So, You Want to Build a Category…

The book Traversing the Traction Gap explains how you can take an idea and turn it into a $B+ outcome using the Traction Gap Framework®. In it, you will learn that all early stage startups must become great at “market engineering”, and, a key component of market engineering is “category creation”.

Make no mistake, though, category creation is hard work.

I was a very early executive at Siebel Systems, the company that created what eventually became the CRM category. However, when Tom Siebel and Pat House founded Siebel, no company had ever invested in an enterprise “sales information system”. No one was even looking for one.

After my operating career I turned venture investor. I was fortunate to be a first investor in Marketo. When Phil Fernandez, Jon Miller and Dave Morandi founded Marketo, no company had implemented a lead generation and scoring “marketing automation system”. No one was even looking for one.

There were no budgets for these applications. Many of the economic buyers were skeptical of their value. Most venture firms were unconvinced that a market existed for them.

Each companies’ first product releases were ugly. The feature sets were incomplete – they were not “whole products” and required significant training and hand holding to stand up and generate value.

In Marketo’s case, they had to scrap a significant amount of initial development work because what they had built wasn’t generating traction. Churn was high. Adoption was low.

It wasn’t until the team introduced “lead scoring” – a marketing funnel, along with an application that supported those capabilities based upon a year’s worth of customer feedback – that Marketo began to see traction in the market.

In those early years, Tom and Pat (Siebel) and Phil and Jon (Marketo) invested significantly in thought leadership activities to make people “think different”. Tom and Phil each wrote a book that laid out thought-provoking principles. Both spoke extensively at conferences, with industry analysts, and focused on winning their first notable accounts.

To go after the “Early Adopters/Visionaries”, Siebel borrowed Andersen’s (Accenture’s) brand and used that to generate legitimacy for Siebel’s products inside large accounts.

In Marketo’s case, they chose to begin in the SMB and didn’t need a large integrator but instead focused on capturing notable Silicon Valley startups as their initial customers.

Geoffrey Moore identified key issues associated with the early market years ago in his iconic book, Crossing the Chasm.  Technology startups – that focus on enterprise solutions – need to identify “early adopters” who believe what the startup believes. These are the few potential customers who believe your solution will give them a competitive advantage and are willing to work with an incomplete product.

These visionary customers primarily respond to thought leadership vs. demand generation programs. At this stage, your job as a startup team is to find opportunities to build your category by telling your epic story – through writing books and blogs, delivering keynotes at conferences, etc. – which lays out the world as it could be, not as it is.

Publicly telling your story over and over again will go a long way toward engaging with the potential “early adopters” you need before you can move on to a larger market segment, “pragmatists in pain”. These are the companies that know they have a problem but won’t be willing to be “the first adopters”.

So, when you’re in the very early stages of building your B2B startup, you should be prepared to put a significant amount of effort into the market engineering task of category creation that includes provocative thought leadership language, concepts, and ideas that you can propagate. These category creation precepts will make people “think different” and separate your startup from the cacophony of the status quo.