The Power of Disruption

Over the years, I’ve been asked many times about the common elements across the companies I’ve worked in. Borland, Active Software, MySQL, Zendesk, Duo Security, were all quite different. However there were several factors they had in common which might be helpful for those thinking of joining or creating a new startup company.

Each of these companies helped usher in a new technology wave that enabled growth across the industry. Borland was part of the first stage of the PC software industry and later helped usher in the Windows era as well as Client/Server computing. MySQL helped drive the acceptance of open source software for the web. Zendesk was one of the early SaaS cloud vendors. Duo security fueled the growth of B2B smartphone applications to make the internet more secure. 

At the time, these bets were not at all obvious. There had been open source products before MySQL and SaaS companies before Zendesk. But these were by no means proven business models. Still, if you squinted right, you could see a future that would continue to grow. Nonetheless, there was considerable risk, and many peer companies fell by the wayside. 

Part of what made the future interesting for these companies was the size of the total available market (TAM). In the early 2000s, the database industry was a stable and mature business, generating around $9 billion in revenue for Oracle, IBM, Microsoft, Sybase and a handful of others. I joined MySQL when the company was doing about $5m in ARR and there had been no new breakout database business in the prior ten years. As I did my research on MySQL it became clear that there was a large market, and that customers were deliriously happy. The same pattern held true at Zendesk and Duo Security. The final piece of the puzzle that made these companies successful was that the strategy was disruptive. 

The term disruption, gets thrown around a lot by founders and investors to the point of it becoming synonymous with “new, cool stuff.” But when I speak of disruption, I am holding to the definition by Clayton Christensen in his book The Innovator’s Dilemma

Many successful businesses have been built without fitting in to Christensen’s theory of disruption. But if you are able to tap into its power, disruption is like having the wind at your back in a marathon. It’s still a marathon, but you’ve got some staying power.

Christensen distinguishes between sustaining innovation and disruptive innovation. Sustaining innovation (such as incremental improvements in a product’s performance or price) favors the incumbent catering to their existing customers. Startups generally should avoid pursuing sustaining innovation as these improvements are easy for incumbents to adopt, even if it takes them some time. 

If your new, cool, VC-backed company creates a product that is twenty or even thirty percent better (faster, cheaper, easier) than the big guys, it’s going to be extremely difficult to lure customers to a new, unproven startup. Customers who buy from large vendors often think: “we’ll just wait a year or two, and we’ll get those features, too.”

The Rules of Disruption

Christensen defines disruptive innovation as a radical change in the market that targets a new audience with different buying criteria. They aren’t seeking something “just a little better.” They are representative of a new emerging market. There are four key elements of disruption: 

1. There must be a large existing market

2. There are existing incumbent vendors  

3. A new entrant plays by different rules to serve an underserved market

4. The incumbents are unable or unwilling to adopt the disruptive strategy

The third item is really the trickiest. But let’s examine this further using MySQL as an example. 

1. $30b market… check!

2. Large incumbents included Oracle, IBM, MSFT… check!

3. New entrant with different rules… MySQL is open source… check!

4. The incumbents won’t open source their products or offer them free… check!

Let’s drill further into MySQL’s strategy and what was going on at that time. During the so-called “database wars” of the late 1980s and early 1990s vendors like Oracle, Informix, Sybase, IBM were all focused on TPC-C benchmark performance. Each was trying to outdo the other with new features, faster disk drives, bigger processors. This was truly an era of sustaining innovation with vendors launching advanced features, more tuning options and faster benchmark scores. The result of many years of sustained improvement was that databases had become increasingly complex. Specialist DBAs were required to tune databases in order to ensure fast performance. 

Finding the Underserved Market

MySQL was not the first open source database, but it was the first one that catered to web developers. In this early period of web development, the dominant tools were HTML editors and scripting languages such as PhP, Perl and Python. As web developers sought to create more dynamic sites, they looked to use a database. MySQL became the default database for web development by virtue of three factors:

  • It was easy to learn

  • It integrated well with popular web development languages 

  • It was free when used under an open source license

So while the incumbents were fighting over a massive Enterprise market that focused on advanced features and performance, MySQL was being used by people who would never have bought Oracle, SQL Server or IBM DB2. To web developers, the existing database products were:

  • Too complex

  • Too hard to learn

  • Prohibitively expensive

  • Required management approval

The very features that made Oracle and others attractive to Enterprise customers made them overkill for newcomers. Web developers were seeking a “good enough” solution for building dynamic web sites and applications. They didn’t need or understand most of Oracle’s features. 

