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JUL 18, 2014 - NaN MIN

Positioning: Winning the Battle for the Developer’s Mind

  • Marketing

Geva Perry has been a board member & advisor to 20+ developer-focused startups including Twilio, New Relic, Heroku, Sauce Labs and now Heavybit. He has 15+ years experience in enterprise software and is one of the top advisors on to go-to-market strategies for developer products.

  • Introduction
  • What is Positioning?
    • Example: Luxury Vehicles
    • The Positioning Statement
  • The Rules of Positioning
    • The Category
    • The Target
    • The Differentiator
  • Positioning Implementation
    • Messaging
    • Value Proposition
    • Go-To-Market
    • Exercise: Continuous Integration
  • Q&A

I paraphrased the name of this talk from the book that was titled Positioning and the subtitle was, Winning the Battlefor the Consumer's Mind or something like that. I'll explain what that means and what role positioning plays in that in just a second.

A very brief intro on me. In the past five years, I've worked with a lot of different startups. Many of them are developer-focused companies. Some of them you may know here. I worked in the early days with the Heroku guys. I worked with New Relic in the early days, with Twilio and a bunch of others. You can see some of the names here, some are more known, less known, but some will be known later on. I'm on the board of a few of these companies, advisory board, doing more thorough consulting a lot of which is around determining the positioning. That's a little bit background on me.

Many of these companies are in different stages of their life cycle. I've seen companies from the very early stages. I worked with Twilio when it was three founders. I was just there this afternoon. Now, they're 200+ something. It's quite exciting to see how that happens. I visited earlier this week Oren Teich at Heroku. Another similar dynamic there. So, you get a better sense of where companies are in their life cycle - what they need to do at what point, what are the indicators that they now need to change, they need to do something different. Positioning is a very important piece of knowing when to do that.

Just real quick, in addition to Tweeting and hash-tagging Heavybit, you can follow me on Twitter.

Let me jump right into it. The classic definition of positioning is the place you want your product to occupy in the customer's mind. Now, what does that mean? Think of the mind, the metaphor as different boxes. Which box does the customer put you in? Why do we even want them to put us in a box? It's because that's how humans work. We get a lot of information thrown at us,especially in the tech businessand especially developers.There's new frameworks, new technologies,new API's, new this, new that coming out every dayand it's just overwhelming to keep upand remember all of these thingsthat are thrown out at you.

Most of the developers, most of your customers that you're trying to appeal to are not in Silicon Valley right in the midst of places like this. They're working at large corporations or even large web companies or some that may not be the biggest enterprises, but are still very large organizations. They have a lot of other things to deal with and keep up with every new tiny startup that comes out.

We need to make ourselves visible and memorable in some particular box that when somebody thinks about us or hears our name mentioned, they say, "Oh, it's the X company." That's what positioning is all about.

It's a fairly simple concept, but really difficult to do and I'll explain why.

To give you a better sense of examplefrom something we are all familiar with.Cars. If you look at the luxury cars category,each of these brands is trying toown one word in your mind.BMW is about enjoying driving.Volvo is about safety.These are long lasting campaignsthat they do to try to capture that wordin your mind.

A lot of times you'll see when people talk about positioning they do these kinds of things which are called perception maps or perceptual maps. This one is for the auto industry. I think it's a little outdated, but it's just to explain the point. You can do more sophisticated maps than just attach one word. This is where the term positioning comes from, where you take two attributes, and this is a very common practice among marketing professionals, and you say these are two important attributes in the market that define different market niches. What's going on? What does the market look like? Where is our product in all of this? And where should it be?

This is an example, the vertical axis shows Prestige at the topand Budget or Affordable at the bottom. Right is for older consumers,left is for younger consumers.You could see some things herewhere obviously BMW, Audi, Mercedes, all of these companies are prestige brands or luxury brands, but they're not necessarilypositioned on the same place.Audi and BMW appeal to younger consumersand Mercedes and Volvo appealto older consumers.

You can also see some other thingsthat are going on here, actually, from these maps. And this is one of the exercises you should be doingwhen you're developing positioning.We'll talk about that a little bit laterbecause one of the most difficult things is choosingthose attributes, but it could tell you a lot.For example, if I'm looking at this,and by the way, I don't know if this is an accuratedepiction of the auto market today.I took it from some websitejust to illustrate the point. You can already see, for example,there's an empty spot in young/affordable.That's an opportunity for a product.

Again, this is not a comprehensive chart.There actually are cars that are already positionedthere, but it just gives you a sense of how these toolsfor positioning can help you and what positioningis all about.It's figuring that kind of thing.You can also see that Audi and BMW are much closercompetitors than Audi and Volvo, for example.These things tell you a lotand you need to think about them. At the end of this talk,I'm going to try to do a little exercisefrom a very, very current market segmentright now, and do a little exerciseof how the positioning works there.

In order to determine your positioning,there's a fairly simple tool,but it's very difficult to implement correctlyor to work with correctly,which is the positioning statement.The positioning statement is very, very simple.It really just says, what's our product category,what our target customer isand what's our key differentiator from our competitor.

Notice that I put there in the topic it's an internal document.This is not the messaging.This is not an attempt to wordsmith how we explain it to the outside world.This is for us to understand what's our positionin this world.These are fancy words for saying it in a much simpler way: what is our product and more importantly, sometimes, what is not. This is going to be a recurring themein my talk which is positioning.

