Where will the next big disruption in B2B Data come from ?

Two of the biggest B2B data companies today are D&B and ZoomInfo. The two companies with vastly different histories are rapidly converging to compete for similar marketshare. I often get asked, where are the next big opportunities in B2B Data (primarily contact and accounts) buried? This article is in part an attempt to capture some of my thoughts on potential disruptions in the data space.

"Disruptive innovation is the process in which a smaller company, usually with fewer resources, is able to challenge an established business by entering at the bottom of the market and continuing to move up-market." - Clay Christensson

Clay Christensson introduced a Disruptive Innovation Framework in his first book "The Innovator's Dilemma" and later built upon it in his next book "The Innovator's Solution". He describes a multi-step process for disruption :

1. Incumbent businesses innovate and develop their products or services in order to appeal to their most demanding or profitable customers, ignoring the needs of those down-market.
2. Entrants target this ignored market segment and gain traction by meeting their needs at a reduced cost compared to what is offered by the incumbent.
3. Incumbents don’t respond to the new entrant, continuing to focus on their more profitable segments.
4. Entrants eventually move up-market by offering solutions that appeal to the incumbents' “mainstream” customers.
5. Once the new entrant has begun to attract the incumbent business’s mainstream customers en masse, disruption has occurred.

There are numerous examples of disruption that occur at the low end of the market. It is common for market leaders to chase more profitable business and in the process ignore the needs of down-market, thereby creating opportunity for new entrants.

Low End and New Market Disruption

For almost a decade; ZoomInfo (and DiscoverOrg) grew primarily on the back of SMB and Mid Market business. It created a market for data, where none existed. They went after a market segment that was not appropriately served by the dominant data vendors of those times. ZoomInfo fulfilled a market need with self service products and solutions that D&B and other dominant data vendors were willing to forego.

Disruption works because it is much easier to beat competitors when they are motivated to flee rather than fight.

However, ZoomInfo is now a much larger company and is expected to run into the exact same market forces that the dominant players faced a decade ago. It's not difficult to infer that ZoomInfo may likely focus on the profitable businesses, go upstream and under serve the low end of the market that they helped build. Thereby creating opportunities for new entrants in the data space.

The next disrupter in B2B Data will likely be great at serving the low end of the market (SMB/Mid Market) with self service tools. Such a company will leverage automation throughout their organisation and particularly with data processes. This company will also be great at rapid product innovations and not be afraid of launching niche data products aimed at new markets or verticals that are very different from existing solutions from all competing vendors. This disrupter will develop scalable GTM capabilities (ideally global) suitable for capturing the long tail of the B2B Data Demand.

What keeps incumbents from responding to disruptive threats - First, it's difficult to identify a disruption looking ahead. Second, creating a new product or GTM is not easy even for a market leader. Third, any new approach renders existing assets and investments obsolete, thus creating a lot of resistance to appropriately respond to a market disruption. 

How big is the low end of the market in B2B Data ?

It's Big. There are over 500K companies just in the US that use a CRM. Salesforce alone has over 150K customers. Each and every customer of Salesforce (and overall CRM) should also be a buyer of B2B data. How else are they supposed to keep their CRM clean ?

All the customers of B2B data vendors do not even add up to 30K unique accounts. This means over 120K Salesforce customers and a bulk of all CRM buyers do not yet buy data from any vendor. This presents a massive opportunity waiting to be converted. Use of B2B data in sales and marketing is yet to go mainstream. With increasing use of AI, Analytics, RPA and Data Driven Sales & Marketing; it's only a matter of time that a lot of these companies (mostly at the low/mid end of the market) will start buying data and ZoomInfo may not likely be their first choice of data vendor.

Succeeding at the low end of this market requires a unique set of skills. It will take a rather determined vendor and a disrupter to unlock opportunities in a market space that others are willing to forego.