In effect, MySQL snuck in the side door by focusing on an under-the-radar market. The big vendors targeted major enterprise applications in finance, manufacturing, retail and ERP systems. They didn’t care about web developers. That market barely existed and certainly wasn’t large enough to attract their high-priced sales teams. 

When the incumbents looked at MySQL, they dismissed it as a toy. It was a primitive database with just a fraction of the features of their products. Worse yet, MySQL users were webmasters and web developers who worked for, ugh, startups whose budgets were a fraction of those found in the Fortune 1000.  

The Growth of a New Market

Over a few years, that tiny, underserved market grew by leaps and bounds, bringing a far bigger opportunity for MySQL and other web technology vendors. MySQL was part of the LAMP stack (Linux, Apache, MySQL, PhP/Perl/Python) an alternative to traditional development stacks offered by Microsoft and others. The LAMP stack became the default development approach for the Web 2.0 era.

To be clear, the LAMP stack was a marriage of convenience, more of a clever acronym than an actual software architecture. The pieces worked together, but it took more work than Microsoft’s fully integrated tools. Nonetheless, the LAMP stack provided freedom to developers that wanted to avoid vendor lock-in. With Microsoft, Oracle and others, the more technology you used, the more you had to pay in annual server license and maintenance fees. The LAMP stack enabled companies to develop a scaling strategy that eliminated the “success tax” as they grew. 

Google, Facebook, Wordpress, YouTube, Wikipedia, all were built on the LAMP stack, as were thousands of startups over the next 15 years. The LAMP stack became the de facto standard for building web sites and we-based companies.

Imitation Is The Most Sincere Form of Plagiarism

Part of the reason MySQL had such unprecedented growth was that the business model was hard for the incumbent leaders to replicate. We routinely promoted MySQL’s Enterprise commercial offering as being 90% cheaper than Oracle. Not surprisingly, that wasn’t a price Oracle could match, lest it decimate its growth. MySQL’s open source business model was part and parcel of its disruptive strategy. 

Oracle argued that its products were more sophisticated and more fully-featured,  which was absolutely true. MySQL wasn’t trying to match Oracle features pound-for-pound. MySQL was targeting users whose needs were more modest. In that regard, both products were a good fit for their respective audiences.

As often happens with disruptive innovation, at some point, the incumbents imitate the disruptor. Oracle announced a stripped-down free product called Oracle Express, which had a subset of features and limited storage capacity. Most users looked at Oracle Express and realized that because of its limitations, it was effectively “cripple-ware” and they’d have to upgrade to the regular commercial product as their data sets grew. For developers this was a non-starter. After all, who wants to swap out databases as you grow?

Microsoft, IBM, Sybase all embarked on similar strategies announcing their own creatively named free products: SQL Server Express, DB2 Express, Sybase Express. All failed to make any mark in the industry and MySQL’s growth was unimpeded. Nonetheless, the moved helped validate the market by showing that what MySQL was doing was worth copying. 

The Billion Dollar Question

MySQL continued to embrace the disruptive strategy, adopting a subscription model and integrating with new emerging programming languages and tools. While there was often discussion about limiting the features of the open source product, we knew that we could not walk away from the open source model without losing our disruptive mojo. There were still plenty of challenges, but the open source approach made us unique.

We grew the company to around $100m in recurring revenue before we were approached by Sun Microsystems with a billion dollar acquisition offer. Oracle also made overtures including an 11th hour bid to match Sun’s offer. 

Working at Sun provided me further insights into the power of disruption. I got an inside view of how an early innovator like Sun could be devastated by disruptive technology, in this case the commoditization of the server industry through a combination of Windows, Linux and Intel processors. Sun, like most companies facing disruption, predictably and rationally focused on their biggest and most valuable Enterprise customers, rather than embracing new emerging technology markets. Less than two years after MySQL was acquired, Sun was acquired by Oracle. 

While MySQL had a somewhat contentious relationship with Oracle, we always respected them and felt that they understood the power of disruption. Oracle has remained a remarkably good steward of MySQL.

So what can you take from all of this? 

