I write a lot about different B2B software solutions and try to provide lots to "chew on" about the good and not-so-good aspects of software offerings in different solution spaces. I constantly look at new thinking and work out my own thoughts and recommendations. Beyond the solutions themselves, I also explore other aspects of providing software solutions: new directions, challenges, internal and external factors, and especially a strong focus on the Customer. Making software that benefits the Customer means creating solutions that work the way customers / users work, adopting more effective customer-focused approaches for marketing and selling, and changing from being tech-centric to solving real customer problems. I suppose I want to help software vendors go into "hype rehab", to be able to do things for real, particularly from the customer perspective.
What I write comes from my direct experience working with software vendors, customers and end users. How I gain that experience comes from what I do for a living: consulting with and advising all kinds of B2B software vendors on product strategy, better sales and go-to-market strategies, the right target markets and customer segments. I want to help vendors create software that really benefits customers and end users, and performs well (you may say I'm a dreamer, but I'm not the only one…).
Over the years I've worked with many different kinds of customers, both for software solutions that I've developed and for packaged solutions from vendors. I respect customers and end users – I also know that customers aren't always right, and don't always have clear motives when it comes to acquiring software. As a solo consultant, I work mostly with startups, and small and mid-sized vendors. I like the mindset of these not-so-large companies and the energy most of them bring to creating software -- but not all of these companies fully understand how to function well as a software vendor that meets customer needs. Just like large software vendors, these companies can get lost in the technology and lose sight of what really matters – if you're in the business of selling software.
Software Vendor Strategy
Software technology vendors are challenged more than ever to evolve if they are to survive – this may be even more the case for smaller vendors. Larger traditional software vendors are being challenged by SaaS and cloud offerings, and by customer dissatisfaction with bloated, overpriced monolithic software stacks. Evolutionary pressures are also hitting the software startup world, although many regional start-up communities aren't prepared to recognize such pressures. New ways are emerging for creating new companies that don't adhere to the "old school" startup way of thinking.
Another segment of the software industry that is on the rise relates to companies that re-invent themselves. As companies re-invent themselves, especially smaller vendors, benefits can come from thinking somewhat like a startup, especially when creating a new vision for the company. But these re-inventing companies can also think too much from the startup perspective and forget that they are in a different category with different advantages and challenges.
There are a lot of small software companies that are starting from scratch. But these companies may not exactly fit the "classic" definition of a startup either. Certain "old school" VCs and entrepreneurs only consider a startup to be a company intended for rapid growth through highly disruptive services or solutions intended for a large market, and frequently, to be sold as soon as possible. With today's economic volatility this approach has less effectiveness. The approach is also riddled with subjectivity and ambiguity, and gives rise to endless - and usually pointless - debates about whether certain companies are truly startups.
Whether reinventing or starting from scratch, this question needs to be asked: are your efforts meant to result in flipping the basic company as soon as possible, or do you want to grow into something more? If there are investors, they may push for a quick sale so they can reap their rewards sooner rather than later. So the company should decide early on if the core strategy includes evolution into a mature company. That decision impacts: who should be selected as backers, how to handle employees, who the real target markets and customers are, and many other critical aspects of running a software company.
Focus on Customer for Real Competitive Differentiation
It still eludes many companies (startups, starting from scratch, re-inventing, or well-established) that the "competitive" factors that matter most when it comes to winning and keeping customers center on: solving customer problems; providing ease-of-use for the tasks to be done; creating software that works the way customers work; and ending up with a product that is cost-effective to buy and maintain. A significant competitive edge can come from delivering on the promise: our software will help you and your business in real ways (and won't be a pain to use).
I worked recently with two smaller software vendors: one in the process of re-inventing itself, and one that has been "starting from scratch"…for three years. For this article, it doesn't matter what kind of software solutions they offer, although both are working on SaaS offerings. What matters is how they are going about building their businesses, and whether what they are doing will be effective or not. The two vendors are taking very different approaches to how they are going to market and how they consider the Customer in the equation. It's not a question of which approach is "better" – it's a question of figuring out strategies that will work, and why a lack of strategy usually goes badly.
