Garage To Global – My Thoughts
One of the unheralded Aussie software success stories is a company called
<div align="center"><a href="http://www.atmail.com"><img src="http://www.atmail.com/images/screen_shots/webmail_big.gif"></a></div><br />
Ben (their <span class="caps">CEO</span> and founder) is a top bloke and a deep thinker who I&#8217;ve met at various Sydney events over the years. Scott and I get on well with Ben because we&#8217;ve travelled a lot of the same roads with our companies and quite possibly because he can&#8217;t be much older than us (perhaps even younger?).<br />
He recently spoke at an event targetting young Aussie entrepreneurs and generously put his <a href="http://blog.atmail.com/?p=51">presentation and notes</a> on the
Mail blog.
There are a lot of great points in his slides, but I’d like to highlight 3 that I think are especially key from Atlassian’s point of view:
- “Show product pricing upfront” – Hallelujah! This is the greatest thing that determines a software company that gets it from one that doesn’t in my book. If you’re afraid of showing the world your pricing model, change it. If you’re afraid customers will run off because it’s too expensive, change it. If you’re not willing to back it up, change it. Otherwise, put it up online and lower your own sales costs.
- “Pay attention to marketing and let the product speak for itself” – Again, right on the mark. Too many software company websites try to get me into a webinar or white paper without showing me clearly what the product does. Tell me the features, show me a whole bunch of screenshots and be straight with me. I’m a smart guy, I’ll make my own decisions.
- “Enjoy what you do” and “Be passionate” – simple, if your heart’s not in it – customers will notice, your product will probably be subpar and your employees will just tread water. Be engaged in what you do and all the constituents will notice. If you’re not engaged in what you do, go find something that you are engaged with!
The only main point I’d disagree with is Ben’s notion that you should “aim for less customers that pay more”. I’ve always disagreed with people that think this. Unless your product is very niche (webmail? C’mon – hundreds of thousands of potential customers) more customers reduces your inherent business risk – basic portfolio theory of customers.
We made the decision very early on in Atlassian’s evolution that we were going to aim to provide brilliant enterprise quality products to lots of customers at a very low price. Once that decision was made and established, it has shaped so much about:
- how we have grown – we’ll need to grow beyond 8 people to have a support and a hyper-efficient operations team that can cope with volume
- how the products have developed – they need to be easy to install and high quality, or we’ll get swamped with support and bugs
- how our business model looks – no outbound sales people, explain the product clearly on the web as people have to be able to ‘grok’ it themselves, be efficient with online marketing, build brilliant products so word of mouth is friend not foe, no professional services – make it installable!
Agree? Disagree? Read Ben’s post and let me know.
Utterly agree. If I can’t find the price for a product on the website, and can’t find out pretty clearly what it does, I’m likely to discard the product before going through a sales organization, unless I have some reason to believe this is the category-defining product.
And even then, I’ll only go through sales channels because I have no choice, and that’ll count against the company.
I agree that “more customers reduces your inherent business risk” and because of this, maybe companies with an Atlassian-type philosophy should not discount the “less customers that pay more” approach but instead see it as an expanding opportunity.
I’m also from a founder of a successful Aussie software company that has used a similar philosophy since 1999.
I see it that the Internet, and the software industry in general has facilitated a business shift. At the extremes we can broadly class business strategies into two groups:
**Market Generating** – Those that take a concept and put in some marketing muscle to convince people they “need” it.
**Market Consuming** – Those that take a much needed concept, let people find it, (giving the consumer the information they need) and let the concept sell itself.
Both strategies work, and in many situations both can exist in the same market. A good example of the first group is Apple “making” the iPod market. The market consuming group is typified by your local Plummer servicing the needs of the local community. Small business and startups tend to fall into the later because meeting an immediate need is easier and less costly.
I believe the internet has shifted the game in the direction of then 2nd group. Suddenly the “local community” becomes the global. People on the internet also expect to search and find. They expect information. They expect access, expect immediacy, and expect to be heard. That’s what the internet is about. The software industry was the first to latch onto this.
I agree with you that the, “less customers that pay more” is not the way to go for a startup. To chase customers that will “pay more”, you need to invest more into marketing and this comes with risk. You end up being a more “market generating” business. Being more of a commodity solution in a commodity priced market has worked well for us and I believe fits much better with the internet community’s expectations.
However there are customers out there that will pay more for the same product. We’ve seen this in our businesses where others have been able to take our product (under a different label) and sold it for much more with a different marketing strategy. Business with an established commodity solution _expanding_ into the “less customers that pay more” market may be consider a good thing (e.g. Toyota expanding into the luxury market with Lexus). How you go about such a transition without changing the way you do business is another story!
Corey here, with CalaCode. I’d just like to clarify that Ben’s point “aim for less customers that pay more” makes more sense in a real-world context than it does standing alone as a quaint maxim. It is compatible with the philosophy of efficiency that keeps our team small in that: as a small team, we are better able to handle the support load of fewer customers, so if we can make the same profit from fewer customers and thereby avoid the outlay for additional support techs (and management and training) to handle the support load, that’s considered preferable.
I agree that we all want to avoid any strategy that unwittingly commits us to being a market-generating business incapable of consuming the market we create. Rather, striking a balance, or establishing a cycle of market generation and consumption, is the goal.
Perhaps it’s also worth mentioning that “the sky’s the limit” and “you have to spend money to make money” are maxims that work nicely in a world flush with capital, but fall apart quickly under the realities of going from Garage to Global.
Thanks, and good luck!
Decisions around price might come down to replicability and scalability. Clearly software is most successful when it is amortized over 100s or 1000s of customers who are all effectively sharing the R&D costs. But what go-to-market strategy will actually work for various groups of customers?
Atlassian have been very successfully in scaling up with internet marketing and word of mouth to a (mainly) developer-oriented customer base. But other types of customers of other categories of software/technology might be better suited to inside sales, partner sales or direct sales. Each of these different models have different price points…. horses for courses I guess.