Silicon Valley founders and investors are great at hyping technologies. But it is still fairly rare for a company to fit Christensen’s definition of disruption. Nonetheless, the theory of disruption is a useful model for evaluating new technologies and understanding whether they are truly disruptive or simply “new and cool.” If you can find a technology that is opening up new markets, the disruption model can be a guide for making decisions to keep you on the right path. But be careful of falling into the trap of thinking that making something slightly better, faster, cheaper is necessarily disruptive.

I hope this post provided some clarity around how to think about disruption. In a follow-up post, I provide practical information on how maximize the impact of a disruptive strategy.

Get Your Positioning Right


One of the topics that comes up a lot in startup companies is around positioning. As in, “we need to hire a marketing consultant / guru who can help position our product.”

Positioning is super important, but it’s not something that can be done after the fact. You can’t build a boat and position it as a car. It works best if you think about how you want to position your product (and your company) before you build it.

While there is some art to all of this, at a minimum you should answer the questions:

  • Who is the product for?
  • What problem does it solve?
  • What are the competing options customers have?
  • How does your product solve the problem better than any others?

There is a huge discipline in modern product management around “jobs to be done” which can help you build a good perspective. If someone buys your product, what is the job they are hiring your product to do? This works equally well for consumer products as business products.

You must focus on how your product is the best and how you want it to evolve over time. Keep in mind “best” is in the eye of beholder. It has to matter to your buyer.

For a CIO buying a SaaS product “better” might mean:

  • Fastest implementation time
  • Easiest for users so there’s less training
  • Most secure / least risk
  • Most advanced reporting
  • Integrates with the broadest range of products

When you start, you might only be better in one way. But as you build your product strategy over many releases, it’s good to continue to concentrate your strengths.

Positioning is by no means easy. But there is a template I have used many times. This came from some “bullet-proof positioning” workshops my friend and colleague Jeff Wiss ran for dozens of different companies including MySQL, Duo Security and others.

It’s based on a deceptively simple template to factually describe a product’s key attributes. Positioning written in this style is not intended to drive a tagline or creative marketing. Rather it should be used to evaluate whether your marketing is “on message” to your target audience. 

Here’s the template:

To Target Market, XYZ Product is the Frame of Reference or Category that Point of Difference because Justification.

Here’s how Fed Ex’s early positioning would be described in the template:

To deadline-oriented business people, Federal Express is the overnight package delivery service that is the most reliable because of its sophisticated package tracking system.

The key point of positioning in this way is to identify a singular vector of differentiation and the supporting proof or feature. In the above example Fed Ex could show they were the most reliable by pointing to their sophisticated package tracking system. This was the proof behind “how” they were able to be more reliable. This positioning worked for Fed Ex because their customers wanted to make sure that if they sent something via Fed Ex it got there the next day. Otherwise, they would have just sent it by regular postal service.

Of course, the positioning template is not the slogan Fed Ex used in their print and television advertising. They used a creative embodiment of the position: “When it absolutely positively has to be there overnight.” Which resonated emotionally with the buyer.

However, if you start by writing the tagline, it’s almost impossible to get to clarity. Instead you will likely end up arguing over the adjectives for hours “wordsmithing” the tagline until everything sounds the same.

Here’s a second example template that illustrates Amazon’s early positioning:

To people that like to read, is the online bookstore that is the best place to purchase books because it has the widest selection.

The creative rendition was: The world’s largest bookstore. That’s a very focused message for people who are looking for a wide range of books they might not find at their local mall store.

Finally, here’s the positioning statement that we developed for MySQL:

For web developers and DBAs, MySQL is the world’s most popular open source database because it reduces the Total Cost of Ownership by 90%.

While the template is simple, it can take many hours to work through an exercise in positioning. Jeff and I led several such workshops when MySQL was acquired by Sun Microsystems in order to help other teams throughout the company improve their positioning. In many cases it resulted in greater clarity for the team about what their appeal was in the market place.

However, in a few cases, it became apparent that positioning alone was not going to be sufficient. I remember when we met with one of the hardware server teams. We went around and around for a long time when finally I asked what I hoped would be a question to get them enthused. I asked “How will you win?” 

After a bit of hemming and hawing it was clear that no one on the team thought that they could win. Their product line had suffered from two years of delay and was far behind the competition. Commodity Intel x86 servers were destroying the traditional price/performance ratios and no one wanted to pay Sun’s premium prices for higher levels of reliability. That said, there was still an installed base who would continue to buy Sun’s servers. So we helped them focus on that. It was a grim reminder that no amount of positioning can make up for a product that is not competitive.   

