http://www.drury.net.nz/2008/05/24/if-i-was-in-charge-2/

But as much as I agree with nearly all his points, I wanted to expand on point number 15 about assigning a design dictator. Here’s the comment (or essay) I posted. Thought I’d repost it here as it ties in with some other topics I’m covering. Here’s my thoughts on the ‘Design Dictator’ comment…

Re: Number 15. The comments about the design dictator and rebranding. Whilst I think it’s a great idea, it’s not quite that simple in reality. if you really wanted to rebrand Microsoft here’s what I’d do.

1. RENAME ‘MICROSOFT’ TO ???

Lets face it – it’s a lame name these days. And the name carries too much baggage – period! No amount of design will erase the memories of the past. It may take a decade or two of turmoil, but new generations coming through will appreciate and accept the new brand. And this is a multigenerational corporation so rebranding needs to be though out as such.

2. CHOOSE THE DESIGN DICTATOR WISELY! Trust them and step back!

Microsoft shouldn’t ’seek’ the designer. This would amount to ‘old thinkers’ choosing who to represent them – not a good idea. A third party should be appointed to find the designer. A hard task, and it could take some time, even years, but if this step is rushed, all could be lost – there would be one shot at this, so for the future of the company it would need to be the right person. Someone prepared to die for the company in order for it to live. Redesigning MS would be a few decades work so that’s a fair chunk of life to commit!

It can’t be a ‘Multiyear Contract Job’ for the designer. Look at Steve Jobs – it has their passion, nothing else – just that job and a pile of love!

3. DESIGN IS AS MUCH ABOUT CULTURE AS IMAGERY.

Let’s face it – Apple has great design, but also great culture. If Microsoft just rebranded, did a few screens and box shots (a few thousand…) all it would be is a facade. Cool people buy Apple Products. Nerds and geeks buy Microsoft products. Yes it’s a generalization – but 90% of the world’s population would probably agree. See the problem?

You can make cool products and branding for Microsoft but you’ll find it near impossible to shift entrenched Apple users from their stunning gear – this is because they love the gear, culture and Steve (God). So that means Microsoft would need to compete with Apple by not grabbing Apple’s customers, but rather taking their current users and trying to sell them ‘Cool Microsoft Rebranded Stuff’.

Hmmm.. Ever tried to make the nerd at school look good for the nightclub? He’s bright, he’s intelligent, he ‘does the job’ but despite putting him in baggy lowriders and a hoodie, he’s still a nerd. You can make a duck wear a tie, but he’s still a duck.

Or simply put, You can rebrand Microsoft, but you can’t reculture Microsoft users ;-)

4. VIRAL SPREAD

To be effective with a rebrand you need to impact the ‘design culture’ of Microsoft. Apple does so well partly because it releases a ‘cool toy’, their fans love it, buy it and most importantly ‘talk about it’ to other people. Great design spreads virally, but ONLY when the customers CARE about the design. Here’s the problem that reinforces my ‘Design Culture’ comments. Ready? Here it comes…

“Apple users CARE” – “Microsoft users USE”.

For example; Rod loves his Apple gear so he blog about it, Twitters about it, Allows people in the street to touch it etc. This is Great marketing for apple – It’s free!.

Microsoft could rebrand but would they have the same viral spread? I’d bet anything that they’d have a lot less viral spread than Apple if the rebrand was good. But if it was bad they’d have a HUGE viral outlash, and worse – it’d be ammo for Apple who, as history tell us like to get the boot into Microsoft at any chance – good on them too! if MS had some balls they’d take a few decent shots at Apple!

IN SUMMARY…

These are some initial thoughts on the issue. I’ll sum up though by saying that I believe rebranding Microsoft has to happen at two levels. Firstly, start to change the company culture from within for a few years – shake up the business by taking shots online at Apple, then secondly (and ONLY when the culture starts to shift) CHANGE THE NAME AND BRAND – RELAUNCH THE BUSINESS! Not just the design!

if done right, a relaunch of a company of this size could be the biggest thing to ever happen online! Once and for all it would lay the Microsoft baggage and history to rest.

Question is… Who’s got big enough kahunas to make this happen?

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http://diversity.net.nz/xero-year-end-results/2008/05/14/

Here’s my comment on the blog post.

