SaaS Strategy: Where are we Today, and which Pricing Model is Right for you.

SaaS Strategy: Where are we TODAY, and which Pricing Model is Right for you NOW? 

Back in 2012, I wrote an article (on this blog) about the potential future of business in the internet age, called The Internet Tsunami. Back in 2012 as we emerged from the infancy of the internet I stated that the internet would become a major business channel for all business sectors not just music and insurance. It was no longer a passing fad.  Back in late 1990's we saw the internet emerge from having been a research tool to something which people could experience through to the dot.com boom of the early 2000's when money flooded in to this emerging market but the infrastructure and customer engagement platforms were not ready preventing online becoming more than a side show for businesses.

After the financial crisis of 2007/8 as the economic bounce-back accelerated change in the economy opening the door to the internet age and it began to take shape. My article in March 2012 suggested that what we were seeing the beginnings of the permanent change across all sectors and markets, it was not just Amazon replacing CD music shopping, but that the world was going to change. 

The SaaS Tipping Point 

The technology tipping point has occurred and it has become the dominant force in driving consumer behaviour. This paradigm shift is when markets move in response to macro factor drivers. For companies going too early with any trend they commit in concrete to a technology which leaves them left behind as the internet evolves (for example Friends Reunited: no interaction and on-going relationship creation, as Facebook found is what makes a successful online social media platform), go too late and you miss the market move and find out you have been left behind (Comet sold electrical white goods and collapsed with over 20% of the UK market share through its 200 stores, but refused to see the move online for these goods by younger consumers, while Amazon at the time had already achieved 8% of the white goods market with no physical shops). 

If you can see a trend you have already missed it.  Once the tipping point has been reached in any trend then you are playing catch-up. So over the last 9 years the internet has not just become another channel to market for many goods, it has become the dominant channel for many sectors most noticeably in retail, but is now almost ubiquitous, impacting upon every market. 

The ability to take products and services online is now in full force with organisations inventing themselves, reinventing themselves as online (SaaS) business models. For many this is a result of a number of key factors, not least is about keeping up with your customers and the competition. But, other key factors such as the reduction in cost of developing online services, as well as the ability to upgrade services quickly in response to rapidly changing or evolving customer demands are other positive drivers of moving online.

Making the shift to go to a SaaS solution is a strategic one, it should be based upon a clear strategic assessment of the market and customer needs and carefully planned out in a detailed business plan.   

Software As A Service SaaS 

Software as a Service (SaaS) solutions are now common across all sectors replacing manually made service offerings. For many businesses replacing, upgrading and being able to compete within their sector requires companies to move to SaaS offerings. Either bespoke designed SaaS from scratch using in-house or outsourced technicians or tailored from white label sector providers. Offering a SaaS solution to a market is not just a shift change in what an organisation offers but a whole new way of thinking. Too often taking the product online is seen as a cost effective way to compete, or stay in the game as others do, or as a way of trading without barriers expanding the brands reach in an internet dominated world.

SaaS though is more than just simple a move online.  It requires a different way of thinking from traditional models. The changing nature of customer engagement, moves from the physical meeting to the online engagement, that requires companies to think and act differently. The nature of the service also changes as it becomes totally arms length customer centric. Customers choose when and what they want to use of the service (for example over 2,700 UK people did their tax returns on Christmas day in 2019, with over 30,000 doing them over the Christmas holiday period in 2019), this requires companies to resource supporting users when they need it not when you are open. 

Business to consumer SaaS models need to support consumers with planned engagement and support channels as well as developing SaaS loyalty strategies in place to retain and develop customer segments. For B2B SaaS models working across partner channels puts a set of different requirements in place in accessing target audiences through integrated service offerings through integrated software .

SaaS behaviours also require business to measure very different metrics to be successful,  many of which are new to companies not used to SaaS solutions, but if you do not measure them SaaS will fail to deliver the results you expect.  Here are some of the key areas for SaaS businesses to monitor and drive decision making from.

Successful SaaS Solutions Start with Minimum Product Viability (MPV)

SaaS achieving its Minimum Product Viability MPV is an essential must have which is not often measured early enough. The principle idea which business leaders are told is that with SaaS 'build it and they will come mentality," but they won't if you don't compete.  Just being an online service does not make your product achieve success. So MPV is often misunderstood as do what we have to do to be a player within the market. 

SaaS MPV metrics need to be clearer. If you take your service online is must do more than exist. Now I am not saying it needs to be perfect, over-polishing a SaaS solution is one of those very dangerous assumptions we will come onto shortly, but simple migration of a product online is not a SaaS MPV.  For Minimum Product Viability to be achieved a SaaS solution must actually compete within the market. It must win existing or new customers for it to achieve MPV status. Too often the model of lower cost looks good on paper, to the accountant, to the competitor analysis and trend analysis but without actually being able to win target segment customers.  

Built and they will come mentality often leads to the knee jerk reactions from companies to offer discounts to customers to gain traction. The downside of that is that the predicted margin gains aren't met and if you give it away, customers then do not value it so engagement is low, and the other major problem is that once the opening price is set to gain traction particularly form early adopters who usually are premium customers,  it is difficult to recover that market price unless you have large marketing budgets to support the opening offer discount.        

Measuring MPV requires leaders to not only check it works (and that is never a given with IT) but also that it achieves MPV as an offering. Does it do what it needs to do for the customer.  Does it meet the complete customer requirement of the value proposition, so do not just focus on the pure IT but on the whole value proposition to measure the MPV status. Test it with pilot groups, measure not only it looks good, but does it replace what they were doing? If not it needs to do more.

SaaS Solutions Being a Disrupter

To achieve SaaS MPV, a solution must disrupt the structure of the existing market. Being a disrupter within a market sector was easier with first mover advantage, but now in virtually every market that has been lost, SaaS solutions need to use the whole marketing mix to achieve MPV and not rely on opening offer pricing. 