The most important thing about positioning is to focus your efforts on what makes your product uniquely valuable to your customers. When done right, positioning acts as your North Star to provide a clear direction in which to expand your company’s capabilities for many years.

How would you describe your company’s position using the template above? If someone goes to your home page is it obvious within 10 seconds who the product is for and who it’s not for? Is it clear how it’s better than the competition? Does everyone in the company understand your positioning?

Does your positioning stand out? Let me know by posting a comment below.

What Does Your Brand Stand For?

Mac hello 3

The early days of my career were in Product Management and I eventually became a Vice President of Marketing (later title inflated to Chief Marketing Officer.) But I never worried about things like company logos, colors and taglines.

I had and still have a strong bias that in a startup, company strategy means product strategy. Brand is important, but we must not get confused about what it means.

A brand is the promise that a company makes combined with the experience customers have.  So if you ask me if I like a brand, it depends very much on my experience with the company’s products. The Apple brand, particularly in the first few decades, stood for innovation, ease of use and creativity. Over the years, Apple invested extensively in its brand advertising to support these ideas. Their advertising, in print and on television to launch the Macintosh supported this idea. It was a computer “for the rest of us” meaning, for non-technical people trying to do creative work. 

However, my perception of the Apple brand is also grounded in my experience (and probably many people’s) with their actual products. The Mac was easier to use than the contemporary DOS-based IBM-compatible personal computers in the mid 1980s. There was an elegance to the hardware and software design that elevated the product experience, especially when compared to the very utilitarian computers from IBM, Compaq and others. Apple clearly cared about it’s product design, in a way that other companies did not. Apple products were in the same league as icons of design such as the Fender Stratocaster, Bang-Olufsen stereo equipment or Ilya coffee machine. And like those products, you paid a premium for that experience.

Later, when Apple stumbled, and its products were not very competitive, the brand suffered. Windows machines eventually got to a comparable level of ease-of-use and much higher levels of performance using commodity Intel processors. In part, this was due to a virtuous cycle from the “Wintel Duopoly” of Microsoft and Intel such that every year or two CPUs got faster, memory got cheaper and more and more applications were written for Windows. During the 1990s, Apple consistently lost market share and as they did, more and more of the innovative software was written for Windows rather than the Mac. Ultimately, Apple’s market share fell to below 5%.

It’s not clear what the Apple or Macintosh brand represented during this time. As many people did, I abandoned Apple in the late 1980s and had become a regular user of Windows machines for the next twenty years. But I can tell you that the Windows brand was strong on attributes like high-performance, good value and fun. After all, the best software, including games, were running on Windows, rather than the Mac.

When Apple fell behind, it was not because there was something wrong with their logo. It was because their products no longer had a unique and valuable position in the marketplace. Apple’s brand marketing people could have shouted from the rooftops “Our products are better…” but the market response was a clear “I don’t think so!” as people rushed to wait inline to buy their copies of Windows ’95. (Yes, that actually happened!)

Astute readers will of course know that the situation didn’t stay this way. The industry is always changing and evolving and new product innovation can surface changing billion dollar markets.

When Steve Jobs returned to Apple in 1997 with the acquisition of his failing company Next, there began a steady improvement in the company that would last for several decades. Jobs focused on fixing the Apple brand. But what he really did, was he strengthened the “promise” that Apple made in creating products that were unique and valuable to people who worked in creative fields. Sure, a Windows machine might be the standard in corporate accounting, but designers, lawyers, writers all wanted something easier to use and more fun.

Jobs cut mediocre, undifferentiated products and focused his efforts on a new and colorful computer called the iMac. It was an all-in-one design that was easy to set up and get going. Over time, Jobs expanded the appeal of the Mac to software developers, engineers, data scientists and pretty much everyone.

Jobs brought out a ground-breaking easy-to-use MP3 player in 2001. In 2006 he moved Apple to Intel CPUs. In 2007 he introduced the iPhone. And in 2010, in failing health, he introduce the iPad.

Jobs re-ignited the Apple brand helping to make it one of the most valuable companies in the world. But it was not a marketing exercise, it was not about the logo, the tagline, the colors. It was about delivering products that customers could not live without.

So when you think about your company’s brand, what is the promise you are making to customers? How can you improve your products and services to better deliver on that promise? There are lots of ways to differentiate your product in the market, but your logo isn’t going to make a difference.