For the greater part of two decades, thought leadership in the software industry has encouraged startup companies to focus their sales and marketing agenda on identifying and closing 'strategic' deals with their customers. But when one takes the time to examine the actual early marketing history of a representative sample of today's dominant, cross-category software superpowers, it becomes clear that this focus on the 'strategic deal' may be misplaced. In point of fact, it has been the successful capture and cooptation of 'non-strategic' deals that has provided emerging startups with the foundation of much of their future market dominance. Here are 3 examples.
Microsoft and IBM
In its entrepreneurial infancy, Microsoft the startup negotiated an OEM agreement to provide operating system software for a new product introduction by an incumbent market leader. The leader---IBM…The product---the original IBM PC. At the time of this OEM deal, the IBM worldwide sales forecast for the PC was an anemic 250,000 units over 5 years, and the only IBM-developed technology in the original PC was the keyboard. In short, from the standpoint of IBM executive leadership, the original IBM PC was 'non-strategic'. By aligning themselves with this non-strategic market initiative from an incumbent leader, and by creatively co-opting for themselves the unanticipated success of this product, Microsoft was able to lay the marketing foundation for its rise to cross-category superpower status.
Adobe and Apple
As a marketing counter-measure to the success of the IBM PC (and hundreds of 'no-name' PC cloners), Apple Computer launched the Macintosh with its innovative GUI. To showcase this GUI, Apple focused on creating a killer application it called 'desktop publishing', rolling out an ancillary product for the Mac called the Apple LaserWriter printer. Buried within the engine of the Apple printer was OEM software technology from a small company called Adobe---Something called Postscript. While it's clear that the Apple laser printer was perceived as a necessary innovation to showcase the Mac GUI, it's equally clear that wider market for laser printers was non-strategic to Apple. So a small company by the name of Adobe became the primary software market beneficiary of Apple's non-strategic initiative in printers, ultimately re-purposing and leveraging its Postscript expertise into its current Acrobat natural monopoly in document viewing and authoring software.
Google and Yahoo
As the dotcom bubble burst, web banner advertising revenue contracted at leading internet portal Yahoo. Annual revenue dropped from $1.1 billion in 2000 to $717 million in 2001. In order to compensate for this revenue downturn, Yahoo cut a 'powered by' search services deal with a Silicon Valley startup named Google. Think of 'powered-by' as the on-demand software equivalent of the kind of OEM relationship Microsoft enjoyed with IBM and the cloners. This deal enabled Yahoo to incorporate a then-unproven form of web advertising referred to as sponsored search into their portal business model. This deal was perceived by Yahoo brass to be non-strategic to its business at that time, despite the high levels of industry buzz around startup Google's search technology innovation. In fact, the June 26, 2000 official Yahoo/Google deal announcement doesn't even mention paid search revenue except for the last sentence which reads "Page views generated from Google search results on Yahoo! will become part of Yahoo's advertising and merchandising inventory." On the strength of this deal, Google was able to creatively co-opt both the user traffic and brand equity of leading portal Yahoo, and cut similar 'powered by Google' deals with other leading portals and ISPs (e.g. AOL). Recognizing the Google competitive threat from their creative cooptation of this non-strategic deal, a new Yahoo CEO cancelled the Google deal in 2003 in favor of the strategic decision to acquire Inktomi and Overture, thereby initiating the so-called 'search wars'.
Conclusion
So what are some practical lessons for startup marketers that can be gleaned from this history? How about these.
1. It pays to look into the actual marketing history of the software superpowers during their startup phase. In many ways, this history is counter-intuitive to the legacy wisdom of many software industry consultants, gurus and thought leaders.
2. It also pays to see incumbent market leaders in the way Microsoft the startup saw IBM, Adobe the startup saw Apple, and Google the startup saw Yahoo. That is, as symbiotic targets of opportunity---Not as targets of 'creative destruction'.
3. Identifying and infiltrating the non-strategic initiatives of incumbent leaders proved to be of considerable value to Microsoft, Adobe and Google as startups. It allowed them to capture competitive advantage from the inside. It's one element of what my book refers to as asymmetric marketing. And here's the really good news. In today's environment of continuous superpower contention for both legacy and emerging market segments (Microsoft vs. Symantec in security, Google vs. Yahoo in search, Oracle vs. SAP in enterprise software), there will always be far more 'non-strategic' than strategic initiatives on which to build your marketing success.
And one final piece of marketing advice. When you do find these non-strategic initiatives of incumbent market leaders, don't broadcast them to the planet to indulge your corporate marketing ego. Loose lips sink marketing ships. Instead, quietly leverage them to build the foundation of your own future superpower status.
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