In the enterprise software world, objectively identifying the value proposition of a product is one of the hardest aspects to master by any startup. To be extremely successful, an enterprise software product does not only need to provide a tangible value but it also needs to articulate that value from the perspective of potential customers. Regardless of the dimension of the problem you are trying to solve, an enterprise will always position your software in one of two groups: either is “mission critical” or a “nice to have”.
Identifying on which group your software belongs to, will do wonders to eloquently articulate your value proposition, target the right audience and clearly understanding your customer acquisition process. While intuitively we can think that software that solving “mission critical” problems will have a deeper impact in the enterprise and an easier sales cycle; the fact of the matter is that some of the most of the revolutionary enterprise software products in this generation have are focus on solving problems that were not initially cataloged as mission critical: they were simply “nice to haves”.
Looking at some current examples: a company like Zendesk is solving a mission critical problem (read: a company can barely do business without a help desk system) while companies like Box or Yammer provide “nice to have” products (read: a company can live without them but it clearly improves certain aspects of the business)
Having built a “nice to have” product before (www.moesion.com ) and currently working on a new product that solves a mission critical problem (https://www.box.com/s/b7aaa23fc1e765b054f8 ), I can’t emphasize enough on the importance of identifying the nature of the problem you are solving from a customer perspective. There are no particular advantages to the success path of your startup whether you decide to focus on a mission critical problem or a “nice to have” one. However, either group presents drastically different characteristics on various aspects that are important to understand.
Let’s go through a simple list
Number of Problems
The number of mission critical problems that are common across most enterprises is relatively small. Even without being an enterprise software expert, you can name most of the mission critical software’s a company use: ERPs, CRMs, Help Desks, HR Systems. Finding a new type of mission critical problem to solve in the enterprise is far from being an easy endeavor and most of the disruptions in the space have been a consequence of technology revolutions that have redefined the problem from a different perspective. In that sense, the cloud computing movement made possible for companies like Salesforce.com or RightNow to provide innovative solutions to mission critical problems in the enterprise. Contrary to mission critical problems, the number and diversity of “nice to have” problems in the enterprise is extremely large and offers an easy room for innovation and disruption.
The functional similarity in “mission critical” enterprise software products naturally translates into the commoditization of the space until the next disruptive product arrives. Products that are not mission critical can enjoy a larger innovation cycle that allows them to fight commoditization.
Firerce competition is part of the enterprise software DNA no matter what type of problem you focus on. Having said that, the small number of mission critical problems in the enterprise translates into more intense competition in the space. As an example, a company like Salesforce.com faces a more intense competition than a company like Huddle which solves a “nice to have” problem.
Because of its increasing commoditization, mission critical enterprise software products typically have to go through long sales cycles that traditionally demand the involvement of the IT department in an organization. Contrary to that, “nice to have” products typically enjoyed shorter sales cycles and can be acquired by different entities within an organization without always requiring IT involvement. To use an example, the sales cycle of an enterprise social networking product like Yammer is exponentially simpler than an ERP product like NetSuite.
Because of the important nature of the problem they solve, enterprises expect to pay substantial amount of money for mission critical products. Quite the opposite, “nice to have” products typically need to rely on alternative pricing models such as fermium/subscription based that allows them to acquire customers in a simpler way.
“Nice to have” enterprise software products typically enjoyed simpler customer acquisition processes which directly translates in a potential bigger customer base. Mission critical enterprise software technologies often find themselves competing in a highly fragmented market which makes it extremely hard to acquire customers at a small cost.
Because of the clear definition and the small number of “mission critical” problems in the enterprise, is really hard to continuously find disruptive innovation in the space. Quite the opposite, “nice to have” enterprise problems offer a broader room for innovating and disrupting specific areas of an enterprise.
As an enterprise software startup, my advice is to clearly identify the characteristics of the problem you are solving. In the enterprise world, “mission critical” does not directly translate to relevant. If you think about it, most of the disruptive companies the enterprise software world are focus on solving “nice to have” problems. Also remember that as technology evolves, there is the potential that the “nice to have” product of today will become the “mission critical” products of tomorrow.