One of the topics we debated today was building defensible market positions with software-as-a-service (SaaS) companies. SaaS companies typically don’t have many of the traditional barriers to entry like high development costs, high infrastructure costs, and slow time to market. As we proved earlier this summer, many companies can be launched in 90 days for $20,000 or less.
Certain SaaS companies like salesforce.com (proper spelling is with a lower case ‘s’) have built defensible market positions due to their proprietary AppExchange marketplace of hundreds of platform plug-ins. Salesforce.com, being one of the earliest and most vocal SaaS companies, required over $100 million in financing to establish their beachhead position and market dominance. They were the first SaaS company to go from $0 to $1 billion in recurring revenue.
How does a SaaS company answer the defensible market position question? I think the answer lies in explaining that this new generation of products isn’t about defensible positions but rather about first mover advantage and grabbing market share. The barriers to entry are so low that the most important task is to sign up as many customers as possible, while offering such a compelling solution that they won’t want to switch or their switching costs will be too high to warrant making a change. SaaS is about economies of scale with a multi-tenant architecture whereby more engineering time is spent on innovation and less on solving one-off customer issues.
The number of software companies that are going to succeed due to patents and significant networks effects is significantly smaller than in the past. Today, it is all about innovating quickly and taking market share.
We made another round of tweaks to our Google Spreadsheet KPI dashboard today, and I wanted to share them here. As you might remember, I’ve talked about using Google Spreadsheets for KPI dashboards two times before on this blog. My excitement for them hasn’t waned at all. Here are the next set of changes that we made:
- Added a new column where the rows represent the running average of each of the KPIs so we can see how our average compares to our goal
- Updated the cell conditional color coding so that values that are empty show up with a light gray background, but only if a value of zero isn’t allowed (e.g. one KPI is the average number of billable hours per person for our services team, which will never be zero)
- Took the average value from the first few weeks and made that our goal for this quarter, as our main task right now is establishing a baseline for the different KPIs
I encourage all entrepreneurs to start tracking different metrics in their business and capture them weekly in a color-coded spreadsheet.
Yesterday I was talking with a successful Atlanta entrepreneur and he was asking about the competition for one of our products. I explained that it was a large market and that there were tons of companies out there doing similar things — it’s very noisy. We got into product positioning, focusing on what mind share we were working on capturing with our respective marketing and messaging.
Shortly into the conversation, he made a simple recommendation: take the most relevant tradeshow in our industry and decide what we should do with each and every exhibitor there. What he meant by that was to decide if an exhibitor was a potential partner or competitor, and for the competitors, work on strategically placing where they fit into the market, as well as how we differentiate ourselves.
Personally, I’m not one for paying too much attention to competitor products because I think it is more important to spend time with customers and prospects. With that said, analyzing a competitor’s position in the market is readily accomplished by looking at their website, social media, and analyst reviews. Superior positioning will frequently make up for inferior products.
So, for all entrepreneurs and product managers, I encourage you to look at all the exhibitors of your most targeted tradeshow, and decide if they are possible friend or foe. Once complete, analyze your competitors positioning in the market, and use that to better your own positioning. Good luck!
Tonight we had our quarterly EO moderator dinner to talk about up coming events, what’s working well and not working well, and any other initiatives. EO is one of the best organizations I’ve ever been involved with when it comes to passionate members, formalized training, and useful structure. If you’ve read Keith Ferrazzi’s latest book, Who’s Got Your Back, you’ll know right away what an EO forum is like. I wanted to share the format of our monthly EO forum:
- 3:00 – Welcome, confidentiality reminder
- 3:10 – Monthly updates (seven minutes per person)
- 4:10 – Lightening round where each person asks one question and everyone else answers in 30 seconds or less
- 4:40 – Break
- 4:50 – Presentation on an issue someone is working through
- 5:40 – Break
- 5:50 – Presentation on an issue someone is working through
- 6:40 – Housekeeping and wrap-up
- Best idea lottery
- Chapter events update
- Needs and leads
- Review upcoming schedule
- Process review of what did and didn’t work
- 6:59 – Close
Obviously, that list leaves out a good bit of detail, but the goal is to get an idea of how a peer-to-peer support forum operates. I hope this helps!
This afternoon I had the opportunity to talk with a gentleman who co-founded a company that is now publicly traded on the New York Stock Exchange. Two of his major strengths are strategy and marketing, which became readily apparent when I asked for feedback about our site and Flash demo. He didn’t hesitate at all to provide solid critiques of what we were doing well and what we could improve upon.
As for the meeting, one of the most insightful takeways I received from him was to redo our Flash demo and make it more punchy. We need to channel Billy Mays. He said I should watch the show Pitchmen on Discovery and really pay attention to how they construct and deliver the material. Here are some of the specific points he relayed:
- Set the demo up like a story
- Be passionate and enthusiastic throughout
- Emphasize the benefits first and set up a hook for the watcher to need more
- Highlight any superlatives, like #1 in a certain market
- Provide a call-to-action at the end for a direct response
We’re going to re-do our Flash demos and channel our inner Billy Mays.
