Challenges in working with Industry Analysts, when you are trying to create a new category.

 

Having been the CMO of multiple startups (with successful exits), and more recently, providing consulting advice to many more over the past 15 years, I am often asked what is the best way to work with industry analysts?

As a young company with next-generation technology, you are trying to be the 2.0 player in your space. To get there, you are trying to redefine an existing industry category or create a new category that represents your solutions. Chasing a position in an industry analyst's leaders quadrants or waves in the existing industry category will not give you the results you desire.  At best you will be placed as a niche player. Why?  To understand how industry analysts define categories, you must look at the world from their perspective. 

• For starters, an analyst will define the footprint of the solution category to be large enough, so that they can build a ‘financially viable practice’ around it.  So, you should expect to find several established vendors in the solution category you are likely to be placed in, which conflicts with your objective of being positioned in a new niche category.

• Analysts formulate a large part of their hypothesis on market trends based on their client inquiries - what problems are their clients looking to solve, which vendors they are evaluating, how much budget they are allocating to solve these problems, what trade-offs they would like to consider etc.  Most of the paying clients of an analyst practice are likely to be mid-sized to large enterprises.  While a few of these customers may be early adopters, a large majority of them statistically fall in the mainstream category – early majority and late majority.  To stay ahead of their clients but not be on the bleeding edge, the analysts are likely to formulate hypothesis that reflects what the early majority is looking for. If you are trying to invent a new category with your solution or redefine an existing category, you need to be ahead of the early majority. So, aligning your product and go-to-market strategy with what analysts are saying about the category would not help you achieve your goals.

• As I mentioned earlier, most of the paying customers of analysts tend to be conservative (upper mid-sized to large companies and not early adopters). Hence, financial viability of the vendors, as well as successful proof points of their technology is an important vendor selection criterion for these customers.  As a result, most analysts use a revenue cutoff or size of customer base in that solution category to exclude vendors who do not fit that profile. If you are a young vendor with new cutting-edge technology that is challenging the status quo, you may not make it to the analyst reports due to their revenue cut-off or installed base requirements.

 So, getting analysts to create a new category, where you can be placed in the top-right quadrant will be challenging. But these analysts will also likely cover some ‘cool’ upstart vendors, or mention them as a side-bar in their reports, where you should try to get mentions.  Also getting into the Niche category in their waves and leader quadrants can also pay dividends.  This is because you are likely targeting early adopters and not the middle majority, and those prospects are likely to evaluate vendors listed in the niche category.  Pairing these analyst mentions with customer stories and blog posts that highlight your industry-changing solution capabilities can get you the leverage you need from your industry analyst investments.