Especially for an early stage startup or startups in general, it's a lot about sacrifice,understanding what we're sacrificing,what we're not doing.It's about focus.Who it's for and who it's not forand why it's better different than the alternative.

A positioning statement helps us developour marketing material,our messaging and our go-to-market planonce we've decided it, but it's not those things. It's certainly a guideline for themand for the messaging as to what we're going to do in the outside world.That's where we're going to wordcraft. That's where we're going to consider all sortsof connotations of the words, things like thatand what are the most important two things, all sorts of exercises.I'll mention them briefly at the end.Although, this is not a talk about messaging.

The other thing that positioning is not,it's not your company visionand it's certainly not a VC pitch.I'll touch on that a little morein just a few minutesbut just keep in mindthat it's not those thing.Positioning is a very, very practical thing we're doingor we're using.There's a whole debate if positioningshould be referenced mostly as a noun or a verb.So, positioning is a noun.But in the process of developing positioning, we are positioning, it's a verb. It's not these things and I'll explainin a few minutes why exactly.

This is one of my favorite quotesin the world by the English writer Somerset Maugham."Three rules to writing a great novel.Unfortunately, nobody knows what they are."I kind of paraphrased it about positioning,but it's a little different.

"There are six rules to writing a great positioningstatement. Unfortunately, they contradicteach other."

I'm going to tell you the rules right now.Here's what people expect for youwhen you're about to embark on developinga positioning statement.It has to be highly differentiatedfrom everything else in the market,but serve a strong existing need.It has to be very, very focused,but serve a very large market.And it has to be a very simple statementbut very, very compelling and persuading.

Obviously, these three things match to those three elementsof the positioning statement: the category that we're in, what's our product,what does it do.Not exactly what does it do. Rather, what is our product?What's our target market or target audience?And what's our differentiator? Of course, these six aspects of the positioning are pulling each otherin literally opposite directions.They are contradictions. I'm going to look at each one of theseand talk about it a little bit more.

The category.We want it to serve a strong existing need.

It is very, very difficult and challengingparticularly for a startupthat doesn't have massive resourcesto try and persuade peoplethat they need to do somethingthey haven't been doing.

Even very large companies find it extremelychallenging to do. In fact,in the history of products it's been done very few times.

Does anybody know what was the positioningor the product category of the automobilewhen it first came out?

Audience: Carriages?

Horseless carriage, yeah.People know what carriages are.They have a need for carriages.This is just like carriagesjust without a horse.It took many, many years until it started being calleda motor car, automobile or whatever. That shows that developing a new category of productis a very, very challenging thing that companies generally avoid.But on the other hand,you do have to make it differentthan the existing solution,otherwise, why would people switch?

Second, in terms of target,be very effective in your messaging,in your go-to-market plan, especially when you're a startup with a low budget. Which conferences do you go to?Which messages do you put on the website?What do you spend money on? Your Google AdWords. All these things.It is, of course, much easier if you're going aftera very, very focused target,but you have a lot of pressureto go after a large market.The pressure is from investors primarily.I'll talk about that specifically.The pressure is from your sales guys once you have them.

The pressure is from many different directionsand a lot of times, it's also the founder's egosthat pressures you to go to a large market.

Finally, for a position segment to be very effective,it has to be very concise, very simple.Talk about one thing. Just likeVolvo is safety.BMW is driving.Just that one word.On the other hand, compelling, persuasive, etcetera. It's very difficult to do. It would be much easier to doif you get a chance to have ten bullets to say why your product is better than the other product.

I want to talk about this category issue a little more.Essentially, if any of you are familiarwith Steve Blank's model, there's this mention of goingand working in a completely new market,a resegmentation of an existing marketor going after a completely existing market.This very much corresponds to definingor deciding on your product categorywhen you're going through a positioning exercise.I put some examples here of the three situations,and let me explain.

We're looking at companiesthat develop new categories. As you will see, by the way,in real life it's not black and white.In real life it's many shades of gray.That's what makes this exercise so difficult.If you look at Amazon Web Services,they essentially had a choice. Let me just say, where you fall on these three types is many, many times a choice.I'm sure somebody could think ofsome corner cases where there's not a choice.

But think about the automobile, what an innovation compared to the carriage,but the positioning of it initiallywas a resegmentation.A carriage without a horse.It wasn't a new category.It's almost always a choice.

Think about Amazon Web Services for example, EC2, S3 when they first came out. They could have said, we're hosting — we're on demand hosting or something like that.But they didn't.They went with EC2. Even the name specifically referred to this new termthat was just emerging called "Cloud Computing." And so they said we're not hosting, we're Cloud Computing. Infrastructure-as-a-service,I think, was more developed by analystsand that sort of thing, but Amazoncertainly embraced it and fought itand the market suddenly perceives at leastthose services, EC2 and S3, asinfrastructure-as-a-service.

Gartner publishes the magic quadrant,infrastructure-as-a-service, and puts playersand puts Amazon thereas the leader and so on.They're clearly perceived as a new category.They did many different things.If we talk about, for example,the target audience.They decided, unlike hosting providers,they went after IT folks.If it's the enterprise or SMB's,technical folks in SMB'sand kind of operational folks, they went after developers.It was a huge different target market,and so they created a very different positioning. By the way, this is something to remember:

Always be very, very carefulwhen you're comparing your startupto very large companiesbecause different rules apply to themwhen it comes to positioning.

