The "C" Shift to Becoming a MegaBrand

New software companies are a dime a dozen. Few survive past their first couple of funding rounds. Even with a great idea and large market potential, many founders fail in their journey from smalltech to bigtech. 

You may think you’re well on your way to success. Great product capability? Check. Large category to sell into? You betcha! But a substantial total addressable market (TAM) alone won’t get you where you need to be, especially if your goal is to IPO and build a sustainable B2B brand. 

To do that--to build a megabrand--a company valued at $10B or more--that creates billions of dollars in shareholder value--you need the magic combination of category and community.

Step 1: From Capability to Category Leader

All software companies start with identifying a white space capability that needs to be addressed in the market. But to take the next step in their evolution, these companies must grow from capability to category leader.

Many companies still fail at this at a feature level. They may not have crystalized product-market fit and hence cannot create a rinse-and-repeat revenue engine. Many ideas are either too early or too discretionary.

Gamification was a hot capability, but it never matured into a mandatory category. I witnessed this first-hand while running marketing at Badgeville, a company that offered the best product in a hot space. Despite having the best product in that space, it turned out that the functionality was always a nice-to-have for customers, not a must-have. And the space was always a “feature,” not a “category.”

Yet even after successfully identifying or creating a mandatory category and “crossing the chasm,” many software companies still haven’t thrived on their own. Once a category is identified, it’s important to rapidly and smartly expand into relevant markets.

Step 2: From Category Leader to Category Expander

To grow into a successful public company, it’s a given that you need a great capability and a large TAM. But this alone does not guarantee that your company becomes a megabrand. To do this, you need to focus on two additional steps to get you there.

Given Wall Street’s expectation of rapid growth, you must first focus on strategic category expansion. You may have category leadership--you may be the Coke or Pepsi of your industry (and not the RC Cola)--but if you fail to broaden your TAM, your business will get stuck at some point in your journey.

What you don’t want to do when it comes to category expansion during a fast-growth stage is adopt an apples-to-potatoes approach by trying to expand your category into orthogonal problem areas. 

For instance, NORTEL Networks tried to expand to CRM by acquiring Clarify for $2B, when its salespeople were selling infrastructure to telco buyers. This didn’t work because the products are orthogonal and required the sales and marketing teams--trained in infrastructure sales--to learn an entirely new and different go-to-market motion for a line-of-business sales. Nortel eventually ended up selling Clarify for 10 cents on the dollar to Amdocs. Even great companies like Cisco have struggled in category expansion when they acquired B2C companies like Linksys that were not not aligned to Cisco’s core B2B DNA.

Smart category expansion, on the other hand, that leads to megabrand status requires an apples-to-apples approach where we can thoughtfully expand our category -- both organically and acquisitively -- to become a more “comprehensive” offering in the same core functional area, appealing to the same or similar target buyers.

For example, Salesforce successfully expanded from Salesforce Automation into Customer Relationship Management (CRM). SuccessFactors also successfully expanded its category from performance management to Human Capital Management (HCM). On the infrastructure side, VMware successfully expanded from virtualization to Hyperconverged Infrastructure. 

Similarly, at Coupa, we have successfully expanded from a focus on becoming the procurement category leader to adjacent and complementary categories, from sourcing to payments. These areas now make up the “megacategory” Business Spend Management (BSM). We’ve expanded to become a comprehensive BSM platform helping procurement and finance executives to manage all aspects of their business spend and spend smarter.

Step 3: From Massive Category to Massive Community

Great product capability and expanding your TAM alone are not enough to become a successful and sustainable megabrand. Many companies successfully expand their categories and still get stuck. Once you achieve category dominance, there’s one more step to reaching megabrand status.

The third most important step to become a software megabrand is community. Splunk and Tableau are great examples of companies that did this right. These companies focused on building community--a tribe of customers, prospects, partners, and influencers--while also dominating their respective categories. 

But you cannot wait to build a community and your tribe. It has to happen in tandem with your early go-to-market efforts. Companies like OpenText successfully scaled to category expansion mainly via acquisitions, but they never made it to megabrand status because they didn’t succeed in building a tribe.

However, many companies get community building right. 

Salesforce build their tribe with evangelistic marketing early in their journey to becoming a megabrand. Whether it was On Demand, SaaS, Cloud, Social, or even the Arab Summer, Marc Benioff and team aligned the Salesforce story to the relevant theme of the time and brilliantly created the feeling that they were ‘skating where the puck was going,’ and you were going to be left behind if you didn’t get on this tribal train. 

Building Your Tribe: How to Grow Your Community

Community building can happen both inside and outside of your product. Although challenged to expand our category beyond Marketing Automation and not achieving megabrand status, Marketo successfully built a massive community with educational marketing that drove the company’s growth through its acquisition by Adobe. At Marketo, the first line of blog was written before the first line of code. The seed of “teaching” to create a tribe was planted early and germinated the larger concept of the Marketing Nation, which became a community of thousands of passionate marketers.

Another way to build community is to celebrate the hero stories of your tribe. The key to these stories is that they should not be about showcasing success with your product. Instead, these stories should showcase your tribe members’ success as crusaders of change in their companies. Simplify put, make your tribe members--not your offering--the central hero of the story. At Coupa, we launched a site independent of our product offering to showcase these hero stories (www.Spendsetters.com.)

Community can also be built directly into your product. At Coupa, we are empowering businesses with nearly $1.5 trillion of spend data (leveraging Community Intelligence (CI)) and providing opportunities for companies to share knowledge and source together. As the foundation of building our global community, CI was built into the product from the beginning based on the early vision by our CEO Rob Bernshteyn.

The result: Smarter by a Trillion! Every member of the tribe is benefiting from the collective wisdom of Community Intelligence and transformative crusader stories, and the next tribe member is smarter than the previous. By building a powerful global community into your product and through hero stories, your company can truly scale.

Scale doesn’t create tribes. Tribes create scale. 

Start building tribes early in your company journey. Consider building it into your product. Whatever you do, do not wait until you’ve achieved scale to build your tribe. If you do, you will be too late.

Want to grow from a software startup to a megabrand with $10 billion or more of market capitalization? Thoughtfully pair complementary Category Expansion with early Community Creation and you will be well on your way to success.

#marketing #strategy #community #tribes #category-creation #megabrand