I had dinner the other night with a friend who is a very successful software company CEO. When I say successful, I mean both as in growing a traditional software company from next to nothing to a very successful IPO some years back, repeating the exercise in a very different market segment, and now successfully growing an innovative SaaS start up. He made a really interesting point at our dinner:
Most companies in the SaaS space, and virtually all those on the sidelines with their cries of, “You can’t make money in SaaS” are missing a key point – they are trying to build a 2.0 business using 1.0 sales and marketing strategies!
His point is that rather than follow 2.0 approaches to sales and marketing, many companies are relying on traditional lead generation mechanisms and ‘feet on the street’ sales forces. This is not only anachronistic, it is doomed to failure for most of them – the economics of this distribution method will just not hold up for most of them. The SaaS naysayers, with their claims that SaaS does not present a sustainable business model, may well be proven correct – at least if they follow a 1.0 sales and marketing approach to a 2.0 solution! Why not leverage all the power of 2.0 to market and sell 2.0 solutions? Why not use multi-media presentations – short and punchy, delivered over the web, with a layered, interactive approach instead of sales forces? Why not use demand pull, which better fits today’s hectic executive calendars and short attention spans, rather than supply push approaches, with salespeople playing their games with executive assistants to get their feet in the door?
There’s a corollary to this 1.0 marketing mix approach to 2.0 solutions – that is the 1.0 delivery approach to 2.0 solutions. Take social networking as an example – perhaps a quintessential 2.0 application. Facebook, Linked-in and their rapidly proliferating and verticalized alternatives have been largely effective for at least a couple of reasons:
- They satisfy a social networking need.
- They have an incredibly low barrier to entry due to their SaaS delivery.
Ironically, as companies start to bring 2.0-type social networking capabilities (collaboration, tagging, communities of practice, communities of interest, threaded conversations, wikis, et al) into their corporate environments, many are doing so with 1.0 delivery mechanisms – they are installing large, complex technology inside their firewalls. The classic example of this is Microsoft’s Sharepoint. From what I am seeing so far, while Sharepoint can add important and valuable capabilities to an organization that was previously using email and shared folders for collaboration, it typically fails to really satisfy the broader social networking needs and opportunities that exist in the corporate environment. If technology-enabled social networking is inherently a 2.0 capability, why should we expect an inherently 1.0 delivery mechanism to be effective? Again, that is both anachronistic and similarly doomed to failure.
My conclusion to this, although I may be over generalizing, is:
Don’t try to use 1.0 sales and marketing methods on 2.0 delivery channels, and don’t try to use 1.0 delivery channels for 2.0 solutions.