The Oxford English Dictionary defines innovation as “a new method, idea, product, etc.” Stewart Butterfield, CEO of Slack, 9th in the 2015 CNBC Disruptor 50, defines innovation as “the sum of change across the whole system, not a thing which causes a change in how people behave.” I, for one, much prefer Butterfield’s definition. The implication is clear – a new method, idea, or product, no matter how great, is not innovative unless it changes the way in which people behave. As someone whose day job in a large corporate is dominated by email to an exhaustive extent, and whose other job at a plucky SaaS publication leverages tools like Slack for productivity and collaboration, I can personally attest to the extent to which it changes behaviour. Slack is a breath of fresh air to the jaded corporate email junky, a stress reliever, a time saver, and I am clearly a fan.
Mind you, I didn’t know I needed Slack until my infinitely wise colleague told me – this is Slack, it’s going to make life a lot easier for us, and we’re using it from now on. If this is beginning to sound like a fan letter, I do apologise but that’s kind of the point – Slack’s ability to convert users in to fans and evangelists is key to its huge growth in the past two years to 200,000 paid seats and a valuation of upwards of $2 billion, and it can also teach us a thing or two about innovation.
Sell a solution, not a product.
As Butterfield put it in a now famous memo to his employees in July 2013, Slack is selling organisational transformation, not the software itself. This idea strikes to the heart of the transactional vs consultative selling argument that those of us who spend a lot of time of preparing sales reps to go out and evangelise software products are blue in the face from making. The sales process when a customer has a specific, known need is very different to the sales process when the customer, like me before discovering Slack, doesn’t know what they need. The way to sell Slack to me wasn’t to tell me about its features, functionality and benefits but rather to isolate my issues and pain points and show me how Slack could resolve them. My colleague, admittedly an excellent software salesperson himself, recognised my disdain for email and provided a slick, Slack antedote. This first lesson might suggest that a “product focus” is a bad thing for a SaaS company but, on the contrary, the product must be at the centre of everything we do as SaaS entrepreneurs.
It’s not your product, it’s your customer’s product.
Having spent months or perhaps years developing your product, it is not unusual to develop a fierce sense of ownership and pride in what you have built. You created it, nurtured it, watched it grow – your product is your baby… but you have to give it up for adoption. In keeping with its mission to create organisational transformation, Slack are unerringly dedicated to listening to the organisations it is helping to transform and ensuring that their feedback becomes part of the product. It is also important to remember that feedback is for life, not just for beta. Even when the beta sticker has been removed and your customer base is growing, your product must remain dynamic, grow, and adapt to your customers’ ever-evolving needs – one of the key advantages of the SaaS delivery model that we sometimes neglect. SaaS is what allows us to innovate on a continuous basis, so be SaaS and be proud. Slack has taken this approach on board to such an extent that it is reflected in their (also highly innovative) pricing model which only charges for active users – that’s right, if you commit to buying a number of Slack seats and only use half, you only pay for half. This takes the uncertainty and risk out of a manager’s decision in buying Slack – their key concern about whether they will really get value from the purchase is alleviated as they only pay when the value is realised.
Forget about existing markets, create a new one.
Zenefits recently taught us about disruption and how SaaS can be used to change the face of existing, slow moving markets. Parker Conrad looked at the health insurance and payroll markets and thought: you know what, I could do what those guys do but much, much better. Although incredibly well executed, this is a classic form of entry into an existing market which is value differentiation – the other classic form of entry is price differentiation. So, you can either find a way to be much cheaper or much better than the incumbents, make what you do difficult to replicate, and let that be your competitive advantage.
Stewart Butterfield, on the other hand, saw a problem shared by many organisations, and decided he could use that to create a new market. Most organisations will already have a defined budget for health insurance and payroll systems and Zenefits are doing a great job of taking their share of it – Slack must create the need (and the budget) in the customer’s mind for something that they hadn’t considered buying and then go ahead and sell it. The fact that they are doing this in such great numbers is testament to their innovation.
by Michael Cullen @michaelcullen87