Disrupting any market requires your SaaS offering to target and penetrate precise target segments and disrupt the existing market.  Focus on measuring the disruption your new offering is causing. Are you reaching your core target audience with your new offering and taking customers from the competition, or protecting your vulnerable customers with you new offering. Disruption is about changing people's perception and behaviour patterns. So it is important to measure the existing behaviours and their new behaviours using the SaaS solution. 

Just shifting your existing customers online maybe a strong defensive strategy if your are the last to move into SaaS, but that is not a disrupter. To disrupt a market you have to do something which changes the game. Changes the structure, the dynamics and the value proposition within the target audience. 

SaaS solutions MUST do MORE

SaaS solution need to offer more to customers within their sector. Providing a bigger solution, not just to the existing need but to wider segment needs should be built into the SaaS solution. Even if not a MPV points the potential to move online must drive engagement, through community, through advice and support to enable SaaS to add real value to target segments. 

Building more into a SaaS solution can be undertaken at low or no cost if planned in early, and is essential. SaaS solutions need to build in evolution so that they can evolve in response to customer evolving demand, competition short-term and long-term responses and to life-time evolution needs. Being able to add in and evolve a SaaS solution to a complete solution is essential so it offers a complete long-term solution, not just a quick fix. That requires several micro launches, (evolutions) to meet theses needs and to enable the SaaS solution to add more value (value proposition). 

Measuring why, where and who is using the site for what as well as forums and associated features will tell you the full value you could, should and must offer. Often support functions such as help desks, brochures, technical information, support functions as well as best practice and associated activities are always areas where doing more can be seen, but only if you measure it! What about training and certification of users and channel partners, and the whole range of other activities which these intranet offerings can also provide?

SaaS target the right segments.       

Moving to SaaS is not a straight line. Build - test - launch sit back and watch them come onboard is how SaaS is sold to CEO's in shifting to SaaS solutions, but that is not how SaaS adoption works. Adoption curves matter, so identifying who and when segments will move over to SaaS solutions is vital and plan out the adoption by target segment.

The challenge is that the key drivers of SaaS solution within an organisation comes from specific segments and so migration plans need to be reflected in the SaaS rollout and marketing adoption planning.  Adoption curves for SaaS should be planned in early so that realistic and appropriate marketing for SaaS solutions inform and determine metrics of success.    

Who are the core target segments that SaaS solution should be targeted at?  This core question is often lost in the generic answer everyone! But it is not. SaaS solutions must add value to everyone, but they must be focused on converting the businesses strategic target audience. That focus must be at the heart of the SaaS solution design and implementation, if you win more great but your focus is to move the brand's customer base. 

For success SaaS solution moves the brand's position, its profitability and its performance by acquiring new higher value customers. Higher value customers in both B2B and B2C environments for mainstream players are usually found higher up the adoption stream. So laggards find growth in volume and value in teh late majority (see below for market adoption curve and total market size modelling). Late majority players can already win downstream laggards but need to expand by either growing with their sector or by moving into early majority customer segments, and likewise early majority customers look at high value (but smaller total volume) early adopters. 

The key measurements here are to identify the precise target segments you intend to win, and measure that  as your metrics of success. Do not just measure total customers as this can inflate your SaaS success. While total numbers always looks good, it mayn't be profitable and can often lead to SaaS platforms being pulled into chasing total numbers not focusing on developing profitable long-term customers. This is typically seen when a new SaaS platform has to buy its customer growth, so people see the growth as success, but it can be boring through their cash reserves as they have focused on the wrong metrics. 

Profitable target customers support growth of a SaaS solution must be measured to see if the strategic goal is being achieved. 

SaaS Pricing Models

There are several ways to price your SaaS solution which we are break down into 5 key models, each reflecting the market your SaaS operates within, your competition and the solution you are providing to whom. Here are the most effective SaaS pricing models and the pros and cons of each with their key features::-

1. Flat Rate Pricing

The most common and simple, often replacing a previous non-SaaS solution. It is simple and effective, easy to use price to incentives by allowing target audiences to compare the value proposition. The difficulty in this model is that it is difficult to add value to target audiences, such as high-use or high-value customers. Some SaaS pricing models then try to add premium models to this, by adding a second solution to enable extra features and pricing to the offering, but this often creates technical and is difficult to migrate customers across to. 

2. Usage Based Pricing 

Usage based pricing is popular and provides an ideal way to price your SaaS solution. It enables pricing scaling, the more your company use, the more you value you consume, the more you pay. It allows low cost acquisition and then scale-up in pricing towards target audiences. This also enables additional levels to be added and funded through growth as usage drives demand.  Usage based pricing also reduces and often removes barrier to entry as the SaaS platform accounts for a wide-range of customer segments, from new entrants through to high demand heavy user groups. 

Usage based pricing does have some limitations. The moving up levels (and down) can be challenging for customers to see what they get for the price they pay. The key area of concern for a SaaS Solution using this model is that monthly revenue, a key metric will vary and is therefore not popular within the sector as predictable revenue is often a core demand for investors.   

3. Multiple Tiered Pricing Models

One of the most effective models as it allows the SaaS platform to be priced to target audiences using tiered pricing. Tailoring different packages around target audiences enables the SaaS platform you can appeal to multiple audiences. This has a key second advantage in revenue generation as you maximise revenue across all channels to market. It also allows simple clear and honest upselling opportunities as well as add-on pricing with new features/levels being added in response to changing demands. 

Key factors to be be aware of here is having too many pricing levels. Just because you can does not mean you should. 3 is optimum and 5 is often seen as maximum, the more you add the higher the abandonment rates and the lower the effective of marketing campaigns. 

