David Cummings on Startups

Category: Strategy

  • Boil the Ocean or Wait for the Tide to Rise

    There’s an entrepreneurial tendency to try and be all things to all people. The thinking goes that if some pain or need in the market has been identified, why not service it since we’re trying to build a company. Generally, I like to think about two common strategies and often pick the one that’s simpler:

    • Boil the Ocean – The idea is to tackle the largest, most general problem in a market and build a solution that will be most ubiquitous (think Dropbox for file sychronizing or where Mailchimp is heading with email marketing).
    • Set Sail and Wait for the Tide to Rise – Pick a more narrowly defined segment of the market, typically the small-to-medium sized business area since they can adopt a solution faster, and then as the market grows, slowly move up market (think Salesforce.com for customer relationship management).

    Almost always, entrepreneurs go after the boil the ocean strategy and subsequently fail. Implementing the strategy of setting sail on a specific course and then waiting for the tide to rise before expanding is a more successful approach.

    What else? What are your thoughts on the boil the ocean strategy as well as the wait for the tide to rise strategy?

  • Mobile Apps Preferred Over Hybrid Marketing Web Apps

    Quick, what are some common tasks you do regularly on both a native mobile app and in a standard web browser? Now, do you favor one interface over another? I’ve found myself using the native mobile apps more frequently than the web apps, even when sitting in front of my laptop.

    Here are some example services where I prefer the mobile app over the browser interface:

    Looking at the apps, the main reason I prefer the native mobile version is due to the streamlined nature of the user experience. The web apps work fine but they’re a combination of full application and marketing site, making it more cumbersome to complete the most common tasks. With a native mobile app, there are fewer features compared to the corresponding web app and use of context-aware features like the phone’s GPS improve the experience even more. Over time, look for mobile apps to grow even more important as the go to way to get things done.

    What else? What are some native mobile apps you prefer over the web version?

  • The Joy of Ideas

    Whenever I give a tour at the Atlanta Tech Village I try to point out ideas we’ve implemented that aren’t mainstream yet. As an example, we have several 70″ TV scoreboards on the wall displaying objective metrics about startups in the room (using Geckoboard), iPads mounted outside each conference room with room reservation info (using EventBoard Pro), and a number of walls covered with white board paint (using IdeaPaint). It’s not that we’re showing off, it’s that we enjoy trying out new ideas.

    In fact, ideas are a form of currency. Not currency in the sense of having a monetary value, but rather a currency in the sense of a third-party item readily traded for mutually beneficial gain. Whenever I talk with an entrepreneur, I always try to find out what’s working, and what’s not working, so I can share ideas about what worked for me. And, of course, I love hearing new ideas.

    In addition to ideas being valuable, I get a real joy from trying new ideas, especially ones that work well. As part of my desire to always tinker and look for ways to continually improve, ideas provide fuel for new initiatives. Fresh ideas that work well can then be propagated online as well in person, and more people can benefit from them. More joy.

    So, keep the ideas flowing and spread the joy.

    What else? What are your thoughts on the joy of ideas?

  • Every SaaS Company Should Have an App Store Strategy

    Salesforce.com set the standard several years ago with the introduction of their AppExchange app store providing a central repository of third-party applications that work with their platform. Apple took the idea and made it mainstream for consumers with their App Store for iPhone and iPad programs. Now, every Software-as-a-Service (SaaS) company should have an app store strategy.

    Here are a few items to keep in mind:

    • Curating the app store is critical; too many SaaS companies claim to have an app store only to have many apps that aren’t functional or are “pretend apps” that are really lead generation to sell custom consulting engagements
    • An app store should be implemented once the startup reaches scale (e.g. 500 – 1,000+ customers) so that there’s sufficient demand from users to warrant the building and maintaining of the store
    • Some vendors charge a tax (e.g. 15% of revenue from apps that connect to the platform), which should be avoided as it’s better to encourage as many integrated products as possible and not alienate potential partners

    While not an app store directly, companies like Kevy will emerge as data synchronization app connectors for hundreds of cloud-based products. Regardless, every SaaS company should have an app store strategy.

    What else? What are your thoughts on SaaS companies needing an app store strategy?

  • Driving an Emotional Reaction

    One of the things Pardot is really known for is amazing customer service. Over the years, we received hundreds of unsolicited compliments from customers praising how thorough, attentive, and friendly everyone was on the team. The services team is so good it drives an emotional reaction.

    Jason Cohen, founder of WPEngine, recently wrote a piece titled Imbalanced People where he talks about the difference in results between an average team member and an extraordinary team member. In the piece, Cohen writes, “A great customer support rep thrilling customers and causing love on Twitter versus 100 others…never invoking an emotional reaction.” The emotional reaction, while hard to measure, is one of the most powerful services of a great team member.

    Much like Dan Martell sent the tweet “Support is the new marketing” earlier this week, delivering an experience that results in an emotional reaction, whether via support, sales, or something else, creates an entirely different kind of relationship. When thinking about experiences, think about driving an emotional reaction.

    What else? What are your thoughts on experiences interacting with people that drive an emotional reaction?

