In one of my favorite children’s books, The Lorax, an evil businessman finds great success by designing a consumer product with such broad appeal that demand for it is insatiable.
This product – a “Thneed” – is some sort of cloth or woven good, but its illustration in the book is intentionally abstract. It is described by its inventor:
A Thneed’s a Fine-Something-That-All-People-Need!
It’s a shirt. It’s a sock. It’s a glove. It’s a hat.
But it has other uses. Yes, far beyond that.
You can use it for carpets. For pillows! For sheets!
Or curtains! Or covers for bicycle seats!
Vast riches are made through sales of Thneeds, and The Lorax is a tale of ecological destruction in the single-minded pursuit of scale and success.
The ethics and wisdom of non-sustainability aside, the marketing of Thneeds also serves as a cautionary tale for enterprise software as precisely the wrong approach. Broad-appeal software products in the world of startups are far, far less likely to succeed than purpose-built, narrow-audience solutions.
Importantly, I am distinguishing between technology and product in this last sentence. In fact, it’s quite common for a startup to craft software that will transcend the initial use case, with the goal of incremental product launches over time; indeed, this is Gain Compliance’s approach.
Still, for the best chance of success, the initial go-to market strategy has to be finely-focused for two reasons:
- All else being equal, generalized solutions provide comparatively modest improvement (for a very broad audience), while purpose-built software offers a lot of value (albeit for a much smaller audience). Selling software is hard even in the best of scenarios, and I’d take the more compelling use case every time, even if the number of opportunities were fewer.
- You know who your customer is. You become intimately familiar with their pain points. You understand their roles in their companies, how to contact them, what features are most important to them. You improve your product to align with customer feedback. Through this, sales becomes much more targeted, effective, and efficient.
I was at lunch a few weeks back with a friend who runs another local startup, similar to Gain Compliance, with a technology that has broad appeal and is getting very good early traction. However, rather than take our approach, he is planning on launching in several vertical markets simultaneously.
Broad logic supports his decision: he has a high-functioning team, happy customers, and good metrics in his initial vertical market. And there is consensus within the venture-capital world that scaling fast is the right call.
At the same time, Gain has intentionally followed a more disciplined path of attaining deep understanding and market success for our initial purpose-built solution. In fact, while we are incredibly proud of our software, it is only one facet of the relationship we have with our customers – we also offer high-touch customer support, training, and a best-in-class resource library for our target market’s ever-changing and complicated filing requirements.
The go-broad vs. focus-narrowly decision is a window into a fascinating dynamic. Certainly, if a software startup actually does have a Thneed-like product (in this case, a “fine-piece-of-software-that-all-people-need”) on their hands, then, by all means, going broad early makes sense.
That’s not what Gain is doing, though.