Provide services, not just products

In the last two weeks there were some discussions about (enterprise) software sales [1, 2] on hacker news. The main complaint is that software sales are often nontransparent, complicated and highly time consuming.

I think this comment sums the problem up:

As you imply, there are segments in every market. Of course there is a segment of companies with hundreds or even thousands of employees with gigantic budgets. These guys are going to do RFP’s and spend months evaluating the different payroll providers.

Then there is the segment of small guys lik me who have under 10 employees who frankly don’t need anything too complicated. You can say “I am only going to serve large enterprise customers through a complex sales process” and that’s completely fine with me. But don’t pretend to cater to my segment if you are not to adapt your model. —labaraka

The last sentences is probably the most important. Don’t pretend to serve a segment just to be “present” in this segment. If your sales process sucks for this segment then it’s better not to serve this segment at all.
Some big software companies tried to enter the SMB market but most failed. Why? I think that it is really hard to sell for 10-20 years products to big cooperations who want customized modules, pay for consultants and don’t care if a basic module costs $100k and then to try to reduce one’s product, make it easy and create a new sales process for said businesses.
The great thing about this is that there’s always a market for software for SMB even if there are big names out there. Salesforce is such an example. At the time there were big names like Microsoft, SAP or Oracle who fought over market shares for CRM systems but Salesforce decided to gather a different market – a market where people don’t have a multiple millions IT budget or even a IT staff.
But even Salesforce can’t serve the whole tail. Still, there are companies that are overwhelmed by Salesforce’s offer or don’t feel adequately served by them.

In conclusion, as a customer I want to know that somebody cares about my company or my segment. If you are just trying to be present in a segment without really caring, people will go to other companies that care. This will allow entrepreneurs to create companies for different niches that other companies don’t really care about. Care about your customers.

#76/111: Four Steps to the Epiphany

What is it about?

Do I really need to introduce this book? You probably know Steve Blank, you probably know Customer Development by now. In this book he talks about the whole process of finding your market product fit.

What can I learn?

Understand your market type: There are different market types and each one needs different strategies. There are new markets, niche markets and existing markets. This sounds trivial but isn’t well understood. A common mistake is to act like in an existing market if you are really (creating) a new market. For example, you investing millions in mass advertising even if you are creating a new market. This won’t work. Remember the Technology Adaption Cycle!

Understand your customer: Yes, you know this by now. However there are some one cool questions. If you want to know if your prospects has a real problem ask if them would deploy your product if it was free. If they say no, you are quite sure that they won’t be your customers so soon. The second cool question helps you to find out how much they would pay. Ask them if they would pay $1,000,000 ($1,000 for B2C products) for your product. Often they will say “Sorry, but we could pay $600,000 at max.” – Bingo! If they say yes, you have to increase the amount the next time.

Learn, Learn, Learn: A startup is about learning. Learning about your market, learning about your company, learning about your customers. There are no standardized methods for your new market. Learning about your market is the purpose of your startup. After you have discovered enough, you can grow and establish processes. This is where you leave your startup phase and become a “real” company.

Conclusion

Four Steps to the Epiphany is actually really nice. Steve Blanks describes each step in detail and provides lots of work sheets. He focuses mostly on expensive B2B software solutions. You have probably to adjust some methods for B2C or mass-market B2B products. Great book.

#47/111: The Long Tail

What is it about?

Chris Anderson writes about the transformation of businesses from mainstream hits to niche sales. He talks about the democratization of production and distribution.

What can I learn?

Distribution became cheaper: On average every second 46 songs are bought on iTunes. The buying behavior is shifting and so are the distribution channels. This lowered the entry barriers. Today, nearly everybody can open an online shop, even with little money.

Everybody can produce: Beside decreasing distribution costs, production costs decreased in most parts. Today you can record descent music with Garage Band or buy a the Flip for $200 and start recording HD videos. Or you can make a fortune with online games (e.g. Zynga) without millions in video game production costs.

From mainstream to side streams: Not everybody hears his individual music, reads his individual news or watches his individual movies. A lot of people still like the same things but it became more diverse. There are simply more niches.

Conclusion

The Long Tail was first published in 2005. Today, the book isn’t so exciting because it has become normal to buy niche products or to see Youtube stars emerge. However, I liked that he shows that this change in distribution leads to more efficient markets. At the first chapters I was a bit annoyed because he hyped his findings. Later though, he got more down-to-earth and agreed that we won’t only consume niche products rather that success will continue to arise but they won’t hit so hard. Nice book.

#43/111: Micro ISV

What is it about?

Just for the clarity, a Micro ISV is a small software vendor. Bob Walsh writes about the complete process from finding the idea, to founding a company, to actually selling the software.

Key points?

Search for pain points: Ask people in a industry that interested you, how you can help them. In general, you will find a lot of problems that arise but haven’t be solved yet.

Building your product is easier than selling it: Bob Walsh interviewed a lot of people in this book and most people agreed with this statement. If you are a professional, you know how to solve problems in your area but often founders underestimate the part of marketing and sales.

Niche, Niche, Niche: One interesting observation was that most people built products for the mass market. Today, nearly none of them still exists. The others chose a niche and are still running. Why? If your market is too big, big players becoming your competitors. If you market is small, all your competition is small.

Conclusion

This book was written in 2005 and is a bit outdated. It doesn’t really cover internet marketing besides writing a blog and Google Ads and it’s heavily focused on Windows development. However, the interviews were interesting and stimulating.