Amazon has the ability A, to create a categoryand B, to not be as focused as it should be.They went after the whole world of developers.Maybe at first,you could say the target market was a technicalsegmentation of Linux.Later they added Windowsand very quickly expanded beyond that.

They also didn't have one clear compelling "this is what we're about."You might say it's on demand.I'm not sure, but they had a whole bunchof things — the API, this and that. But they could afford that.They're a big company with enormous resourcesand a very long runway to do this stuff.They didn't have to report it on their financialsin the beginning.They still don't.They had a lot of room to experiment, to try and go broadand work it that way.

If we look at a different companythat you're all familiar with, Heroku.Heroku, it is arguable,did start a new category.It wasn't aloneand it was riding a wave.This is an important tip towhen it's okay to start a new category.If there is a trend,whenever you're developing positioning,it's never in a vacuum.You always have to look at what are the market trends?What are the analyst is saying?What are the journalists saying?What are the bloggers saying?What are the other company is saying?Thought leaders, etcetera, etcetera, etceteraand does this fit in that?

Sometimes you have the wind in your backand you can do things that you normally can't do,but I would say that it's still sort of ararity to succeed in creating a new category.

Heroku circa 2009 what was it?I don't think they ever used it on their website.I'm not sure. James,have they ever used the term platform-as-a-service on their website? I think it was called Cloud Application Platformor something like that.People understood itand very quickly put that tag on them.Again, positioning is what it isin the customer's mind, not yours.

James: The very first thing we did wasthe horseless carriage thing.We said, "Hosting is obsolete."That was our only tagline for the first six months."

I remember that!

James: So, it was not hosting,but replaces hosting.

Right and I remember in the beginning,you were more concerned aboutbeing similar to Slicehostthan an Engine Yard maybe or something like that.Or maybe stuck between the two.But you could have said they had the wind in their backbecause already people were writingabout platform-as-a-service, categorizing them as it, whether they liked it or not. They were calling themselves hosting,but others were already putting this tag on them.

They had Engine Yard,which was actually ahead of thembelieve it or not in many ways,in the perception and mind shareof the industry and certainly funding, I think,and other things. Arguably, a new category, but I would say generally,yes. Because there was still no dominantmainstream player that owned that space. The key there,they had the wind in their back so it was good.

Twilio is the company I've been involved insince early on and that was a really unusual one. I was just there discussing it todaywith Linda, their current CMO.They don't really have a category yet, but they're doing quite well. I'd argue they're very much getting therein the mainstream. This is a really unusual one, but they're certainly thinking of "we need to define a category for usif we want to take it to the next level,to be a billion dollar company in revenues, not a 100 million dollar company."

There are some anomalies. I mean, Twilio did a lot of thingsthat I really do not recommend to do even though, when I worked with them, I did think it was the right ideabecause there were very unique circumstances.For example, they went very, very broadand horizontal.

Just to make sure everybody understands,Twilio was an API for a service in the Cloudthat basically lets developers integrate telephony capabilities,calls, and SMS or texts in their applicationsvia Simple REST API. They run a huge infrastructure in the Cloudand they take care of, as Twilio calls it,all the "telecom goo" for you.You don't need to know anything else, SIP serversand all that stuff.They take care of itand you can make and receive calls, text and do all sorts of cool things.

They went very, very horizontal.They basically released an API.They did not focus on a particular groupof developers. Unlike Heroku, for example,that focused on Ruby on Rails originally. I'll talk about that a little more. They just went with it.They just did a really, really good jobof getting the word out on what you can dowith this thing in the world. They got the word outand they just did a lot of footworkwhich is not an easy thing to pull offthe way they did it.

People do tag some kind of positioning on them.It's not a very clear cut positioning,which is maybe one of the thingsthat is making them nervous.They don't have that box in people's head.They're in a few boxesand they don't completely fill a boxand it's a very blurry positioning. That's not a good thing for growth.

When buyers are thinking of buying you,they're thinking about a category.They're thinking about a budget line.They're doing a Google search for something.If you're not coming up in that,if you're not in that budget line,you're going to have a very uphill battle.

There are companies that have obviously succeeded and some that the jury is still out on. A company I worked with called Totango, what they do, and this is even hard to explain, is basically they measure activityin your app and let you do business stuff with it.For example, they let you know which oneof your free trials are likely to be bought. So, your sales guys should be giving [them] a callor you should be sending them an automated e-mailsaying something, offering them a discount,doing this or that.They can tell you which one of your existingpaying customers are at risk of abandonment.

They don't have a category.It's not CRM.It's not marketing automation.It's not any of those things.They are working on developing a categoryand they've been doing that for a couple of years.

One of the problems is thatif you don't have competitors,you don't have a market.You need to pick competitorsand start defining the market.

There are other players emerging. I think one of them is called Site Gain(?).There are a couple of otherswhere they're starting to call this customer engagement managementand another one is customer success management.I actually like that one betterbecause now in the world of SaaS it's starting to be clear. Another key for successful positioningis how you position it relative to other thingsand how you create analogies.This is to this as that is to that.

They're saying, "Look, you've got CRMand lead capturing and all that.You've got marketing automationfor getting your leads to buy afteryou got them first.Now, you need customer success management. It's the next phase.Now, they're using it.You wanna make them use it more.Not abandon, etcetera, etcetera, etcetera." It kind of makes sense to position it that way, it makes sense for people. "Oh, I understand.I will need that.Yes."Or, "I already do need that."That's one example.

