To aggressively oversimplify the world of SaaS, there are two potential goals of a product: solving for the current customer, and solving for the future customer. In this post, I'm going to explain how to map these goals against the classic S curve of adoption that represents the market’s reaction to a new technology.
First, I'm going to re-label the S curve a bit and re-frame it in terms of customer experience goals for a product.
Two Product Priorities on a Sliding Scale
Solving for the current customer typically means developing and releasing more slowly, spending more time messaging change management, and generally focusing on their feedback as opposed to the market forces or opportunity. In practice, this prioritizes ease of use, speed of adoption, and reliability.
Solving for your future customer is much more opportunistic (and sexy): it typically means developing and releasing quickly, iterating rapidly, and taking a riskier stance toward stability and reliability. Because after all, you're not entirely solving for the customers using your product today, but instead moving as quickly as possible to a future where your vision of a perfect product-market fit resides.
Armchair economists will spot a kind of trade-off here between opportunity cost and present value. That's a decent analogy because, as with opportunity cost vs. present value, you can't have both maximized at the same time without some serious skill and luck. When should a product solve for the current customer (present value) or build the future customer? I propose a sliding scale over the evolution of a business and technology adoption curve.
At the Beginning of the S Curve: Few Customers, All Opportunity
You have relatively few customers, a world of opportunity, and few customers to lose. There's almost no reason not to move quickly, iterate, and find that traction as rapidly as humanly possible:
Some would argue success here is the most difficult part of building a successful SaaS business. There are more than a few successful examples of this: DropBox, Square, Basecamp, etc.
At the End of the S Curve: Lots of Customers, Bigger Risk, Less Market Opportunity
This portion of a company’s lifecycle is also pretty clear cut. If you have a predominance of your market already signed on as customers, there's little incentive to build, innovate, and change. Even moreso if you're in a uncompetitive market with little outside threat or have an especially niche product with a small market and little competition. You’re here on the curve:
Fact of the matter is, very few companies get here due to market competition or difficulty of saturation. There are a few examples of companies like this - you know them: Microsoft, SalesForce, Symantec, and so on. Most of them are B2B, and outside threat is limited largely due to high switching cost for existing customers. These customers are many times hostage – they don’t love their vendors - but won't leave unless their boat is significantly rocked.
In the Middle of the S Curve: SaaS’s Most Delicate Balancing Act
The bulk of this curve is the hard part, the delicate balancing act between pace of innovation and product predictability:
Balancing iterate-fast-until-it-hurts development with the growing needs of an ever-larger installed base is a stage many companies never have the privilege of experiencing. It’s also a major area of evolutionary challenge for SaaS providers because it’s such a dramatic change from the first part of the curve. These companies forced to learn new tricks to optimize for this compromise and, even, start taking on characteristics of companies far larger than they perceive themselves to keep their current customers happy.
Fast-growing private SaaS companies with tremendous market opportunities sometimes fit this bill. I’m lucky to work at one in HubSpot.
Why Movement to a Suite Benefits Both Customer Experience and SaaS Businesses
By building products in limited markets, and adding products to related but discrete markets, companies can both solve for the customer and build for the future simultaneously – with discrete products as part of an integrated suite. This is a “bolting on” process, wherein you’ve already realized too much of one market opportunity to continue moving as quickly as you used to, and in turn begin expand to new markets in order to start at the bottom of the S curve with additional, complementary products.
Astute data visualizers will see this coming as a series of overlapping S curves! Clay Christensen is highly notable for this theory of innovation, and it works wonderfully well when attempting to burn the candle at both ends by retaining current subscription business and continuing to innovate rapidly:
For instance, if your core product is a music streaming service, it may make sense to create a second, complementary technology for music recommendation. Or if your core product is an email platform, it may make sense to tack on social media tools that increase your total market opportunity and allow for rapid development in the new product, while simultaneously solving for the customer in the old.The challenge then becomes inwards and balancing the cultural differences between these two modes of work.
The interesting part to me about the progression to a SaaS suite in a series of successive S curves is that it benefits customers so strongly. Customers of a previous technology can continue with a steady, more predictable experience while opting into new technologies as an early adopter. Or they can wait until the new technologies are fully integrated and continue to experience a very smooth, reliable continuity of service. It’s actually a great process for them, as opposed to attempting to continually expand the core functionality in a fast-and-loose manner:
By moving to a suite of complementary products developed as almost independent companies, customers gain the benefit of little disruption to their core technologies while early adopters can get the “next cool thing”. It’s why so many largers SaaS providers have had success moving to suites – if the company can manage to execute against the complexity of a suite, it benefits both the enterprise and the customer experience.