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Channel Colonization

During the second year of my tenure at my last employer, a decision was taken to back away from our sales strategy, which up until then was largely focused on selling directly to end customers, and begin working with resellers. The ostensible objective of this strategic shift was to leverage the vast sales resources and client relationships of the channel to drive volume and cut our customer acquisition costs (CAC). What we were in fact doing was spending millions of dollars learning a lesson that we could have learnt by spending twenty bucks on Joe Benzel’s book: we were entering a superpower ‘no-fly zone’, the Microsoft channel.

Once we landed we discovered that Microsoft had completely ‘colonized’ the channel, in Benzel’s parlance. The systems integrators that we attempted to partner with had all made massive investments in obtaining (& maintaining) Microsoft certification. Their consultants and reps were glassy-eyed evangelists for all things Microsoft. Most significantly, their revenue projections were almost 100% Microsoft based. As you can imagine, they were not delighted to work with us. We only managed to sign a handful of partners, most of whom required special ‘early adopter’ rebates and lots of ‘sales mobilization’ (which basically meant embedding sales resources with their sales teams 24/7). The net result was that our indirect sales strategy  substantially increased our CAC! In all fairness things did improve some, as the company’s brand became more prominent, customers began to ask their advisers about the technology and that in turn resulted in some fairly respectable organizations approaching us with offers to partner on our terms.

In hindsight it might have been a lot more sensible to identify Microsoft as our strategic superpower before attempting to engage their channel. We could have then evaluated Microsoft’s strategy and made the appropriate adjustments to our own before proceeding. We might have tweaked the technology to drive adoption of one of their strategic systems or platforms, for example. We would then have been ‘co-opting’ Microsoft’s own momentum from within’ – leveraging their marketing might to drive sales through their channel.

 
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Posted by on September 29, 2010 in Technology

 

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What is Asymmetric Marketing? Why blog about it?

Asymmetric Warfare: is the study of conflicts that take place between large organized forces and much smaller armies, specifically those wherein the smaller force leverages unique experience or tactics to either withstand their enemy or win. The British victory at Agincourt and the Boer War are two notable examples of Asymmetric conflicts.

Asymmetric Marketing: is a go-to-market strategy that was first espoused by Joseph E. Benzel in his book “Asymmetric Marketing: Tossing the chasm in the age of Software Superpowers”. The book is essentially a response to Geoffrey Moore’s much admired (and often referenced) book “Crossing the Chasm”. Moore’s thesis is that there are five different profiles of technology buyers: innovators, early adopters, early majority, late majority and laggards. He calls this model the TALC, or technology adoption life cycle. The ‘chasm’ is the transition that software vendors take from making incremental software sales to early adopters (risk taking technology buyers with a pronounced need not serviced by more established offerings) to selling on a volume basis to so called pragmatists (buyers who need to see technology in wide adoption before considering it). Moore advises that early stage technology companies identify innovators in a single ‘beachhead’ sector and work with them to develop and refine their product offerings before leveraging  their initial success to gain entry into the early adopters which in turn drive sales into the pragmatists, and so on.

Benzel’s assertion is that this strategy succeeds rarely and that software businesses seldom cross the chasm on their own (Moore himself admitted that as many as 70% of the technologies that cross the chasm do so in the hands of an acquirer). He feels that Moore developed his model in an age when most large software players focused on a single product category. In his opinion this era has passed. Single category leaders have been replaced with cross category software superpowers, powerful multinational IT aggregators with huge distribution channels made up of consultants and resellers who are highly reliant on these organizations for the bulk of their revenues. The superpowers are jealous of their client base and partners and will take out any interloper who threatens them. Benzel believes that software startups that wish to enjoy market leadership must factor these juggernauts into every aspect of their planning, from distribution strategy to platform selection and right down to product requirements and functional specifications.

So why write about Asymmetric Marketing? After a decade and a half  of working at startup software and software-as-a-service (SaaS) businesses, most of whom approached the market in the manner prescribed by Mr Moore et al, I have come to realize that the chasm cannot be crossed easily. The route to clients is through their trusted advisors, and they are, in the aggregate, reticent to work with vendors that are not sanctioned by their superpower software partner(s). Many businesses that I have worked for have attempted to sell through such channels and have done so ineffectively and at great expense. They could get the attention of reseller partners (typically through granting them enormous rebates) but they could not sustain it.

Success for a software or SaaS startup is , in my opinion, now defined by the nature of its alliance with a superpower. The game is no longer about rendering the superpower’s products obsolete (parasitic symbiosis) but rather about helping to drive adoption of their technology while furthering your own cause (creative symbiosis). This may sound intuitive and ordinary (after all many startups have partnership agreements with major players) but it is not as straightforward as it looks. Asymmetric marketing is not merely about distribution. It is a complex, top-down strategy that should permeate all aspects of a tech startup’s planning and operations. It can be the difference between a multibillion dollar IPO (and potential superpower-dom) and an ignominious exit from the market.

The Asymmetric Warrior is an effort to seek out like minded souls to engage in the debate about how to best leverage this approach to attain market leadership. Over the next few weeks and months I will drill into some of the above concepts in greater depth and include some real world examples of businesses that have triumphed through application of this strategy and businesses that have failed as a result of regretting to situate themselves in the superpower continuum. I will also an attempt to utilize the Asymmetric framework to evaluate significant moves in the technology market (acquisitions, mergers and new product releases).  It’s going to be fun. Let’s get started!

‘Cry havoc, and let slip the dogs of war!’ -William Shakespere

 
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Posted by on September 28, 2010 in Technology

 

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