I won't get too much into Takipialthough I think it's an interesting one.It doesn't have a category yet.I do want to use Ravello as an exampleof why it's so difficult to create a new category.How many people over here have heardof Ravello Systems?One, two, maybe three at most.Very few people have heard of them.They've got a category that's calledthe Cloud Application Virtualization.That's the category they're trying to definefor themselves.

They've raised $26 million out of the gatebecause the two founders and the third guy,that's not exactly a founder but is with them, already had three successful exits.They work with the same VC's, Sequoia, and a couple of othersThey have great track recordsso investors feel very comfortable.They raised $26 million before they had a websiteor anything else for that matter.No, I think they had some technology alreadyin place andthey've spent a lot of it already.

They've been out there for a year or two trying, but still a lot of youhaven't heard about it.It's a new category.That one is almost very, very closeto being what I would call a true new category.It's very unlike other things.What it does really, in short,is it encapsulates a whole sort of multi-VM appwith web server, app server, database server,the networking configuration,the storage configurationand lets you clone it,move it around between Clouds so you could have an app runningon VMware in one Cloud and run it on Amazon without touching a thing. It's the same exact thing.

The first use case they came up withis for dev and testing.They did try at least to focus it very much there.It's targeted at developersand the use case they're going after right nowis dev testing in the Cloud and then you can bring it on-premisefor production, as many enterprises want to do.I'm just telling you they raised a lot of money,have a lot of resources, it has very experienced entrepreneursand it's very much of an uphill battlefor them to try to work in this new category approach.

The second one, as you can see,is sort of a middle road betweengoing after a completely existing category.Maybe I should just start with thatbecause it's kind of obvious.It's really going after an existing category.Look at AppDynamics for example.There has been application performancemonitoring or management,or application monitoring for years.They're just saying, "We're an applicationperformance monitoring thing.We're on premise like the previous generation."There's no particular differentiationin a big way. They're just saying, "We're just better."

You've seen this in many, many thingswhere it's just about performance.Think about razor blades, Gillette ads. First they have one blade,three blades, five blades; they're just saying it's better.It moves better.It does this or that.Computers are faster.Hard disks are bigger.There's not a big leap. If any of you ever read the book,Innovator's Dilemma it gives a very, very famous case study ofhard disk sizes. They become biggerand bigger and these players ignored itand then new entrance took it.

You can definitely win by coming upwith a better mousetrap,but I'd say it would very, very difficultin this day and age for a startup to do.

Just because if it's an existing category,it's got existing leaders who, if it'sa worthwhile market or making a lot of money,have already entrenched themselvesin that box, in the buyer's and customer's mind,and they own that box. And it's going to be very, very difficultto rip it away from them.

My prediction about AppDynamics, by the way,is that either they don't succeedor they will reposition themselvesas something differentiated — do a resegmentation or do somethingwith what they're targeting, if they're not already. You could argue that they are trying to do that, but they're not doing it in a focused robust,aggressive way.And that's not going to workso they're going to have to change that.

The third category is sort of the middle roadas expected. It's resegmentation.You're putting it in relation to an existing category, but you're saying it's differentand you should be looked at differentbecause it's different in a very, very fundamental way.The classic example of course is Salesforce.com.They went after a very established category CRMthat had a very strong leader, Siebel Systems, later acquired by OracleThey said, "We're CRM, but we're in the Cloud.We're software-as-a-service." They started explaining to peoplewhy "you don't want on-premise software."

Siebel may be the greatest productCRM in the world with the greatest functionality features.It has huge companies using it.It has a support organization.It's got an ecosystem around it.All that's great, but it's on-premise.It's yesterday's newsand on-premise fundamentally is wrong. "You want to go for this new approachthat's in the Cloud." When that happened,there was this wave of Cloud. We've seen that happen in almost every software category.I dare you to find a software categorywhere it hasn't happened except for nuclear plantmanagement software or something.

New Relic is the same thing.New Relic started about the same timeas AppDynamics.They all came from Wily Technology,which is the old generation of enterprise APMand they took very different approaches.New Relic made their whole story about [that].By the way, they also like Heroku, focused initiallyon a very focused target segment.They also went after the Ruby and Rails market — I should say Ruby, right James, because it doesn't necessarily have to be Rails,I think, in Heroku at least. They did those two things.They resegmented the categoryand they went after a very focused target.

Sauce Labs is another company — similar idea except with a slightly different situation,which I want to talk aboutbecause it's very, very common. Which is another thing you will see a lot,this is happening in CI as we speak. Sauce Labs does functional testingor cross browser testingin the Cloud.They have a Cloud where you can run your,specifically, selenium tests.

Selenium had become a very common practicein large and small companiesto do browser testing withor functional testing withand everybody was doing it on-premise.Selenium is a free open source framework.There was no commercial playerto be seen in that space. They basically said the same Cloud story. "Yeah, that's great. But if you do it on-premise,it's a big headache.Hardware, software installation,configuration, management, doing all that.You want to do it in the Cloud, we'll do it for you.Just send it to us."

