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Pros and cons of Push and Pull product positioning and differentiation

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In my view, there are two types of product positioning and differentiation: Push and Pull.  Both have benefits and drawbacks.

Push

A Push positioning and differentiation strategy assumes that you understand the market and your customers well enough that you can come up with some positioning that sets you apart from the competition.  You have a vision and hypothesis about why you’re different and better, and you push that message to the masses, without extensive customer validation.

Pros: To develop this kind of positioning, all one has to do is look at the competition’s literature and come up with positioning that seems sufficiently different from the alternatives.  Potentially saves time because it can be done without speaking to customers.  Maybe a good first step in developing a go-to-market strategy.

Cons: The competition may have it all wrong and have no idea about what customers really want, so trying to work around the competition’s messaging may be pointless, since they all have it wrong anyways-and you probably do too since you haven’t spoken to any customers!

Pull

A Pull positioning and differentiation strategy implies that your customers tell you what features, functions, positioning, and messaging that they find most compelling.  You use these “pulled” items as the crux of your messaging and positioning versus a hypothesis about the messaging and positioning that will resonate with a customer.  This is how the Customer Development guys would argue that you should develop your messaging and positioning.

Pros: You’re using positioning and messaging that has been validated by numerous potential customers in your target market.  These are the reasons they see your solution as different…and who are you to argue with the people who have the money?

Cons:  Requires extensive customer interactions to identify the things that customers feel are the differentiated features of your product.  Easier said than done and may require several, iterative cycles of customer interaction.

What are your thoughts on Push vs. Pull?  Are there certain markets or types of products where one strategy is superior to the other?

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Written by John Gannon

February 21, 2010 at 2:14 pm

5 ways to recognize a good Startup Salesperson

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Over the last couple of years as I’ve been deeply involved in startups as an early stage investor and now operator, I’ve noticed that one of the most critical pieces to the puzzle is the 1st salesperson.  Startups in particular require a certain type of salesperson that has a set of key traits, and those traits can be very different than those desirable for salespeople selling into existing markets.

Here are 5 traits that I think are key to identifying good startup salespeople:

  1. Most or all of selling experience is within startups – A salesperson who has had great success for 20 years selling for big, established tech companies is probably not the right person to build your team around.  You need someone who knows how to sell the company vision AND who can close your first couple of deals to early adopters, even though your product is pre-release or newly GA.
  2. Wants a leveraged compensation plan – This person will be comfortable with a lower base as long as they have a package that is heavy on commission and equity.  They are motivated by cash but take the equity portion of the comp package very seriously, because they believe in the product and the company vision.
  3. Doesn’t need a big expense budget – Your startup barely has enough money to pay the employees, let alone pay for a couple of Morton’s steakhouse dinners every week.  Make sure your salesperson isn’t going to need to use expensive activities to generate prospects or sales.
  4. Can sell the product as spec’d – The startup salesperson should be able to find prospects who will buy what the development team has built.  This will be harder than finding prospects who will buy your product if you add a few additional features, but the benefit is that you’re not bloating your feature set and doing custom development to win every deal.   There are many startups that fall into this trap, and its hard to move from here into a repeatable scalable sales model.
  5. Shouldn’t be aVP of Sales’ type –  You will need a VP of Sales if you figure out a scalable, repeatable revenue and sales model and need someone to manage your growing sales team.  Until then, stick to the folks who are hunters, love selling startup company technology, and enjoy having a huge territory in which to sell.
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Written by John Gannon

February 17, 2010 at 8:00 pm

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Shrink Before You Grow and Sales 2.0

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This past Thursday I left the friendly confines of VMTurbo HQ and attended Highland Capital Partners‘ “Sales 2.0” conference in Cambridge, MA.    The conference was dedicated to sharing knowledge about the “low touch” sales model –  a sales model that does not depend on an army of direct sales representatives knocking on customer doors and doing face-to-face meetings.   Unlike the traditional sales model, the “low touch” model relies heavily on taking leads from the web and moving them through a drip marketing funnel, using inside sales teams to close business when the customer is ready to buy.  This model is gaining quite a bit of attention due to the success of companies like Solarwinds and LogMeIn, both of whom have had recent IPOs.

Every presentation and panel at the conference was great, although the most engaging one was from Joe Liemandt, the CEO and founder of Trilogy.  I remembered Trilogy from the late 90’s, when they were running splashy recruiting events at my alma mater.  Over time they have morphed into a holding company that buys struggling software companies for pennies on the dollar, restructures them, and then turns them profitable.  In his talk “Shrink Before You Grow,” Joe made many great observations and suggestions which came from his experience purchasing and restructuring these companies – and advice which I think is also applicable to software startups.

Here are a couple I thought were particularly interesting…

Field direct sales forces selling $100k-ish deals is a money losing proposition: The dirty little secret of enterprise software is that companies who sell with a field salesforce are typically losing money on each deal.  So, when Joe buys a company, he typically fires the entire field salesforce and moves to a low-touch model (inside sales).  He did say that they will retain one field sales team to chase big ($5MM+) deals, since those are deals that can be done profitably via a direct sales force (and would also be impossible to sell without sending someone onsite to meet senior management).

