November 24, 2005

Attenuate Goliath’s Technology Platform Strength

Posted in management at 10:42 am by scottmaxwell

This post is part of the overall posting “How Can David Beat Goliath?- Strategy #7: Attenuate Goliath’s Strength“:

The platform advantage…
Goliath already has a technology platform in place with many customers. If it is software, it may also be integrated with the customer’s other applications and data sources. They can continue evolving this platform by adding functionality and, if you come up with a good idea, they can incorporate your idea into their platform. They have the advantage over the newcomer, right? Well, yes these are all good points, but the emerging growth company can take steps to address this large company advantage that will minimize the advantage and might possibly even create a slight advantage against the large company. (Note: this advantage is more important in the B2B markets, so my comments below are more oriented to those markets.)

Attenuating the large company technology platform strength:

There are several possible approaches that the emerging growth company can use to minimize the large company technology platform advantage:

  1. Focus on the prospects who are not using (or don’t want to continue using) the large company platform. No matter what the platform and how well distributed it is, there is always a segment of the population that is not using it at all or wants to stop using it. If you aim at this segment, you have neutralized any advantage the large company platform might have!
  2. Create an approach that is completely separate from the large company platform. There are many, many architectural possibilities, and the large company does not necessarily have the “exact right” architecture for every solution (For example, competing with a client-based or client- and server-based platform by creating a browser-based approach that utilizes a service with embedded data in the cloud or allows networking of some kind.). The key here is to think very carefully about the natural architectures for you approach and to build capabilities into your approach that fundamentally need a different platform! (That is, don’t force a different architecture, but rather create customer-driven feature/function into your product that results in the fundamentally different architecture.) A great example of a company using this approach is Salesforce.com that has a completely web-based approach to CRM that is completely different that the traditional Siebel Systems (now part of Oracle) installed software architecture.
  3. Create an approach that leverages more than one large company platform at the same time. This is more an observation than a structural issue, but large companies tend to want to build their own platforms rather than share the best of all the large company platforms. To the extent your product or service leverages the natural heterogeneity of any user environment, you will minimize any individual company’s platform strength and probably gain a slight edge (some people might call this “living in the white space between large vendors”). Veritas (now part of Symantec), for example, grew to become a very large company by providing data lifecycle management solutions for all the major platforms.
  4. Embrace the large company platform, but make sure that you are prepared! For example, you might
    • Focus on tactical feature/function enhancements to the large company platform (I think of it as delivering feature/function one level of abstraction removed from the large company platform). This strategy works in the short-term, but you need to be extremely nimble and always be ready to release the next generation of feature/function when the large company builds your feature/function into its products (and they will if they are useful ideas). For example C360 has a platform that leverages Microsoft CRM and users have told me that it does an excellent job extending the capabilities of the core platform.
    • Focus on customer needs when the large company releases the next generation of its platform. Most of the large companies are so focused on their next generation platform that they leave many, many holes for emerging growth companies to fill with respect to user needs. For example, migration of data and user settings to the new platform, migration of all of the other supporting infrastructure (connectors, back-up systems, administrative systems), and/or allowing users to use both the “old” platform and “new” platform at the same time (transformation and synchronization types of issues). For example, Aelita Software (now part of Quest Software) had some software applications that make it easier for users to adopt the newer versions of the Microsoft Exchange product lines.
    • Create a deep domain expertise that leverages the platform but makes it very difficult for the large company to replicate. For example, Acorn Systems has a profit and cost allocation system for businesses that uses solely Microsoft infrastructure. Their depth of domain expertise and software/service sophistication they have would make it very difficult for Microsoft to recreate. Another example is Salesforce.com, who uses the Oracle infrastructure in their data center and integrates into the browser as well as Microsoft Office on the workstation, but their On-Demand approach makes it impossible for Oracle or Microsoft to incorporate into their platforms.

These approaches work no matter whether your target users are individual consumers, families, small businesses, large enterprises, or governments, or other large organizations. The more you aim at the business product markets, the more important they become. The key is to make sure that you are approaching the situation in a way that you mitigate the platform advantage of the large companies!

(Note: full disclosure, Acorn Systems is a portfolio company of my firm and both Quest Software and Aelita Software are former portfolio companies).

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2 Comments »

  1. […] A technology platform in place with customers […]

  2. […] A technology platform in place with customers […]


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