What's notable about thisis that there wasn't acommercial play in on-premises software.It was an open source play.It's a very common thing.I'm sure you can all think of a coupleof other examples for this.CI is one — I put CircleCI here, where that's happening right now.There was Jenkins/Hudson, a very, very dominant and kind of the on-premiseopen source stuff. Now, there's this big shiftto the Cloud.I'm going to get back to CI laterbecause it's an interesting case.

Garantia Data is another companyI worked with.They have Redis Cloud.Even though that is already a Cloudand it's based on open source, when they got in, it was already an existing category. Probably Redis To Go is what everyone is the most familiar with. They really think,and they have a lot of technological chopsto prove it, that they have a superior product, that it's fundamentally more reliable, that it's faster, that it's cheaperbecause of how their technology works. But it's going after an existing marketwith incremental differentiations. They're just saying, "We're faster,but we're the same thing.We're just faster, more reliable, etcetera."

I just want to clarify this pointbecause I thought this might be confusing:

What happens to markets is that theycontinuously resegment categories.Categories split and split and split and split.

Think of automobiles it splits to sedans, andsedans then splits to prestige and affordable. Then it splits to young and old,and it splits too.It keeps splitting and splitting and splitting, or fragmenting. And this happens in every category.

Think about software categoriesthat you're familiar with.Think about CRM, another classic example.There was on-premise CRM,then there's Cloud, and on-premise. Then Cloud splits into SMB's — 37signals, Highrise. They said, "Salesforce is for enterprise,we're for SMB.We're a much different approach." Then you had a whole slew of companiestrying to do SMB, CRM.Now, you have social CRM.

People keep reinventing these sub-segmentsor these subcategories in order to own themand so, that's the nature of any industry.

Just think soft drinks. Think whatever you want.That's what happensand then people start measuring you.You're not a soft drink.People measure colas.People measure energy drinks.People measure this and that. And the industry keeps splittinginto these subcategories.But, you always hear that industriesactually consolidate over time.

Just to be clear, the vendors consolidate.The players in the industry consolidate.The categories fragment. Inevitable.

The second thing is choosing the targetand, again, that push and pull betweenbeing very focusedversus having to go after a large market.About this, I want to say that for startups this is a very, very easy choice.You can almost never err on the side of focus.Again, a startup with very limited resourcesbut they have to do it.It sounds easy, but I found this is the most difficult thingto achieve when I'm working with companies. Especially their foundersand their boards and investors.This is one of the most difficult things to achieve.

What's the good of it?It focuses everything in the companywith limited resources.It focuses your product development.It focuses your go-to-market,your sales marketing.It makes life very, very easy.You know after who you're going after,what conferences you're going to,what publications,what keywords you're buying, and what features you're developingand all that.What platforms you're supporting.It just makes life easy. It's the only way for a startup to enter.

Many startups even if they don't explicitlymake that choice available as a message on their website,they do make those choices.They should make them explicit though.Their lives would be easier.

What's the problem though?I'm going to pin it on VCs,but it's really not just their fault.A lot of times it's the founders' egos too.The problem is that a lot of companiesin these early stages when they need to start defining their positioning are also raising money. When you are raising money,this big ball or circle is the vision and the addressable market you're explaining and showingand demonstrating are to investorsthat you're going after. Especially top tier investorswho expect at least a potentialof a billion dollar company, over 300 million+ exit, etcetera.

You start getting into this modethat this is what people expectto hear from you and that anything elseis not enough.That's a trap because actually in order to succeed in a successful go-to-market you need to focus on all those things that I talked about before.That's what you need to be looking at.It's a very tempting and difficult situation.Also, you need to put yourselvesin two completely frames of mind.You actually have to believe both things,which is hard.

When you're developing a focused positioning,you need to be obsessed with: If this doesn't fall in our positioning,it's not our target audience, it's not the category we're playing in, it's not what differentiates us, then we shouldn't be doing it. But then when you're actually going fundraising,you say, "Yeah, yeah, yeah!That's just a tactic we're doing for now.Here's what we're going to be doing."

You really have to put yourselfin that frame of mind of: Wait, what could this be? And forget: I don't have resources, forget: There's a long wait. There's a million reasons why this could fail. We won't execute and all that. But, if we do all those things, that's great.What's it going to look like?

It's really difficult to be in both those frames of mind.It reminds me of another quote I like by the late prime minister of Israel Rabin,who was assassinated later, but nevermind.He said at the time:

"We should negotiate peaceas if there's no terrorism, and we should fight terrorismas if there's no peace negotiation."

It's a very difficult thing for a country to be in that kind of frame of mind.How can you negotiate with the guyswhen the other guys are killing you?It's a similar thing.

The last point I talked about is kind of thispush and pull.When I go with companies through these exercises,sometimes this becomes very, very different. "What is that one message that we want to saywhich makes us different?"It's extremely difficult to do a lot of times,especially, when engineers are involvedand they're thinking featuresand technology.By the way,it's okay that maybe the differentiator is technology.

There's always this approach, if any of you are Mad Men fans you may have seen the episode, this famous story in advertising and marketing wherein the 50's all the cigarettes were tryingto vie for attention and differentiate themselves,but people really didn't see a differencebetween them. Then Lucky Strikes saidin all their ads, in huge letters,"It's toasted."All the cigarettes were toasted.All tobacco was toasted,but they said it in their ads. So people thought, "Wow, it's toasted! That's a difference."You can do that.

Companies do it all the time,where they make up somethingin the manufacturing processthat everybody uses,but they say "ours is this or that"and consumers think it sounds coolor different or good.

