Posted on | January 29, 2017 | Comments Off on January 2017 Event
January Event Review: “Rules for Disrupting Sleepy Markets” with Guru Chahal, VP of Products at Avi Networks
By Dan Galatin
Guru Chahal gave an informative presentation steeped with knowledge from practical experience at the January 11th meeting of the SVPMA. Somewhat unusually for this type of talk, Guru’s focus was not on how to launch a hot startup innovating in a brand-new product space. Rather, Guru explained how you can better disrupt existing, somewhat commoditized or “sleepy” markets by following a distinct set of rules. He effectively demonstrated these rules by drawing on stories from his own real-world experience.
Guru began by arguing that just because established markets aren’t as “sexy” and cutting-edge doesn’t mean that they don’t present massive opportunities for innovative entrepreneurs, technologists and product managers. Guru demonstrated this by talking about his own journey as a technologist with various independent and newly-acquired startups. He also worked for a time on the investment side at Lightspeed Venture Partners. As a “hardcore B2B” technologist, Guru is very much biased toward strong technologists and small teams, and biased against things that don’t add value.
The first of Guru’s rules is that you need relevant, demonstrable, superior technology to successfully go after a large existing market. As the age-old adage goes, “no one ever got fired for buying IBM.” Your technology needs to be truly much, much beyond what the existing leaders provide. It needs to be “shockingly” different, the same way the iPhone was a quantum leap beyond feature phones at the time it was introduced. At Cisco, Guru and his team introduced virtual switches with demonstrably superior technology that radically reduced the expense of managing large networks. This allowed Cisco to grow both market share and margin dramatically.
Guru’s Rule #2 is that you must provide a significant economic advantage to customers – 10x rather than just an incremental improvement – to crack an established, commoditized market. At Nuova, Guru tackled this challenge by introducing several innovations that together provided such an advantage. You need to demonstrate your economic advantage by showing significantly lower cost of acquisition, removing budgetary line items altogether, and reducing operational expenses. Furthermore, it is crucial to create trust at customers through effective marketing and developing virality around your products, by leveraging user groups, third-party references, and analysts.
The final rule is to “hyper-target” the existing market. It’s too difficult to reach the mass market when you’re starting out – you must find the customer that you can provide the greatest value to in order to get established. For example, Tesla initially rolled out its roadster in order to establish the brand and attract the funding that allowed it to proceed to develop the Model S. Guru has been putting this rule into practice at Avi Networks. He identified which market verticals are experiencing the most pain managing their existing networks. It turns out these were large enterprises, and specifically those groups that were undertaking next-generation projects such as private cloud, public cloud, and containers. A fanatical focus on customer success is necessary to turn early adopters into champions who volunteer enthusiastic endorsements at user events. The exception to hyper-targeting is if you happen to get acquired by a large company with a huge salesforce: then you can sell to the world!
Guru concluded by emphasizing that all three rules go hand-in-hand. They need to be practiced together in order to disrupt sleepy commoditized markets.
Dan Galatin has over 20 years of combined experience in product management and software engineering. He is Director of Communications for the SVPMA and can be contacted at firstname.lastname@example.org.