#72- Ideation for first time B2B SaaS founders
The process to identify your first B2B SaaS product
First-time founders, are you struggling to find the right B2B SaaS idea? Look no further, I summarize the B2B SaaS ideation into 4 simple steps.
You do not need to reinvent the wheel and create a new category; you just have to be more thoughtful about the market you target.
How to find the right B2B SaaS idea?
There are 4 steps:
Narrow the department
Identify the system
Choose between vertical & horizontal
Go niche
Step 1: Narrow the department
The first order of business is to narrow your scope – the cricket pitch you want to bat on. Since you are selling to businesses, you have to take into account the purchasing power of the business. Most businesses provide strategic business units (SBUs) or departments within the company freedom to make investments within a certain budget. Your job is to segment the functions of a business in the order of the biggest budgets.
In early-stage companies, R&D has the biggest budget followed by sales & marketing, people, operations, finance, and general admin. This is because they are young and have to build the solution before selling.
In mid-market and large enterprises, sales & marketing usually have the biggest budgets because these are going concerns looking to grow, followed by R&D, people, operations, finance, and general admin.
At the end of step 1, let’s say you’ve decided to build for a marketing department since they have large budgets.
Step 2: Identify the system
There are 3 systems to segment solutions into – Systems of Record, Engagement, and Action.
System of Record
This is the repository of all your data. Think ERPs, CRMs and the likes. This is where the entire data is collected and sits and forms the base of all and every interaction and decision within the system. This is also a very competitive field and already has large players. In terms of value, a system of record is the most valuable and least likely to be replaced. As first-time founders, you decide not to play here and fight the big guys.
System of Engagement
This is the place of engagement and interaction with customers from data gathered from a system of record. Think about outreach tools – all of them pick data of customers from the CRM and contact them via SMS, email, social media, phone etc. In terms of value, a system of engagement is less valuable than a system of record but more valuable than a system of action. It acts as a customer-facing tool, takes some time to get used to, and companies will generally not change tools often. But most companies will always keep A/B testing tools and these are likely to be replaced if results are not very forthcoming. You will choose not to play here because it may be difficult for a first-time founder with limited resources to replace already running existing systems.
System of Action
This is the place where all the data from previous steps is analyzed and a decision is to be made. For the marketing department, after collecting customer data in a CRM, and engaging with them on a regular basis via email campaigns, it’s time to understand how to improve conversion! Voila – a conversion rate optimization tool which seeks data from your customer engagement tools and helps you create targeted offers for power users. Companies will use a variety of CRO tools, and this also means they are more likely to replace these tools than any. This is your chance to advance and get a foot in the door. You choose to operate here.
So, at the end of step 2, you’ve decided to build actionable insights within the marketing department.
Step 3: Choose between vertical & horizontal
Vertical software is one that solves many problems of a particular industry whereas horizontal software solves one problem of many industries. This is not an easy decision, but for a first-time founder, it is important to let the market guide you. If you have experience in a particular industry, leverage it to build industry-specific (i.e. vertical) software. If you have domain knowledge (i.e. within marketing) then build horizontal software which covers multiple aspects of marketing.
For this example, let’s assume you have a decade of experience within the consumer industry right from sales, marketing, managing P&L etc. hence you decide to build for the consumer industry. You build vertical software for consumer companies for better end-user conversion via insights.
Step 4: Go niche
Going niche is a very important step for a first-time founder. You essentially tell yourself, that on a cricket field, you will focus on the batting pitch only. Hence you know which customers to cater to, what are their problems, how can your solution help them, when to validate, how to price vis a vis competition etc.
Since you are from the consumer industry and are building vertical software with a focus on better user conversion via analytics, you take another step and narrow your focus on new-age D2C companies in the Americas.
Why?
D2C is a rage in the west, companies are thriving. Businesses are new age and adopting technology. There is a shortage of talent and talent is expensive. Hence the propensity to pay for automation tools is high. You can leverage the cost arbitrage of building in India and selling in the developed markets.
At the end of step 4, you are building a better user conversion tool with the help of analytics for the marketing departments of an early stage D2C company in the USA.
What next?
You found what you want to build for. At every step of your ideation journey, it is important to keep talking to potential industry people. After you finally zero in, the next step is to talk to potential customers to understand which problems are they looking to solve in quicker or better user conversion. After identifying the problems, you should make a market map of existing solutions within the industry and identify the gaps. This can form the base of your MVP.
None of the steps above is unique or my own creation – as I said earlier, let’s try not to reinvent the wheel. Let’s make better versions of it.
Happy ideating!
What are some of the steps you took in your ideation journey?