My little tip here — and I'm skimming through the topic, unfortunately, otherwise we'd have to spend months here — is that if you're having a hard timefinding one, I would argue, but I sometimes give up in these positioningdevelopment sessions, maybe two of these differentiatorsthat you're completely focused on as your primary message everywhere, then you need to go backto defining your categoryand choosing your target market.You haven't done a good job of that.You have to go back up there.

If you see, there's sort of a balance herethat if you choose a very targeted market wisely,like Heroku did Ruby on Rails,you could get away with a lot of other things. Because you're looking at a very tight knit communitythat you have a lot of say in,that you can become the leader in,that you can go to their conferences,you know their talk,you know all this stuff.You have a lot of credibility there,and you can get away with a lot of the other things.

I'll end with implementation.I talked through a lot of this.Once you finish the positioning exercise,you then take that and you start building your marketing materialsand your go-to-market plan with it.First, your messaging.You define what the features are,benefits, the problem statement, differentiator versus different competitor categories,because there is not always just one competitor category.

Again, just to give Heroku as an example,on one hand they had Engine Yard,which is sort of also a platform-as-a-service. On the other hand they have Slicehost,which is a kind of aRuby-focused low-end hosting thingand then they had Rackspaceand they had all sorts.

What's the positioning differentiationversus the different categories? These are sort of the more advanced messaging thingsyou have to derive after you're donewith the key positioning stuff.

And your value proposition. If any of you have read Jeff Morris' Crossing the Chasm, a very, very classic formatthat has served me well over the years.It's classic and for good reason. We basically take everything we learnedfrom that whole process that I describedand we're saying in the end: It's for our target customer. Java developers who are dissatisfiedwith current gateway app servers.Our product is a Java platform-as-a-servicethat provides instant deploymentor auto-scalability unlike etcetera, etcetera.

So, that again then forces you to focus.It's almost a result of the whole thing.It's not as easy as it looks on this pageto come up with. Of course, like I mentioned before,from that you derive your branding. And by the way, I don't know if this is confusingsometimes for people between branding and positioning.

Branding is the look and feeland the tone of your company or brand.It's not just the design.

Is it playful or professional?Is it old or young?It's those kinds of things which is of course, derived from your positioning.If you're going after a developer demographic,it means certain things for your brandthat you need to think about. Even different groups of Java developersare different from Ruby developers or Python developers.

But the nice thing about it is it lets you livea very, very focused life as a marketing and sales person because you know exactlywhich conferences to go to,which publications to pitch to,which keywords to buy,what sale structure you need,what pricing, what's the general gist of your pricing.All those things.The partnerships and channels.That's a really important onethat we could devote several hours talkingjust on that.

The final thing I want to do is show you,for example, a category — and I'm sorry I'm going to do itto the CircleCI guys because they're here — that I think right now is influx and undefinedand needs to be shaken up, isthe CI category.If you look at the CI market right now,it's very, very fragmented.First of all, there is still a significant portion of companies who don't use CI servers.But let's say that's shrinking quickly.Those who do, it's very dominatedby sort of Hudson/Jenkins,which is the old school, open free, open source stuff.A lot like Selenium was for Sauce as a market. There's no dominant commercial playerin that category.In fact, in any category.

There's old school versus new school, even in the on-premise stuffand there are Cloud players now that are saying, "Yeah, why do CI on-premise?"Blah, blah, blah. Same old Cloud storyor as-a-service story.There are multiple developer communitiesthat are leaning towards different products.Not necessarily for good technical reasons,but you know how it is.Sometimes it's just word-of-mouth. A friend brings a friend and somehowall the Ruby guys end up using this one or that one.And the whole thing is influx.You keep seeing new players popping up.

This is a very, very partial list.Actually, I looked up Wikipedia.Somebody wrote an article that compares CI systems.There is, I think, 42 or something like thatand it's probably not completely updatedbecause I found others that weren't on there. If you just look at the playerswho are Cloud CI players, you could see how fragmented this market is. With very few exceptions,it's very, very difficult to understandwhat the difference is between them. What box do they occupy,what are they expecting me to rememberafter I visit the websiteor try their product?What is different about them?

You see some attempts and one that I would say is fairly differentiatedis CloudBees.CloudBees basically say the classic story. "Hey, you are using Jenkins on-premise. Why use it on-premise?We've got a Cloud for you.We solve all those on-premise problemsthat people have.No software, no configuration,no hardware, no this, no that." We all know the advantages of Cloud — easy pitch,easy differentiations.

Positioning as I said, is what's in the customer's mind, not yours.You have to make a credible positioning statement.To give themselves credibility,they hired the lead Jenkins developers and all that,and they're sort of positioning themselvesas the Jenkins Company. Easy for people to understand and remember.

Then you have a new generation of guyslike Travis, like Circle,like Wercker,Codeship IO,which have a little bit ofa differentiation nuance inthat they're building themselves as continuous deployment versus continuous integration.I'm not sure how significant that isor what it means for that matter,and I'm not sure the customers they're targetingunderstand what it means.If anything, it may be confusing.

There's this whole new generationthat is very, very difficultto find differentiation between them.

At some point, Travis called themselvesGitHub for CI or something like that.But in what way are they GitHub for CI?What does that mean exactly?It was when they went after Open Source,just like GitHub went after Open Sourcein the beginning.Okay, great.That's not good positioningto make customers want to understandhow you're different and want to buy your product. Which customers?Who are the target?Open source guys — okay, they'll succeed at that, they already have.If anything, it actually could be detrimental to them.

