Software-as-a-service (SaaS) products are starting 2014 with a certain degree of mainstream success. However, as a relatively new part of the broader IT industry, the SaaS environment remains fluid and is still likely to continue changing. Nevertheless, as the SaaS marketplace has developed, trends have also appeared that identify which services and which leadership teams are more likely to succeed and achieve a measure of market dominance.
Build an Annual Plan
Success rarely happens organically. It’s usually planned. SaaS companies that achieve dominance do it because they are executing on a pre-defined vision. This includes defining plans for their finances, their marketing, and their products.
Plans that create dominance also include measurable objectives and define expected results. Doing this for the entire company as well as on a worker-by-worker basis can help to ensure that the big picture is being met while also maximizing the return on the company’s labor expenditures.
Source Capital — No Matter What
One of the distinguishing features of the 2014 market is that capital sources are open to funding SaaS companies. This can make it an excellent time for companies that can achieve their valuation goals to get outside capital.
In unique times when capital is relatively easy to source, acquiring the capital becomes a given. What becomes challenging is defining how much to take.
Allowing the market to provide as much capital as possible is usually the wisest strategy. After all, cash crunches are much more common at start ups than having too much liquidity. Furthermore, any creative organization should be able to quickly find ways to productively utilize any extra funding that it can land.
Create a Comprehensively Skilled Team
An SaaS company’s success is directly tied to the skills that its leadership team possesses. Dominant businesses need excellent products and technology. They also need the sales and marketing support to bring those products to market. When a team is strong in one area and weak in the other, the path to dominance runs through beefing up its weak spots.
Alienate a Few Users
SaaS companies sometimes fall victim to one of the Internet’s drawbacks: the ability to amplify vocal minorities. To build a dominant SaaS product, organizations should focus on creating sales and pricing plans that pacify the middle of the bell curve, understanding that they may alienate some prospects at the end of the long tail. For example, setting a price that is 30 percent higher but runs the risk of cutting off 10 percent of prospects will still increase both sales and profitability. The same principle also applies to product design and feature decision.
Combine Urgency and Serenity
Creating a dominant SaaS application requires management teams to operate on two opposite time scales at once. First, they must rush high-quality products to market to get first-mover status and quickly respond to competitive threats to keep their position. Second, they have to be willing to wait for growth to occur and for their company to scale. This can take as much as 10 years.
Leverage Mobility
SaaS platforms become dominant by being available where users want to use them. In the 2014 market and beyond, this means that the platform has to have a mobile component. Desktop-only platforms are at risk of quickly being supplanted and replaced.
While any company needs to have a compelling product at a compelling price to achieve dominance, it isn’t enough in the SaaS market. Following these six principles can increase any company’s chance of being on top of the winner-takes-most nature of most SaaS competitions.
