Innovation Showcase Lessons
A number of factors are combining to create perfect conditions for new enterprise-focused startups.
At the past two Enterprise Connect conferences, I’ve had the pleasure of directing the Innovation Showcase, which recognizes younger firms that are innovating in enterprise communications. In past posts, I've focused on the selected companies, but here I thought I would devote this post to some observations about the startup opportunity for enterprise-focused firms.
There's Room for More
Startups are hot, and it seems harder and harder to go a day without learning about a new one. One might incorrectly assume it's too late to start. There's a perfect storm hovering over the startup opportunity: the cloud is enabling instant and low cost infrastructure; the mobile environment has put underutilized, always-on, geo-aware super-computers in everyone's pocket; and economic conditions and shifts in attitudes are creating a supply of human and financial resources willing to invest in startups.
Companies are forming and getting noticed like never before, particularly in the consumer sector. To reach the million-user milestone, it took AOL 9 years, Facebook 9 months, and most recently Draw Something 9 days. Just six weeks after Draw Something launched, it had over 20 million downloads, was generating $100,000 per day, and it was the number one app in 79 countries. This type of explosive growth and distribution was simply unheard of just a few years ago.
While the vast majority of these rockstar apps we hear about, such as Draw Something and Instagram, are consumer oriented, the same conditions exist in the enterprise space with much less competition. The enterprise world is watching, and even uses the term "consumerization" as code for bypassing IT, yet few startups see the opportunity. The aforementioned conditions that are favoring startups are also creating favorable conditions for startups to sell to the enterprise, and it’s not a crowded sector. The barriers to entry into the enterprise have never been lower.
Consumer App or Enterprise App?
Every year, the Innovation Showcase judges wrestle with this distinction. It's is not an easy distinction when considering the service itself—think about some well-known web services such a LinkedIn or Skype which can be construed as both business and consumer services. The other approach is to determine the buyer: IT or direct end users. But that model also provides inconsistent results. The way we address the dilemma for the Innovation Showcase is to let the enterprise decide, by requiring each applicant to provide a large customer reference. If a large company is willing to try out the product or service in a pilot, that’s a sufficient indicator of enterprise suitability.
It's amazing to us what gets through this filter, echoing the point above that enterprises are hungry for new ideas. There are two paths into the enterprise: via IT and not--and both are accepting better mousetraps. When apps go through the non-IT door, they are labeled consumer apps, but that doesn't mean they have a consumer focus. Consumerization really just means selling directly to the users of the product or service. There's a lot more purchasing going on at an enterprise than corporate purchasing managers would care to admit.
Consumerization is the buzzword, but IT is still buying, too. IT departments are under pressure to provide more intuitive and cost effective solutions. Consistently, IT departments are evaluating and buying new solutions that enable a more mobile, distributed, workforce--including cloud services, collaboration tools, security solutions, and wireless infrastructure.
We have a mixture of backgrounds among the judges, but always try to include some enterprise CIOs. What stands-out with CIOs is they tend to look at supportability first and technology second. Supportability refers to a broad range of factors including how intuitive the product or service is, its reliability, and of course the vendor's support mechanisms. From a judging perspective, this is difficult because we simply are unable to truly test or compare these factors.
Instead, we get glimpses, and the CIOs are unforgiving of any cracks in the supportability armor. Telltale signs such as a failed demo, an evasive response to a question, or a poorly constructed website can significantly hurt how an applicant is perceived. Based on my casual observations, CIOs are far more likely to become unemployed over unstable good solutions than reliable bad solutions.