It’s not just about the product, stupid. The conventional wisdom for technology-based companies is that developing a product with strong product-market fit is by itself enough to build a compelling business. The reality is that having a great product is necessary, but not sufficient for large-scale success.
A perfect example of this is AppDynamics, who, on the brink of an IPO, got snapped up for $3.7B by Cisco. This was a giant premium over the anticipated IPO valuation. As a board member for nearly six years, I was lucky enough to see firsthand how the team created enormous value so quickly. While the company is basking in the glow of a terrific outcome, one area that is typically overlooked by the press and analysts is go-to-market (GTM) execution. The efficacy of AppDynamics’ GTM efforts created a competitive advantage, and as a result the company was growing its business far faster than any of its competitors. This commitment to GTM excellence was an important reason for the outsized outcome.
Obviously, AppDynamics got a lot of things right. First, they had a passionate and talented founder who had the foresight to see a massive opportunity by enabling businesses to monitor and manage modern, distributed applications on-premise and in the cloud. Second, they had a superb engineering team that delivered a category-defining product to solve that operational challenge. Third, they assembled a high quality group of investors who provided the necessary capital to allow the company to invest aggressively in the business. But the team understood this was just not enough.
To give you a sense of the company’s journey, I highly recommend this LinkedIn post from my good friend and the founder of AppDynamics, Jyoti Bansal. He tells the story of growth from a one-person startup to a billion dollar business. As part of that journey, he mentions an important conversation we had over breakfast in 2011. We talked about a lot, but most importantly we discussed other ways to look at creating a competitive advantage. He writes:
That [conversation] inspired me to make that the next big company milestone. I resolved to learn everything I could about the art of enterprise software sales. We invested heavily in bringing some of the best enterprise software sales management into the company and over time built a highly skilled and methodical enterprise sales force. Meeting that milestone was key to our continued hyper growth for many years to come.
By that time, I had already been involved with a number of tech companies as a founder, leader and investor. So, I had seen the importance of go-to-market execution, but getting to witness the vigor and focus that Jyoti and the team put into making it a priority for AppDynamics was inspiring, and it has helped reinforce that philosophy for me in my current role as CEO at MongoDB.
It is blindingly obvious to say your company needs to focus on marketing and sales. But my point is: that’s simply not enough. Those functions need to become every bit as outstanding as your product. Think about it like this: if your major competitor, who probably has a bigger brand and more resources than you, came out with a product that was nearly as good as yours, how would you be able to compete?
When I look back at the breakfast I had with Jyoti all those years ago, I’m amazed at how far that company has come. By marrying an awesome product with a fanaticism for GTM excellence, they were able to build a company that was, as of last week, worth nearly $4 billion. If you want to be a decent company, strong product execution might do, but if you want to be an outstanding company, it’s impossible to get there without making GTM a real competitive advantage for your business.
Dev Ittycheria is on the board of AppDynamics
