While playing the software game was lucrative, this blog helps software companies sidelined by innovation to re-enter the game and to win.
Once upon a time it was lucrative to play the software industry game. We sold functionality at excellent margins. Annual maintenance was steady money for (rather) little work. Technology advanced at a manageable pace. The peer community dispensed recognition. Growth was steady and life was good.
But then the software game changed. In many niches FOSS has turned functionality into a commodity. SaaS upsets perpetual licensing, while annual maintenance is increasingly suspect. The community scattered as global players bought and consolidated. Innovation quickened. New business slowed.
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Seth Godin’s book ‘All Marketers Tell Stories’ inspired me to share what I’ve learnt in 30 years of the software business.
Software companies often find themselves stranded on islands of excellence, serving a small group of customers but unable to grow. Opportunistic sales result in a few more islands from time to time.
It’s depressing to see companies with excellent technology shipwrecked. A love-hate relationship with marketing is often a contributory reason. We love having many qualified leads, but hate getting our hands dirty with marketing.
Why’s marketing hated like this? In my experience the cause is often the developer background of many managers. Developers equate lead generation with advertising. And developers hate advertising even more than marketing!
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There’s no time to think when you’re surrounded by fire. You need to put it out for good by starving it of fuel: customers who don’t fit.
Fire-fighting often becomes a core competency at software companies. The usual cause? Our dread of no revenue forces us to accept customers who are not consistent with our worldview. Unique customers cause trouble.
You’re doing the best you can to deliver great software. You pull all nighters and work weekends to satisfy each hard-won customer. Been there. Done that. But, while it’s great to play the hero fire-fighter occasionally, in the end something’s got to give.
Seth Godin nails it in the 2nd edition’s preface to All Marketers Are Liars Tell Stories:
There are small businesses that are so focused on what they do that they forget to take the time to describe the story of why they do it.
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In a famine of qualified prospects, you’ll try to grab anything that appears edible. Lack of a reliable sales process is corrosive.
When prospects are rare you’ll do everything to win. Development adds features. Marketing invents ROI justifications. Prospects are too precious to waste; you cannot risk letting even one get away. You do whatever it takes.
Lack of a shared worldview is an increasing problem as you grow. Special cases abound; exceptions appear. Everybody is paranoid about saying no.
To see how sticking to a clear understanding of your worldview changes everything, take a look at 37signals. They are a 20 person company selling web-based apps for small groups and individuals. With more than 3 million users, they are very profitable.
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Selling to developers who hate tools is a quick way to waste lots of money. We targeted the few whose worldview embraced tools.
As application tool vendors we convinced prospects with metrics and ROI. Adopting tools, we thought, was a no-brainer. Even so, selling to developers who didn’t want to use tools was difficult. Time and again developers successfully blocked tool adoption.
Our problem: their worldview didn’t include the idea tools are useful. Our solution: we focused on the 1 or 2 developers whose existing worldview did include a positive attitude towards tools.
Whether or not these developers had formal authority, we got our tool into their hands so they could reach their own conclusions. If they thought our tools worthy, they’d start spreading the word internally. Having someone who developers trust spread our story for us made all the difference.
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