Is Startup Software “Bought” or “Sold”? Startups Discover Demand, They Don’t Create It… (And Zoho HCM is Out!)
Posted by Bob Warfield on March 10, 2008
Got an email note from Zoli Erdos, whom I read religiously, about a new SaaS HCM offering from Zoho that’s being launched this morning. Cool! Love to see more SaaS entrants. I believe fervently in the model.
Zoho has been a fascinating company to watch because they produce so much. Here is a startup sized company that is just cranking out products right and left. And they’re quite good too! The thing is, there is so much activity, at times I’ve wondered what they’re up to. What ties it all together? Zoli’s note this morning had the answer, at least an answer that I latched onto. In it was a short passage that speaks volumes:
…there are no marketing and sales plans. It will just be released out on the wild, like all other Zoho apps. I am known to be a fan of the “pull-model”, software “bought” rather then sold, …
I too am a big believer in the “pull-model”. I don’t believe startups can create demand. They are too weak, they don’t have enough money, and demand is way to expensive for them to create when you look at how conventional companies go about creating demand. Instead, startups discover demand. I like to use an analogy for what demand discovery is like that’s fairly graphic. I liken it to breaking through the window on a jet airliner. We’ve all seen the movie clips where one minute things are pretty calm and then the window gets broken and suddenly there are hurricane force winds and it’s all anyone can do to keep from being blown out into the void.
When a startup is searching for the right product/market fit, they’re tapping on various windows with a hammer. The window itself is brittle, and not all that hard to break. It represents getting the word out to a large enough critical mass that you can tell whether the hurricane will develop. Most windows have dead air behind them, so you have to keep looking. If you hit on the right one, you’ll be catapulted into a growth crowth that will take all your energy just to keep up with.
Coming back to Zoho, they’ve clearly figured this out. They’re tapping on windows like crazy, and by all accounts they’ve found several promising ones. Perhaps this new SaaS HCM application will be the latest. Check it out. The first 10 users are free for your organization.
Zoli, in a follow on post asks whether it isn’t crazy for an enterprise app to be launched simply by announcing it, without sales or marketing. I don’t see this as all that crazy. I’m not saying you don’t need sales and marketing, but I do think it can be brought to bear prematurely, particularly for startups where cash is king.
This comes under the heading of marketing and sales being “tragically knowable.” Many companies do tests of messaging before putting wood behind the arrow. Traditionally, this is done in secret, with focus groups and one way mirrors. But why keep things secret? The web lets us move faster and with less friction. By launching the package without much fanfare, Zoho gets to see who wants to be an early adopter. They can look for themes among that crowd and then amplify those themes with sales and marketing to bring more along. I think it is an interesting way to change the order things are done in.
The biggest risk for startups is lack of information. They should be far enough off the beaten path that they’re not just doing what the big players are doing. To combat the lack of information they have to get out there and collect some. When you’re dealing with uncertainty, setting up a Darwinian system with lots of cheap experiments works. Monitor the results, double down on what works, and try some more experiments. Eventually you’ll find the right window. You will discover the demand that’s waiting for your startup and its products.