Other than that, when they startedbecoming more commercial,if you look at the website,you'll see it's not clear at all.They make some claims about GitHub,so does Circle.It makes some claims about integrationto platform they can deploy to, the types of teststhey can run, all that.There's very little differencebetween the players there. I think one of the reasonsthat's happening is because they're doingexactly that thing I said was very, very difficult to do,which is decide what you're sacrificing.

In my opinion, in order to succeed in this space,these guys are going to have to decide,I am going after this target marketor this is my key differentiator.Even though I do 10 other things,I think better than Travis or better than Circle,this is the one thing that matters to peoplethat makes me different. Or targeting a particular developer groupor a particular use case or something. If you look at their website,you could see all the thingsthey are trying to say,the important features.It's probably coming from one of those categories.Either it's the platforms they deploy, doing the kinds of tests they run,the developer segment they're going after,that sort of thing.It'll be interesting to see how this plays out.

The reason I'm not saying that CloudBees isn't one of the possibilities was that CloudBeesis already the leader.I don't think they are.I don't think,and I don't know this for sure,but I don't think. And "leader" means that a lot of people thinkthey're the leader.I don't think that's the case at all.Plus, they're for a certain group. It's true that it's very Silicon Valley orientedand cutting edge stuff,but Jenkins is very old school stuff,complicated, unfriendly,not cool stuff.There's definitely an opportunity hereto, in the same swoop, say,yeah you need a Cloud CI serviceand you need one that is modern, fresh,simple, easy to use, fun, cool, whatever.Interesting to see how that plays out.

I just want to give you a thought exercisefor you to think about.What would you do if you were one of these players?And I know Paul and the guys are actuallygoing through that thought exercise a lot.

I'm also going to leave you with one last quotethat I like. One of the thingsyou have to remember about positioning isit's not in a vacuum,you have a plan but there's competitorsand there's what customers actually start thinkingand saying about you.My last quote to leave you withbefore the Q&A is this one from Mike Tyson which is really one of my favorite quotes.And he knows a lot about this:

"We all have a plan until we get punched in the mouth."

So that's it.That is to make the point that you want to revisit it, be very aware and listen to what's going on.Is the positioning you think you have a fantasyin your head?What are your competitors doing?They're not going to stay lying down.

By the way, I called this presentation the battle for the customer with developers in mind.It is a battle.Make no mistake about it. People will be aggressive.They will badmouth, not in a vulgar way,but they will very explicitly saywhy they think their product is better,a better approach, better technology,better this, better that.You're not going to avoid that.It is a battle.You're going to get punched in the mouthat some point or another.So, good luck.

I guess we'll open it to questions now.

Q: For startups, is there an order of importance regarding your six rules of position?

A: Well, as I said, and I'll just go back to that really quickly.The six rules aren't really rules.They're sort of six thingsyou're trying to do in your positioning statementand they're pulling you in different directions.Again, to recap it really briefly. In the category decision,are you going highly differentiated?Or strong existing needs?You're actually going in the middle.That was the resegmenting of an existing category. You want to relate itto people's existing need,but say it's fundamentally differentin this way.There you're in the middle.

The second issue of a target audienceor target market, target customer,you're going very extreme to the leftas an early startup.

As I said, I'd rather err to the left being too focused than err to the rightof going after too broad a marketbecause you're limited in resources or nobody has heard of you.You need to be very focused in product developmentand your go-to-market and do that.

The last issue as I said on choosingthat one or two things you want to say. One thing you want to say to the market: "This is why I'm better than that other guythat's like me.This is what makes me different or better.This is why you need me."

If you can't find that one thing,you haven't chosen your category and target well.You need to make those better.

Q: Where do companies struggle the most with a go-to-market strategy?

A: The focus thing. As I said, the pressure. A lot of it is from VC'sbut a lot of it is founder ego. If you start telling them,"You guys should really focus on thisas your go-to-market," and it soundspetty and uninteresting to themand not something that will change the world. They're probably rightthat if that was it,that's where it's going to be.

Again, look at Heroku started as focused on Ruby,became a polyglot PaaS.Same thing with New Relic.Same thing with Salesforce.Even in the name. Look at Salesforce's pick of a name. A. horrible name in the long run,but in the short term,extremely focused on Salesforce automation.It wasn't even CRM.And now, Salesforce does a whole broad rangeof things and so on.

You have to start with that focus.That's where people have the most difficulty.It's hard for them to digestthat they need to do something that narrowin the beginning.

They get feedback from investors and othersthat they shouldn't be doing that.That it's too small.

Q: How do you know when your positioning is too narrow?

A: That is looking at a situation case by case.It's really difficult to get actual dataon markets and all that. Also, that data is usually very unreliable.You can't do surveysbecause you probably won't do them scientificallyand they suck anyway and people don't knowwhat they want.

Even if you look at something simple. Let's say you want to targetby a particular type of developer,by programming language,you have some data on that.You don't want to go after a very obscureprogramming language that nobody uses.If you're going after a job or something like that,that's probably not the way to narrow it down.You probably need to do a coupleof other things to focus the Java market.

