"A user interface is like a joke. If you have to explain it, it's not that good"
Martin LeBlanc, Founder IconFinder
You build SaaS products for people not companies. You sell to people not companies. SaaS for the enterprise is only different because you have a lot of people. All with the same logo on their business card. You get one large sale for a lot of yesses. Selling to SME is one small sale for each yes.
One of the health problems my wife has faced is with her kidneys. We are very lucky that she has had excellent treatment. In the end a kidney transplant has allowed her a full recovery.
She is still under the watchful eye of the renal unit at our local hospital. This gives her access to something called PatientView. It allows her to look at results of blood tests and some other specialist medical information. An example of digital health in action.
My wife has been using the product for several years so is familiar with how it works. But on at least two occasions in the past year she has been asked for help by doctors or pharmacists. They don't understand the system or the data. Think about that. A software product designed for patients that is not even intuitive for medical professionals.
Its a common problem. A recent survey by Digital Health focused on the IT priorities for the NHS. There was a sting in the tail. On social media one tweet called out the elephant in the room “most clinical systems in clinical settings are unusable by clinicians”.
The same disease afflicts B2B SaaS and software of all kinds. Even some of the best are vulnerable. I find Xero simple to use but I am a qualified accountant. I always have a suspicion that the layman does not have things so easy.
There is not shortage of advice on good UX design. Good people are hard to find but not that hard. The root cause is much more basic. Too much software is designed for companies not people.
"You want to deliver to the world what you would buy at the other end."
Regular readers of this blog (are there any out there?) will know that some topics keep coming back. One is a fundamental point about SaaS. You are selling a service not software. The two S’s in the acronym seem to confuse a few people. You are building software but you are selling a service. As this excellent reminder from Onstartups points out.
Or to look at this a different way, your customer is buying a service.
I want to point out a couple of key things in this piece.
Enterprise ready is an entry fee not a sales pitch
I can’t improve on the list of product features your SaaS product needs to be enterprise ready. If you ever enter into an enterprise procurement process, covering these bases will save you a lot of heartache. And likely prevent your bid falling at the first hurdle.
But don’t be deceived into thinking this is anything like enough. As the title says this is just for a product manager. Selling SaaS to the enterprise has multiple dimensions. Meeting certain technical standards and the preconditions set by procurement is only the entry ticket.
Your SaaS needs to convince buyers not just procurement
Every sale needs its own unique selling point.
Most entrepreneurs will be familiar with the idea of a USP. A clear and distinctive advantage that set your SaaS apart from the competition.
The implication is that there is a clear USP which will appeal to a range of potential customers. Services are not like that. Services are personal. So each customer likes to feel that the USP is designed from them and them alone.
Back in the day, we used to refer to this as the killer slide. Every proposal had to have one page that made the buying decision for the client.
Your SaaS needs to be beyond compare and score
First, this will never appear on the procurement agenda. Procurement’s job is to get specific answers to a whole range of standard questions. This allows them to do like for like comparisons and score your SaaS against its competitors.
Winning this type of scoring is an art form in itself. But it does not touch on USP. By definition this defies comparison. To figure this out you need to talk to the real buyers. The people in the enterprise that will benefit from your SaaS.
Your USP for a specific customer needs to be couched in the benefits that key people within that enterprise will realise if they use your SaaS. (Note use it, not just buy it.)
The Chairman's View
Once you engage with customers, you have to get on the business benefits agenda.
Satisfy procurement and deliver the wow factor the business buyers. away. Or, click the Write button and compose something new.
Wednesday this week I had my first customer meeting for an early stage startup I am involved with. Since it was the first meeting on behalf of that company, it was also my first meeting with the two people involved.
The company is nowhere near ready to make any sales. So this meeting was part of the discovery process. The good news is it went well. I learned a lot and I left the room with a commitment to positive engagement and the possibility this customer will become an early adopter.
The start not the end of a customer lifetime
Since I have gained value, I must owe them more value in return. Its an obligation plain and simple.
Retention first not acquisition first
But metrics are outcomes not strategy. Churn and its relative LTV are good examples. They capture an important concept. Yet they result from measuring customer lifetime at the end not from the beginning. That can’t be right!
Nonetheless, I liked the principle when I first read the post. I was also a little bit doubtful to be honest. Retention first sounds very attractive to someone who prefers building relationships to cold sales. So was I just playing to my own preferences?
My customer meeting has put that niggling doubt to bed. Good business works on human relationships. Not just transactional benefits.
That’s why numbers and benchmarks are useful tools but no way to run a business.
B2B SaaS - relationships not pipeline
- As soon as you figure out someone is a potential customer, your job is to retain their interest.
- Real lifetime value is measured by the benefits gained and the depth of relationship. Not by the date when a customer stops paying.
- You measure the strength of your business by relationships not pipeline.
- Like everything else this is not a zero sum game. You are trying to give more value than you get. Whether money changes hands or not.