  • Never Forget the Golden Data Rule

    Recently I was talking to an entrepreneur and we were discussing the importance of data control in business applications. Now, this is control in the sense of which application dictates who gets access to the data as opposed to which company owns the data (the customer always owns the data). During the conversation it occurred to me that there’s the Golden Data Rule just like there are the two common Golden Rules.

    Golden Rule A: do to others what you would have them do to you.

    Golden Rule B: he who owns the gold, makes the rules.

    Golden Data Rule: he who controls the data, makes the rules.

    This comes into play when considering business ideas and strategies that involve other application data (whether accessed through a plug-in, an API, or some other means). Big risks here include being a sharecropper on someone else’s land (they can take away access), “borrowing” the most successful features from your product and incorporating them into their product, or charging increasingly higher fees to access the data (taxes to access SaaS systems are more common than people realize).

    At the end of the day, never forget the Golden Data Rule when building your company.

    What else? What are your thoughts on the Golden Data Rule?

  • Matching Brand Promise and Reality

    Last week I met an entrepreneur working on a Software-as-a-Service (SaaS) product where one of his main value propositions was product ease of use. The market is cluttered with a number of vendors, mostly a decade old, that have a distinctly web 1.0 feel. The entrepreneur sees an opportunity to be better, faster, and cheaper with a focus on ease of use. Only, after seeing his investor slide deck and current website, it screams complicated and not easy to use.

    Brand messaging and reality need to match up.

    Looking at it from an investor perspective, the entrepreneur immediately lost credibility as things didn’t match. My advice is to hire a professional designer, either through a crowdsourced design site like 99designs and crowdSPRING, or hire a local like Two Way Dialogue or Nebo Agency.

    Make sure the presentation and product match the brand promise.

    What else? What are your thoughts on disconnects between brand promise and reality?

  • Pivoting is More Common Than Expected

    We’ve all heard the term pivot by now. When a startup isn’t working out, it’s time to try something different, thus the concept of pivoting to a new idea. What most people don’t know is that a large number of successful startups became successful after doing a pivot. I was reminded of this again a few days ago when Alan Dabbiere, chairman of AirWatch, spoke at the (co) lab summit. Both of Alan’s huge successes were pivots:

    • Manhattan Associates (NASDAQ:MANH – Market cap of $1.8 billion) – Started out as a solution for printing packing slips in warehouses and eventually pivoted into supply chain software
    • AirWatch (raised a $225 million series A round in early 2013) – Started out doing WiFi management for a restaurant chain (Panera Bread) and eventually pivoted into mobile device management software

    On the personal front, Pardot started out as a pay-per-click lead generation service before pivoting into marketing automation software. Pivoting is a normal part of the startup process and more common than expected.

    What else? What are your thoughts on pivots being more common than expected?

  • SaaS Business Apps with a Paid Mobile Client

    Last week I was searching the App Store for an unrelated item and I came across the listing for the HotSchedules iOS app. Now, I normally wouldn’t pay any attention but HotSchedules, with their office in Austin, TX, is actually owned by Red Book Connect, which is based in Atlanta. More importantly, I saw a price tag of $2.99 to buy the app, which really surprised me. Why the surprise? HotSchedules is a B2B Software-as-a-Service app for scheduling hourly workers (e.g. restaurant employees, retail staff, etc) — I’ve never seen a SaaS business app with a paid mobile client.

    It got me thinking about why they chose to charge for it. Here are a few ideas:

    • With an extremely large number of end-users forced to use the software, HotSchedules sees it as an additional, meaningful revenue stream (web based access to the product is free)
    • HotSchedule’s end-users, which are hourly workers, change jobs frequently and are likely to only use their app briefly, making support costs higher, and thus this could be a way to offset some of those costs
    • HotSchedules is in a competitive industry with foes like PeopleMatter and SnagAJob.com, providing more pricing pressure on the core product, such that if they can offer the main application at a lower price, they can capture more market share and make up the revenue via end-users

    I don’t believe paid mobile clients for B2B SaaS app will ever be the norm, but it’s interesting to know that there are examples out there and that companies are trying it.

    What else? What are your thoughts on SaaS business apps with a paid mobile client?

  • Sugar High with One-Time Sales

    A few weeks ago I was talking to an entrepreneur that has a couple different product lines with one product being installed software and the other product being Software-as-a-Service (SaaS). Naturally, the strategic focus is on the SaaS product but the installed product is still doing well replacing more expensive incumbents. The entrepreneur then said something that really stuck with me:

    A one-time sale is a sugar high for the business.

    Think about it for a minute. Selling an installed product that has a one-time fee is great for short-term revenue but, like a sugar high, it’s only temporary. The following year you have to sell the same amount as the previous year just to get back to the same level of annual revenue. Now, with recurring revenue, each new customer adds more revenue that layers on to the existing revenue making it much easier to grow and making cash flow more predictable (assuming a sticky product with a high renewal rate).

    Businesses with one-time sales aren’t bad, but, if possible, recurring revenue is a much more desirable business model.

    What else? What are your thoughts on the saying that a one-time sale is a sugar high for the business?