Congrats, you now have enterprise customers...
This process will help you prepare for the enterprise segment
In the early days of a startup, during the seed through series-B stages, the sales motion tends to be irregular versus structured and repeatable. The first sales the startup does are usually relationship based, through the founders, early sales reps or your investors. The profile of the customers who buy your products will also vary quite significantly. One might observe a few startups within the customer base, alongside some medium sized companies and a few large enterprise ones. While the startup might be increasing its ARR on an annual basis, it still feels like the selling motion is sporadic vs systematic and repeatable. That’s normal, but needs to quickly evolve, especially if you aim to start targeting large enterprise customers.
Your early customers might very well include a few large enterprise ones, but in my experience these initial enterprise customers are exceptions to the norm. One way to assess if you have truly cracked the enterprise puzzle is to start observing and measuring the following.
The effort, especially out-of-band services offered, to close enterprise customers.
Churn within your enterprise segment
The rate of feature deal-making needed to win these customers.
The rate of post-sales critical escalations and production blockers that these customer encounter
If you observe that two or more of these measurements are way off relative to the rest of your customer-base, then you have not conquered the enterprise segment yet. In my experience the frequent indicators tend to be a combination of professional services and feature-deal making. Both are also leading indicators, whereas churn tends to lag.
The good news is there’s a process that I have observed a few times in my career that helps you cross this chasm. This process is outlined in the diagram below and requires you to critically and objectively answer two questions: the value you provide to your customer and who your ideal customer is. Once you are able to answer these two questions, you are then able to use them to refine your product and go to market (GTM) strategies
We’ll cover this process in today’s post using an illustrative example. Before we do so, a few caveats.
First, the value you provide customers has to be either enabling them to make or save money. You are either able to help your customers increase their revenues, cut their costs or even better both. That’s the only acceptable definition of value in this process. Second, the value your customers derive from your products and services has to be defendable and observed. This means it has to be gathered via objective evidence. I have found it very valuable to conduct this portion of the exercise via an independent third party who can interview your customers and prospective customers who didn’t buy your products alike. If you fool yourself here you will end up using unreliable data. Garbage in, garbage out.
Third, when conducting the exercise to identify your ideal customer profile (ICP), you should focus on trying to surface commonalities along the following axes:
Value they derive from your product. The value drivers you defined earlier have to be visible within your ICP.
Use cases and pain points. These will help you understand how they use your products along with their future needs
Buyer characteristics like titles, departments, company size, tools they use and so on. These will be quite useful when crafting your GTM strategy
Case study: Exascale
Let’s go through an exercise that puts this all together. Consider the case of Exascale, a series-B startup in the enterprise file storage space. Exascale undertakes this exercise and is able to surface the following value drivers
Exascale saves its customers money by consolidating file storage into a single file system, which reduces the manageability burden of managing multiple file systems. This is a clear cost saving trait
Exascale exhibits very low latency and high throughput. This allows their customers to complete complex HPC jobs in less time than other alternatives. This is a clear cost saving trait and perhaps revenue generation if time to complete HPC jobs results in faster time to market.
Exascale also identifies the following traits for its ICP
Their primary use case for Exascale’s products is a fast backing store for high performance computing (HPC) jobs. These tend to be run from a large cluster of Linux machines.
Exascale’s ICP tend to work in industries that rely on HPC. These include media and entertainment, oil and gas and genomics.
Having defined its value proposition and identified its ICP, Exascale can then use both to refine its Product and GTM Strategy. I won’t cover much on the GTM side, but will focus instead on the Product Strategy. I had earlier written a post on product planning, or the process used to derive a roadmap. One of the key components of product planning is the product strategy.
Let’s assume that Exascale product strategy is two pronged. First, Exascale FS should penetrate more of the HPC workloads, which is a function of improved performance. Second, Exascale FS should enable its customers to run HPC workloads in the cloud at a lower cost relative to on-premises. This strategy is then used to drive roadmap investments, which could include items like the ones below.
Improve NFS read latency performance by 5x and file creation times by 10x
Run Exascale FS on AWS using EBS as the backing store.
Enable Exascale FS to run on both on-premises hardware and cloud VMs simultaneously offering a unified file system spanning the cloud and on-premises.
Focus, cohesion and customer happiness
There are two benefits to this process, which are focus and cohesion. Consider Exascale’s roadmap. It is both focused and cohesive. The investments that Exascale will make on its product are all in service of its ICP and aim to enhance the value their customers device. You do not see the addition of features that are not aligned with the ICP and use cases she cares about. For example, there aren’t use cases for general purpose file shares, or for Windows machines which aren’t typically used in HPC workloads. Focusing is critical to a startup, especially when utilizing scarce resources like product development.
When you narrow focus, you are increasing the resourcing on the remaining priority. It doesn’t have to time-slice and compete any more with a bunch of other stuff. And then things begin to move, stuff is getting done, and we move to the next thing. Many people and organizations are focused a mile wide and an inch deep.” Amp it Up! by Frank Slootman
The cohesion and focus will also extend to the GTM functions. Exascale’s marketing and messaging will be dialed towards HPC use cases. The Exascale sellers will target companies and industries that are heavy users of HPC workloads. The combination of a cohesive product and GTM strategy should allow Exascale to increase its penetration within its identified ICP segments.
When done correctly, this process should also reduce, or eliminate entirely some of the friction observed within your enterprise customer segments. You should notice that you are able to win more of these customers with fewer custom features. You should also start noticing that their churn rates are no different than your typical customer.
The process I outlined here is extremely simplified version of the real exercise, but should illustrate the benefits of this approach. It’s worth noting that this can be an iterative exercise too. The value your products provide should evolve over time and cover a wider range of ICPs. Therefore, each iteration, pivots not withstanding, of this exercise, beyond allowing you to focus should also increase your addressable market.