SaaS Software and Competitive Advantage
Where’s the differentiation?
We all know we need our business to achieve competitive advantage to increase profitability. But if we implement the same best-of-breed SaaS platforms as our rivals, how do we differentiate? The answer is both in how the platform is uniquely implemented for our business and how we operate the software after it goes live.
When you implement a SaaS solution, you naturally pay a lot of attention to the functional capabilities of the platform and the reputation of the vendor. However, since SaaS makes it easier to switch platform, these aspects alone are unlikely to lead to long term competitive differentiation. Instead, differentiation can be achieved through change management, the professional services provided by the vendor and implementing optimal processes and structures to manage the platform when it’s operational.
Let’s say, for example, that your organisation wants to improve customer experience by rolling out a knowledge management platform. The functions of that platform will improve the performance of customer services and back office staff by providing easy access to documented processes and guidance. However, once the benefits of that platform become clear, your competitors can also subscribe to the same software. Sustainable competitive advantage therefore needs to come via other means.
SaaS software has two phases in its business lifecycle: the initial implementation and, subsequently when it becomes operational, business-as-usual. Both phases have aspects that can lead to differentiation. But both also have aspects that are commoditised and won’t contribute to strategic differentiation. It is therefore important to focus energy on the high-value elements. That focus should occur from the earliest stages of planning and continue to be applied throughout the lifespan of the software.
In the diagram above, I have separated aspects of SaaS software into implementation and business-as-usual. Elements at the top of the diagram support differentiation and elements at the bottom are commoditised. We can immediately see some common themes: differentiators are dependant on the unique characteristics of your business, whereas commoditised elements are common across many technologies and businesses.
To take one example: implementing a process of continuous improvement in operating the software will separate your organisation from its rivals. In contrast to that, however, the capabilities of the underlying cloud infrastructure is commoditised and will make no difference. This is not to say cloud infrastructure or product capabilities are unimportant; it’s just that they are easy for your rivals to replicate.
SaaS Implementation Differentiators
The SaaS vendor should provide you with clarity and confidence about their approach to implementation and configuration of the platform. Assess the maturity of their professional services — while technical capabilities are important, they are merely a means-to-an-end. SaaS professional services should focus on delivering outcomes for your business rather than delivering technology or project management milestones.
When a vendor talks immediately about change management and adoption you know that they get it. They understand that without successful adoption from end users, you won’t achieve the ROI that underpins the whole delivery. That is the mindset that you need from a vendor.
When planning the implementation with you, the vendor should work backwards from end user go-live. The vendor should collaborate with you and share past experiences of similar projects. They should share lessons learned on planning the rollout to end-users and how to maximise adoption.
The vendor delivery team should have experience working in your business domain, as well as expertise with the product and technology. By having experience in your industry, they will understand the nuances and complexities that your business faces. They will understand common regulatory challenges, key financial dates and security implications. That will help them manage the risk of the delivery from their perspective.
The resource profile of the vendor professional services team should heavily skew towards business-facing consultants and product experts. These team members will interface with your business, interpret your requirements and configure the application optimally for your unique business context. This is probably the single most important element of the engagement — by configuring the application to support your requirements, these consultants lay the foundation for a competitive advantage.
This is probably the single most important element of the engagement — by configuring the application to support your requirements, these consultants lay the foundation for a competitive advantage.
You should initially expect discovery sessions where consultants from the vendor learn about your business. If the first session dives immediately into configuring the application — be concerned. You understand your business and the vendor understands their technology. It’s only through close engagement that the vendor can adapt the SaaS software to have capabilities that differentiate your business from its competitors.
The vendor consultants should also demonstrate an interest in the longer-term aspects of your business. Consideration of strategic aspects of your business is needed to ensure the architecture of configuration supports both current and future requirements. For example, they should ensure that the organisation structure configured in the SaaS software reflects both the current structure of the business and is designed to be flexible enough to support future new departments, new accounts, new brands, new partners or new acquisitions.
It is also critical that you also allocate the right internal team to work on the implementation. Business stakeholders should be involved from conception. A business sponsor needs to be behind the initiative and should help drive a singular focus on achieving the target outcomes. You need to assign a project manager to own the implementation. The vendor is responsible for their software, and supplementary services, but they’re not responsible for the wider rollout.
The vendor’s delivery would merely be a workstream within your wider project. A common pitfall is to think that the vendor’s project is the whole project. Do not underestimate the amount of investment you will need from internal resources. Your plan should have separate streams for compliance, change management, go-live planning and any configuration work that your team needs to do (such as setting up users). Additionally, you will need to plan for the formation of the business-as-usual team that will manage the configuration of the platform on an ongoing basis.
Business-As-Usual Differentiators
With a strong foundation laid during implementation, you should turn your attention to post-go-live business-as-usual. This is when the project transitions from a capital investment to providing returns. Your focus should be on defining the processes and structures to run your SaaS software on an ongoing basis.
For this phase, you should focus on two elements:
- The formation of an internal business support function that configures and manages the SaaS software to achieve operational continuous improvement. For the purposes of this article we’ll call this the Centre of Excellence, although you may prefer an alternative name.
- Your relationship with the vendor via the customer success manager that they have assigned to your account
The Centre of Excellence is your internal function that manages the operation of the software. They have expertise both in the software and also your business. They also need to understand the background behind the implementation — ideally they will have been part of that and had experience working with the vendor consultants. Typically, they are also trained by consultants or trainers supplied by the vendor.
In order to implement the processes and structures of continuous improvement, the Centre of Excellence must receive feedback from users. Ideally, that feedback will be provided as part of the SaaS software and presented as part of an inbuilt workflow. The team culture must encourage and embrace feedback, and have time available to incorporate updates based on the value brought to end users. By incorporating this as an integral part of their processes, adoption can be maximised throughout the lifespan of the software.
Typically, the Centre of Excellence is comprised of former operations people. That, however, means that they don’t actively work in operations — which means their expertise can quickly grow stale. Therefore, it is critical that business stakeholders are engaged frequently.
The vendor should also allocate a customer success manager to support your business. This is the most important person in the vendor team to support the success of the software for your business. They can help you navigate the support process. They can help you influence the SaaS product roadmap by facilitating discussions with product management and being an advocate for your business. They can also pull in product experts and consultants to steer your Centre of Excellence in the right direction by reviewing their approach.
If your Centre of Excellence facilitates a dynamic and flexible change process that incorporates continuous improvement driven by feedback from users and stakeholders, you will maximise adoption and differentiate your business from its rivals. Additionally, by combining these internal factors with the support provided by the customer success manager you can maximise the returns on your SaaS investment and achieve sustainable strategic differentiation.
