Winning in the Software Products Business
A really simple model on how you can really win in the software business
As a startup founder for over 10 years of experience, here is a really simple representation of what it means to win in the software business. This model looks deceptively simple, but it took me a long time to figure this out. I wish I knew this earlier.
There are all kinds of companies, products, and founders and you will see that they have "won" in their markets in different ways. When you hear someone's story, you need a mental model to place their strategy. Then you also need to identify a strategy that will help you win (or at least survive in the business).
Let us start with the Really Simple Deal Formula. It states that the value of your offering is based on 3 factors:
Deal Value = Product + Marketing + Sales
And you win a deal if your deal value is greater than the competition. Let us look at each of the factors:
- Product: The first component is about how amazing your product is in terms of solving the customer's problem, or how much better it is than the competition. If your product is significantly better, you don't need a lot of support from marketing or sales, you can win on product alone. Some examples here are GMail or iPhone in the consumer space, or Slack or GitHub in the B2B space.
- Marketing: This is the quality of your marketing which comprises your branding communication, positioning, and pricing. Apple is a great example of marketing. The polish of its websites, the events, the packaging all makes Apple very desirable in the eyes of the customer. In the B2B space, you see companies spend a lot on events and buzz too. Microsoft under Satya Nadella has been starting to get its marketing and messaging in place. Nike is of course the best example of great marketing.
- Sales: This is relevant in the B2B space only. B2B products are complex and sometimes decisions about which product to choose are confusing. Here salespeople can play a role in helping the customer place the product inside their organization. Without the help of salespeople, your internal champions will find it hard to buy. Sales becomes particularly important when the products are similar in terms of features or quality.
Once you have figured out the components of a deal, let's talk about strategy.
Winning Strategy #1 - Product or Marketing
To win on product, you must have a product that knocks the wheels off your competition. Such products are incredibly polished and have excellence in quality and performance. They absolutely nail the user experience down to the T. Once you start using the product, you start appreciating the details and how smoothly it fits your hand like a glove. You are so delighted by using this product, that you can't wait to tell everyone you know about it.
Familiar? I am sure we have all used products like these. And the marketing and sales is done by the people who are users of the product. If combined with good marketing, such products set the standards for the industry that other products would aspire to meet.
But there are great challenges in this strategy. First building such products is extremely hard. Not only do you need outstanding craftspersonship but also deep insight into each element of the product. Such products are not skin deep either. They combine with the layers below to create magic - Like Apple creating its own hardware to create an outstanding user experience.
Winning on Product and Marketing is Unpredictable. It's like the movie business. * It's like the Olympics.* You compete globally and with the best in the world. It is not easy to even qualify for such contests.
Winning Strategy #2 - Sales
If the product strategy is like the Olympics, sales is more like dating. You have to show up, be nice and somehow make things work! To show up, you need to be present a lot around the customers, and having such access is hard work and takes a lot of time and effort.
If you are able to hit it off with the customer, the customer is very likely to give your product a chance just based on the time you have invested in them. Even your marketing and messaging is customized for each individual. This is called Account Based Marketing.
You still need a competent, validated product and marketing to win, but you don't need to win the Olympics. Once you have the right sales team and they are reasonable, you are almost guaranteed to have revenue. Most venture-funded startups use this strategy to grow once they have validated their products.
The challenge in this is finding the right sales leader and then investing time and effort in building a sales team. It is also likely that if you are not an aggressive salesperson yourself, you would need external funding to invest in such a sales team.
Whatever Works for You
Both strategies work, so you can pick any. If you are struggling with growth or business, this model is helpful for putting things in context.
For example, in Frappe we are in a product heavy model, but we have not won the Olympics yet. So either we can continue to invest in the product until we have a mind-blowing product, or we can build a strong sales team to augment the product and win handsomely in the market.
What's your winning strategy?
Rushabh is a software developer and founder of ERPNext. He usually writes about the startup experience, open source and the technologies he is working on.