Every year I look forward to reading the Inc. 500 issue to better understand trends in different industries, look for companies I know, and to find winners in the Atlanta area. My issue of Inc. came in the mail yesterday and I dove right into it. One particular interest of mine was looking for SaaS companies to get a feel for their revenue growth and industry. Here are a few SaaS companies I knew about previously and found in the August 2009 Inc. 500 issue for the fastest growing companies in 2008:
- iContact – $15.1 million in revenue, 1,049% revenue growth
- Squarespace – $2.2 million in revenue, 723% revenue growth
- AtTask – $15.5 million in revenue, 1,097% revenue growth
- Infusionsoft – $12.6 million in revenue, 661% revenue growth
It’ll be great to watch these companies continue to progress and carve out their space in the market. It’s an exciting time for SaaS businesses.
Now that we’ve been using Google Spreadsheets for our KPI Dashboards over the past two weeks, as previously discussed earlier this month, I wanted to provide a quick update on what’s working well and what’s not working so well. Let’s jump right in and talk about what we’ve learned.
- The color coding based on percent of goal really does work well. Instead of spending the first five minutes of our weekly tactical going around and saying our KPIs for the previous week, we only talk about the yellow and red cells, meaning items below goal get more attention.
- We don’t have too many weeks of data, but I can already see how over time we’ll be able to quickly identify trends based on a short glance at the cell colors.
- Each week the previous week’s values are copied into a new column to be filled out Friday afternoon for discussion at the Monday morning meeting. Google Spreadsheets doesn’t have an easy way to make certain cells in the formula fixed, resulting in having to update 10+ formulas each week. Does anyone know a better solution?
- The Google Spreadsheet is shared with the rest of the company providing greater transparency for all team members.
Overall, I think Google Spreadsheets for KPI Dashboards work great and I highly recommend it to other managers and entrepreneurs.
This morning we had our last partner breakfast for Shotput Ventures to debrief on the year, discuss lessons learned, and talk about next year’s program. Each partner talked about things that worked well and things that needed improvement. Here are some of the takeaways:
- Try to better discern which teams are “all in” vs those that see it more as a hobby or summer job
- Mentor the teams to make the investment money last six months, instead of the just the three months during the program, so that they have more runway to be successful
- Ensure each team has at least two programmers (we only required one programmer per team)
- Don’t allow teams greater than three people, unless it is a special circumstance
Of course, we discussed several more lessons learned that can’t be discussed here. Overall, I’m very pleased with our first year and I really enjoyed working with the awesome Shotput partners.
Today I met with Peter from the Medici Center in Atlanta. I hadn’t heard of the non-profit until he reached out to me to gather feedback on entrepreneurship and incubators in Atlanta. First, some background on the Medici Center.
The Medici Center is a relatively new non-profit created to buy Atlanta’s City Hall East and turn it into a renaissance center with arts, businesses, eco/green awareness, and social entrepreneurship. City Hall East is over two million square feet of office space and is mostly unused. The Medici Center is scheduled to purchase the building from Atlanta on January 1, 2010 and then spend 12 months refurbishing 400,000 square feet for offices, class rooms, galleries, and more. I believe the facility and resources will be a great asset for the City of Atlanta.
Peter was interested in learning more about the entrepreneurship community in Atlanta. I told him that Atlanta could really use a space like his as a co-working facility, for networking and educational events, and for seed stage entrepreneurs because traditional office space is so rigid with terms. In addition, I pointed him to sites like TechDrawl.com, StartupRiot.com, StartupLounge.com, ATLSE.com, and others. He was amazed at how much entrepreneurial activity is going on in Atlanta and I explained that we’re only getting started. I also filled him in on the new direction of the ATDC and how it is really shaping up to be the center of the technology eco-system in Atlanta.
It’ll be interesting to watch the development of the Medici Center and I’m excited Atlanta has a such a forward thinking organization.
Today, I had the opportunity to meet with a successful entrepreneur who is working on transitioning his 18-person company from services only to a mix of software products and services. I think this is a common occurrence with service businesses: the business owner gets tired of selling labor-intensive work and looks for product ideas related to his or her core competencies.
I offered up the following advice:
- Hire completely new people to work on the product. It is very difficult to transition existing people out of their current roles, especially if you don’t already have excess capacity in the business.
- The best new product development teams I’ve worked with combined a full-time marketing product manager and a full-time lead software engineer (you really only need two good people to prototype normal web apps).
- Plan for it to take a solid three to six months to get the first worthwhile beta release into the hands of potential users.
- Budget for 12 – 24 months of expenses to see the new product through to product/market fit.
I haven’t done it, but I can imagine transitioning from a services company to a services and products company is very difficult. I hope he’s successful!