(This post originally appeared on LinkedIn here)
After startups succeeded in winning first customers of their new, revolutionary product or service, their focus must be on winning Early Adopters to function as references for the more conservative Mainstream buyers. At this stage new and existing investors will push the startup to focus on Landing instead of Expanding. So for a while the sales organization must chase these new logos at almost any price, even at the expense of profitability.
Staying focused on Landing still makes sense after the startup successfully crossed into the Mainstream market. Initially these customers will only commit to first implementations with limited scope to manage the risk they perceive in adopting the new technology. Only after these first implementations delivered on the value proposition projected by the startup will they commit to large-scale rollouts.
This is where the problem starts:
A sales organization focused on Landing will walk away from the customer to chase new logos elsewhere, leaving the customer uncovered. Incumbents will use this void (by now they are highly alerted by the pilot implementation) and develop their own new value proposition to counter the startup’s attack on their customer base.
And they have all the means to do this, despite not having a competitive product or service. They have access to multiple layers of decision makers within their customers, likely to reach much higher than the startup’s contacts. They have a recurring revenue stream with the customer they can use to fund Proof-of-Concepts or even pilot implementations. And they command a vast ecosystem of partners they can leverage.
Incumbents will focus on one thing: making sure the startup’s pilot will not be rolled out without a formal RfP. Because this is where the buying decision influences start to favor the incumbent and put the startup at disadvantage.
Formal Buying Process: Incumbents know them much better than the startup and will throw their vast own and partner resources at it.
Formal Approvers: Incumbents know them, their agendas, and how to play to them.
Technical Buyers: Incumbents know all the relevant customer standards and ticked the box on them already multiple times before.
Economic Buyers: Incumbents built trust with them over years or decades (well, the opposite might be the case as well).
Power Bases: Incumbents know them and are associated to them.
Corporate Culture: Incumbents know the customer’s culture, worked with them for years, might even employ former customers and vice versa.
Reward: Incumbents can leverage their existing business volume with the customer (discounts, non-billable resources).
Risk: Other than with the startup the customer knows the Incumbent and their risk profile since years.
The incumbent’s activities will be hidden to the startup’s sales organization busily chasing new logos elsewhere. They will only learn about their attack by the time the customer issues an RfP. Still in Landing mode, they will approach the opportunity the same way they approach new logos: focused on the technical competitive advantages of their product or service that made them win all the deals so far.
The problem is: By then the customer has a long list of decision criteria and technology advantages are only relevant for a minor part of these.
Now the startup’s sales organization gets confused. Why do all the arguments used so far become irrelevant? Why are they bugged now with all kinds of commercial, legal, and compliance requirements? Why do new decision influencers pop up all over the place with some of them seemingly completely unrelated to the problem the customer wants to solve?
The simple reason is: Expanding is a whole different game than Landing.
Landing is about now, solving a problem for a small part of the organization for a mid-level Economic Buyer. Expanding is about the future, solving a problem across the entire organization for the C or C-1 level once and forever.
So what must a startup do to not miss out on the Expand part of the business?
First they must clearly understand where in the Innovation Adoption Lifecycle the market is. Are new customers Early Adopters or already risk takers within Early Majority organizations? In the first case they are still in pre-chasm, in the latter one they already managed to cross the chasm. In the first case leaving the customer alone after Landing is ok as winning them completely will not significantly add to their value as a reference. In the latter case leaving the customer alone means the startup just prepared them for the incumbent to take it away when the real business is to be made: end-to-end rollouts of the new technology across the entire organization.
It is the startup’s top management’s responsibility to manage this. They need to instrument sales cycles and dive deep into both won and lost deals to understand where the market is. They must make the shift to Expand early enough, right after Landing at Early Majority customers. They need to communicate this to sales, adjust their incentive system, and accept sales to work on sales cycles long before the customer issues an RfP.
Sales must stay close to the initial Economic Buyer, working with and through them to prepare the roll-out, building a non-traditional value proposition reaching all the way up to the top of the customer organization.
As this is the best way to block the incumbent: Avoid the formal buying process alltogether, go straight to the top, present a value proposition the C level wants to have now, not in only a few quarters.
Sell the future before the incumbent does.
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