The past 40 years in technology have been more dynamic and innovative than any other 40 years in history. The pace of innovation has accelerated, and access to technology and capital has created a very active emerging world. Every company comes up with the next great idea, but with thousands upon thousands of companies striving to make it big, how do you determine the winners?
I’ve spent the past four decades in technology, starting with sales and later working as a leader, investor, advisor, and board member at various software companies, venture capital firms, and cybersecurity startups. I can say from experience that choosing the entrant who is likely to have the greatest impact is a difficult task.
However, there is one certainty: every successful business I’ve seen offers real value, because people buy value. While technology is important, if a company is to win big, a real and unique business case is required.
Some indicators could be that the company offers real value and may be on its way to huge success. Whether you’re looking to monitor competition, join a new company, form a partnership, or decide which organization to emulate, the following tips can help you identify those businesses that offer value.
Look at TAME
Looking at the Total Addressable Market (TAM) allows you to objectively determine a company’s potential for growth. If the market is saturated with a myriad of competitors, the company entering this market is at a disadvantage. On the other hand, if a startup enters a market with a compelling product to solve a challenge that no one else – or very few others – has solved, there is a greater chance of leadership in the market. It’s common sense and a basic rule of economics: early market leaders have an incredible advantage. The size of the TAM is also important, but be sure to consider the current and potential size.
When I originally joined AppDynamics, many thought the TAM for Application Performance Management (APM) was $2 billion. This resulted in the addition of revenue from the four largest APM service providers: CA, IBM, BMC, and HP. But some did not see the shift from legacy applications to the modern Java and .NET applications that were driving digital transformation. While we were preparing for our IPO, we were able to discuss APM TAM with a credibility of $16 billion. Looking forward rather than backward is crucial. I think the same is happening with the TAM native cloud app. In fact, according to Gartner, by 2025, 95% of all digital initiatives will be powered by cloud-native technologies. Skating to where the disc is headed is far more important than looking back at the historic TAM.
Assessing and addressing market needs with solutions that deliver value
The product may have a great interface and innovative capabilities, but if it does not solve a difficult customer problem, then it is simply a “nice-to-have” solution (and unlikely to be part of the organization’s budget). When a product satisfies both wants and needs, it demonstrates a unique business value and gains a competitive position. However, the level of need can vary greatly from market to market.
For example, consider risk mitigation. Any product that mitigates risks is usually required, but whether it is needed depends on many factors. When the market is volatile, the demand for risk mitigation increases and needs to be very high. Since some risks are intensified in a volatile market, security, safety and savings are usually more important than in a stable market.
Regardless of the market, the business impact should be clear for both hard dollar savings (CFOs love it) and soft dollar savings (for example, protecting your company’s brand). Potential customers make their purchasing decisions using both, but you should clearly define which benefit goes into which combination. A product or service can survive in the market for a while due to superior features, but it must stand on its own, based on both the benefits of hard dollars and soft dollars, to have the best chance of long-term success.
While on the CrowdStrike board of directors, I noticed the company’s legendary growth and success. This success depends, first, on building the best security solution in its space – one that is superior to any the company’s old competitors offer – and making that solution easy to use. CEO, George Kurtz, makes sure that the entire company understands and drives business value through everything it builds, sells, and supports. The first question he asks before entering into any deal is, “What does assessing business value look like to a potential customer?” Kurtz is a rare high-tech CEO who “goes the talking.” In my opinion, this is one of the main drivers of the company’s outstanding results – and one that will also ensure its continued success in the long run.
Don’t chase trends, chase success
It is important for companies to exceed the hype of both the product and the industry. Hot industries like crypto or artificial intelligence tend to attract more partners and investors, but products in those markets need to rise above the noise — and trend — to demonstrate unique business value and viability. It is essential to assess successes (ie customers, growth numbers, renewal rates, time to value business, investments) and consider timing versus path to determine if companies are reaching or on track to achieve their business goals. Legitimate companies will be able to demonstrate measurable success.
At AppDynamics, we’ve never said our organization is beyond customer satisfaction. It wasn’t strong enough. Instead, the organization was driven to achieve customer success, led by Chief Customer Success Officer, Hatem Shafik. We measured Net Promoter Score (NPS), or “How likely is a customer to recommend our solution to someone else?” Additionally, the company led Business Value Realization (BVR), or “Did the customer realize the business value of the solution they purchased to deliver?” The focus on NPS and BVR had a direct and measurable impact on renewal rates, cross-selling and customer referrals.
Separate honest missionaries from users
When a technology company uses its own product, it is indicative of confidence in its capabilities. The company will be invested in quickly repairing, modifying or improving this product for its own use, and the resulting value will pass to the customer. The use of the product versus its promulgation demonstrates the commercial value inherent in the product. I have always been amazed by the number of potential clients who have never asked a vendor or alliance partner, “Do you use the solution in your own company?” When a company uses its solution internally, this ensures that problems are identified faster and that the product is solidified more quickly for enterprise use.
Also, deploying actual developers to spend time with actual users is beneficial. Knowing how companies use the solution is a great way for developers to gain insights on improvements. Conducting this research in Mercury Interactive and AppDynamics, we saw, without fail, that developers would return surprised and inspired by the way customers actually use the solution – sometimes very differently than the way developers thought they would use it. In addition, at the AppDynamics Customer Conference, we supplied demo stations to the developers. The ability of customers and prospects to interact with solution developers created a great benefit for both parties. Jyoti Bansal, CEO of AppDynamics, spearheaded this initiative, and it continues to be a best practice.
Discovering the next technology leader is an art and a science. It requires comprehensive notes as well as detailed research. It means understanding where the specific market is headed more than where it has been. Businesses come and go quickly, so identifying the true and unique value of the business is critical to predicting success. The next five years may be the biggest for technology we’ve ever seen, and there’s no doubt that companies across sectors will compete for market-leading positions. Picking winners can lead to long-term financial success, great career advancement, and lots of fun along the way. Good luck picking the next big winners!
Joe Sexton is a Board Member of Aqua Security.
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