The idea of dynamic pricing, too many tiers leads towards a platform that looks like usage pricing which dilutes and degrades the tiered pricing focus on key target segments, vital for strategic success of a SaaS solution. The other downsides of too many packages is that trying to over target segments damages the focus on the tiered model, confusing customers through too many choices and damaging price effectiveness by not reflecting tiered pricing to deal with heavy use customer groups.   

4. User Pricing

The fourth pricing model moves away form company wide pricing to the end user. This model is ideal for many sectors where simple pricing wins customers over. Wether that is a fixed annual or monthly fee, its simplicity and logic engages with SaaS platforms whose offering of a direct pricing model allows customers to sign-up as individuals. 

User pricing is popular as it is predictable in income and scales easily with numbers. This predictability makes it popular but needs to be internally measured by usage by individuals to see what value they generate from the platform. 

While simplicity makes it popular it is also its major limitation as a pricing model. Per user charges means that there is little opportunity to get group buy-in as one person can use the platform and share the results. The inability to signup whole teams as one limits routes to market through channel partners. It also means that churn becomes a major factor as it is harder to control churn as people relate use to value as an individual.    

5. Active User Pricing

Is a variant of of user pricing but works by charging for people actually using the SaaS platform. It is seen as excellent value for money as it removes risk for purchasers as sign-up does not cost. This drives engagement and adoption as it is only usage which is charged.  People can sign-up but do not pay until they actually use the platform, it is ideal for enterprise business models. 

The downside of active user pricing is that it is difficult to grow outside specialist enterprise areas. Often premium priced as a live service it is difficult to encourage widespread adoption with teams or across sectors.       

6. Per Feature Pricing

One recently developed and rapidly growing variation on this theme is called per feature pricing. Customers of businesses pay a subscription fee, a base fee with limited functionality which achieves MPV and adds value and then differing premium priced add-on features which either replace the need for multiple upgrade options or allow a SaaS solution to adapt with its own specialist feature cost model expansion. 

This model encourages customers to upgrade to unlock additional functionality which allows segment specialisation and directly relates those functions to direct costs.  This per feature pricing model allows sites to know their operating cost models and revenues of the base model, and enables cost scaling for bespoke areas that may take significant resources to develop. Sub-segmentation by feature is popular as it allows cost to value to be direct and then reverse rolled back into the SaaS site as it evolves as a cost-free upgrade.   

The key challenges of cost per feature pricing is that SaaS solutions can be pulled by small segments away from their core model to meet these minority groups. The other challenge of per feature pricing is that of customer frustration as key features are at a premium.  

7. Freemium Pricing

Saving one of the most popular and misunderstood to last is the freemium model. This model allows customers limited functionality the SaaS solution platform for free. This enables mass adoption through any market of the SaaS platform with a clear level of functionality which buys users in. It is ideal for large volume platforms such as social media channels as the model removes the key hurdle to volume customer acquisition. 

Freemium  gets customers bought in for nothing as there are no barriers to entry and this supports rapid expansion through and across channels, but it does limit value adding at the freemium level. Encouraging customers to trade up and use the additional chargeable features is teh real challenge  

Revenue is the real looser here for companies. This makes it less popular with funding parties as conversion to revenue is undefined within this model.  To fund freemium SaaS models multiple funding systems are often adopted, such as smart algorithm advertising which is an ideal way to fund expansion.    

With freemium sites high churn rates and low loyalty rates are major drain factors to this model, both of which make traction and the ability to encourage customers to upgrade difficult. Funding to support the core functionality is often under pressure to keep it developing and engaging with the volume of its core customer base. 

Summary

SaaS solutions are now mainstream to nearly all business and customer segments. Being mainstream though does not mean that the risks have disappeared, in many ways they have increased as expectations have accelerated as audiences demands have risen.  

Whichever SaaS pricing model you adopt understand that they all come with risks which need to be understood and actively managed within your planning.  

SaaS solutions must be part of a strategic process for leaders to understand and deal with. One area that many leaders do not fully appreciate is that building an experienced SaaS team around them is a prerequisite for success.    

Learn more read further blogs or get in touch to see how I can assist you.

Learn more at www.richardgourlay.com

Why Plans Don't Work: And What To Do To Make Them Succeed

Why Plans Don't Work 

Why Plans Don't Work, 

Here's Why And What To Do To Make Them Succeed. 

Leaders often say they have a plan, it can be written down or in their head. Sometimes they have great names, from action plans, to project plans, to business plans.  When I visit clients I am often presented with plans, ideas and concepts all in some state of existence. Some are online share documents with many contributors, several revisions and are carefully annotated graphs and charts, others are glossy brochure plans with pull out action and implementation plans.  

But Plans don't work!  A plan of any kind is just some works (images graphs etc) to make change happen. But plans do not make change happen. Plans only show the steps to make change happen. To move the company from where it is today too somewhere new. But that does not make change happen. That just moves people out of their comfort zone to somewhere where they are not comfortable.  

Habits Matter More Than Plans

Plans make change, but don't make change happen.  ITs what happens next that matters if plans are to work. Taking people somewhere new is interesting but getting them to stay there and thrive is the real goal of any vision. It is the afterwards that matters if change is too be sustainable. If you want people to perform in a new way it's making those new ways their habit that matters.

Habits matter because that is where change becomes the way. Habit is what matters in making change happen. The biggest driver of people's behaviours is creating new habits, but these do not feature in business plans. Habits are very powerful but business plans, action plans and implementation plans fail to have habit forming built into them.      

Habits are why people do things. Habits are why people are reluctant to implement real change. Habits are the most powerful driver in people's behaviour. Habits are often more powerful that people's desire to succeed in making change happen.  Employees are often open to change until it becomes something they have to do differently to their habits. 

