Infiltrating the Enterprise

by Katharine Nevins


Using customer development methods for enterprise products seems hard, but Dropbox is making it work

Lean startup wisdom says that a startup should get product in front of customers early and often in the process of customer development.  Feedback from real customers voting with their clicks and their dollars is the cheapest and most reliable user data you can get to improve the product, marketing, etc.  Customer development as we’ve been learning it, however, seems like it would be challenging to do when creating an enterprise product.

Unlike consumers, who are can be found cheaply through Twitter, Facebook, and Google Adwords, enterprise software buyers are relatively few and tough to access as cheaply.  Assuming that the startups can find enterprise decision-makers through their personal networks, LinkedIn, etc, getting real feedback from them might still be difficult.  My understanding (based on having worked on small business accounting package Quickbooks) is that getting businesses to trial a product is not trivial.  At Intuit, we paid small business owners well to spend 1-3 hours using the product in front of us and providing feedback based on a fake data file; higher-end enterprise customers likely have an even higher opportunity cost for their time, and are less likely to give a startup their attention.  If they do agree to try the product, they generally have to enter their data, integrate it with their existing products, and train their employees to adopt it before they can give you really valid feedback.  They take on the risk that if there is a bug in the early version of the product, their business could be disrupted  Therefore, trying even a free product is not as low-cost for them as it would be for a consumer, and they are less likely to do it.

To convince an enterprise to adopt or buy a product, the startup would typically have to demonstrate return on investment or some other metric.  For a very early product, such data might not exist, or might not be compelling yet.  Sunil at Triangulate discovered that it was hard to sell a better couples-matching engine to companies such as eHarmony without being able to quantify the revenue lift it would generate.

Even if a startup succeeds in getting early customers and collecting real feedback, understanding what the customer needs and requirements really are in an enterprise also seems like it would be difficult.  In the small businesses which used Quickbooks, the decision-maker, the purchaser, and the user were often different people.  For example, the CPA would “make” her small-business-owner client buy Quickbooks so she could make the most of her time during tax season.  The small business owner would buy the product, then have his wife/ office manager set up and maintain the books.  Each party had different ideas about how the product should work.  This problem is likely exacerbated in a large company with multiple teams using a product and multiple stakeholders who care how it works.

What happens if the early product you show customers is bad?  What if you lose their data or cause a business disruption?  Feedback is valuable, even when it’s negative.  However, if a startup makes a bad impression on one of its 10 potential enterprise customers, it may be doing itself real damage.

All of these issues around using lean startup/ customer development methodologies to build enterprise products makes me question whether putting real products in front of customers is really the leanest way to get customer feedback for early enterprise products.  However, Dropbox is pursuing an interesting strategy to get around many of these problems to get traction in businesses.

As it happens, online file storage, sharing, and management is a need shared by both consumers and businesses.  Dropbox has started with the consumer segment, and as a result seems to have bypassed many of the difficulties in penetrating enterprises.  They were able to acquire early customers at relatively low cost; it is unlikely that an enterprise online file management product would have gone viral the way Dropbox has.  Having acquired customers, they were able to incorporate feedback and improve the product to the point that there is now minimal risk of serious problems like lost data.

Now that the product works well for consumers, it can infiltrate small businesses and larger companies.  As it turns out, many consumers have day jobs at SMBs and enterprises.  In the case of online file management, it’s possible to have your consumers double as enterprise decisionmakers/ buyers/ users as well.  By having loyal consumers surreptitiously use Dropbox in the workplace, for free or on their company expense accounts, they demonstrate value to real companies, and will have a compelling case when IT decision-makers need to formally approve and pay for the employees’ existing use of Dropbox.

This tactic is ideal for products with similar utility for both consumers and businesses; email (Google) and productivity applications (Zoho) come to mind.  How do other kinds of enterprise startups get early customer feedback and gain traction with early adopters?

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