(My takeaway: use senior management as a direct sales team in the event the customer requires high touch in the sales process AND the deal is big enough to warrant that high touch)

Focus on attach rate and install base, not price: When Joe buys a struggling company, he looks at its product line and figures out which products are not seeing good attach rates with the installed base.  Then, he works hard (by listening to the base and by cutting prices) to get that attach rate up.  They also spend a good deal of resources on support, and do some unconventional but very customer friendly things.  For example, one of the companies they purchased was an accounting software company, and as part of the restructuring they hired CPAs for the support group.  When a user called support, they would not only be able to get software help, but could also get accounting help from a CPA!  Talk about a great way to cultivate a strong install base.

(My takeaway: In a low touch model, there is certainly an element of a volume game, where you are trying to fill your funnel with as many leads as possible, qualify them, and then move them through the funnel until they are ready to buy.  However, your existing base is going to be the best place to look for additional revenue opportunities, so make sure you’re not focusing only on building a massive leads database just for the sake of doing so.)

I’m spending alot of time these days analyzing and learning about the low touch sales 2.0 model, so if you have any good pointers or resources, please add them in the comments!

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Written by John Gannon

December 6, 2009 at 2:29 pm

My new company – VMTurbo

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We just launched a very simple website for my new company, VMTurbo.  If you’re interested in VMware, virtualization, or cloud, drop in and register so we can keep you up to date with what we’re doing.

We also just grabbed the VMTurbo twitter account, although we’re not using it yet.  Feel free to follow us and eventually I promise we will be tweeting some good virtualization-related nuggets!

Also, I’ll be at VMworld next week with our cofounders…hope to see some of you there.

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Written by John Gannon

August 29, 2009 at 9:01 pm

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Going away from the ‘dark side’ and into the startup world

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I recently decided to make a career change and at the end of the month will be leaving the world of venture capital (as some affectionately refer to as ‘The Dark Side’) for the maybe greener and definitely more uncertain pastures of the startup world.  My time at L Capital over the last year has been great, and I’ve learned an incredible amount about startups and investing, but I recently came upon an opportunity which was just too good to pass up.

I’m joining an early stage software company in the virtualization management and automation space and will be involved in all manner of customer development, biz dev, and marketing.  I’m going to work with a great team and a stellar set of investors, all who are laser focused on building a great company.  Needless to say, I am very excited about this move.

I’m not going to post details about the company publicly at this point, but will certainly do so after I have spent some time in the new job.  If you have a strong interest or background in virtualization technology and would like to discuss what we’re working on, feel free to reach out to me directly.

Thanks as always for reading, and although I’m no longer a VC at the end of the month, I hope you still keep reading!

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Written by John Gannon

July 15, 2009 at 5:15 pm

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Vertical integration as a cloud competitive weapon

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When will the cloud providers begin acquiring product companies in order to keep the technology out of the hands of their competition?

Is that a strategy worth pursuing?

Many clouds are using open source technology to power their solutions, but I assume many of them have reliance on commercial products as well.  Could one cloud get an upper hand over the others by bringing a leading edge commercial product in house, integrating it tightly into one’s own cloud, and then end-of-lifeing the commercial version?

If you believe that the winners of the cloud game will be won by those firms with the greatest ability to control and continually shrink OPEX then maybe it is worth for big cloud players to bid against the typical acquirers of typical infrastructure technology (MSFT, Symantec, etc) in order to keep that technology out of the hands of the other clouds.

Are there any commercial products that are so clearly differentiated and powerful that they’d be worth a cloud provider paying up to acquire?

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Written by John Gannon

June 26, 2009 at 4:23 pm

Technologies I wish we had in 2001

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The best and worst thing about working in the technology industry is that you constantly build custom solutions to problems, sometimes quite expensively, and then years later see the same problems get solved through affordable (or free) off-the-shelf products.

Recently I’ve been thinking about solutions that we could have really used during my stint at FOXSports.com, but didn’t exist at the time (2001-2003).

Amazon Web Services (EC2 and S3): It was exciting to support interactive polls during major FOX broadcasts like Super Bowl and World Series, but a huge challenge for the technology organization, particularly in the areas of capacity planning and scaling.  We literally had our hosting provider bring in additional servers for these events, and then decommission them after the events ended.  If we had EC2 we might have been able to scale more flexibly during these events.  Also, we had loads of static content stored in our Oracle database, and served up by our web servers.  S3 would have allowed us to serve this content more effectively while reducing our reliance on a homegrown caching system.

Cloud integration (a la Boomi, CastIron Systems): As a sports website, we had a whole bunch of data and content feeds that we’d get from third parties.  Each feed was a custom integration using different protocols, authentication methods, and required specialized operations support.   If we had solutions like Boomi or CastIron available to us, we could have saved ourselves and our partners a whole lot of development time, and the end result would have been a more operationally supportable set of systems, with more flexibility to onboard new business partners quickly.

Application caching layer (e.g. memcached): We built our own caching platform within our app so that we wouldn’t hit our Oracle database so often with reads.  The cache logic was built in our app and the storage for the cache was an NFS shared volume sitting on a Netapp NAS device.  If we built the site today, we could have leveraged memached (or one of its commercial derivatives) and saved a bunch of dev, testing and debugging time.

Google Analytics: We spent a ton of money on web analytics solutions back in the day.  Google Analytics would have given us much of the same functionality, for free.  Enough said :)

All of these solutions would have addressed big pain points for our tech team, and consequently for our business as a whole.

Would love to hear any of your war stories related to this topic in the comments.

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Written by John Gannon

June 24, 2009 at 11:39 am

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