The past 40 years in tech have been more dynamic and innovative than any other 40 years in history. The pace of innovation has accelerated, and access to tech and capital has made for a highly active startup world. Every company is pitching the next great idea, but with thousands upon thousands of companies scrambling to make it big, how do you identify who will be the winners?
I’ve spent the last four decades in tech, starting in sales and then later serving as a leader, investor, advisor, and board member at various software companies, VC firms, and cybersecurity startups. I can say with experience that picking the up-and-comer likely to make the biggest impact is a challenging undertaking.
There is one certainty, however: Every successful business I’ve ever seen offers real value, because people buy value. While technology is important, if a company is going to win and win big, there must be a real, unique business case.
A few indicators can suggest that a company offers real value and might be on its way to massive success. Whether you seek to monitor the competition, join a new company, form a partnership, or identify the enterprise to emulate, the following tips can help you identify those companies that provide value.
Look at the TAM
Looking at the Total Addressable Market (TAM) allows you to objectively quantify a company’s potential for growth. If the market is saturated with an incalculable number of competitors, then a company entering that market is at a disadvantage. On the other hand, if a startup is entering a market with a compelling product to solve a challenge that no others — or very few others — are solving, there is a higher chance of market leadership. It’s common sense and a basic rule of economics: Early market leaders have an incredible advantage. The size of the TAM is also crucial, but make sure you consider both the current size and the potential size.
When I originally joined AppDynamics, many thought the TAM for application performance management (APM) was $2 billion. This resulted from adding the revenues of the big four APM providers: CA, IBM, BMC, and HP. But some didn’t see the shift from legacy applications to modern Java and .NET apps that were driving digital transformation. As we were preparing to go public, we were able to credibly discuss an APM TAM of $16 billion. Looking forward instead of backward is crucial. I believe the same thing is happening with the cloud-native application TAM. In fact, according to Gartner, by 2025, 95% of all digital initiatives will be supported by cloud-native technologies. Skating to where the puck is going is much more important than looking backward at the historical TAM.
Evaluate market need and address it with solutions that provide value
A product may have a great interface and innovative capabilities, but if it does not solve a hard customer problem, then it is simply a “nice-to-have” solution (and unlikely to be part of an organization’s budget). When a product satisfies both wants and needs, it demonstrates unique business value and gains a competitive position. However, the level of need can vary significantly from market to market.
For example, consider risk mitigation. Any product that mitigates risk is typically wanted, but whether it’s needed depends on many factors. When a market is volatile, risk mitigation demand increases and need skyrockets. Because certain risks intensify in a volatile market, security, safety, and savings are usually more important than they are in a stable market.
Regardless of the market, the business impact should be clear for both hard dollar savings (CFOs love these) and soft dollar savings (for example, protecting your company brand). Prospects make their buying decisions using both, but you should clearly articulate which benefit goes in which bucket. A product or service can succeed in a market for a period of time due to superior features, but it should stand on its own, based on both hard dollar and soft dollar benefits, for the best chance of long-term success.
While on the Board of CrowdStrike, I observed the company’s legendary growth and success. That success is based, first, on building the best security solution in its space — a solution superior to any offered by the company’s legacy competitors — and making that solution easy to use. The CEO, George Kurtz, makes sure the entire company understands and drives business value with everything it builds, sells, and supports. The first question he asks before engaging in any deal is, “What does the Business Value Assessment look like for the prospect?” Kurtz is a rare high-tech CEO who “walks the talk.” In my opinion, this is one of the key drivers of the company’s outstanding results — and one that will also ensure its continued long-term success.
Don’t chase trends, chase success
It is important for companies to live beyond hype for both the product and industry. Hot industries like crypto or AI are inclined to attract more partners and investors, but products in those markets need to rise above the noise — and trend — to provide unique business value and staying power. It is key to evaluate successes (ie, customers, growth numbers, renewal rates, time to business value, investments) and consider the timing against trajectory to determine if companies are reaching or are on track to reach their business goals. Legitimate companies will be able to demonstrate measurable success.
At AppDynamics, we never said our organization drove customer satisfaction. That wasn’t strong enough. Rather, the organization was driven to deliver customer success, led by the Chief Customer Success Officer, Hatim Shafique. We measured Net Promoter Scores (NPS), or “How likely is the customer to recommend our solution to someone else?” In addition, the company drove Business Value Realization (BVR), or “Did the customer realize the business value of the solution it bought to deliver?” Focusing on NPS and BVR had a direct and measurable impact on renewal rates, upsells, cross-sells, and customer referrals.
Separate pure evangelists from users
When a tech company uses its own product, it demonstrates trust and confidence in its capabilities. A company will be invested in fixing, adjusting, or improving that product quickly for its own use, and the value created from doing so will trickle down to the customer. Using the product versus simply evangelizing it demonstrates the product’s inherent business value. I’ve always been amazed by the number of prospects who never asked a vendor or Alliance Partner, “Do you use the solution in your own company?” When a company uses its own solution internally, this ensures that problems get identified faster and that the product gets hardened more quickly for enterprise use.
Also, deploying actual developers to spend time with actual users is beneficial. Seeing how companies use the solution is a great way for developers to get insights into improvements. When performing that research at Mercury Interactive and AppDynamics, we saw, without fail, that developers would return amazed and inspired by how customers were actually using the solution — sometimes very differently from how developers thought they would use it. In addition, at the AppDynamics Customer Conference, we staffed the demo stations with developers. The ability for customers and prospects to interact with the developers of the solution created an outstanding benefit for both parties. Jyoti Bansal, the CEO at AppDynamics, drove this initiative, and it is still a best practice.
Spotting the next leading company in tech is both an art and a science. It requires big-picture observations as well as detailed research. It means understanding where the specific market is going even more than where it’s been. Companies come and go quickly, so determining which offers real, unique business value is crucial to predict success. The next five years may be the biggest for tech that we’ve ever seen, and there’s no doubt that companies across sectors will be seeing for the market leader spots. Picking the winners can lead to long-term financial success, extreme career advancement, and a lot of fun along the way. Good luck in picking the next big winners!
Joe Sexton is a Board Member at Aqua Security.
Welcome to the VentureBeat community!
DataDecisionMakers is where experts, including the technical people doing data work, can share data-related insights and innovation.
If you want to read about cutting-edge ideas and up-to-date information, best practices, and the future of data and data tech, join us at DataDecisionMakers.
You might even consider contributing an article of your own!
Read More From DataDecisionMakers