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Hacking Growth for SaaS Market Leadership


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A platform approach to help Software as a Service businesses swiftly grow and outperform competition

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Hacking Growth for SaaS Market Leadership

  1. 1. 1 Software as a Service Platform Strategy Exponential Growth A platform approach to help SaaS businesses swiftly grow and outperform competition HackingGrowthforSaaSMarketLeadership Floyd DCosta
  2. 2. 2 The SaaS market has been rapidly growing, albeit with highly ‘oligopical’ segments SaaS application revenue could grow from $10 billion in 2010 to $21.3 billion in 2015, a 16.3% CAGR, increasing from 9.6% of all enterprise application purchases in 2010 to 13.8% in 2015 Sales & Service Talent Management Marketing & Social Supply Chain /B2B Back Office (ERP, HRIS, and Accounting) Vertical Specialists Collaboration, Integration, Pro ductivity IT and Security Taleo Cornerstone OnDemand Workday SuccessFactors Ariba Concur Rearden Commerce Bazaarvoice Intuit NetSuite ServiceNow RealPage IntraLinks Covisint Covisint Responsys ExactTarget Lithium PowerReviews Kenexa ConstantContact RightNow Technologies SugarCRM Oracle Adobe Microsoft IBM Veeva Systems Vertical Response Marketo LivePerson BigMachines Vocus Patersons Ultimate Software OpenTable Athena Health Convio Management Dynamics Dropbox Informatica Google IBM Microsoft Cisco Citrix SPS Commerce ob10 SciQuest Emptoris BravoSolution Coupa Hubwoo DemandTec Aravo Saba Jobvite HireVue Peopleclick/Authoria SumTotal Oracle Sonar6 Plex Online Rootstock Freshbooks Intacct OrderMotion ProofPoint Symantec Cisco Google AppFirst Apptix Logmein DealerTrack Medidata Tangoe CaseCentral Elemica GHX FastSpring FPX Telogis Demandforce iContact Axeda Advanced Planning Arena Solutions Xactly Baynote Zuora MarketLive Venda Workda y Source: Goldman Sachs, Yankee Group and Gartner
  3. 3. 3 The Challenge: In such hyper-growth markets, linear incremental progress can be limiting; and with churn, competition can quickly get overwhelming While adding features is good practice, it rarely brings about the exponential growth required to get to and stay at the top VS The linear product-based business model is broken. A case example:
  4. 4. 4 • In a platform model, cost and revenue are generated, both to the left and the right of the value chain • Because of network effects, platforms enjoy increasing returns to scale. • Value grows as the platform matches demand from both sides. • Users will pay more for access to a bigger network, so margins improve as user bases grow. By leveraging dual-sided network effects, reducing transaction costs and the internalization of network effects, SaaS vendors will able to grow swiftly, revolutionize marketplaces as well as substitute incumbents The Solution: To radically hack growth, SaaS’s need to shift to a platform business model, establish an ecosystem and nurture communities Ref: Strategies for Two-Sided Markets [Eisenmann, Parker and van Alstyne]; image via Dion Hinchcliffe
  5. 5. 5 The Proof! Platform businesses are disrupting markets and transforming complete industries From Google and Amazon to Apple and Facebook, platform businesses are dominating the landscape and displacing market leaders faster than ever before Organization Market Cap Apple 438 Exxon Mobile 380 Google 291 Microsoft 282 Berkshire Hathaway 281 Position Brand 1 Apple 2 Google 3 CocaCola 4 IBM 5 Microsoft Top 5 firms in 2013 by Market Cap. InterBrand: 2013 Best Global Brands Ref: Bloomberg, InterBrand
  6. 6. 6 So how do SaaS businesses make the shift to a Platform model? “In the future, businesses will no longer compete over superior products, but over better evolved platforms” 01 A Definition 02 A Framework 03 An Approach 04 Some Strategic Elements
  7. 7. 7 Defining a ‘platform’ – Understand the paradigm shift from owning to enabling value creation and consumption Platforms enable the creation and exchange of value between users, with the business only providing the infrastructure enabling users to interact Source: Bloomberg Business Week, Yahoo Finance • Facebook bought Instagram for $1B . • Instagram has only 13 employees. But it has 30 million users • Wall Street investors recently gave Twitter a $24.9 billion valuation. • Twitter has only $500 million in revenue, no major physical assets, and no profit. • Similarly, LinkedIn is worth $26 billion. • And Facebook, despite a poorly executed IPO, is now valued at $120 billion, making it one of the 30 most valuable companies in the world.
  8. 8. 8 Getting started - A five point framework to seed, cultivate and harvest platform thinking Business Model Innovation democratize value creation Network Value Circles redefine competition Open Innovation Culture a radical new ethos Social A positive impact Prosumerism blurring between value creators and consumers Extend Technology every company, digital and connected Remember, your platform should be a system, which other entities can easily connect with, build products and services on top of, and co-create value
  9. 9. 9 The way forward - A high-level approach to crafting a platform Strategy is crucial - Deploying traditional ‘linear’ thinking, would definitely result in a wasted opportunity for a network business Map and understand the ecosystem [industry and organizational] Identify opportunities in the value chain to harness networks and channel co- creation [Think beyond your own products and services] Incubate partnerships and nurture multiple- sided communities; enable peer segments to interact via your platform Experiment; Hack growth [focus on enhancing the underlying system, to enable others to easily connect, create and consume higher value propositions on top of your platform] Expand your technology’s scope; to enable the effortless creation, exchange and consumption of value by others [API’s, etc] 1 4 3 2 5
  10. 10. 10 Getting it right – Basic elements of a successful platform strategy Based on the overall position and approach, a platform business will need to place varying emphasis on each of the three building blocks. • The Toolbox creates connection by making it easy for others to plug into the platform • The Magnet creates pull that attracts participants to the platform with a kind of social gravity. • The Matchmaker fosters the flow of value by making connections between producers and consumers. • Connection: how easily others can plug into the platform to share and transact • Gravity: how well the platform attracts participants, both producers and consumers • Flow: how well the platform fosters the exchange and co-creation of value. Ref: Three Elements of a Successful Platform Strategy [Bonchek and Choudary] 3 determining success factors 3 building blocks
  11. 11. 11 11 Thank you “A platform is a system that can be ….., adapted to countless needs and niches that the platform’s original developers could not have possibly contemplated, much less had time to accommodate.” - Marc Andreessen