How to disrupt a well-established incumbent in the enterprise software space.

One of the startups I met last week asked me during my “ Giving It Back “ session this very interesting question — how do we find a foothold in an enterprise market that has a well-entrenched dominant category leader?

The startup is building products for loan underwriting. They believe that consumers are looking for rapid decision on loan eligibility and limit from credit providers and therefore businesses offering credit products need technologies to offer quick parsing of financial documents and models to create credit risks / approvals.

I began the session by asking them the ICP (Ideal Customer Profile) they were building their product / solution for? The founders have 12–15 years of experience in tech domain across tech, finance, product management in global cos etc so I expected a very sharp ICP definition. I was disappointed — “this product can be used by any credit provider” was their weak response.

I challenged them to rethink their approach to product design as the needs of their target user will change dramatically depending on which segment of loan seekers they seek to serve, after all a loan of Rs. 10,000 needs a very different approval criterion than a loan of Rs. 10 cr.

Over the next 10–15 minutes as we discussed the “criticality” of ICP, two potential target profiles came up for consideration — a) credit providers who offer emergency cash (upto 50,000/- loan) to mostly salary earners; AND b) large credit providers who need to interpret related financial documents to build viability models for HNIs and SMBs.

When I asked the team how their target customers were solving the problem today (existing alternative), I learnt that there is a dominant player with over 50% market share in the second category. “How do we enter a market that is dominated by such a well-entrenched dominant player?” the question was waiting to be asked.

Here are my responses. It will be good to get some feedback and ideas (that I can pass on to the startup) if any.

i. Study user groups and forums of the dominant competitor to understand their strengths and weaknesses — areas where most of customers complain, rating of customer success teams, speed of resolving customer issues.

ii. Talk to some of the oldest and biggest customers of the dominant provider. Chances are they have outgrown the initial product capability (their own business has grown significantly due to the automation) and their needs are currently unmet, part met and/or they are facing delays in the product being responsive enough to their needs ( a large product with large number of customers can’t change quickly enough).

iii. If the dominant player has 5+ years old tech stack, chances are there are vulnerabilities on security, data privacy, platform changes and other technology environment changes that makes the current product a bit of a pain.

iv. Some of the earliest customers will have seen their budgets sky-rocket with growing number of users, transactions and may be open to consider a shiny new product with new technology, new user experience and significant savings on cost.

v. If they could create a target of say 3–5 such users of the existing product, and articulate their own value proposition, tech advantage, the 10x superior USP etc, they could get an opportunity to a pilot (the existing user is the best positioned to assess the value a new platform can bring in).

vi. If they could find a foothold in even 1 existing user, even as an add-on to the existing competitive platform (for some specific workflow where the incumbent platform is weak) then they could use that reference to quickly expand to other users and use the credibility of the reference to establish themselves.

What is the strategy by which Salesforce won over Oracle in the CRM business? What is the strategy by which Zoom won over WebEx in the enterprise video space? Incumbent elephants seem daunting but nimble young lions can make them dance to their movement.

ps — After the session, I got this feedback from the startup — “After the call with you. We re-priotized few things and made a trade off of depth vs breadth. That will reduce the go to market time as we will be addressing fewer use cases and build incrementally”. Made my day.

Ps — I am doing my “Giving it Back” sessions with B2B SaaS / Innovative Tech startup founders to listen to stories and share my insights , feedback and ideas to help as possible. If you would like to speak with me, book a session using this link.

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