The Multi-Cloud Opportunity: How Strata Identity Identified and Validated Their Market
Throughout his career, Eric Olden has built companies around major technological shifts. In a recent Category Visionaries episode, he shared how Strata Identity identified and validated the multi-cloud opportunity that would become their foundation.
Pattern Recognition
“In the nineties, it was the shift to the web. In 2006, when I started my second company, simplified, it was the big shift to software as a service. And now with my current company here, since 2019, it’s all been about the move to multi cloud,” Eric explains.
This pattern recognition helped identify the opportunity, but validating it required a methodical approach.
The Year-Long Customer Development Process
Rather than rushing to build, Strata spent almost a year interviewing potential customers. “Get your hypothesis as vetted and validated as you can and document it,” Eric advises. “Through those notes of customer development, that’s when you can start to find what you’re going to build.”
Validating Problem Priority
The team developed a specific framework for validating market opportunities:
- Priority Check: “When you’re talking to them, the question is, okay, of all the things that you’re doing without me telling you what I want you to say, what are the top three things that you’re concerned with right now?”
- Investment Test: “Would you give me more time and pilot this? And if you were able to be successful on a pilot, would you purchase that?”
- Value Assessment: “Is this a $1000 problem or a million dollar problem?”
The ROI Validation
To quantify the opportunity, Strata worked with Forrester to conduct independent research. The results were compelling: “Typically for every hundred applications that you secure with orchestration, you’re going to save anywhere from seven point five to fifteen million dollars.”
This ROI validation was crucial because, as Eric notes, “the alternative is to do things by hand and that costs tens of millions of dollars.”
Market Research Evolution
Strata’s market research began as customer interviews but evolved into formal research through their “State of Multi-Cloud” report. This annual study helps track changing priorities: “What was last year not as important is now the most important and vice versa.”
Keeping Costs Low During Validation
A key principle during market validation was maintaining minimal burn rate. “It’s important to keep the company in the burn rate really small because you don’t want to short circuit anything there because it’s usually after a lot of discussion and analysis and conversations that you land on the thing that your first generation is going to be,” Eric explains.
The “Dirty Dozen” Framework
To structure their validation process, Strata used what Eric calls the “dirty dozen” framework – focusing on twelve early adopters. “The reason it’s dirty is that you’re dealing with customers that are really unclear about what they want because they’ve never seen this before.”
The goal isn’t to please all twelve, but to find the six to eight who “have the same problem and they’re all happy with the same solution.”
2024 Market Evolution
As the market matures, Strata’s approach evolves: “The product expands, but our message contracts. And so I like to think about it as market the vision and sell the product.”
This evolution reflects a deeper understanding of their market opportunity: “We’ve really oriented our go to market message around a very concrete, tangible set of value propositions, solving very tactical things.”
For B2B founders looking to identify and validate market opportunities, Strata’s approach offers several key lessons:
- Look for major technological shifts
- Invest time in customer development before building
- Validate both problem priority and willingness to pay
- Keep burn rate low during validation
- Focus on finding a core group of customers with aligned needs
Most importantly, recognize that proper market validation takes time – but it’s an investment that pays dividends throughout a company’s journey.