The software industry needs to evolve to perform tasks that are automated and require no human involvement. Learn more from Womply founder Toby Scammell.

1. The Next
Generation of SaaS
Toby Scammell

2. As I’ve spoken with investors over the years, a common
theme in the software-as-a-service sector is the use of
“engagement” to measure the value of software.

3. On the surface, this makes sense --
if users put time and effort into
software, that must mean it’s
valuable to them, right?

4. If your business model relies on advertising
impressions to make money, time spent and
actions taken are still good indicators of value.

5. But for a growing number of software
companies that don’t monetize
impressions, user engagement is on its
way out as the dominant value metric.

6. As automation goes mainstream, users will
increasingly expect software to operate
invisibility. The SaaS world needs to take
note and start building for this reality now.

7. We all know that automation has gone
mainstream, but sometimes we forget how
long things have been trending this way. Just
a few decades ago, most businesses in
America tabulated their financials manually-
they literally had to close their physical books.

8. Today, most big businesses and millions of
small ones use accounting software to do
the work automatically.

9. As people experience automation in more and
more daily contexts -- from paying the gas bill
to ordering a taco -- “do it for me” has quickly
become the expectation, not the exception.

10. In fact, if you founded a SaaS startup today
on the value of user engagement, I’d bet
you’d be staring at the daunting prospect of
a major product pivot away from
engagement and toward automation right as
soon as you try to raise your Series A.

11. To understand what needs to change in B2B
SaaS, it’s helpful to think of its evolutionary
arc in three distinct phases.

12. Currently, we’re in Phase One. Today, most
SaaS platforms are essentially frameworks
that help users do jobs themselves.

13. As we head into Phase Two, users will input
some general rules and the software will
handle a bunch of tasks automatically.

14. Eventually, in Phase Three, users will just
switch on their SaaS product and the system
will figure out what to do without any
additional guidance.

15. Some companies are already
moving to Phase Two.

16. Shopify, for example, describes its Kit
Application as a virtual employee that you
“hire” to automate small business marketing.
In addition, Intercom announced a product
called Operator with a marketing email that
said the bot “takes care of simple tasks so you
can focus on things only a human can do.”

17. These are very public declarations that the
software’s value is based on automation,
not engagement.

18. For the rest of the SaaS
industry to make the leap,
here’s a few things that need
to happen….

19. We need a new product philosophy.

20. When user engagement is your north star,
you build software designed to captivate
users. The unintended side effect is that
users become enslaved to technology
instead of liberated by it.

21. Product teams need to get deeper
than problems, solutions, features,
and benefits and move toward
“jobs theory”.

22. What else can the software do to save time?
You can add tremendous value by
automating specific actions.

23. Data should come first. If Phase One
requires users to input data manually,
Phase Two puts the onus for data
collection on the software itself.

24. One of the biggest challenges when
building automated software is
collecting and curating data before the
user ever logs on.

25. Software alone won’t be sufficient -- it will
need to bring its own data to the table.

26. This will presume that data is considered
at the beginning of any development
process, not just added as an afterthought.
That will require rethinking the interactions
between different functional teams that
build software.

27. User engagement is measured by
time spent and actions taken -- relics
of advertising business models.
Automation flips these metrics upside
down and completely changes how
SaaS should be evaluated.

28. Instead of engagement metrics, SaaS
companies should start measuring
true value-delivery metrics such as
“time saved” and “jobs done”.

29. Phase Two SaaS should track metrics like
“helpful ratio”, “time to wow”, and other
measurements of utility over usage.

30. Founders and investors should start
talking about how they can incorporate
next-generation metrics into their reporting
right now. Even if engagement metrics are
needed for specific reasons, they shouldn’t
be considered the only measures of
product value.

31. Every SaaS company should start
measuring jobs done and time saved for
their users, and build a way to monetize
those results. And investors should expect
startups to build automation and value
delivery into their product roadmaps.

32. The next-generation SaaS movement is
happening and won’t be stopped by inertia.
The transition will benefit everyone, and
software companies that catch the vision
will reap the rewards.