Last week I did several reference calls on a new project we were looking at in the enterprise IT market. In each case I was speaking with a senior IT executive at a large financial institution. The calls were not to the company's existing customers, but rather to people I just felt would be thoughtful on the company's market opportunity.
As it turned out, each had actually evaluated the company's product and they started out the conversation by saying how impressed they were with the company's technical approach, how it was really innovative and superior to other solutions, and how much they liked the company's management team. So far, so good.
Then I asked the obvious next question: so did you buy the solution? In each case, the answer was no. The why behind the no, however, is what is illuminating on some of the recurring challenges for traditional start up enterprise IT companies. Although they used different words, the consistent themes were:
- We went with our incumbent vendor. We know their solution is not as good, but it is good enough and it is already integrated into our infrastructure and we know how to work with them.
- This project, while important, was not high enough on our priority list to get everyone's attention. Given tight budgets, the only new initiatives we are doing relate to driving revenue or addressing pressing regulatory changes in our business.
- The company wanted to do a paid pilot with us to prove how much superior their solution was, but given a pilot required standing up new iT infrastructure and integrating into some of our core systems, this was a significant undertaking and not something we were willing to do given point two above. Further, the pilot was required to demonstrate the business case which left us in a Catch-22 situation.
Many of the takeaways from this conversation are the same as I wrote about two years ago in my long enterprise IT post, but I felt they are worth repeating in the light of this conversation. First, if your product/market focus requires a traditional enterprise IT approach, which for me means high touch direct sales with a product that requires some level of IT support and integration, you better make sure that:
- Your "superior solution" is significantly superior. As in 10 times better, not 50% better.
- You are focused on a company's top three strategic initiatives, because nothing else is going to get funded in amounts or in a timeframe that will make you happy.
As you have likely figured out, these two things are hard. In the fast paced technology world, sustainable 10x product differentiation is uncommon and fitting that with the ever-shifting strategic priorities of large organizations is even harder.
The alternative, of course, is to think creatively about ways to reduce the friction in the adoption process which is why we continue to be attracted to open-source, freemium and SaaS business models. Instead of the conversation I had above, imagine if the customer was able to download/ sign up for the company's product - without consuming any IT resources or getting into a lengthy procurement cycle – and then use the product and see its value. If the product was easy to use and understand, did not require deep integration or if it did, the integration came "pre-built" via some partnerships, the potential customer would have been able to develop its business case and pre-qualify themselves as a relevant customer. Thus they would consume minimal resources from the vendor until they raised their hand and said, I am ready to buy. While this is by no means easy, if you have the right focus across your company in terms of product management, development and sales and marketing, it is likely an easier approach than trying to find that magical 10x better product that meets your customers top strategic priorities in an era of constrained budgets and shifting priorities.