Re-Inventing A Software Company – Lots of Hard Work
My client, the re-inventing vendor, is making a big and very deliberate transition from providing on-premises software to building a fresh SaaS version that truly takes advantage of the SaaS solution delivery model and the notion that software should work the way customers work. A lot of the work that we have done together centers on the fact that going SaaS will transform almost every aspect of the business, from business model to pricing to marketing and sales – and particularly how customers interact with the software and the company.
These following points are at the heart of how my client is going forward:
A majority of respondents (53 percent) say they have reinvented their business "to stay afloat or competitive." This strategy is reinforced in the current competitive climate that 38 percent of respondents describe as "extremely intense."
"Small-business owners are especially adept at reinvention – whether because of obstacles or new visions for growth," Veltre said. "Change is never easy, but neither is starting and running a business. We see our small-business clients embracing change and reinventing themselves to secure a rewarding future."
As part of the reinvention process, small-business owners say they focused on overhauling the products or services they offered (47 percent).
If small-business owners aren't reinventing their business, they stay sharp and evolve to keep up with the competition. The following steps were cited as ways they kept business thriving:
88 percent kept updated and knowledgeable about their field
70 percent increased face time with customers
It has been exciting to see a company that really understands its original software business now embrace the SaaS platform and build an offering that takes advantage of what works best for customer-focused SaaS, particularly around clean design and usability from the end user perspective. It's also real work to alter management mindsets and help the company realize that it is leaping into a whole new world. The change to SaaS will likely lead this company to increased innovation in what it does for customers.
There seem to be a lot of articles about how traditional vendors often fail at creating SaaS offerings but these articles are generally talking about large companies who obviously come with a lot baggage. Smaller vendors are usually more agile and open to new thinking. They are much more in touch with their customers, and have the real-world experience to avoid certain pitfalls and to hard-earned credibility to a new SaaS solutions platform
To a certain extent, having a startup mindset is useful, especially when taking on a new solution delivery model. The mindset is necessary to be strongly open to change and some very new concepts of doing business. But the re-inventing company must keep in mind that it is not starting over. The company needs to see that many years of experience, lessons learned and a diverse customer base are invaluable, and catapults the re-inventing well beyond a "startup".
This re-inventing company is hungry for real intelligence and insight to be able to formulate good strategies, to understand the new SaaS paradigm, to know how to market to customers, and who those new customers may be. Getting a good feel for the vendor landscape is also essential. For SaaS, web presence and pull marketing escalate in importance; well-informed and well-crafted strategies and tactical implementations for marketing and sales must be based on the right intelligence.
Brand identity is a focus for the re-inventing company, not for competing against larger vendors, but to make clear to customers what the company does, that it does it well and can be counted on as a partner. This company is crafting core concepts around the customer and end user. As to lessons learned that are being applied to the SaaS offering: which current solutions have done well; what customers have indicated they liked and didn't like; unexpected use cases from customer implementations that open doors to niche solutions.
This company has a real commitment to customers and solving problems. This company is learning how to see from the customer perspective. As a step in that direction, they are revamping the current website not only to accommodate a SaaS offering, but to make sure that the website responds to the way customers want to navigate it.
"Starting From Scratch" Gets Off on the Wrong Foot – and Stays There
Unfortunately the client that started from scratch is not an inspirational story, but more a cautionary tale. Both from my brief advisory tenure and what I continue to know about the company, this is a company with no focus and no strategy, and apparently no concern that these two essential ingredients are missing from the plan (if there is a plan). "Starting from scratch" is entering its fourth year of existence.
What's the problem? "Starting from scratch" seems to be a vanity creation of the founder, with decisions running on his ego. The founder had previous experience with starting and growing a couple of other small software companies, and has elevated himself to "I can do no wrong". Generally rude and self-involved whether dealing with employees or outside consultants, this founder is a control freak. The final fatal flaws: changing direction constantly, no cohesive vision, and no ability to stick with a solution direction long enough to develop it. These are not pivots – there's simply not enough structure in place to pivot from. More like meanderings.