Plans Fail. 

Habits are a lot more powerful than someone else telling you to change. This is why plans fail. Even if people see change as necessary they will agree that change needs to happen they often fail to embed it, preferring to go back to what they know, like and have always done, they kept their habit. 

"Plans change processes but fail to change peoples' habits."  

Changing habits needs to be built into a plan. The changing habit phase is rarely, if ever identified until after the plan has failed to succeed. Look at why plans fail and the most common and frequent reason given is the failure to change peoples' habits in implementing change. 

Creating and sustaining change requires plans to build in habit changing as part of culture change. Habit changing     takes time and needs to be planned out over the long-term not a short-term fix.  A plan saying we will change this process next week, is unlikely to succeed if it has been around for a period of time and is part of people's habits and is supported by the existing culture. 

The Power Of WHY

Simon Sinek has outlined the importance of why change is being made as a driver of supporting change. Leaders' must provide context, the WHY change is happening not just WHAT and HOW. The power of why is an essential underlying rationale which changes the relationship between leaders and employees, buying them into the strategy, rather than them being kept in the dark on a need to know basis of information.

Leaders need to understand that plans don't work, but people do when they are doing something they love, in a way they control for a cause they believe in.  

Plans are meaningless unless they carry everyone to somewhere they can create new positive habits. When you remove those habits you alienate your people. 

Changing Habits Takes More Than A Plan

Here are a few ways I have found to make plans really work, to get them beyond the page, implemented, and embedded with new habits in place.

Leadership Behaviours

]Leaders needs to act as ambassadors of change and provide new habits for people to adopt and ideally develop their own new habits within the new model which the plan determines.  Leaders need to proactive lead from the front in creating a new culture, being and developing role-models of the right behaviours and habits in each department so those role-models can be seen and modelled against.   

Recognition And Reward

Recognition is also a key element of habit forming, recognising and rewarding the right behaviours is central to bring the new way of working. Too often leader's spend too long penalising those not doing the right stuff rather than focusing on people doing the right behaviours.   

Burn Bridges

Burn the bridge of the old ways, change everything that needs changing with no going back or slippage options. This drives new behaviours which can be supported and allowed to develop.

Zero Tolerance

Zero and immediate corrective action to keep people on track with the new behaviours and performance which the plan requires. Do not let people have leeway in moving to the new way of doing things. Leaders must not just lead but also carry people forward and then allow them to flourish within that new environment. 

Champions Keep Everyone On Track

Creating habit champions is a highly effective strategy. But not just line managers, identify early adopters of the new from wherever they sit within the team, ignore their title or role, and make them champions to keep everyone on-track with the new, so that they can support across all the whole company the new way of doing things.

Buddy up people through change. Encourage those who have adapted early to support those who need to be nudged along the way. But don't waste energy on the change deniers (laggards), never waste good people on carrying deadwood. They won't thank you. 

Accountability Matters

Make everyone accountable to someone else for making a permanent change happen. Keeping a change alive is one of the biggest challenges a plan has, how to keep it living post the initial launch phases. Once the excitement of plans launch and big changes has happened, keeping the plan alive so that the cultural and new habit forming changes are shaped and embedded are often where the most required to deliver the plans Return On Investment ROI.  

Embed Change

Make the change permanent across the whole organisation. Plans don't work unless you make the change permanent across the organisation and re-enforce the changes you want to see and as importantly see the change that has happened. So often looking at where you have come from to where you are now and where you see teh company getting to carries your people forward. If you have made  change which can increase your processing by 25% then show them that change from where you were to where you are now and where you will get to over the full rollout of the plan as new habits are formed.  

Create An Environment Where New Habits Can Form 

To get people to stop smoking experts identified that getting people to stop for a month increases the likelihood of them giving up smoking for good six times more effectively than other traditional stop smoking campaigns.  It takes time to form a habit, and in stopping smoking giving yourself time and changing your existing habits from breaks to who you go for a work break with (don't hang out with smokers, or carry on the smoking driving habits) if you want to stop smoking. Form new habits that support you change your habits to the ones you want. 

The same is true to making change happen at work. For people to change they need to burn the old habits that are no longer wanted, but more importantly be allowed to create their new habits which fit with the new model. That requires leaders to allow people, actively encourage them to create new habits, so do not tell them what to do, give them the environment and the freedom to do it their way. Allow people to create their own new habits.   

Measure The Change

If you measure what matters, then measure how people adapt to the new normal, the change by their habit forming as they normalise to the new work environment the plan delivers. If you measure habit forming, people's ownership of the new way of doing things, how fast they take ownership and lead the change, then you will see the plan deliver the positive outcomes which your plan wanted to achieve. 

Plans don't work, but people making change does. Focus more on delivering a plan that moves people and allows people to own their plan then you will see the productivity and effectiveness that you wanted to see the plan deliver. It's not the plan that matters, it is how people react to that plan that will deliver the results leaders need to see.

Strategically are you leading ahead of the curve of behind the curve?

For a Managing Director or Chief Executive Officer, knowing where your business sits within its market is an important first step in leading it to where it needs to be. Where you are today is the result of action taken years before. For leaders' determining where they want their business to be is about deciding where a business is best positioned to succeed within its market over the leaderships tenure. 

Strategic Brand Positioning

That conversation of where to be (and where not to be) requires careful consultation with the shareholders, and key stakeholders as well as the people within the business.  What are their aspirations for the business today and over what horizon?  If a business is a mid-market player within a sector then is everyone happy to stay there and defend their market position and market share, or do they want to move to somewhere else?  Pressure mounts as other players within the market accelerate their growth by moving to other areas of the market. Staying where you are needs to be defended, then the leadership team must be able to defend these strategic decisions.  