Yet as leaders we could never escape the feeling that something was missing. Every client engagement was different. A team of smart people would think through a complex business problem and use their experience and a bit of innovation to develop a specific solution.
If only, we could capture the essentials and repeat the same solution over and over. What a business model that would make!
Alchemy - Turning service gold into product margin
The SaaS struggle to dismantle every product
Contrast this with the startup world today. SaaS is the business model of choice for software.
By definition, it takes a product (software) and turns it into a service. And technology enables this mindset to spread far wider than just software. As one of the leading thinkers in the industry, Ben Thompson of Stratechery, put it recently, we are now in a world of “everything as a service.”
It looks like the leaders in services are desperate to become product businesses. While those who make a living from products are striving just as hard to turn those into services.
What is going on here? No doubt part of the answer is “grass is always greener” mentality. On a more positive angle, both attitudes show a bit of an innovation mindset which can only be a good thing for customers. But in the end, I don’t think we will see an outright exchange of business models. Services will win.
As customer we love to be treated to excellent service. Delivering services is more painful for most people. As technology overcomes that particular barrier, expect to see a service mentality take over (almost) everywhere.
If you are building a product or running a product company, remember selling and delivering services needs a different approach to success.
Sorry I digress. This is not a process problem. Leads and various other clear and specific data are all recorded neat and precise in CRM. Yet all the things that matter seem to be missing. Or hidden in notes and free text fields.
There is a simple reason. CRM systems are designed for selling standard repeatable solutions. To customers with similar needs and predictable buying processes.
SaaS: You are selling a service not software
Layer on top of this the spaghetti medusa that is enterprise procurement and buying processes. There are a thousand different ways to SaaS. (Another small sidebar: Do yourself a favour and ignore any book/ article/ advice that offers a standard model for business procurement. These things are peppered with terms like influencers, decision makers and hierarchies. Its all rubbish. Every large organisation is different. Most don’t even know their own process very well.)
So your standard pipeline definitions are of no more than marginal relevance. You need to think about your enterprise sales pipeline a different way. Let me offer you a simple and flexible model which will help.
I claim no credit for this. I learned it from a lovely man and good friend, Carl Erickson the CEO of Beacon Worldwide. I have been using it for 10 years and it has never failed me. It unites people with 100% opposite approaches to sales. It drives intense debate about all the right things. And as a business leader it kept me informed and in touch with future growth prospect like nothing else.
0 - Development
Move after: A lead moves from 0 to 1 when you have direct contact with a named organisation.
1 - Identify
The key question: Is this the right type of customer? Deciding whether it is worth investing in the pursuit is the next stage. For now, you only need to know if this organisation would benefit from your SaaS. And figure out if they are the right fit for your company.
Move after: You have had a direct person to person communication. You have identified the customer business issues. You have confirmed the date of the next meeting/ discussion. (Note: you need to meet all of these criteria.)
2 - Qualify
- How does this organisation make this type of buying decision?
- Can you engage directly with those who have the power to make that decision?
- Why will this organisation buy now?
Note: For an established company with time to wait, question 3 is part of the evaluation stage. A startup can’t afford this time so answer it early.
Move after: You know you have access to power. No exceptions.
3 - Evaluation
This is expensive. And it feels exciting and important. But observe that the most critical decisions have already been taken. Your SaaS is a good fit for the customer’s business need. You know who makes the decisions and you are talking to those people (almost never one person). You also know that this is the right time for the customer.
I hope its clear why you should have this stuff sorted before you start heavy investment in an opportunity.
Move after: You have verbal confirmation that you are the chosen supplier.
4 - Selection
There is a whole load of contractual stuff to resolve. Most times, there may also be a bunch of interested parties inside your customer’s business who get involved for the first time. You know people who might use your product, that sort of thing. It can be a painful journey.
Contractual questions tend to dominate. But never lose sight of the need to deliver value to your customer organisation. A beautifully framed contract has an ARR of Zero.
Move after: The contract is signed AND you have a clear plan to install your SaaS with the customer.
5 - Win: Now Celebrate!
Its become fashionable to call this Upsell. In reality its plain good business. Selling more to your existing customers rather than spending money acquiring new ones. A fundamental since forever.
The Chairman's View
Despite the apparent complexity and the repeated insistence on structure, process and experience, its quite simple: Listen to the customer; Learn how your SaaS can add value; Remember you are always dealing with people not companies.
But this window dressing obscures a fundamental underlying message. A big part of the populism that is driving today’s political agenda is rage against multi nationals. In the US the talk is of trade barriers that will disrupt low cost global supply chains. In the UK and Europe Governments and citizens demand “fairer” tax contributions. Extracted from the profits generated by global companies. Used to prop up public spending.
In every country and all sides of the political debate, inequality is seen as the defining economic and social challenge. And nothing represents that inequality more vividly than the pay of Fortune 500 CEOs and their ilk.
