Ten commandments for new software niche players to follow
What could we do without software? Whether it’s the micrometer I use when adjusting features of the 1930’s tractor engine in my 1962 Morgan roadster, the digital thermometer we bought for the pandemic, the microwave oven we have in our kitchen, the Apple watch I wear or the cloud-based applications I access – software is essential.
There are many different classes of software companies. For example, consider some of the giants of industry: Amazon, Google, Microsoft, Facebook, Alibaba, IBM, Nvidia, Adobe, Tesla, Siemens and Intel. Funny list? Don’t be confused by the presence of hardware firms. Without software, they’re nothing. Many rely on others to write the software that makes them successful.
“Artificial Intelligence” technology isn’t that different. The same high-level patterns apply. Like other software, AI has to be designed, constructed, hosted, tested, debugged, run, and revised. It’s just that AI technologies do more – much more in certain use cases. It’s still software (models fed data.)
The Analyst Syndicate has clients on the giants list. Our time is split between them and smaller suppliers who are focused on specific niches. We also work with entities that consume what most of the suppliers are selling.
Who is niche?
Assume that if you’re not a giant, you’re a niche supplier. If you’re less than a decade old, you’re new enough to be thought of as part of the stem cell layers creating the next few generations of technology businesses.
I use these in advising (and evaluating) niche suppliers. If you’re considering consuming any niche players’ offerings, you should look at them through the lens of the rules. (We’ll do some of that in future articles.)
All these rules are simple.
Some buyers and some sellers will be comfortable with them. Indeed, some of them sound like clichés, and some clichés are past their freshness date. These clichés aren’t. Others of these rules are novel insights. Follow the clichés and the novel. Also, watch for exceptions. For most of these rules, you’ll find people who have successfully violated the rules.
It’s the ten rules — taken together — that count.
Here they are:
- Articulate business value. Are you in the tool business or the business of business? Toolsmiths can prosper but only if they clearly articulate their offerings’ business value. Else, technology without obvious business value is like the sound of one hand clapping. Is the business value something essential to the success of the business? Or a secondary nice-to-have? How should the business decision-makers value what you’re selling? How does this relate to the objectives on which the business decision-makers are measured?
- Simplicity is essential. Being the best or first does not guarantee success. Perfect is the enemy of good. Be good at delivering results. Where possible, start with a minimum viable business result — not a minimum viable product — even if you’re in the tool business! Tools only matter if they help the tool user achieve a valuable benefit.
- Pivot quickly – but not too quickly. In carpentry, you learn to measure twice, cut once. The same applies to your business.
- Sell to the potential buyer most open — and able — to buy from you. Often, that’s business people, not IT. Build a base of both money and customers this way. Land and expand. Don’t ignore a category of unconventional buyers that might be more open to buying from you than the people most sellers call on in your segment. Start with many small wins among unconventional buyers, then slowly start to buddy up with more traditional buyer-types.
- Find a compelling metaphor that your buyers will quickly grasp. For example, the concept of robots, as in RPA — robotic process automation — revolutionized the selling of and charging for RPA tools and services.
- Push use cases that result in the shortest decision cycle, sales cycle, and order-to-cash processes for you. Over the next five years, target potential customers near the high end of the SMB market, the upper-middle.
- Use inside sales for initial account penetration. If your product or business benefits are too complicated or too pricey for inside sales, change your product or pricing strategy. Of course, there are also excellent opportunities in long decision cycle sales that require extensive direct sales engagement, for example, breakthrough operational technology in manufacturing.
- Minimize the cost of entry for prospective buyers. Freemium pricing can make a lot of business sense in some situations.
- Integrate your products with fast-growing SaaS services with a strong market share. Automatically integrate with data in those SaaS services. The growth of SaaS-application instances is increasing the standardization of data labels, metadata, and master data.
- Simplify the installation cycle. Minimize customization. Automate integration with other customer data and technologies if such integration is needed. The ideal install consists of a URL for self-installation in five minutes.
For each of the ten items, rate yourself on a scale of 1 to 5 where 5 is the best fit with the criterion, and 1 is no fit with the criterion.
- Articulate business value.
- Simple, minimum viable business result.
- Agile – consider pivots often.
- Sell initially to business people, not IT.
- Use a compelling metaphor for buyers.
- Shortest possible sales cycles. Target upper-middle.
- Inside sales to start.
- Minimum cost of entry for prospects.
- Exploit SaaS-application standardization.
- Zero-effort installation.
Prepare to fail, no matter how well you do on those 10 items if you can’t deliver on critical values in areas such as security, governance, integrity, and compliance. If those values aren’t present in what you do, don’t bother interpreting the sum of your ten scores. Else, consult the following chart:
- 42-50 — You got a real chance
- 33-41 — Better get busy addressing the items that you ranked low on but you have a shot at making it
- 16–32 — Maybe you better get some serious help
- 00-15 — Try another line of work
Let me know where you stand and let’s have a conversation about how and why you should improve. Schedule a call with me using my Calendly account.