What it amounts to I believe is that XERO is like no other business in the sense that, remarkable product or otherwise, to build a sustainable SaaS business just takes time and hard work (and watching the balance sheet).

SaaS businesses in the early years always looks ‘on the surface’ like they’re finding sales hard as the revenue always appears less than people expect. This is because the very nature of SaaS is many, small payments, monthly. It takes time to build the revenue, and for quite a while it seems like not a lot is happening – but then the revenue picks up. And SaaS revenue is like gold!

When you have thousands of committed customers paying monthly, it takes a major event to dent the revenue stream. SaaS becomes a solid revenue model, compared to traditional software service companies that may have only a few high paying customers. ie: When they lose a customer – there goes 250k and some jobs.

I do wish XERO all the best, and New Zealand’s tech community is watching with great interest, but what we all want to see is XERO get to the positive cash flow – covering overheads, before the cash in bank runs out. A XERO success is good for everyone…

So yes, looks like they need to ramp up fast, and they’ll know that and be working towards it… But my comment for the day (We’re in SaaS too) is don’t judge a SaaS businesses potential by it’s first years results. it’s the nature of this type of revenue stream to be low initially, then (if they have a winner product/model) it grow exponentially.

What we don’t want to see is linear growth. These business models should grow exponentially.

As a side note. It takes some balls to run a company with public financials. I wonder what comments we’d all make if we could publicly scrutinize each others business accounts?

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About the author:
Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com
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Here’s the article:
http://diversity.net.nz/telcos-and-saas-a-happy-fit/2008/05/05/

and my thoughts on it are below…

I’ll be interesting to see how the Telcos approach the SaaS model. Contrary to popular belief, SaaS is hard work and many players don’t have large margins – especially early stage SaaS players as they’re spending heavy in Marketing/Dev to get established. Even SalesForce is still working on improving margins…

So how can a Telco partner with a tight margined SaaS player? It’ll be interesting to watch these Telco/SaaS M&A&P’s over time.

Google/Salesforce is a good example of two different models coming together (Sales model vs Free model) – but would a similar deal be struck with a Telco?

Unsure… They could be a technology partner sure, but could they be a software partner? if sales or support (or custom dev) were moved from the SaaS business to the Telco, would the service to customers be lessened? I don’t know if the Telco would have the same product knowledge/passion/experience to deliver equivalent service to a SaaS’s current service?

I mean, you can’t have a Telco support or sales worker working on Internet plans, or dial up packages, then switching to CRM product support…

The Telco would need a specialist team for a ’service’ partnership to be feasible. and then if they have a specialist team, what becomes of the SaaS company’s role? Does it revert to a simple R&D focus? If so, then there’s an issue that R&D & dev teams are removed from customer front end, so the product development angle suffers…

Telco and SaaS business in partnership. Whilst I like the idea of marketing a solution down the Telco’s channel, there are some questions:

1. What’s in it for the Telco (Because the revenue won’t cover the cost for them)
2. What’s in it for the SaaS (Because service and Product dev may suffer)

Just my thoughts. I’m open to ideas on this.

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Here’s the original post to read:

SWAGS – Interesting, but can you trust the research?
Click here for the article!

And here’s the comment emailed through from the research company:

Julian,
 
Thanks for the comments and the feedback it is appreciated. Congratulations on the success of your company to date.
 
To clarify the forecast, we are looking at the demand in the market within New Zealand. This only include vendors selling solutions within NZ. If you have international revenue to Australia, the US, or any other market, in this instance we do not count it.
 
I take heart that at least we are in your opinion being conservative, having been around the analyst market for many years, including during the ASP mega hype days, I believe a more conservative view on market potential is appreciated more firmly than an over the top one. Like a few people I am still waiting for the XSP market to hit US$1 Trillion by 2004 or so which was forecast in about 2000.
 
To highlight the methodology, there was a combination of both end user perspectives and discussions with vendors. The SaaS market is very fragmented as you know, so we cannot always get to every vendor.
Finally on the NZ market, it is a very innovative and clever market, and by proportion puts Australia to shame in many ways. As a 50-50 Australian/Kiwi, I guess I can take the best of both markets.
 
