Tuesday, December 27, 2005

What does Vinod Khosla know about Web 2.0 that others don't?

At the recent 2005 Web 2.0 conference, John Heileman had a discussion with Vinod Khosla of Sun and Kleiner Perkins fame to get his perspective on Web 2.0. There were quite a few summaries (audio here) of the conversation but they all missed a brief passing reference to Mark Leslie (a rare CEO of a tech company that shepherded a company from $0 revenue to well over $1B during his Veritas stint – there’s probably fewer than 10 tech CEOs in history that sat in the CEO seat for that period of growth). Khosla knows Mark well and is undoubtedly applying a blend of his insights into so-called Web 2.0 dynamic with the principles that Leslie is espousing.

His quote was “My friend Mark Leslie, founder of Veritas Software, says that the more money you give a company to start with, the less likely it is to be successful. The more money the founders have, the more confident they get about their business plan, the less they experiment.” He goes on, “The right way to build a company is to experiment in lots of small ways, so that you have plenty of room to make mistakes and change strategies.” Mark has been working with Charles Holloway (one of the foremost academics in the field of entrepreneurial studies who has sat in the Kleiner Perkins endowed chair at Stanford for several years) over the last couple years on what they’ve referred to as the Enterprise Sales Learning Curve (ESLC). You can review an early draft of his whitepaper and a presentation he gave at an Altus Alliance CEO briefing. You should expect to see his paper published in the 1st half of 2006 – reading the draft will give you the essence and it has been very well received.

We have been fortunate to work with Mark as we’ve developed a practice around the ESLC and he has tremendous insights into selling into the enterprise which is something he had great success with while leading Veritas. One of the fundamental tenets of Leslie’s paper is that the risk in startups has shifted from primarily a technology to a go-to-market risk due to the fact that development tools have improved so dramatically. As anyone knows that’s been trying to sell into businesses know, the go-to-market approaches that work have shifted quite a bit over the years. Since Leslie’s paper focused primarily on traditional selling methods to enterprises, I thought it would be useful to analyze what may need to change in this new world (some are calling it Web 2.0 dynamic). [Note: Traditional enterprise selling will still apply in plenty of situations. The point of this is that in many cases there may be a better or complementary approach.] Leslie makes the point that having too much money and not experimenting enough can be inhibitors to a company’s growth. Fortunately, many of the approaches that are applicable in this new environment lend themselves to not spending inordinate amounts of money as well as choosing tactics that lend themselves to lots of experimentation. For example, when I ran marketing teams selling enterprise software in the 90’s, we’d lock and load on a campaign several months ahead of time that might include tradeshows, print advertising, a seminar series and a media tour. Once we fixed our plan, there was relatively little that changed during that particular campaign as we’d already made our commitments to tradeshows, media spending, etc. (most lessons learned were applied in the following year). In today’s environment, it’s much more feasible to be nimble with Internet-based marketing that might include advertising, webinars, and influencer outreach so that you can achieve the experimentation that Leslie and Khosla espouse. In that spirit of experimentation, we are putting into practice several of the practices outlined in the right hand column below.

The following table is a comparison of some of the traditional vs. “Web 2.0” sales & marketing approaches with some links to useful resources to execute upon this approach:

Traditional Enterprise Sales/Marketing

“Web 2.0” Enterprise Sales & Marketing

Marketing strategy

Product marketing: Focus groups

Have a “conversation” via blogs (book, blog) and aggressively use web usage analytics

Awareness generation: Print advertising, direct mail

Internet media advertising (search, email, blogs, etc.)

Awareness generation: Media tours, Press releases

Influence the influencers

Demand generation: Tradeshows, Seminars

Thought leadership webinars

Sales Strategy

Direct sales to Business/I.T. Decision Makers

End run traditional buying processes to get consumer/end user adoption first building internal credibility and grassroots support

Hire high-powered direct sales force

Tightly integrate a telesales team with web leads to qualify (and close) leads

Target Fortune 500 as first customer

Pursue SMB market before Enterprise

Pipeline management

Web lead funnel management

Most of items in the “traditional” column were difficult for a startup to pull off due to the resource requirement. The good news is that most the items in the Web 2.0 column are feasible for smaller enterprises as aptly described by Seth Godin in his “Small is the new big” post.

Additional insights that are complementary to this thinking are also worth looking at.

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