That desire to shift should be based not just on a simple aspiration, or the selection of a new MD / CEO to move the brand, but on key factors which will include growth potential within segments of that sector, short-term opportunity analysis of moving compared to staying where you are as well as long-term goals including profitability and sustainability over the a long-term strategic and team culture goals.

Leaders' Biggest Decision

Moving position is not about dropping what you currently do, unless that is redundant within the market, but more about where will the business will be over time. Deciding where make prioritisation of future investments and place resources, including your energy is how businesses naturally migrate. Dramatic events such as Covid where businesses have to overnight pivot their model is the most often need to make complete shifts. Traditional change models are often driven by macro market drivers, (PESTLE) factors most of which are driven in response to consumer demand, reflecting changing preferences or within markets by changing dynamics of a market. 

The big decision for an MD / CEO is where to go from where you are today. That decision starts by answering why where you are today not where you want or need to be tomorrow. For a new leadership team moving the company's position is the reason they have been brought in as shareholders are not happy with the current position in terms of profits, ROI or sustainability. Deciding where to go requires some deep sole searching as well as emerging market opportunities from existing key customers but also in where and what impact emerging trends will make on the business. Dealing with the conflicting pulls and pushes of advice as to where to go, requires detailed analysis and evidence building, so as not to be pulled from pillar to post in strategic thought.

  

Leading ahead of the curve, or behind the curve.

Moving a business requires a thought process of where is that business sitting today within its market. Is the business ahead or behind the curve? Is the first and most important question to answer.  The gulf between the two is a huge chasm, are you a brand leader or a sector follower. 

What is the curve?

The curve is where a company/brand sits within a market. Any and every market are structured around the technology levels within them. From cars to computers, fashion to furniture, to energy to engineering every sector has its own defined structure. The curve is how customers see a market, and how customers engage with brands along that curve. In effect the curve shows where customers are by their buying behaviour, what they will spend based upon their value perception of each brand. It's why Rolex and Tag Heuer can charge more than Swatch and Timex. Those ahead of the curve invest more in research and their product across their marketing mix than those behind the curve.

This understanding of a market is a strategic issue for leader's to assess, understand and determine where and how they position their company to develop their long-term success. Where to position a company for long-term success is fundamental to the business's success.  Where you sit within a market provides you with a place to defend and an according accessible market presence, it is easy to use an existing cash cow to sell more downstream, it is harder to reposition yourself upstream with a new product as the brand perception is outside comfort or competency  The danger of growing using just cash cows is that it naturally slips the brand down the curve, a dangerous precedent which is hard to stop or reverse. 

Strategic Curve Positioning

This structure, the normal distribution curve is a line along which every player in the market is mapped by perception as to where they sit. At the far left are the innovators, small technical product/service creators at the cutting edge of the market who develop bespoke new products. While there are always very few of these players (in a mature market) they are vital as the develop the new and innovative products and services the sector is known for. To do this they require the right mix of talent, creative space to succeed and deep pockets to support their innovation development. That makes them small players but with disproportionally  big brand presences and are often funding (owned or in Joint Ventures with main stream players).  

As the curve increases businesses are seen as early adopters, where higher growth companies sit who have developed sufficient market size to stand alone, and who quickly adopt ideas form innovators and take it to the mainstream market. for many people these flagship companies are what determines a market as they reflect the innovation but in a larger scale than then the pure innovators. Typically good at marketing and sales as well as product development these companies can premium price their products and services to the discerning customer who buys the pure value proposition that early adaptors offer.

Early majority companies, play in the mainstream, safe, established with a wider value proposition than the product they bring innovation in once proved. By being a mainstream player the brand USP and value proposition has to be clearer across the entire marketing mix and unlike the earlier sections a wider skillset of people are needed who can identify trends and develop them into the mass market position early on in which those companies operate. 

Late majority companies gather trends and repackage them with lower priced versions of that trend, but bring it to new audiences with enhanced convenience, more support and rely upon mass acceptance using a wide range of marketing mix techniques suitable to their sector.

At the tail end of any sector are the laggards, players in the market who hoover up trends that are now past, but have some lower price or new laggard customer segments who they can resell these products too. Laggard markets can be extremely successful where they extend lifespans of trends to keep them alive by repackaging them to wider, often high value alternative markets. 

Why being ahead of behind the curve matters

Where a new or existing customer, sits on its sector curve is a core strategic issue. A company must play it its competitive advantage, and shifting that takes time and resources to achieve.  The gulf between the front of the curve, the innovators compared to the laggards is huge. Players within the same sector but at significantly different market positions are almost speaking foreign languages to each other and certainly very different cultures.   

Innovator and early adopters will more heavily invested in new products and services while those behind the curve invest significantly less, sometimes very little in products and services.  This reflect sin visual differences in the relative prices they can charge for their comparable products and the timeline with which they bring bring their respective products to market.   

That investment in new products require high investment which is offset by higher profit margins to premium customers, while those further down the curve have to offset lower gross margins with lower costs in product development coupled with larger market segments increasing sales volume and therefore lower costs to come to market. Choosing where to sit 

Strategic Sustainability

Choosing where to position your company is therefore a vital strategic decision to take. The key criteria of a long-term strategic view is essential, where does the company want to compete over the next 5 years, not just to capitalise on next years' opportunity. It takes time, even in agile companies to orientate, become established and achieve positive ROI's and develop a sustainable position within a market.   

This means that strategic positioning defines a leadership's success or failure. Picking the right strategic position is the biggest single decision which a leadership team has to undertake, it will determine what your business future looks like, determining your business model through to defining your long-term success.

Getting your strategy right.

Strategic planning is the most reliable way to develop a sustainable and successful market position. Evaluating all options, stakeholder and shareholder needs aligned to the current and future market opportunities and risks. It also focuses leaders on setting their goals and aspirations in context with those key factors aligning the whole business with a focus and shared direction to take. 

