Aaron Levie on How Box Competed with Giants and Won
What began as a crazy idea for a consumer storage product in the cloud has evolved into one of the fastest growing enterprise services on the planet. As CEO Aaron Levie casually puts it, “In 2007, we decided to focus on the enterprise. Five years later, that's what we do. We have a few hundred people down in Los Altos just trying to build a different kind of enterprise start up.” In this First Round Town Hall talk, Levie shares with founders what he has learned while building Box for the enterprise and strategies for winning in competitive marketplaces.
Building Enterprise Software Like a Consumer Product
In 2006, Box began as a consumer product. Levie shares, “It was meant to be a solution that was agnostic to the use case, [and] we wanted to take it everywhere.“ But Levie and his team quickly made the very ‘unsexy’ (remember, this was 2007 when SharePoint was considered innovative) decision to focus on the enterprise. Levie saw that rivals like Windows Live Mesh and Google Drive were going to make competing in the consumer storage market like climbing into the Octagon for a wrestling match with at least two 800-pound primates — a brutal brawl against some of the largest tech companies in the world.
The major competitors could subsidize the growth of their storage business with other, unrelated business lines. He also saw how other storage-related businesses targeted at consumers seemed to falter on their business models and couldn’t deliver the right set of features that were standard in the enterprise.
We started when we were 20 years old. So I didn't really know what an enterprise was.
Like so many founders, Levie had one keen early insight that shaped the company’s strategy. When making this original shift to enterprise, he saw that very few enterprise software companies focused on the end users of their products. Most were only focused on the CIO or Head of IT. The consumerization of IT is now obviously a buzzword, but like so many big ideas, at the time entrenched players largely ridiculed it. Most believed that without a massive sales force selling directly into the office of the CIO, success would be impossible — it was how all-modern enterprise software was sold.
Levie elaborated, “We saw that the big opportunity was to take the exact same concepts that consumer applications use as their advantages and their focal points and bring [those] to the enterprise. We're at a point where the inverse of the traditional enterprise players are companies that build and operate and work like consumer companies but just happen to sell for the enterprise, so we said, instead of having a really, really big sales force early on, we'll use our user base as a way to get into these organizations. Instead of having to go call these companies and ask them to buy more seats, we'll have the end users actually share the service with other people in the company, to make it more viral than normal. [And] we'll make our design much more focused around user experience than about how do we throw in a thousand features into the UI.”
How to Compete With Giants
Enterprise storage is a classic example of an incredibly crowded marketplace with entrenched leaders. To win, Levie turned to a process that Clayton Christensen calls RPV or Resources, Process and Values. If you understand your competitors’ RPVs, then you’ll understand where your company’s advantages lie and where you should compete.
If you think about Oracle, IBM, or Microsoft, their resources are their sales people and their deep R&D methods. These processes involve Levie knew he couldn’t compete with the big guys on the basis of sales force or pure R&D because they all had significantly more resources at their disposal than he ever would. However, he could compete by being more agile (a process innovation) and focusing on what they ignored: user experience (value).
Levie brought up the example of Microsoft SharePoint, a similar product at the time Box was founded, saying, “If you look at SharePoint…has anybody ever had to actually interact with SharePoint? Okay, so your lifespan will be about five years less than everybody else… these products were horrible. No offense to anyone that worked at Microsoft. So we just said we'll build software different from them.”
To beat your competition you need to understand their motivations and approach to the market, and look for opportunities to win by playing in a way they’re not structurally set up to play — engineering methodologies that take multiple years to pay off. They only want to sell their technologies at high price points while earning massive profits.