Ideas might be a dime a dozen, but coming up with a truly great business idea is no easy feat. Where do you start? How do you develop a concept that will solve a problem in a profitable way that will set you apart from the competition?
The wish to become a Unicorn, a killer ISV with at least $1B valuation like InsideSales or Cloudera is largely driven by VCs who wish to secure high returns. But the process of becoming such an ISV may take too long and can be too expensive to pull off.
You have to nail the Product-Market fit, continuously adjusting your product, while scanning potential market segments, and when the shoe fits…you are golden. Sounds easy, but it isn’t really because you are multiplying two dimensions: Product and Market Segments. So, if you have five different feature sets in mind and five different market segments to go after, generally speaking you have 25 options to test. In fact, you are dealing with more than 25, because you have to keep on thinking your distribution, pricing, and positioning, as they are likely to vary as well.
The Pitfalls of a Unicorn Strategy, the Power of Beacons
Practically, many ISVs who dream of launching the next Unicorn don’t take the time to contemplate the Product-Market fit. They will shoot an idea into the sky hoping to hit a star. Then, when they realize they’ve missed, they will adjust their thinking.
An alternative method less frequently considered (though highly profitable) by entrepreneurs is to become a satellite ISV, capitalizing on the successes and markets of established ISVs with a pre-established platform. I call these ISVs: Beacons.
Beacons are ISVs that can leverage other ISVs to create economies of scale – such as CallidusCloud or SolarWinds. By partnering with other ISVs, Beacons are able to help these other businesses succeed, while advancing their own growth in the process.
When an ISV develops software for a pre-established platform, it essentially contributes to that platform’s ecosystem by enhancing the original platform in some way to provide additional value to the end user. And if the ISV solves a problem that a multitude of users face – they can make a substantial amount of money in the process
Connecting with a Beacon ISV, satellite ISVs can reduce the complexity of finding a Product-Market fit dramatically because the satellite ISV can keep the target market, the delivery method and the pricing boundaries constant, leaving them with one degree of freedom: The feature set.
Now the question becomes: How to find an adequate Beacon to align with.
Building Your Beacon ISV
Most of the entrepreneurs I know, think about starting a Unicorn rather than a Beacon. There is certainly value in the attempt to become a Unicorn. However, I believe that Beacons have substantial opportunity for success as well. For example, any ISV with an established market and an adequate platform can become a Beacon. By becoming a Beacon (hub) for Satellite ISVs to build upon, you establish your organization as an essential piece of their operation. As the Satellite ISVs grow, you grow. As the Beacon grows, the Satellite ISVs grow as well.
Although a Beacon may never become the recognizable face of an industry, playing this support role can prove to be very beneficial, as you become the foundation on which many faces are established.
After spending some time working at Salesforce, I was excited to guide RingLead – an organization which is quickly becoming a Beacon in its industry. Although I initially saw myself working at the next Unicorn, I’ve discovered that establishing a hub which provides other businesses with a foundation to grow is not only rewarding, but exciting.
I’ve also discovered that launching a Beacon allows you to play a pivotal role in the industry and have the opportunity to work with and support other ISVs who use your software as a springboard for their own success.
Who Really Wins in a Gold Rush?
In 1849, thousands of opportunists gave up everything to pursue the dream of striking it rich in California. All they had to do was stake a claim and start panning. With a little bit of luck, they could find a gold vein and become rich. Although a few 49ers did end up with massive amounts of gold, the biggest winners from the gold rush weren’t gold miners at all – but rather the suppliers who provided provisions to these men. One example is Levi Strauss – whose jeans are still worn today.
In short, when you’re thinking of your next great business idea, don’t get caught up on the gold. Instead, consider helping the gold miners in their endeavors. You may be surprised with the outcome.
In short: Launch a Beacon business to help others thrive, and you’ll inevitably wind up succeeding yourself.