2017 will be the year when some of this anger translates into real challenges. Corporate giants are right in the cross hairs. The US President’s remarks about the pharmaceutical industry are a straw in the wind. The actions of the new US administration and the fallout from the UK leaving the EU will have consequences for big companies.
Hitting the enterprise where it hurts
Expect meaningful action in areas like:
- Taxation. Nominal corporation tax rates will fall. But linked to a much more determined effort to bring profits within the tax net. The overall tax burden will rise.
- Regulation and disclosure. Red tape will be back in fashion. There are new targets such as high/ low income ratios, immigration and new tax rules. But the solution will be familiar.
- Competition policy. While startups grow and disrupt at the edges, established business has been consolidating. A big part of the world economy now lies in far fewer hands.
- Trade. The most talked about area of all. Yet, my guess is that changes to global agreements will have less impact than the other areas on this list. May well get more press coverage though!
The SaaS opportunity
The enterprise software landscape is also shifting on the ground. I was fascinated by Tom Tunguz’s $100m ARR Deal. The headline number is eye catching. His analysis of the implications for Workday is interesting in its own right. But for me the big message is that this was a straight fight between the SaaS alternative ERP company and SAP. No better sign that SaaS will be a big part of the solution for enterprise companies.
The Chairman's view
- Finding organisations where there is an appetite for change and a trigger to make it happen. Perhaps because of a change in leadership or significant market setback.
- Understanding the change needed for the individual organisation. Then being clear how your solution helps the customer execute that change.
- Building value adding business relationships with multiple people in each customer. Recognising different priorities and agendas for each individual.
Success with enterprise customers is not about a high volume of leads and conversion rates. Nor is a brilliant sales team the key factor. Focus on qualifying which opportunities to go for. Analysis and insight followed by patient pursuit is the winning formula for enterprise SaaS.
Jason Lemkin wrote a fascinating piece on SaaStr a couple of weeks ago about the SaaS Decacorns we need by 2021. His conclusions were optimistic. He believes both that the market as a whole is big enough. And that there are companies there with the potential to become the mega leaders of the future.
I am not going to comment on the latter. But I share his optimism about the overall market. We are only scratching the surface of the opportunity for B2B SaaS. Reaching this potential demands great products which solve real business problems. SaaS companies must also help customers execute change to realise the benefits. All in the face of strong resistance from multiple vested interests.
It will not be enough just to wait for the market to come to you. B2B SaaS companies need to take the lead in finding strategies to overcome these challenges.
The scale of the opportunity
However you look at the numbers this makes no sense. SaaS is an ideal platform for innovation and increases the speed of change. It offers much greater flexibility and agility. Integration allows for rapid adoption of best in class. And its cheaper.
The question is not whether the market opportunity exists. What bugs me is why progress is so slow.
SaaS does not bring any of the benefits listed above to business. It provides a tool or a platform to improve a business. To realise the gains, the business must change. Businesses of any size find it hard to execute change. An established business is different from a startup in two major ways:
- A startup has a bias to action. Established business has a bias towards the status quo. This sounds awful. Yet if it works, why fix it? Remember that the current way of doing business got your customer to where they are. No matter what disruption you offer, you should respect their past success.
- A startup pulls in one direction. Larger businesses have lots of different groups and interests. Disparate measures of success. Greater or lesser magnitude of change in each area. The threat of losing the knowledge or the budgets that convey internal power. In every enterprise sale, your customer will have losers to overcome as well as winners to wow.
The big enterprise vendors are the tip of a large iceberg. They are the visible part of an ecosystem that includes consultants, systems integrators, lawyers, training providers, independent software vendors, project managers, change leaders, corporate IT careerists and a raft of other specialists who have carved out a niche that is built on SAP, Oracle and the rest.
The strident voices of direct competitors are easy to deal with. Corridor whispers by trusted advisors and “independent” experts are much more insidious. So be careful. Resistance is everywhere.
The Chairman's View
Each market opportunity and in some cases each deal will need different specifics. The outlines of any successful approach will include:
- A long term commitment to customer success. Help the customer make the change and realise the benefits of your product. This is every bit as important as any product feature.
- This means that a customer signature is the start of the battle not the final victory. Your metrics and incentives should not be constructed around a sales funnel that ends with closing the deal.
- Gathering customer feedback should also be a long term process. With modern technology, why rely on single point in time case studies. Use the dialogue in your customer channels to build a picture of success real time.
- Keep working on reducing friction for your users. An enterprise customer will have a large and diverse population of users. So offer onboarding and help to support these different audiences.
- Consider partner strategies that offer value to others in the ecosystem. Make your SaaS valuable to consultants and training providers. This will improve your distribution and pick off at least some of your opposition.
And do it all with confidence. The market is moving toward B2B SaaS. Let's help it along.
Kenny Fraser is the Director of Sunstone Communication and a personal investor in startups.