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Tag Archives: Strategic Alliances

Superpowers or Asteroids? HubSpot gets all Asymmetric

Just read an excellent blog posting by Brian Halligan, founder and CEO at HubSpot, the leader in inbound marketing. Entitled “8 Lessons From HubSpot’s $32 Million Round with Salesforce, Google, and Sequoia”, the blog’s ostensible purpose is to act as a set of do’s and don’ts for wannabe tech entrepreneurs. It’s a very good post with lots of valuable insights from a business that has defined a new marketing service category and, putting their money where their mouth is, leveraged their own technology to grow their user base from zero to over 4,000 businesses in a mere four years. Impressive stuff.

Accolades aside, the lesson that really resonated with me was number 7, “Partner with Asteroids”. Quote:

“I had dinner a couple of weeks back with Drew Houston, founder of Dropbox.  He said that a big part of his job was navigating his spaceship through the asteroid field of potential competitors.  Part of that statement motivated me to partner with Salesforce.com and Google on this deal as they are asteroids that could blow up our spaceship or could accelerate it if we can hitch a ride.  Too early to tell if this decision is a good one, but it feels right.”

Good decision Brian. Co-opting the momentum of two SaaS juggernauts rather than going head to head with them is a great idea. There is no question that your assessment of Google and Salesforce.com as potential ‘asteroids’ who might wrest the Inbound Marketing opportunity away from HubSpot at any time is wholly accurate. Better to align your interests with theirs and, in doing so, explore opportunities to make their scale and momentum work for you.

HubSpot has learned the most important play in the Asymmetric Marketer’s book: Identify you most likely ally (or competitor) from amongst the ‘software superpowers’ and find out how to make what you do work for them, all the while quietly (formlessly) nurturing your own aspirations for market and ultimately, multi category, domination. This is a tried and tested approach that has helped propel numerous businesses from startup to multinational cross category aggregator, organizations like Microsoft, Oracle, Google and Salesforce.

HubsSpot seem to get it. I’m going to watch how their Asymmetric strategy plays out with interest. I suggest that all superpower aspirants do the same.

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Posted by on March 15, 2011 in Uncategorized

 

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Formlessness

In the early nineteen eighties, technology superpower IBM decided to enter the personal computing market, despite the fact that they weren’t particularly convinced that PC’s were going to be a needle moving product category (their projections called for sales of a mere 100,000 units per year). It is probably safe to say that, at that juncture, PC manufacture was not seen as a particularily strategic undertaking for IBM! So much so, in fact, that they couldn’t be bothered to dedicate their own internal resources to the development of an operating system. They decided instead to OEM a third party system. They looked at a few companies who might have the necessary software (Digital Equipment was in the mix for awhile) and ended up choosing a small software company that had recently relocated from Albuquerque, New Mexico to Bellevue, Washington, called Microsoft.

Microsoft didn’t actually own the operating system that they pitched IBM on (it was the property of a local company, Seattle Computer Products. Microsoft effectively entered into negotiations to deliver a technology that wasn’t theirs). Once the deal was done they acquired the system and changed its name from 86 DOS to MS DOS and the Microsoft legend was born. We all know what happened next. PC’s went on to become an absolute phenomenon with annual unit sales in the tens of millions. Many companies have entered the PC market since then, but there is still only one hegemon on the OS side: Microsoft.

This is asymmetric warfare at its finest. Microsoft identified a product category that had real momentum but that was not seen as strategic by their superpower partner. They co-opted IBM’s marketing momentum to drive sales of their software through IBM’s own partner community. By the time IBM realized the PC category had legs and that the demand  for Operating Systems was substantial, it was too late. They could neither co-opt the market by developing an alternative OS (they actually developed their own product, OS2, in partnership with Microsoft, not a great idea) , nor could they acquire Microsoft which had by then become one of the fastest growing technology companies in history.  Microsoft went on to release Windows in 1985 and went public in ’86. Since then the stock has made four billionaires and 12,000 millionaires.

The question is whether this was all a stroke of good luck, serendipitous timing or a conscious act of asymmetric warfare. The answer, to my mind, is that Gates and Co. knew what they were doing from day one. Think about it: they never sold out to IBM! If this was just good fortune, why didn’t they get when the getting was good? The fact is that they knew that PC consumption was going to go nuclear and that there would ultimately be many entrants into the space that they could sell their operating system to. They knew there was a market beyond IBM, and they consciously exercised creative symbiosis (driving adoption of  IBM technology) while co-opting their momentum from within and, ultimately crushing IBM’s own offering (parasitic symbiosis). Breathtaking, isn’t it?

Aspiring Asymmetric marketers would do well to pay close attention Microsoft’s incredible discipline. Although they were knowingly working on a plan to exercise parasitic symbiosis, to build and dominate their own market, they did not breathe a word of their ambitions to anyone outside the company. Instead they were an IBM partner through and through, even helping them to develop an OS that might have put them out of business. This kind of discipline is what Benzel refers to as formlessness. The term comes from Sun-Tzu’s book ‘The Art of War’. In Sun Tzu’s world a smart warrior not only never reveals his plan of attack to his enemy he even even goes as far as to look weak to lull them into a false sense of security. Software startups that plan to build and lead a market by forging an alliance with a software superpower should strongly consider keeping their long term aspirations to themselves. They should appear in all ways to be wholly aligned with their superpower’s strategic objectives. This posture should underpin all front facing sales and marketing efforts and must be maintained right up to the point when the superpower is no longer likely to be a source of market co-optation. Then the true market leader can emerge.

Formlessness. A critical weapon in the asymmetric marketer’s arsenal.

 
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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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