Enterprise stickiness, power, careers and risk.

Roadmaps and Machiavelli. Product Led Retention.

Founders in start ups usually consider themselves to be high risk takers, the media and society portrays them as such. Starting a company is indeed a risky endeavour. We celebrate the entrepreneur, and rightly so.

Middle management in a large corporation, on the other hand, is perceived by many of those founders and their sales folks as low risk. On many levels the founder’s existence is more precarious, but to assume that middle management is low risk is simply naive nonsense. The politics of middle management can be Hobbesian (solitary, poor, nasty, brutish, and short). Power dynamics are complex and nuanced. Get it right, and the middle manager progresses, get it wrong and they lose power, and perhaps even their job. Risk free it is not. Prof Jeffrey Pfeffer (a friend of our firm) is probably the leading academic on corporate power. You should read his latest book. He is wicked smart.

Where’s the risk, really?

It is useful to remember that when you are selling into an enterprise, and you discover your champion, that middle manager is betting a big chunk of their career on you. In many cases the financial downside and upside for that manager far exceeds the commission of the sales person. Sometimes it may even exceed your ACV.

When they hoist your flag, they fight against other projects and their champions for budget, they make promises to their leaders, compromises with peers and more. They may invest months and their own political capital into getting the deal done. If you lose the deal, you dust off and move on to the next one. They are left to deal with the aftermath.

Should you win the deal, the risk quotient goes up for the middle manager. They now have to deliver on the promises of the sales cycle and the demos. If they are successful, perhaps a promotion awaits, if not, they may be off to the corporate version of Slough House.

There is nothing more difficult to take in hand, more perilous to conduct, or more uncertain in its success, than to take the lead in the introduction of a new order of things. Niccolo Machiavelli.

Smart vendors learn to help those managers amplify and de-risk their success, but this is not just a customer success or even a marketing thing. Sure, celebrating the go-live, and getting your champion on stage at events and in the press and so on is a good thing. Andy Raskin writes forcefully and eloquently about the customer is the hero, not the product, and he is right.

In my early days as a product leader at SuccessFactors I grasped that folks like Rob, Anat, Shakti, Georgina, Bernie and several others were betting their careers on our product being successful. When Employee Central had a handful of customers, the risk of failure was palpable. I made many mistakes as a product manager, but I always treasured that trust. I understood and respected that risk they were taking.

Thinking beyond the go-live

Once the lukewarm prosecco and overly sweet celebratory cupcakes are cleared away, the clock starts ticking for the renewal. And while the renewal will partly depend on the use of the solution over time, that is not the only factor.

Usage stickiness.

There are a couple of ways of calculating this, and all software companies should keep a focus on usage stickiness. As with most things in SaaS, there is a formula.

(Formula via Shane Doyle )

Generally speaking, the higher the stickiness, the more likely the customer is to renew. More on user stickiness here. It is really important to understand both your absolute numbers and how they shift over time. This is especially important for applications that proport to help the end-user directly, and where usage is voluntary. However, as ever, enterprise is a bit more complicated.

User stickiness < enterprise stickiness

Enterprise software’s defining characteristic is that the buyer and the user are not the same person. In large organizations they rarely meet.

The power dynamics of the enterprise mean that your end users or even your champion are not usually deciding on the renewal of the SaaS licence later on. In today’s market, IT wields more power, and purchase decisions may have moved up a couple of levels in the LOB hierarchy since the hey days of LOB all night shopping. The kitchen drawer problem is real. Mind the gap between the economic buyer and your champion, or even your champion’s boss.

So what has this got to do with your product specifically?

What feature in the product have we delivered that enables our champion show live to their boss and ideally boss’s boss that our product is essential?

If I were building enterprise software today I would insist that the product leader answer this with every release. From now on I’ll be asking our portfolio companies exactly the same question.

Can your champion fire up the live product in an executive meeting and show a couple of powerful analytics that immediately shut down any discussion about churn, and vindicate your their support for you?

Too often I see product leaders and founders focusing on end user features, without deeply thinking about providing visceral and factual value for the economic buyer. Having happy users is not the end goal of enterprise software. The end goal is a business outcome. If that outcome is not obvious to those not actually using the product, you risk irrelevance, happy users or not. Does your product provide the evidence to vindicate its existence to executives that are not users of the product.

This is at the heart of successful enterprise software.

If it doesn’t you are leaving your champion and your renewal at ask. I call this product led retention. Build for it explicitly and you will see your renewals and pricing rocket.

As I usually do, here is a bit of music. If you like spy stories, you really need to watch and read Slow Horses. The theme tune is by Mick Jagger. It is brilliant too.