Regards and Thanks
Phil Hassey
VP Services/Country Manager ANZ
Springboard Research

Technorati Tags: New Zealand,Project Management Software,ProWorkflow,SaaS,Software as a Service

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Julian Stone, CEO – Project Management Software visionary for: ProActiveSoftware.com, ProWorkflow.com & Julian101.com

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After reading this post I felt I should speak my mind a bit in the comments section. They’s discussing how easy it would be to copy BaseCamp’s project Management Software product and offer a free version. I thought I should point out a few things in defence of them, www.ProWorkflow.com and other software providers who are trying to offer value-based solutions in a market flooded with price-driven customers. Here’s my comment:

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“Our solution is called www.ProWorkflow.com – project management software and we have many thousands of users in the 1-100 user level. I can tell you from experience that copying the code and building a similar tool is only a small part of it. Think about 37s’s overheads, back end management systems, networks, marketing commitments (paid and social), security, support, sales, backups, billing, 24/7 requirements, load balancing, monitoring etc. All this comes at a cost to 37s (or in our case, to us).

How much do you value your business? Some people on this list obviously don’t think their own businesses are worth a few cents a day! Sheesh! ;-)”

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Good on all these guys! Keep up the 20hr days! I’ve met Rod from XERO, and had a few good chats with Grant Ryan from Eurekster and they’re both passionate, and focused. XERO seems to be fleshing out it’s powerful offering nicely and Eurekster looks to be picking up some good momentum. I think in the next few years we will see even more great Internet successes come from New Zealand as more kiwis learn to use the Internet as a massively powerful and leveragable marketing and distribution platform for their ideas. Rod also has some tips on starting a business on his website that may be of interest.

Definitely some great talent being displayed there, however I wanted to add a couple of other promising Internet companies to the list (ours included). Keep an eye on these companies as they’re both growing nicely. They both are keeping a strategic low profile whilst refining their low inertia scalable business models but are set to scale and should make some good ground this year.

………..

1. PROWORKFLOW.com
- Online Project Management Software
http://www.proworkflow.com

ProWorkflow.com (developed by ProActiveSoftware.com) is a web based project management and time tracking solution for IT, creative and service businesses (a HUGE global market). It’s the brainchild of Julian Stone CEO and Alan Barlow CTO, who developed the initial solution in 2002 to meet needs in their own business.

The company runs a low inertia business model with tight overheads, automated systems and is run as a SaaS (Software As A Service) business model. Simply put, the ProWorkflow solution sits on servers in the USA and customers rent the solution. ProWorkflow has thousands of paying users (80% of users are offshore) and is winning accounts with well known names such as Fossil, MySpace, News.com.au, Fox (and many more) in a space where the leading alternative solutions are 10-100 million dollar business, and many massively VC funded. – A great effort considering the company was bootstrapped to revenue with no funding. Watch this space…

……….

2. INFONEWS.co.nz
- Citizen Journalism Website
http://www.infonews.co.nz

Infonews.co.nz is a citizen journalism website for local news in New Zealand that allows any member of the community to publish news, photos and event details while also providing a forum for opinions, messages and interaction. The website was started by Fraser Mills and Peter Hodge, both graduates from the Peter Arnett School of Journalism at the Southern Institute of Technology in 2006.

Infonews.co.nz has designed a unique system allowing websites to benefit from the news aggregation aspect on the site. This makes it easy for niche websites to keep their content up to date and gives them the ability to focus on original production while increasing their websites natural exposure.Citizen Media Limited have designed their model to be easily expanded outside New Zealand once the website is fully established. The business is not totally reliant on advertising which is so often the case for content based websites; bringing more stability to their growth and revenue.

Citizen Media Limited currently has private funding and aims to develop infonewstv.co.nz and infobusiness.co.nz along with several other news delivery services during 2008.

If you know of any other promising internet startups, add them in a comment below. I’d love to check them out and see who else is out there playing on the global stage… ;-)

Technorati Tags: Project Management Software,Entrepreneur,Business,Startup,ProWorkflow,SaaS,Software As A Service,citizen journalism

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———————– FORUM QUESTION ———————–

Why are people not buying our software?

