Design, Decentralization and Democratization — The 3 Ds of Industry-Leading Software
A decade ago, quality software solutions were a privilege reserved for the corporate elite, those who could afford multi-year implementations with swarms of resources to develop customized products. Customers would bring in large professional services firms to help with vendor selection, process reengineering and training, often running up 9-digit tabs for a multi-year system implementation effort. The running joke amongst the consultants advising these clients was that you could spend your entire career selling ERP solutions to a single client, simply waiting for the next CTO to rip out the old infrastructure and repeat the process all over.
This story is all too true, and we’ve seen it happen in historical fashion with a single technology implementation for the Air Force resulting in over $1b in costs before ultimately being scrapped. Horror stories like this one haven’t stop providers from becoming billion dollar behemoth enterprises, but the rules are changing and expectations for software are changing with them.
Cloud-based infrastructure has enabled more agile products, more efficient entry points for sellers and smoother integrations that circumnavigate the sea of resources required for traditional implementations. This phenomenon has allowed solutions to emerge, unseat legacy applications and create immense amounts of value for their customers. These solutions reflect the unique needs of a customer’s specific pain points and processes, without requiring lengthy (and costly) customization and integration periods. This has led to increasing fragmentation across the SaaS landscape, whether it be horizontal solutions embedded in the tech stack or industry-based vertical software.
As this fragmentation proliferates the market, the key determinant of success is time-to-value (TTV), and emerging solutions are finding better ways to create value for their customers earlier in the lifecycle through applications that are easier to use, implement and empower (kudos to Lenny Pruss for a fantastic post on the topic). As we think about time-to-value, I see 3 critical factors that often serve as a lens into predicting the success — Design, Decentralization and Democratization.
Design: Perhaps one of the biggest differences between yesterday’s technology buyer and today’s is the lack of patience today’s has for inferior UX/UI. Most of today’s enterprise customers have grown used to using beautiful products built by Apple, Google, Facebook and LinkedIn and simply won’t tolerate products with the UX/UI of legacy platforms. For an application to generate value quickly for its customers, it needs to experience rapid and broad adoption within the enterprise’s user base and rewrite the organizational process flow.
Decentralization: Decentralization hones in on the lengthy and costly integrations required to make enterprise software successful. With today’s distribution models, clients are enforcing “try before you buy,” and solutions that are highly operable with other elements are able to demonstrate their value and convert customers more effectively. Max Wessel and Roy Ng published a great piece recently discussing how the full-stack/no-stack paradigm is impacting the industry, and it demonstrates the decentralization and agency of buying power across enterprises. No longer do buyers need to go to the CTO. They can have products that garner followings in the developer community and can be seamlessly integrated with the rest of the organization’s core technology with little to no effort. Similarly, business line leaders can deploy solutions within their own teams, provided that these solutions can integrate with the organization’s existing architecture. Designing a highly interoperable product that is ready to “sweat” out of the box reduces the likelihood of customer churn during onboarding. Systems requiring lengthier integrations should focus heavily on quality onboarding to drive customer success and satisfaction.
Democratization: Today’s leading software solutions widen the base of technology users to the populous. We are seeing this happen both in ticket price — as solutions move further down-market offering Fortune 100 capabilities to SMBs — and audience as technology penetrates legacy industries that have failed to enter the digital age. In many cases, these software solutions are enabling non-technical users to work with greater efficiency and agency than ever before. In select circumstances, solutions are enabling digital-forward workers to emerge as leaders in their organizations. We’ve seen technology-forward digital marketers leap frog over their bosses to CMO roles over the last decade and progressively seeing more cases of this in sales, HR and other horizontal functions within typical enterprises. In all these cases, technology forward professionals are leveraging software to differentiate themselves from the pack by enacting organizational change. If you can turn your customers into organizational “rock stars”, they’ll continue to use your product and champion it within their organization and across the broader market.
As the trend toward fragmentation continues across the software landscape, many fear that it will result in fewer wins for VCs like myself. I disagree. The companies I see displaying these traits are infinitely more efficient and profitable than the legacy companies of yesterday, creating immense opportunities to maximize both producer and consumer surplus by eliminating the “fat” of traditional software deployment (integration specialists, sales commissions, marketing expenditures, etc.). While sales, marketing and deployment will always have their time and place in the software lifecycle, great solutions that deliver immense TTV for consumers will speak for themselves, generating better returns for founders and investors alike.
