SaaS: New Category or Bust?

SaaS: New Category or Bust?

Note: Half baked thoughts from December 2017 ahead. Proceed with caution

It started when I saw this tweet by Jes:

I didn’t quite understand exactly what she meant so like any person would do, I asked her “What do you mean” — that kicked off an interesting conversation around positioning & whether software products existing in new categories (and should they) or is it better to position your product in an existing category?

It’s almost holiday seasons and we have a ton of snow in Toronto, so if this isn’t your jam, I don’t take it personally. For the rest of you, a disclaimer: these are half baked thoughts so you won’t find any answers here.

First of all, what the hell is a new category. Great question — it depends on how you define it.

1. A product that doesn’t fit into an existing framework or mental model so you need to define the framework on how to think about this product and how it fits in with everything else.
2. A differentiation technique in business where you don’t want to be compared with competitors so you create a space for yourself and by default of the vacuum that exists there, you own it that space.

I am of the opinion that new categories rarely exist — products are built on top of existing behaviours that software makes efficient or easier.

Jes brought up a good point that Gainsight (Customer Success Product, sits on top of Salesforce) and Drift (live chat) are creating new categories. I disagreed with the category part, I agree they are creating great brands — Gainsight has become associated with Customer Success (not huge when I started) but I would argue, the discipline of CS existed before Gainsight, the product gave CS pros a common language & a product to make their workflows better.

Live chat has been around before Drift & Intercom. I remember using Olark around 2012 and connecting it with my Google Talk account for incoming chats. What Intercom and Drift did differently was to build an ecosystem around Live Chat, so live chat isn’t just about chat, but a supported in the backend with systems to operationalize it. In Drifts case, Salesforce/Hubspot/Marketo (MA/CRM) and in Intercom’s case MA/CRM and their own Engage platform. Both Intercom and Drift have built great products and great brands but they IMO did not create a new category.

Creating a new category is hard and often not necessary. It involves giving your prospective customers/users a mental framework on how to think about your product in context of everything else. Our brains work in patterns and associations — we tend to think of products in relation to what we use/know.

For example, MailChimp is still best known for Email Marketing and we know what email is and MailChimp allows us to send emails to many people vs sending it 1:1.

Even though now they’ve moved towards the direction of integrating with Ad networks, Landing Pages & lightweight automation with workflows, most of us still think of MailChimp as an email marketing tool primarily.

So you want to create a new category of software products, what now?

First you have to decide what the category is as and what the market is and if you can fit yourself into something that exists.

Let’s take Organimi’s example.

We started out with a vision of a HR system of record based around an Org Chart — fundamentally different, in our view from the usual HR systems which worked around a linear database model. We didn’t know if it was a new category within HR Tech or just a different type of tool, we ran into a problem. How do we explain this to folks? It’s not exactly an HR system, but it is. Execution like web copy, SEO optimization and Adwords became tricky — do we want to call ourselves an HR system? But we’re not quite that. You could argue this is a positioning problem or you could look at it as a category problem. The issue was we weren’t quite sure where we fit. At this point we could have gone and created new vocabulary and promoted that heavily through content + speaking + paid, positioned ourselves as the tool that captured the use of this new vocabulary and be virtue owned our category or we could simplify our product + message to fit into an existing behaviour.

We decided to tap into an existing market space rather than create a new one. At the end our product was focused on Org Charts and that’s where we fit in.

Jes brings up the point here:

If your market is crowded, why not move yourself out of it and into a different space? Blue Ocean vs Red Ocean for Strategy 101 nerds out there.

But the challenge with any first mover or any software category creator is, popularizing the vocabulary so your customers associate you with that word. Think Inbound == Hubspot even though Inbound Marketing sort of existed before Hubspot, but now when businesses think ‘we should do inbound marketing’ in the next sentence they mention ‘we should buy Hubspot because that’s the tool for Inbound marketing’.