We sell an international software suite, geared towards small/medium sized businesses worldwide.
We offer a FREE Demo version that users can install and try out.
If they like the software they simply purchase a licence key.

Based on the number of downloads each day, we seem to be getting around 5-7% who actually purchase the software.

What we would like to do is to conduct an exercise and establish exactly why most people are NOT purchasing the software.
Could it be the price, could it be there is something missing or needs improving, or simply something else?

We originally thought of contacting all these people and offering them a huge discount or even a FREE licence. My thinking behind this idea was that it might work for the people who thought the price was too expensive, would these people spend a few minutes answering questions on something they didn’t want anyway?

My question is, what is the best method of contacting all these people worldwide and finding out why they didn’t buy? We have telephone numbers for many of these people but we prefer to use email if possible.

I very much look forward to your ideas, particular from people who have already done a similar exercise.

Regards, Davel

———————– MY ANSWER ———————–

Hi Dave,

Firstly, answer some basic questions. Be honest, and check your thoughts with industry peers. I don’t want to sound negative but a lot of software developers are blind to these questions.

We’re assuming (without knowing) that your software is great, fills a good need, fixes a common problem etc.

Q1: Do people ‘NEED’ your software? or is a ‘GIMMICK’ application?
- (if it’s a ‘Gimmick’ application, then your conversion rate may be sporadic at best, It if’s a ‘NEED’ type app and you’re not converting well… it’s simple, you haven’t solved the problem your software is trying to solve)

Q2: Are there ‘BETTER’ alternatives to your solution?
- (if so, you may not be converting on bad functionality and design – improve the solution)

Q3: Is your installation system for the software ‘SEAMLESS’ or ‘DIFFICULT’?
- (Should be seamless if possible if not, smooth the install bottlenecks)

Q4: Is your software ‘EASY’ to install?
- (Should be seamless if possible if not, smooth the install bottlenecks)

Q5: Is your site attracting the wrong type of traffic?
- (ie: you could have a million downloads, but if they’re all 15y/o school kids, then it won’t convert – they have no money and may be just stuffing around! But if you have 100 downloads and these are from CEO’s or IT specialists, your conversion rate will be high as they’ll be looking for a solution.
Marketing success is more about the quality and type of traffic than it is about the volume.

BARRIERS TO SALE…

Remember that every ‘PROBLEM’ a trial customer encounters is a barrier to converting. It could be that you have 5-10 barriers in your download and trial process and you have to find them and fix them one by one. The ONLY way to know the barriers is to test and measure EVERYTHING. It’s a huge job sure – but so is looking for a new job beause your software company went under due to poor conversion and not understanding the sales process. So put the effort in!  ;-)

OUR METHODS… Our solution is www.proworkflow.com, a project management solution.

WEBSITE – Fish out the good Leads…

- We have screenshots, tours, specs, PDF whitepaper etc. Means they can evaluate before trialling. We show them the product before they trial it, so only the interested people sign up for a trial.
- Get email addresses on the website, ie: Newsletter signup…
- Google Analytics, track where people get ‘lost’

FOLLOW UP – Hold their hands… Automatically…

- We have automatic preformatted emails that go to customers on day 1, 7, 13 and 16 of their 14 day trial. Each with the correct message for the stage they’re at. This is great at ‘tickling’ them through the trial process and massively increases conversion.
- We even capture their timezone from their IP Address and have a CRM system we built that helps us to call them at the correct time of day regardless of country. (ie: we know that it’s 3:30pm in Switzerland for customer X)
- On the trial signup form we ask where they found us (dropdown list)
- On the trial signup form we automatically select their country and state (using a GEO IP app we built) – this impresses people.
- When demo finishes, they’re locked out of the solution with a ‘Click to Signup’ link
- Google Analytics, track where people get ‘lost’ and what they focus on
- We offer teleconferences and ‘run throughs’ of the solution
- We built a ‘One Click’ link into all trial accounts so we can help people easily

WE MEASURE…

- Demos – Amount signing up per day
- Demos – Countries per day
- Demos – What day in the trial period they’re on
- Demos – Conversion to sale rate
- Demos – Cost per converted lead
- Demos – Staff user numbers per account (so we can focus effort on big leads)
- Demos – Graphs – Where they found us (measure change over time)
- Demos – Graphs – Why they left us (measure change over time)
- Demos – Graphs – About another 10 graphs  ;-)

- Subscriptions – Amount signing up per day
- Subscriptions – Countries per day
- Subscriptions – What day in the trial period they’re on
- Subscriptions – Cancellation rate
- Subscriptions – Revenue per customer (monthly)
- Subscriptions – Revenue per customer (lifespan)
- Subscriptions – Project numbers per account
- Subscriptions – Task numbers per account
- Subscriptions – Time tracked per account
- Subscriptions – Graphs – About 10 graphs  ;-)

Ultimately, information is power. You don’t need to get as pedantic as us – we’re numbers nerds, but the point is that to sort out the true reason for the low conversion you need to KNOW what’s going on in a lot of different areas. Work out the important metrics to track and the info you need to capture and put a few systems in place. Soon you’ll have a clear picture…

Hope this info is of benefit. I love this stuff so anyone is welcome to contact me if you have any questions.

- Regards, Julian

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I’m talking about the need to stay focused on the business model in the first year. I think they’re doing really good so far…  Just thought it was worth a mention on J101 as the principles below apply to ALL software co’s. Feel welcome to comment.

Source Blog Post: http://www.fastchicken.co.nz/blog/2007/11/14/XeroAndRevenue.aspx

My Comment:

Re: “I imagine that, in it’s first year, AfterMail made a loss, like most businesses getting off the ground do”

- Ultimately, none of us know if they made a loss in the first year and it’s the result that matters, not the means. Good on AfterMail.

However, from experience, our company ProActive Software – ProWorkflow.com and a few others I know of have built globally trading software businesses without incurring losses or any debt. Just bootstrapping forward, so it’s definitely possible.

But… That doesn’t mean we’ll necessarily scale any faster than XERO or other debt or Investment funded software co’s. In fact, if XERO have the business model right, they’ll scale a lot faster. They simply have more resources and means at their disposal (never a bad thing). As I see it, I wouldn’t expect to see XERO scale too much in the first year. I would imagine (and I think I’m right) that they’ll be working on refining and experimenting with the business model (and sales/marketing models) prior to ‘pushing the scale up’. And that’s great – it’s where they should be focusing at the moment.

To be honest, it’s really encouraging to see XERO experimenting with the business model and trying lots of different things. Too many software co’s just create a product, sell it on a website and never give thought to the business model and infrastructure. Unless you do this ‘hard yard’ experimentation, you can’t position yourself for growth.

Ultimately though, for all software companies there’s only one equation that matters and this should be focused on by ALL software co’s…

Cost of acquiring Customer
<MUST BE LESS THAN
Revenue from Average Lifespan of Customer

For Example:

If you spend $2000 of time acquiring a customer worth $100 per month (20 month payback)and the average time they stay with you is 3 months, you’ve just LOST $1700. (Scale that loss up!)

but: if you spend $200 of time acquiring a customer worth $100 per month (2 month payback) and the average time they stay with you is 12 months, you’ve just MADE $1000. (Now Scale that profit up!)

So you can see that focus should be on business model and sales/marketing systems prior to scaling up. Hopefully that’s as clear as mud!  ;-)

Disclaimer: I don’t own XERO shares. (more of a property guy).

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About the author:
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With traditional software selling, you make the sale, turn your back on the customer and move on to the next – “Accountability=none”. The on-demand model is great. If the customer fails, we fail, and vice versa. There is great reason to ensure the service works, not just for the customer, but for the future of the SAAS business too..
We’ve had customers try to talk us down on price. We say, “Sure, we could discount price, but that lost revenue at our end is affecting the level of infrastructure we can afford to have in place to support your business.” They always pay after hearing that – they understand.

With traditional software, it’s inherently a selfish model. The software co takes money for the product, and shifts the risk of the software to the customer’s end, often with no accountability if any issues occur. It’s “Tough, thanks for the sale, cya later!”

With on-demand software it’s a symbiotic relationship once in place. If the customer leaves, the SAAS provider suffers. If the SAAS provider leaves, the customer suffers. They need each other, which means, like it or not, you are in a forced ‘relationship building’ business model. It’s a great way to do business…

Technorati Tags: SaaS , Software as a Service

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