I'm working with a startupthat I actually put on the slide,but I didn't get into what they do so much,called Takipi. Look them up.Their product can actually work with Javaand they decided to go after Scalaas their initial,just because of all of those reasonsthat I mentioned. It just makes their life very, very easyand targeted.They know where to find those guys.There are not a lot of thembut enough to start getting feedback,getting signups, doing all that stuff.They can start seeing enough traction with that, but it lets them focus on everything else they're doing.

Q: Should we try to position our business toward a larger market to gain new customers?

A: I'd say so.Do you see a larger vision for it?

Audience: Yes.

Do you agree by the way thatwhat you're doing now is not going to be a big business?A hundred million dollar company in revenues?

Audience: I think we can hit a hundred millionwith the current product.

What's that?I can't hear you well enough.

Audience: I think we can hit a hundred plus with the current product.

With just what you're doing,it's probably true by the way.But would that mean, you would have to have100% market share or something like that?

Audience: 60.

Yeah, that's unlikely. Like I said before, a top tier VCthat's looking for a certain return, orat least a potential for a certain return — that's why they invest for those few potentialsor those few actuals, but they investin a lot of potentials.If you're not even a potential to be that big, then it's not interesting.I probably think you do need a bigger vision.

Frankly, realistically, you probably won't touch itfor three years. You probably need a bigger vision.

"But this is just the beginning.Once we're in there and this group of peopleare using us, here are all the other thingsthat want to be using with us,and dealing with us,and here's additional wayswe can make revenue." You need to think about that vision.

Q: When building a positioning map, how do you pick the axis?

A: That's a pretty long discussion,but I'm going to sum it up with something that may not be particularly helpfulbecause you need to look at it case by case.What do we think matters to people?

On the one hand, trying to sense what is itthat customers are looking forand that distinguishesdifferent buyers.We're going to have to do firstthe segmentation exerciseof what different customer groups look like.

Sometimes it's easy if you're an industrythat analysts sometimes cover itand define a lot of these things,but I wouldn't count on that too much.And in the end, that's a tough one.That is definitely a tough one,but you'll see also how your competitorsstart aligning themselves.You'll start seeing these guys thinkit's important to... I'll give you an example from Sauce Labs, for example.

Everybody in that testing space,is getting into mobile. Functional browser testing.Everybody is getting into mobile.You could see people taking different approachesof mobile.You actually can't put that one a two-by-two.That one has to be what's calleda multidimensional chart that you can also do.There's a technique for that.But a lot of people are saying,you can only do mobile testingwith actual physical devices. Some people say you could do emulators.And some people are saying you need to dowhat's called "in the wild" or actual peoplewalking around with the devices testing them.

You start seeing there's a dimension there.Technically, this one is a tougher oneto put on an actual matrixbecause it's not exactly a continuum.Well, you could put it in a matrix actually, to be clear about that, but you can't do a two-by-two thing.You're starting to see there we started differentiating. This is specifically, by the way, for their mobile stuff.They have other things.

But who are the folks that are doingdifferent kinds of mobile? Cloud, on-premise, that's a sort of categorization. Now, we want to be the leader of,let's say for the sake of this discussion,the leaders in automated testing in the Cloud.Therefore, it's emulators.It's automation, not manual. Cloud, emulators. That's our positioning.We're going to own that space.We're going to own that box.

Q: What tactics can you employ to change your positioning when it's already entrenched in the consumer's mind?

A: I'd say what they're doingand what auto car companies are doing.Look at Toyota.Toyota was considered an affordable, budget brandor affordable middle of the road,not necessarily the cheapestbut they created a new brand called Lexus.That's the same company that sells a lot of the same car, by the way, for a much higher price.

That's a branding thing. Big companies do thatand they have multiple brands.The most famous branding company is Procter & Gamble that have dozens and dozensof product with a completely different nameand you have no idea it's Procter & Gambleand they're all positioned in all sorts of nichesof the market.I think that's also guys like Samsung and all that.

But companies can go upstream and change themselvesand that sort of thing,and that happens all the time.By the way, sometimes they mess themselves upby doing that.I barely remember this, I was a kid. In the '80s there were the cola wars, the Coke versus Pepsi.

Coke started saying, "we are the real thing"or "the original cola." Then Pepsi usedthat strength against them and said,"Well, because you're old.We're the drink of the new generation."Pepsi is the new generationand they started that war. Then Coke ended updoing a whole new Coke thing in the end trying to rebrand itself, and only hurt itself. That's one of the most famous storiesin the history of this stuff.Companies mess that up all the time.

By the way, for example,you could start to see Volvo, they're really losing.That's why I said I think that chartis a little out of datebecause Volvo is already losing their clear "safe, prestige" car positioning.They're not there anymorebecause they've got convertiblesand they've got all these things now.It's really confusing people because they're trying to go younger. But companies do do itand sometimes they do it by changing names,rebranding and all that.Sometimes they can pull it off.

One of the most difficult things to dois reposition yourself in a lot of thoseperception maps for people.Companies do it,but it's much more the mature companiesthat are really established.

A lot of what we're talking aboutamongst startups when we're saying pivots,nobody gives a shit.You don't have a position yet.You could pivot a lot at the very early stageof a startup because nobody pays attention.Maybe a few people, it sounds like a lot to you,but in the broader market context,nobody notices that little move.That's why early-stage startup is a good timeto learn quickly and pivot quicklyand not worry about it too muchbecause you haven't spent a lot onestablishing your position.