For leaders to lead they must be going someone and that requires them to make the big decisions, but make them strategically not tactically.

Did you and your business Pivot, Furlough, Hibernate of Fold during Covid19?

Business Leaders Did you and your business Pivot, Furlough, Hibernate of Fold during Covid-19?

Everything is easy in hindsight. 

In history everything is clear and simple, some would say obvious to the point where the reader is left thinking what was all the fuss about. Well off course Britain would be on the winning side at the end of World War 2! How could they not be with the Americans and the free world all supporting them against a deranged megalomaniac.

• Except that in 1939 after the collapse of France that was not the perception. 
• The rescue of The British Army of the beaches of Dunkirk that was not the perception.
• At the beginning of the Battle of Britain that was not the perception.

Etc

History is only in Hindsight

History of anything only tells you want happened from the view point of hindsight, that 20 / 20 vision in which all things are clear, simple and obvious.  For those who lived through those difficult times would have seen the debate first hand things would have looked very different. Requiring difficult decisions against conflicting advice to be made with uncertain outcomes from each step they took. When things are tough its easy for leaders to say dig-in, but the real challenge for all leaders is not just when its tough, but when we are in the unknown and it's tough. That's when leaders will show their true colours in leadership.

The Covid19 era, March to July 2020 is one of those occasions. In January and February we saw a disease far away causing small problems. Like a huge wave approaching a calm beach, we stand and look not realising its impact upon us until it is too late.

Shock and Horror 

When it hit us in the west at first we stood in disbelief, a pandemic had arrived. Some seemed oblivious to it. The daily commute did not change, the polite conversations were around isn't a shame. Then came the realisation phase that a pandemic was like the black death or the Spanish Flu (which was not Spanish at all, just before anyone things it was, it came from the USA). Having seen the initial impact of Covid19, overwhelm northern Italy then came the sobering understanding that this was now everywhere and we all had to change our behaviours.

Leaders look for Certainty 

Few leadership teams had prepared their risk model to include pandemic (despite Bill Gates's 2015 TED talk forecast). They had in their risk model locker room, Millennium bug (2000), Terrorist Attack (2001) and financial crash (2008), and so had contingency planning in place for those such activities, but not for a pandemic. This meant that for many, form politicians, to health professionals down to business leaders they were stepping into the unknown and with no experience of anything like it. The Black Death and Spanish Flu being too long ago to fit with modern economic thinking.

For business leaders this pandemic has (and is) outside the playbook. There is no this is how we deal with this one, turn to page 101.  The response of business leaders has been a real eye-opener for us all, and if you worked in a company how your company reacted tells you a lot more than you might expect about the leadership within your company.  

Many carried on as if nothing was happening until told to stop. Others ran for the hills (Caribbean or such like) to find shelter leaving their underlings to hold the fort. Some froze, some panicked, some just buried their heads and carried on until told to stop, while a few saw the wave before it hit and changed their business not only to survive but for some to thrive during the pandemic.

Leaders Speed in Response 

The speed with which businesses leaders responded to imminent arrival of Covid19 depended upon several factors, but being a unknown meant everyone started on the Back-foot. Those financially over-stretched or totally depended upon current markets were left with fewer options, so closing or furloughing were their only realistic options.  Airlines, pure retail shops, pubs and event businesses immediately went into total hibernation.

Many will have to wait until their market re-opens for they can be brought back and their leadership teams are left modelling how do we re-emerge and what world are we likely to re-emerge into? The new normal, won't be normal, instead we are most likely to see  paradigm shift has occurred in every market. As Barclays and Twitter have already identified, why do we need offices if our people can work better at home? Technology, lifestyle and the customer prefers our people to work from home, so why not change the success we are now finding.

This is just the tip of the iceberg, who is going to want to spend money on locked-in white elephant buildings, when they have learnt how to work remotely, butting the 2 to 3 hours commuting to zero. Why go back if you don't need to. The agile and flexible business models are where people want to be. Technology has made the shift happen and while people want to be part of a physical team they will not be doing that 5 days a week.    

Opportunity is there if you look for it.

For many business leaders there is always opportunity if you look for it, and I don't mean toilet roll manufacturers.  There are many businesses which pivoted, some overnight, some took longer. From making medical PPE, to pubs doing takeouts and some becoming pure mobile pubs, the rate of change, the pivot has been impressive to see how quickly leaders have responded to the adversity and looked for and seized the opportunity.    

The people who looked and worked out how to survive in the short term also have the first mover advantage in developing their model for the future.  If you can be agile then you can adapt quicker. Huge potential markets for loungewear have opened up. The home group exercise market (think Joe Wicks and Davina McCall), and the clothing, and paraphernalia around these areas are seeing huge growth.  

Change has happened, it was not just a short nightmare

As individuals, families, communities and businesses all adapt to what some have called the new normal, or bounced back as their channels to market have reopened, the requirement for leaders is not to just go back to what's there before. The world has changed for good. It will not be life as before it will all be new. It might look the same and even feel the same (with facemarks), but this pandemic has accelerated, magnified and accelerated changes that were happening. 

Shops did not just suddenly stop trading, they were already struggling to deal with market changes, Covid just accelerated that change. Restaurants that have not adapted were unlikely to adapt to changing demand patterns of home eating which Just eat etc have developed. Change is always happening sometimes we see it, once it becomes mainstream, but change is always with us. 

Covid has accelerated and magnified those changes that were happening. from home working, which was 14% before the lockdown is likely to stay either as a permanent move, or become part of a shorter office working week for many, some believe that over 60% of people will not come back. Major companies such as Twitter and Barclays are not planning for everyone to ever return.         

