This Sunday we bring you a book review of Under The Radar by Robert Young. Written by the Founder & CEO of Red Hat, Robert Young chronicles the dramatic rise of the open-source movement and the emergence of Linux. If you don’t know anything about Red Hat or the open source movement this book is a good place to start. In addition, the specifics are timely given the recent announcement by IBM that they will acquire Red Hat for $34B. This deal represents the largest software acquisition ever.
We give the book a 4.5 out of 5.0. The book includes a ton of anecdotes about how Young persuaded giants such as Intel and Dell to invest in Red Hat and the “bizarre notion” that his company could topple Microsoft, or at least provide a strong alternative. It was written in 1999 but still provides a ton of insight and history around the open source movement and growth of Red Hat. We wish the book had spent more time in discussing some of the things that didn’t work as well as in general some more key learnings from Robert Young. Below were a few key takeaways from our book review of Under The Radar.
1. Learn From Those Who Say “No” To Your Product. To figure out Red Hat’s business model, Robert Young spent a great deal of energy learning from those who didn’t adopt Linux from 1995 to 1999. What caused them to not sign up? Did it have something to do with the product? The process to buy? Through this process, Young discovered Linux was often too complex for non-adopters. For example, more than 600 separate programs made up Linux. Who on the customer’s staff would maintain them all, and who would keep track of each one’s updates and changes? Using this feedback was one of the key turning points and helped Red Hat really figure out how to productize their offering. Learning from those who churn or are “closed-lost” can sometimes be the most helpful form of product development.
2. User Level Growth Can Sometimes Win Over Manager Level Growth. One of the more interesting takeaways from our book review of Under The Radar is that Red Hat is really one of the first companies to “own” the user level growth model from a sales and marketing standpoint. Looking at technology spend in medium and large corporations, the company built a bottoms up or grass-roots approach and infiltrated large companies through the individual users. There are countless examples in the book of developers, systems administrators, and engineers who use budget for various projects to spin up Red Hat Linux. Sometimes Young would be at a conference pitching a CTO of a F500 company who balked at the technology and he would go back and find out there were ten engineers already using the product in that same company. There are tons of history lessons here for the next generation of SaaS founders focused on infrastructure.
3. In Commodity Markets Make Sure You Market To Own The Category. Another interesting takeaway from our book review of Under The Radar is that Young and his team looked at commodity industries and began to recognize some commonalities. All leading companies selling commodity products, including bottled water (Perrier or Evian), the soap business (Tide), or the tomato paste business (Heinz), base their marketing strategies on the building of strong brands. These brands must stand for quality, consistency, and reliability. Heinz does not own the market because Heinz tastes better. Rather, Heinz dominates the market because they have been able to define the taste of ketchup in the mind of ketchup consumers. Red Hat excelled at marketing and spent a considerable amount on trade shows, user conferences, web marketing (remember this is 1999), and other areas to own this category. They largely succeeded. We heard about the success of Salesforce around marketing their early product in a prior book review. Red Hat shares a lot of the same tactics and approaches.
If you liked “Sunday B2B Book Review: Under The Radar by Robert Young” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog.