Startups are famous for their ability to develop innovative products for emerging markets. In fact, many established software companies, eager to capture some of the advantages of their smaller brethren, have created internal startups – sometimes called “Intrapreneuring” or “Spin-ins” – to send a few people “back to the garage” with the task of coming up with innovative products.
But established vendors that focus on product innovation alone often miss out on what may be the most important advantage of startups: their ability to quickly understand markets and deploy successful go-to-market strategies.
One of the challenges established companies face when pursuing an emerging market is that the intrapreneurial team often has to unlearn otherwise successful lessons that have been carried over from their career in the larger organization.
As an example, when Oracle introduced its applications suite in the early 1990s, the sales and marketing team naturally gravitated towards the audience that Oracle had been very successful with: the IT department. Unfortunately, while the IT folks were happy buying databases and tools from Oracle, the same people felt threatened by Oracle’s applications since these had the potential to displace some of the pet projects the IT folks were working on. Only after Oracle started targeting the businesspeople, did the Oracle applications business take off.
Lessons from startups
There are a number of strategies that successful startups have used or have been forced to use that may seem anathema to established companies. Yet the results from those strategies are undeniably rewarding. Here are six go-to-market lessons established software vendors can learn from startups.
1. Sell the product while it is being built. Most established companies use a structured, sequential approach to product introductions typically starting with product definition, engineering, marketing and then sales. On the other hand, many startups, typically starved for money, try to sell their products while they are being developed. Those “premature” sales efforts, whether successful or not, enable the startup to obtain feedback from a critical constituency – real buyers (and not focus groups!). This can bring very beneficial results. Since the product is under development, the product definitions can be modified to ensure that the first release of the product can be successfully sold. Also, if the early sales are successful, the new business ends up with references that can significantly accelerate the adoption rate.
2. The entrepreneurial team – not sales professionals – should lead the initial sales efforts. Most startups cannot afford to hire professional sales people and that works out just fine anyway. Entrepreneurs tend to be more successful selling to early adopters. Vision makes up for what a startup sorely lacks: references. Once the first few sales have been made, sales professionals can be hired to scale the business.
3. Everyone is in sales – especially marketing employees. In a new business, the marketing department has the unique challenge of coming up with a marketing strategy before any sales have been made. Yet, the marketing department is often unable to answer key questions that are critical for an effective marketing campaign. For example, what constitutes the decision unit? What is the customer’s buying process? On the other hand, in a startup, the marketing team is often an integral part of the sales effort and therefore can gain, early on, a deep understanding of the customers buying process and the decision unit.
4.Align marketing and sales efforts to reach key decision makers. Most startups have scarce marketing budgets. Those are best spent helping the sales team getting in front of decision makers. Too often, marketing campaigns target audiences that are poor entry points for the sales team. This is a waste of precious resources since the sales team ends up engaging the customer at the wrong level.
5. Create a simple, yet compelling “elevator speech.” Most startups need an “elevator speech” – a concise version of the product’s unique selling proposition – to introduce their business to investors, to early customers and to the founders’ moms. Since this target audience is from outside the industry, the elevator speech has to be simple yet compelling. As the startup interacts with various prospects and partners, the elevator speech will be honed and toned. This elevator speech serves two purposes. It becomes the rallying flag behind which the entire company aligns as the company evolves and it becomes the cornerstone of the company’s messaging that can be used to develop effective marketing and sales tools.
6. Follow the money. Most new businesses start with a loosely defined target market and product offering. As the business interacts with real prospects, it typically changes its focus and product direction. A startup will give particular attention to those customers that “vote with their purchase orders.” Microsoft’s original plan was to sell computer-programming languages. Their plan changed when they landed an IBM contract to develop an operating system. It is not unusual for a business to go through several iterations before it narrows down to a sweet spot.
The best of both worlds
Are established companies doomed to stumble when introducing new products? Of course not. Midsized and large software vendors have numerous strengths of their own such as crossover customers, significant resources and market credibility. However, when these strengths are combined with the scrappy sensibility of a startup’s go-to-market strategy, established software vendors will be more likely to actually deliver on the always-optimistic forecasts for a new product introduction.
Antony Awaida is CEO of StartLeap.