Covid has (and is) a step change Prepare for it.

For leaders of any business, they need to understand that there is no new normal, only a new way of working. Now is the time to make step changes to keep up with changes as they impact upon your longterm future. Your business plans for 2021 onwards need to reflect the world we are likely to operate within towards 2025, not the world in 2019.

Build your model for tomorrow built upon what you can see and feel today, not what happened last year.  For many 2025 is here now and the landscape they have come back to has changed, a step-change forward in many markets. Home delivery for example is now the normal, as is working from home. For many why go back is a reality and for many businesses, not being tied to high cost, high profile HQ, when you can run a global business without the cost. Retail is a changed landscape, many aren't there any more, bye bye Debenhams etc, and demand has gone online for affordable retailing. This is just the tip of the iceberg of change, so leaders must look at the real business landscape they will be operating within.      

Learn more at www.richardgourlay.com and learn how Richard Gourlay supports leaders grow and develop their skills though his online mentoring support. 

How to STOP pointless meetings 

If I were about to walk into a lamp post, what advice would you give me? I imagine…

"Stop"

And you'd be right.  Why would anyone keep going on a path which was only going to get more painful?

Which brings me onto meetings…

Some of those meeting you attend will be pointless, useless and mind-numbing wastes of time. To keep going on this path will only make things more painful. Meetings are often seen as an essential element of working in a company or organisation, but why are they so prevalent in todays' working environment. 

"Stop"

And, by this, I mean meetings that…

• Add nothing to the business – then stop having them
• Add nothing to you – then stop attending them
• Include people who can't contribute – then stop inviting them
• Substitute discussion for decision-making – stop them being an excuse for inaction
• Are too long – stop putting an hour if you don’t need it, if it can be done in 5 minutes
• Always start late – stop starting them late! It's disrespectful of everyone's time
• Nobody has done the prep for – stop the meeting, and say you’ll re-convene when people have done the necessary pre-work. Anything else will waste everyone's time

Sounds easy, but it is not. People often see this type of advice as challenging how companies operate, breaking the  Comfort Zone is often seen as tacking a great taboo. Meetings are seen as a management function, a control mechanism, and above all as a core element of business communication. Meetings are often a default mechanism, rather than a productive communication tool. Habits are difficult to break, the key challenge in breaking them is how to replace them with mass physical (of Zoom) communication with something that looks familiar and is seen to engage (even if it does not) with all levels of the organisation.   

Classically a senior manager calls the meeting, runs the meeting, talks the entire meeting and looks for nodding heads, produces the meeting minutes and tells other senior management that it was successful. Engagement is self-certificated self-rewarding and there is often no understanding of its real impact upon the other attendees.

Action point

List the bullet points above.

And how many of them happened and impacted upon you?  Definitely more than none!

Identify better ways of communicating with your colleagues and make a plan to try these to replace pointless meetings. 

What will Business Look Like After Covid 19?

As we've reach the point where we have been living with (or locked down by) Covid 19 for a year it is difficult to remember what impact the pandemic has had on all of us. We have become conditioned to living in lockdown. What started as a novelty, the no commute working lifestyle of Zoom and Teams, became a slight inconvenience, then a limiting way fo life. 

I've been working with people across multiple business sectors, from public sector to senior leaders in both PLC and SME leaders throughout, supporting them through the unforeseeable pandemic challenges.  As governments clumsy responded to the emerging pandemic, so business tried to keep everything running as normal as possible throughout the turbulence. 

Business leaders like stability, normality and predictability, it lets leaders work within the known parameters of a market and deliver results accordingly.  So uncertainty creates a whole series of challenges for business leaders depending upon their sector. Some where shut down over night, others were not immediately affected at all, but most fell somewhere in-between left to pulled back to a survival model or  tried to pivot into this new market reality. 

Uncertainty unsettled all. Every basic business assumption overnight was challenged. Leaders were left with shifting foundations of their business. What was solid and certain, became quicksand and uncertain. Were order books valid? Were orders still able to be honoured or delivered? Where had customers (b2B and B2C) gone? Confidence took a hit and business assumptions evaporated.  

The debate and planning for Brexit had taken years of analysis and scenario planning across every business sector, while many businesses had no time to plan their response to the Covid pandemic. We watched what was happening in Wuhan and elsewhere for months without fully understanding its impact on our business environment. 

Covid 19 Impact

UK business was suddenly trying to deal with the complete unknown, and even worse than that, ever changing business scenarios. From complete shutdown and furlough staff, to the yoyo open, shut, partly open and shut again, through to the carry-on your essential workers, to adapt and onto expand as you are now the future.  

Many sectors such as travel companies have shut down (nearly full hibernation), the high street (bricks only) through to events and leisure sector. These casualties of the pandemic are now about to reopen as the vaccine reaches the tipping point, but are they opening just as they shut, or will they have seen the shift in the market. The Government may provide a prime pump investment to kick open these markets (and significant pent-up demand and money exists), but will it be 'business-as-usual' or will the real shift be understood by these sectors? 

Other business sectors which has operated and thrived (yes there are sectors which have seen significant growth from home improvement, builders, home deliver and technology companies) who have seen exponential growth such as those involved in every aspect of lockdown Britain. 

Business did not stopped, but it has changed and here is what we know so far.

There's No Going Back To Normal after Covid19

The impact of Covid has been to jump the economy 5 years forward from its natural evolution for nearly every sector, and for some that could well be 10+ years forward.  That's not an evolutionary move forward but huge leap forward throughout society and one that it will not step back from. This is described as a paradigm shift within a market. In the same way a the iPhone changed the world of mobile communication so Covid19 has changed the business world forever. 

