A few months ago we had the pleasure of convening founders, CEOs and product leaders from some of the fastest growing SaaS startups for our annual Product Leadership forum. At the event, product leaders from Dropbox, ZipRecruiter, Expensify and elsewhere shared their advice for how to build, optimize and grow SaaS products in 2017. In reflecting on the event, here are the top seven lessons learned that you can apply now to your own SaaS business.
Understand the “One Thing” You Sell
Too many companies get distracted by ‘shiny-object syndrome’ when it comes to their product. There are always so many new requests, integration opportunities or competitor features that get added to the backlog, and never enough engineering resources to get it all done. Ian Siegel, the co-founder and CEO of rapidly growing hiring marketplace ZipRecruiter, recommends getting back to basics and identifying the “one thing” you sell. Then obsess over that “one thing” and devote as many resources to being the best at it.
That laser focus propelled ZipRecruiter to reach north of $50 million in revenue while maintaining profitability prior to raising their massive $63 million Series A funding round in 2014. Here’s how Ian puts it.
“No matter what you think your business does, your business sells one thing. If you want to find out what that one thing is, take a current customer who loves your product and put them in a room with a prospect and ask the current customer to describe your product to that prospect. Whatever that sentence is they use to explain the value they’re getting, that is what you do. Therefore, you need to be the very best at just that.”
Challenge Conventional Wisdom
Startups that make the biggest splash take a contrarian view of the world. They aren’t satisfied with the traditional way of doing things or the conventional wisdom, and instead seek out new and innovative solutions. Salesforce notably pushed the concept of “no software” and SaaS products have all but ended an era of clunky, legacy and on prem software solutions.
David Barrett, founder and CEO of Expensify, is taking an even more contrarian view with the company’s much-loved expense reporting solution. From inception in 2008, Expensify took a mobile-first approach to their product – the same year the App Store launched – and employs a bottoms-up, grassroots approach to selling into some of the country’s largest businesses.
Expensify’s love of challenging the status quo even extends to their marketing (“expense reports that don’t suck!”) and their “Expensicon” user conference, held in Bora Bora rather than the standard Vegas or San Francisco. David’s advice for others? Seek a different path.
“The challenge with good ideas is that they always look like bad ideas. If everyone knew it was a good idea, it would be what everyone does. Good ideas are the things that no one has tried. If you’re not pursuing something that everyone thinks is stupid, you’re probably doing it wrong.”
Accelerate Innovation by Incorporating Diverse Perspectives
A less talked about element of success is hiring high-performing teams that allow your company to innovate. When making hiring decisions, many companies look exclusively at candidates who look great on paper – they’ve done product management before, they went to Stanford and so on. While those candidates may be great individual contributors, over time you end up with a homogenous team that looks the same, talks the same and has the same perspective. That doesn’t sound like a team that will challenge the conventional way of operating.
Lesley Kim Grossblatt, the COO and VP of Product at theBoardlist, stresses that she’s seen time and again that diverse experiences lead to closer customer connections and more innovative product. Here’s her advice.
“Do you as a team have the diversity of experiences and insights to innovate? One of the things we can see is that that when you have teams that don’t have diverse experiences or perspectives, you tend to solve problems the same way, see all the same problems, and don’t see as many opportunities as people with different perspectives would pick up on.”
Say “No” to One-off Customization as You Move Upmarket
As SaaS companies start to move upmarket to serve larger customers, an inherent tension sets in. Large enterprises willing to pay six- or seven-figure sums frequently want customization so that the product fits their exact specifications. Those Faustian bargains may sound extremely alluring – think about the revenue, the nice logo, how pleased investors will be – but can spell ruin for a SaaS startup. That’s because they create an enormous amount of technical debt and put companies in an endless loop (enterprise customers don’t all of a sudden stop requesting new features once they’ve signed the contract).
Loren Padelford, GM at Shopify Plus, cautions against custom dev work. This was a linchpin behind the smashing success of Shopify Plus, a spin-out of Shopify’s core eCommerce solution that serves medium and larger businesses (versus Shopify’s traditional SMB audience). When Shopify Plus was launched in 2014, you could imagine the internal struggle between staying true to the core product versus introducing customization to serve large brands. Loren’s advice is to stock up on your intestinal fortitude and just say “no” – revenue be damned.
“We had to be super intentional about not building all kinds of custom stuff for individual customers because they have lots of money… Companies who start to stretch upmarket almost always fail that test because it’s very attractive. I want the cash flow, right? Wouldn’t it be nice to have this big logo on my website? So they take the money… [but] at that point their long-term technical debt just went through the roof, and that customer is ultimately fickle and won’t stop demanding things. It really takes intestinal fortitude [to say no].”
Experiment, Experiment, Experiment
In parallel with building new products, high-functioning product organizations play an important role in driving growth from existing offerings as well. Such growth could come from improving conversion rates, optimizing the onboarding flow to help new users hit the ‘magic moment,’ driving upsells within the product, reducing churn or a number of other initiatives. You can’t achieve that growth through gut feel or intuition alone. Rather, it requires an obsession with data and a culture of experimentation.
Dropbox’s VP of Product, Todd Jackson, attributes experimentation to helping fuel their unparalleled growth. In fact, Dropbox recently became the fastest SaaS company to hit a $1 billion run rate, doing so in 8 short years. It’s worth taking his advice to heart.
“Experimentation is a huge part of our growth infrastructure. In 2012 we were running 2-3 experiments per month. These days we’re doing 80 per month. We’re constantly running experiments. This is driving more than $100M in incremental revenue every year.”
Validate Whether You’re Solving a Top Five Pain Point
When you’re prioritizing your roadmap and planning what to build next, don’t forget to validate that you’re solving a real pain point in the minds of your buyers. If it isn’t a top five pain point for your buyers, then buyers won’t go to bat for it. They won’t pay for or use the feature and it ultimately won’t move the needle for your business. Cut it from your roadmap.
That’s the advice of Judy Loehr, Partner at Cloud Apps Capital and one of the pioneers behind the Salesforce AppExchange. In her position at Salesforce and experience advising SaaS companies of all sizes, Judy sees apps and integrations that fail to live up to expectations. More planning and diligence at the early stages would weed out shortcomings before the product enters development.
“There are a lot of nice to haves in the world, so many cute tchotchke integrations. But customers don’t pay for nice to haves. Ultimately you want to do a product integration that is so valuable that people either pay for that integration outright, using the two products makes customers so much stickier that they’re never going to leave (reducing churn), or that product integration is only available in a higher edition (driving upsells).”
Anticipate Changes to How Users Want to Buy and Engage with Your Product
Finally, as a product leader, you should understand and anticipate market changes so that you can seize new opportunities as they arise. Right now, traditional ways of buying software are being disrupted, as more buyers want to try out and even buy products without talking to a sales person. We’ve termed this trend product-led growth, and it puts the product at the foundation of acquiring, expanding and retaining customers.
Steve Johnson, the President and COO of Vidyard and formerly the CRO of Hootsuite, believes that product leaders need to embrace this trend as they build product experiences going forward. Here’s his perspective.
“I believe in a future where product-qualified leads, or PQL’s, are going to trump MQL’s, because buying is changing. People are getting much, much more comfortable buying on their own and don’t want to talk to somebody. Just give me the product. Let me see that. So I think that’s going to drive growth even more – you’ve got to be serving up stuff.”
What’s your best advice for fellow product leaders? Let us know in the comments!