I've been thinking lately about our corporate strategy, and I find myself pondering the relationship between business model (software-as-a-service) and corporate strategy (customer intimacy). My wife just rolled her eyes and stopped reading . . . it's probably time to separate my personal and professional blog posts.
Adopting a SaaS model requires more change than you think
Software as a Service (SaaS) has been a buzzword for several years now, as more and more companies have adopted the model as a way of generating regular income and delivering significantly new and different value to their customers. What most (if not all) of those companies learn is that switching business models necessitates fairly radical changes to almost every aspect of their business, from development to operations to sales to finance. PLATO started the transition to a SaaS business over three years ago, and we're still working through some of the needed changes to our organization's structure and processes.
When companies transition to a SaaS business model, their financial success becomes highly dependent on their subscription renewal rate. This dependence is what forces all of the organizational changes that I mention above. You have to sell, service, and support customers very differently when your financial success depends almost entirely on your customers' renewal decision, which in turn depends on their continued successful use of your product.
BUT, what effect (if any) should a SaaS business model have on other parts of your corporate strategy?
The Discipline of Market Leaders (Treacy & Wiersema) is one of the more influential business books published in the last 15 years. In it, the authors posit that successful companies must focus on one of three Value Disciplines: Product Leadership, Customer Intimacy, or Operational Excellence. They must maintain minimum levels in the other two, but pick one and focus on it passionately.
In looking at the three value disciplines, customer intimacy seems like a natural fit for a SaaS company. Focusing on customer intimacy means that you understand your customers better than your competitors. Providing a SaaS solution means that you have access to vast amounts of customer data to analyze and understand their behavior. Focusing on customer intimacy means that invest in making sure that customers get the most out of your product. Providing a SaaS solution means that your livelihood depends on renewals and renewals depend on making sure that customers get the most out of your product.
I suppose you could make a case that focusing on product leadership also fits well w/ a SaaS business model because product leadership makes your product & platform sticky, but I'm not convinced. For my money, SaaS companies should almost always be customer-intimate companies as well. I'd love to see someone do a study that looks for a correlation . . .