As we unlock post covid, many voices just want to get back to normal, book holidays, get back to the office and reopen the high street. These leaders voices are those who have not seen (or refuse to believe any change has happened). The reality is that while a semblance of what was normal may be seen (Government money often puts a short-term smokescreen over reality), in reality each of those markets has irreconcilable changed.        

Will the high street simply return once the lockdown ends? This is unlikely as much of it has been mothballed, some of it permanently, but the impact of a year of lockdowns has changed how society looks at shopping. The customer and business has changed, what and how people shop. Home delivery is now the normal for many people and the sector has changed. Why would it change back?  While segments of the population like the old shopping experience, the high street is not there to support it. It has been replaced by pure online / home delivery coupled with click-and-collect services.  The large format stores have shut up shop permanently or reinvented themselves as online retailers. 

The high street is not just mothballed but has jumped forward. Home delivery of fast food now dominates the market. For example Cinema's once the preserve of the new blockbuster release, must now compete with straight to home services form Netflix, Apple, Now (etc) services.  Huge investments by vertically aligned providers supported by the customer who have upgraded their home cinema experience and new infrastructure of 5G  (and 6G on the horizon). With home delivery of food and drink (you can order anything by Uber/Deliveroo (etc), why go out?     

So this is not a short-term hiatus between the norms, which normal can bounce back from, this is a complete paradigm shift across the entire business world. Let me explain why.

PESTLE Impact

In any market the macro factors which drive the market are defined within the PESTLE assessment of macro drivers.  PESTLE (Political, Economic, Social, Technology, Legal and Environmental impacts) a good as any model to summarise this, defines changes and their impact upon a market. A pandemic does not just impact on one factor for a short period time. A fuel shortage does make people sell their cars, but not needing commuting cars, city centre offices, business HQ's or regional offices through to high street shops, mean that the business world has changed forever.   

What governments' have done to insulate this change through bounce-back loans, furlough payments, tax breaks and deferred loans, will soften the impact, but will not be able stop the change for the normal to return, but soften the rate of change for a new normal to emerge with the least impact that any society can afford. The impact fo Covid is not just on one element of a the PESTLE analysis, but on every aspect of the macro environment within which any business operates. Learn more at: PESTLE

People's behaviours have irreconcilable changed. Let me start with just one simple example: Work From Home will become the normal, it was on a growth curve, now it will be the expected normal for a workplace.  Why commute to an office, if people do not need to?  People are more productive working from home and provide lower costs to the company and less commuting will means that while the office is still needed, it is now somewhere to connect with the team, it is not the place to actually do the work.  

If people are not going to work then the commuter travel, parking, petrol stations, work fast food outlets, shops and support services are all redundant. While some can pivot, the fast food outlet can joint the Just East home delivery network, others such as the large format high street shops designed for high footfall cannot. The later high street features were slowly dying as pure shopping moved online through Amazon home delivery, this shift will mean that the high street will need to look very different.         

Our towns and cities can become something else. Somewhere where people can connect with society, but not somewhere people need to be 5 days a week.  PESTLE macro market factors cannot be ignored by business. PESTLE factors drive markets and create growth.

Where's the Growth?

For business owners in every market sector even those which have successfully pivoted so far, this shift is only the start of this unknown and unchartered new world. Change in business is usually seen at the edges, with a paradigm shift, the whole world shifts, except for the laggards (who just complain louder). 

Looking for growth is therefore a real challenge. Leaders cannot just look to their innovator or early adopter customers, but need to recognise that everything has shifted, new players, substitute products and services and whole markets have sifted overnight. 

The first thing for leader's to recognise is that the people have not gone away, they still exist, and so do their needs and expectations. They have been moving house, upgrading their homes and becoming more self-sufficient at unprecedented rates.  Customers still have needs and wants, it will simply not be the business suit.  Growth will come as the vaccine rollout takes effect, but will companies be ready for tomorrow's growth opportunities. 

The First Bounce of change is happening now across all sectors as a result from the Covid paradigm shift. The growth in markets from house sales, home building is just the tip of the iceberg off the growth that will come from this shift. As change happens so clarity fo the change will be seen and Second Bounce growth will also happen, as new and emerging markets become established and begin to shift into profitable volume.  

Looking for growth from historic analysis will be challenging for business owners. Paradigm shifts require owners to look for horizontal parallel examples rather than linear historical analysis.  Is Covid19 more the the arrival of the internet to a sector rather than your business performance over the last 5 years?   

Uncertainty is the New Reality 

Now is an excellent time to review your business model. We know that markets will open up, but what they open up looking like is not yet certain. For some markets such as tourism (in hibernation during the pandemic) knows that people want to go on holiday and that delayed and latent demand will enable an immediate short-term bounce-back of this sector as people will still want to travel (and probably more than ever before).  

The longer term effect of change for travel will have several major long-term impacts. Business travel will certainly change, why travel around the world when you can click a button and connect to them through Teams?  Couple the introduction fo 5G and the move to SaaS delivery of many services and suddenly established travel models will need to be redefined. Couple all of those factors with people's rapidly growing awareness about the environmental damage which long-haul flights have on their carbon footprint and suddenly safe assumed business models, may not be any more. 

This is true for many markets, every market has become uncertain.  But do remember that uncertainty is always an opportunity for the entrepreneur. It's the entrepreneur leadership mindset, between fixed and growth, do you see the opportunity or see change as a threat?  

Strategic Planning Workshop

Strategic planning enables leaders to review and plan out where they are going and how how they will compete and succeed within their chosen market(s).

Looking for direction, focus and an action plan to deliver success? 

Like to review your business strategy, find growth and develop a growth mindset and look for growth and plan where you re going and where, then why not look at our Strategic Planning Workshop  to support you redefine your market.

Learn more see our other blog posts or see my website for support leaders grow and develop their business at www.richardgourlay.com