On face value there is a good idea for the SaaS offering. But it has never been given enough time for definitive development and execution. In fact, very little has been built. A rather large list of vaporware inhabits the corporate website, with a hidden "we will build it if they come" agenda. The company basically waits for a single customer request something that will then be developed as the next app. The flaw of this approach - creating an app for a market of one - should be obvious. Beyond that, the "model" doesn't scale. All the company has is a series of one-off custom apps, just like a developer for hire would do. Brief flights responding to "whim" do not add up to a long term strategy.
Remember, this is a SaaS offering. But there is very little available for subscription. Kind of defeats the purpose. There is no process of testing apps with potential customers for feedback, since there are no apps to test. There is little research on target markets, customer roles and problems to be solved – simply because the founder already "knows" what should be done. Yep.
Marketing efforts are of course scattershot, following the lead of the founder. For example, efforts related to social media are not part of an overall marketing strategy, but are random self-promoting blasts that totally miss the opportunity for interaction on social media. There's no on-going plan, no engagement with potential customers, little creation of useful or high quality content. Just a lot of disjointed activity with no overriding purpose.
With no brand identity or real goals for the development of the offering, this company is playing at business. The founder has failed to define a real solution space, target markets/customers, go-to-market strategy, a business model – and then stick to them long enough to get anything done. For "starting from scratch", a real customer focus is non-existent as far as defining target markets and problems to solve, and then providing a well-developed SaaS offering to do it. Surprisingly this company has VC backers. These backers are in the game because of the founder's previous companies.
There wasn't much that I could do for this company simply because they don't understand what a mess they are in. They had no interest in comprehensive market and customer intelligence, so I simply completed the requested tactical project for them – the end.
Devil's Advocate and Tough Love
While my consulting practice officially involves terms like market intelligence, future trends and customer strategy, I frequently think the better phrase is "Devil's Advocate". Most companies, whether re-invented, starting from scratch or a "classic" startup, need a devil's advocate. Partly to counteract all that kool aid drinking so many software companies tend to do. The devil's advocate is needed to dish out a certain amount of 'tough love' to help companies find and navigate a good path for growth and success.
Unfortunately many new companies, or re-inventing ones, rarely budget for in-depth assessments for determining the right strategies for products, go-to-market, customers, and vendor landscapes. These companies need outside perspectives to determine if the company is truly solving customer problems, providing a product that customers want to use, or even for understanding whether the software has value for any customers.
A devil's advocate asks all of the "so what" questions: does the solution matter, is the offering really a solution, who would buy it and why. The devil's advocate helps companies keep an eye on the future, understand the present, and keep looking in the rear view mirror to catch a glimpse of which unexpected vendor may be their next main competitor. B2B software vendors have specialized risks and competitive factors. All too often these vendors are too rooted in the day-to-day to look in any other direction, no matter what stage of development the company is in. Keeping pace with change is critical; change will be constant and sometimes brutal.
Those companies who ignore the coaching of the Devil's Advocate, or don't think they need one, many times achieve these negative distinctions:
- Lack of real innovation – more "me too" masquerading as "new tech"
- Short-sighted approach for employees – now and for future direction
- Too enamored of the tech itself – no sense of why a customer would use it
- No real markets or customers
- Failure to continuously monitor solution space, markets, customers, other vendors
- Failure to constantly test strategies for change, good and bad, and then figure out what actions to take
To prevent bad outcomes, software vendors of any size need real intelligence, real analysis and realistic strategies.
About the author: Julie Hunt understands and sees the overlap and convergence of many business processes and software solutions that once were thought of as "separate" – and how this impacts both software Vendors and Buyers, as well as the strategies that enterprises implement for how technology supports the business and its customers. Julie shares her takes on the software industry via her blog Highly Competitive and on Twitter: @juliebhunt For more information: Julie Hunt Consulting – Strategies for B2B Software Solutions: Working from the Customer Perspective