Is It Time to Disrupt Your Own SaaS Subscription Business?

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His workforce management solutions business had been around since the 1970s, even reaching the magical $1 billion revenue mark.

But CEO Aron Ain was worried.

He'd witnessed the fates of Kodak, Xerox, and Blockbuster—all once-powerful behemoths that had gone bust as they failed to keep up with business trends.

Ain didn’t want his business, Kronos, to go the same way.

After some discussion with his leadership team, the path ahead was clear. As Kronos vice presidents Bill Bartow and Susan Rossnick wrote:

It was time to put Kronos out of business ourselves, before another company could do it to us.”

Enter Project Falcon.

Launched by Kronos, this internal startup was tasked with building a modern workforce management product that would surpass the business's existing offerings.

Development took five years, but the resulting product—Workforce Dimensions—was a hit.

Customer demand for the product exceeded the company’s goals by 50% during its first year of launch. The product also bagged Kronos—now known as UKG—the 2020 North America Company of the Year Award by business consulting firm Frost & Sullivan.

When it comes to business—especially software business—there’s never time to rest on your laurels. Be prepared to either disrupt yourself or be disrupted by others.

If you, like Ain, have come to the same conclusion that it’s time to disrupt your SaaS subscription business—great! You’re already one step ahead of the competition.

Now, how exactly can you do it? Here are some tactics.

Focus on the findings that don’t make sense

Disrupting your business necessarily involves changing some aspect of it. But if you’re unsure where to start, try taking a leaf out of Intuit’s book.

The FinTech business has kept itself relevant for almost 40 years by adopting a certain strategy: focusing on finding what doesn’t make sense.

This means when you observe a trend that goes against your current understanding of the market, don’t just assume it’s unimportant and dismiss it.

Instead, ask yourself the following.

  1. What are the possible reasons for this trend?
  2. Is there an opportunity for innovation?
  3. How can we leverage this opportunity to grow the business further?

Take Intuit’s online money management service, Mint, for example.

While the service had been designed for use by young professionals, Intuit noticed some Mint users were using the service differently from intended.

It would have been easy to disregard the observation as an anomaly. But the business investigated further and found self-employed individuals were also using Mint to manage their finances.

In response, Intuit launched QuickBooks Online Self-Employed, an offshoot of its existing small business accounting software specially designed for self-employed people. It became Intuit’s fastest-growing product.

Expand your SaaS product offerings

After you’ve noticed a potential growth opportunity, one way to leverage it is to expand your product offerings. This could involve:

  • adding new products
  • adding an enterprise version of an existing product, or
  • adding a freemium or downmarket version of an existing paid product.

For example, while marketing platform Mailchimp was crushing it with its email marketing product, its small business customers wanted more.

They wanted a platform that would help them do all their marketing in one place. And the business delivered.

Mailchimp reinvented itself as an all-in-one marketing platform, offering solutions not just for email marketing but also for social media management, digital ads, and even sending postcards.

That said, timing is everything.

Don’t expand your product offerings if your business isn’t equipped to handle an influx of new customers. Otherwise, you may end up biting off more than you can chew.

Founder and CEO of SaaS community SaaStr, Jason Lemkin, echoes this sentiment.

“If you’re small [...] don’t launch 17 products too early,” he cautioned on a SaaStr podcast episode.

“But I think as early as $10 [million] or $20 million in ARR (annual recurring revenue), you want to start thinking about it. You want to start planting seeds and thinking about: what can move the needle? What later [...] can I test along the way from $10 [million] or $20 million ARR to $100 [million ARR]?”

Serve the under-served markets

When starting a SaaS subscription business from the ground up, chances are you’ll be looking for existing gaps in the market and how you can help solve them.

Well, this tactic also works beautifully when you’re searching for ways to disrupt your more advanced SaaS business.

For example, Vimeo originally started out as a video-sharing platform. But faced with strong competition from businesses like YouTube and later Netflix, Vimeo struggled to find its footing.

The turning point came when Anjali Sud was promoted from marketing director to CEO of the business in 2017.

When she took charge, she decided it was time to focus the business’s efforts on serving independent creators. This was a market that had been with Vimeo from the very start, but which had been largely neglected by other platforms.

With that, Vimeo transformed into a SaaS business offering tools for creators and businesses to produce, share, and monetize their videos.

“Today, Vimeo is much more than a viewing destination,” as the business’s 'About' page declares.

“It's a start-to-finish video platform, giving creative professionals, businesses and organizations everything they need to make and market amazing, impactful videos.”

The business’s efforts have paid off, too. In Q4 2020, Vimeo had 1.5 million paying subscribers and grew its overall year-over-year revenue by 54%.

Don’t be afraid to make bold moves to grow your SaaS subscription business

Disrupting your own business is often easier said than done. Because just deciding how your business should change isn’t the finish line.

You’ll also need to execute your plan.

And depending on how large your SaaS business is and how many stakeholders you need to get buy-in from, this can be a mammoth task.

But, if it has to be done, it has to be done.

When creative software provider Adobe saw growth was starting to stagnate under its perpetual-licensing model from around 2007, it began exploring switching to a cloud-based subscription business model.

To that end, the business undertook in-depth discussions with its stakeholders about its proposed move. Adobe also tested the waters by offering subscription-based pricing for certain products.

When Adobe officially announced its plan to Wall Street in 2011, its stock price dropped by 6%.

But the stock price fully recovered within three months, and the rest is history.

For fiscal year 2020, Adobe reported achieving a record annual revenue of $12.87 billion.

“It can feel risky to make this type of [disruptive] move,” acknowledged Dan Cohen, then-vice president of business operations and strategy of Adobe, in a 2015 interview with management consulting firm McKinsey.

“But once you recognize that the market will go in [a] new direction with or without you, there’s really no other choice.”

Tags: SaaS SaaS Strategy Subscription Business

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