June 5, 2019 | Portfolio

How to Create and Secure a Category

Costanoa Team

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Costanoa Team

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A question we hear a lot of B2B startups ask is “What is necessary for us to lead our category?” It can take many forms, but there are many great lessons to learn from Alation, which has been credited with creating the data catalog category by Forrester Research and named a leader in Gartner Magic Quadrant for Metadata Management Solutions for the past two years. In this exclusive profile, Alation CEO Satyen Sangani and SVP of Marketing Stephanie McReynolds share the top three lessons they learned by being the first to bring a data catalog to market.

  • You can only create categories under the right conditions. Not all markets are right for category creation. Technology innovation alone is not sufficient. To succeed, you need to deliver clear and substantial business value that will sustain category growth. This is often validated by seeing multiple competitors entering the space.
  • It’s critical to partner with influencers. It’s difficult to define a category by yourself. Instead, convince influencers to read the signals of an emerging space — and let them “discover” the category.
  • You need to flip the script on marketing. Rather than leading with your unique differentiators, problem you solve first and foremost, educate potential customers on why there’s a new category emerging, and then explain why you’re the best choice.

The growth of the enterprise data catalogs have been impressively fast. The name dates only to September 2015, but the category now has nearly 30 different competitors and its own Forrester Wave report.

The leader in the field, however, is Redwood City-based Alation. The six-year-old startup not only has the most production customers of any data catalog, it was also largely responsible for naming and creating the category itself.

“You have two ways to build a company,” explains co-founder and CEO Satyen Sangani. “Either you can re-segment an existing market, building a better or cheaper version of something, or you can build and name something new, a product that no one knows they need.”

The conditions for definition

While every startup would like to create its own category, the time and business conditions are not always right. According to Alation SVP of Marketing Stephanie McReynolds, two major things determine if you have the potential or not. The first, surprisingly, is that you need to have competitors offering similar solutions.

“A big mistake,” she says, “is to define a category of one. Market categories thrive on competition. If you’re the only vendor making money in a space, it may mean that the category is not sustainable. Early on, there were around five other smaller players offering products similar to the Alation Data Catalog, they may not have been doing as well as us, but they were out there.”

The second major element is that the category needs to deliver a significant increase in business value for customers — and data catalogs did. If you’re curious, it’s best to think of data catalogs as a combination of Google and Yelp for data. They continually crawl through logs of analytical queries, automatically generating recommendations that make it easier for analysts to find and understand the nuances of the data that drive deep analytic insights. From the early days, Alation’s customers were seeing a jump of anywhere from 20–40% in the productivity of their data analysts. This was a good indication the company had the potential to create a category.

To do so, however, Alation needed a name for it. The company had launched its product as a “data accessibility platform,” which was technically accurate but hardly inspiring. Instead, Sangani and McReynolds looked for something simpler and found it in “catalog.” The term under sold what Alation did, but as Sangani points out, this is a good thing. The most famous example is that “phone” downplays what iPhones do, but that ultimately worked out surprisingly well for Apple.

“Catalog” had other advantages. In a field consumed with large, polysyllabic names, it was simple and familiar. It emphasized the value the software delivered because people knew what catalogs were and could easily imagine one would be useful. And it evoked emotions with positive associations. Even in a digital age, people still liked browsing through catalogs.

“As humans, we’re drawn to collections and browsing catalogs. Just as you used to look at all the toys in the Sears catalog as a child, making a wish list,” McReynolds says. “analysts today experience a similar excitement in the discovery of new tables, queries and data sets.”

Partnering with influencers

Now it was time to get the world to agree, and here Alation knew that it couldn’t rely on itself alone. To create a category, you need to get smart people in the industry to agree with you. In enterprise software, that means influencers and especially industry analysts so the team began a program of outreach and education.

Key to their efforts was content, and here Alation stressed quality over quantity. The company relied on a number of small scale studies to build insight around buying audiences active in the category. Its team then provided industry analysts and others with exclusive insight into market trends and encouraged them to write their own thoughts that built on the same seeds of insight.

They also kept their ears on the ground to understand what terminology and analogies were catching on. At events, trade shows, and even sales meetings, Alation paid close attention to what words resonated with what audiences, and which ones weren’t getting traction.

“We tried to gather as much anecdotal feedback as we could,” says McReynolds. “We needed to know what we should talk about and not — and how much support we’d get in the marketplace. We did a lot of active listening early on.”

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““We needed to know what we should talk about and not — and how much support we’d get in the marketplace. We did a lot of active listening early on.” Stephanie McReynolds

Marketing through education

Typically, when marketing a software product, you lead with differentiation. Market expectations tend to be set, and your only task is to show why your product is the best option. But while Alation did have competitors, the company’s real challenge was explaining why you might need a data catalog in the first place.

“We typically led off with a description of the problem Alation solved, which was something everyone could relate to,” says McReynolds. “Then we talked about data catalogs generally and how they solved that problem. And finally, we would talk about our own software.”

In doing so, Alation found itself creating a lot of its own language around data. A good example is “tribal knowledge,” or the knowledge that before a data catalog was often shared informally, through interactions amongst members of a data tribe. This is knowledge that now the software collects and makes available to every analyst.

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Defending your space

The company knew it was gaining traction when its competitors started calling themselves data catalogs and talking about tribal knowledge in 2016. Then in 2017, Forrester Wave released a report on Machine Learning Data Catalogs, and it became clear that Alation’s efforts to create a category had succeeded.

Of course, the challenge isn’t over, and not by a long shot. “Once you have a category,” says Sangani, “there is always a rush to fill it. Where we only had a handful of competitors at first, now we have 20 or 30, with more every month, each trying to pull the category in their own direction.”

Nonetheless, Alation is reaping the often-excellent rewards of successful category creation. The company has seen four straight years of triple-digit growth revenue growth, with more than 100 production customers, including Daimler, eBay, GoDaddy, Liberty Mutual Insurance, Munich Re, and Pfizer. It has clear leadership in both sales and mindshare, and great prospects moving forward.

“It was a high risk, high reward strategy,” says Sangani, “but in the end, it’s been worth it.”


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