back in the day. In other words, you are offering the market a somewhat comparable solution to what exists in the market, but you are just developing or selling or delivering or architecting it differently. Now there are challenges, as I spell out in the slide below.
2) Take and existing large enterprise product area and build new solution that is optimized for a new platform. By “new platform” that means new operating system or computing architecture. The reality is that vendors who optimized their products in the old platform often have too much of a boat anchor to move to new platform. Again you are delivering the same type of functionality (e.g. Customer Relationship Management) in a pre-existing market, but you have built and optimized for new platform (e.g. Salesforce with cloud vs. Siebel with client-server). Think of it is as reinvention of the wheel, with the wheel previously being stone and now it is rubber and steel. There are challenges, e.g. Are you too early to the new platform? Is the platform you are betting on really going to be the next new platform and/or will it be quickly replaced by a newer platform? And can the pre-existing vendors easily adopt the new platform, i.e. how big of a barrier to adoption?
3) Mashup new model(s) and/or new platform(s) and/or product functionality into single offering. In this playbook, you maybe not only delivering on a new platform but also using a new pricing model or sales distribution that legacy vendors are not using. Or you may be mashing up formerly distinct product offerings into a single solution. Challenges to this would include are you too much/too soon for customers and/or is your startup biting off to much etc.
4) Automate processes that have hitherto been manual or previously not productized. In other words, your startup is building something that did not previously exist as a product or market per se, but enterprises were still addressing the problem, but not with a software product per se (e.g. in a highly manual way). The best examples are stuff that organizations have use spreadsheets for, e.g. tracking stock options (hence Carta). Or stuff they wrote on paper, e.g. visitor check-in at your front desk (hence Envoy). The challenges is the stuff that people previously did in a spreadsheet — is it a big enough market? Or could this functionality be easily mashed into an existing solution? Is there a buying center for this? etc. Now one could ask is this a creation of a new market or product category? Technically yes, but the solution in the past was solved by enterprises either manually or via spreadsheet etc., so not completely out of left field.
5) Dream up a new enterprise product category or market. The hardest playbook, as so much of our enterprise technology is the same stuff we did before (accounting, etc.) but on a mainframe or in client-server etc. (or manual or via spreadsheet). This is dreaming up something completely new. But if you can do that, and execute, and it is a big market, your startup can be one of the major tech vendors out there on par with Google or Facebook etc..
No doubt these strategies/playbooks can be refined, but hopefully it gives you some ideas re: the various playbooks out there that you can use to form a startup that could attack the enterprise software market.