Part I: BlueArc’s challenge to get past the low-hanging fruit

By Francis Moran and Leo Valiquette

Last month, BlueArc Corp., a 13-year-old maker of network storage systems based in California, was acquired by Hitachi Data Systems for a reported $600 million.

BlueArc’s business was networked attached storage (NAS), the kind of high-end storage system for managing unstructured data — files, spreadsheets, digital content and images — in high-performance computing applications. However, the company struggled for years to achieve profitability despite periods of strong revenue growth.

“BlueArc, while it had received funding somewhere north of $200 million, couldn’t dominate the NAS market on its own. It needed a partner. With the acquisition by Hitachi and its intellectual property girth, it has nailed that market down,” InformationWeek’s Deni Connor wrote shortly after the deal was announced.

Despite its challenges in achieving profitability, BlueArc had established itself in a number of key industry sectors — health and life sciences, media and entertainment, telecommunications, energy and e-discovery. Its key competitive advantage from a technology standpoint was a file system built on custom chips, which were able to maintain a performance advantage over competing Intel technology at a price point that kept customers coming, Paul Madera, a managing director with Meritech Capital Partners, told the Wall Street Journal.

But it takes much more than the wow factor of the technology to achieve market penetration, especially in key verticals with unique needs and pain points. We caught up with Ken Rosen, a corporate strategy and marketing consultant with Performance Works who worked with the Blue Arc team in the mid-2000s, about how the company learned to see the world from the perspective of its potential customers.

Technical superiority vs. business value

Rosen was hired as a consultant in 2004 on the recommendation of Apax Partners, one of BlueArc’s investors. By that point, six years after it was founded, the company’s early rapid growth based on technical superiority had plateaued.

“The founders had started the company with a technically creative idea, putting algorithms in hardware rather than software,” Rosen said. “As a startup in the late ’90s when they were seen as hot and up and coming, they got people on their side the way many small companies did, by explaining their technical superiority and selling to people who understood and craved it.”

These early markets included research and hosting and a variety of horizontal applications, where customers could see for themselves how BlueArc’s technology would provide them with a business advantage. This provided BlueArc with its initial market traction among companies that had a clear pain point and were actively looking for a solution.

“This was the key difference between marketing and sales in this era and later eras in the growth path of the company,” Rosen said. “The customer needing to connect technology to business value versus BlueArc understanding the customers’ business well enough to highlight business value.”

In other words, BlueArc’s initial sales and marketing model relied on prospects being able to figure out for themselves how and why the product would be a fit for them. As a result, the company had trouble resonating with the next tier of potential customers – those companies that were aware they had a pain, but were not actively looking for a solution or didn’t know a solution was available. (We call these the second and third buckets in our three buckets of customer segmentation.)

From Rosen’s perspective, it wasn’t that the BlueArc team had dropped the ball; they simply realized it was time to evolve their marketing strategy in accordance with the current growth phase of the company. It was time to change the message to position the product in terms of the market’s need.

Finding the pain

After Rosen joined the planning effort, the team took a strategic look at BlueArc’s potential target markets and narrowed it down to 14. Then it was time to pound the pavement.

“I believe in primary research,” Rosen said. “If you talk to decision makers, ask good questions and don’t try and sell them something, they will tell you their pain points … they will even tell you how they want you to sell to them. We’ve found the source of ‘truth’ – where ‘truth’ is the best path to growth – is primary research 99 percent of the time.”

For example, in the pharmaceutical industry, BlueArc learned that the scientists and researchers typically have the power to overrule the IT department when a different path will drive better, more productive science. Talking to the IT guys about the merits of high-performance storage was often a wasted effort because, too often, IT is evaluated on maintaining standards and reducing vendors rather than the science of new drug discovery. What BlueArc had to do was get the ear of the scientists and talk about how the technology would help with what mattered most to them – accelerating drug discovery and shortening time to market.

“We started in IT and on the science side to test both directions for priorities which were a match with the differentiation of BlueArc’s offering,” Rosen said. “That is, if BlueArc were a commodity provider of standard equipment, the right point person might have been in IT. But given its area of differentiation, the decision maker who cared was a different person with very different priorities.”

Rosen beat the bushes in his own network, mined BlueArc’s sales pipeline and even purchased lists of executives from companies that typically fill rooms with executives for focus groups. Instead of focus groups, however, BlueArc simply asked for one-hour phone calls. The goal was to have frank conversations with decision makers within the industry who were willing to discuss issues critical to their success.

Don’t sell, just talk

“Executives often wanted to keep talking at the end of these calls,” Rosen said. “You know discussions are going well when the person interviewed thanks you for helping them look at the own needs and operations in new ways. It means you are reaching the heart of how they think about their own success.”

Most important, at this stage, BlueArc was talking to its target market without trying to sell anything.

The company then used this intelligence to educate its sales team with direct, in-person training sessions.

BlueArc repeated the same process in its other target industries. In 2004 and 2005 it focused on animation, pharmaceutical and biotech drug discovery and Internet services, then expanded into the oil and gas exploration and design and simulation markets in 2006 and 2007.

How did BlueArc execute on what it had learned from this primary research and what was the outcome? Next week we will reveal the results and share Rosen’s takeaways.

This is the first article in a continuing series that will feature case studies and anecdotal stories from entrepreneurs, consultants and veteran marketers about their efforts to develop, implement and measure marketing programs to bring technology to market and grow market share. We invite your feedback.

Francis Moran
Francis Moran
Francis Moran is principal of Francis Moran & Associates, a consultancy that provides business-to-business technology ventures with the strategic counsel required to make their innovations successful in a highly competitive marketplace. Francis can be reached at [email protected].

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