Sequencing Business Models: Can That SAAS Business Turn Into a Marketplace?

Sequencing Business Models: Can That SAAS Business Turn Into a Marketplace?

In the ever-evolving world of business, companies are constantly looking for innovative ways to grow and expand. One potential avenue for growth that has been gaining traction is the transition from a software as a service (SAAS) business model to a marketplace model. But can this transition truly work? In this article, we will explore the possibilities and challenges of this business model transition.

To understand the potential of transitioning from a SAAS business to a marketplace, let's first define these terms. SAAS refers to software that businesses access online and purchase via a subscription. Well-known examples of SAAS companies include Slack, Adobe, and Atlassian. On the other hand, a marketplace is a platform where sellers provide their services to attract additional buyers, and buyers come to the marketplace to seek out these services and find new suppliers. Marketplaces commonly process transactions and charge a commission or lead generation fee.

When a SAAS company considers becoming a marketplace, they aim to help their existing customers attract more buyers by aggregating buyers on their platform and aiding in their discovery of the company's services. This transition is often driven by the desire to expand into new markets and industries, especially when customer acquisition becomes challenging in the SAAS space.

However, there are several key requirements and challenges that companies must consider when attempting this transition. Let's delve into these requirements and explore how to overcome the associated challenges.

1. Change the incentive structure for the entire company
   Founders of SAAS companies must understand that transitioning to a marketplace requires a shift in the entire company's growth strategy. Instead of solely focusing on optimizing the core business, founders need to make the growth of the marketplace initiative a priority. This can be achieved by either making the entire company's growth revolve around the new initiative or creating a separate team with separate goals and reporting lines. By doing so, the company can allocate resources and drive the necessary changes for a successful transition.

2. Shepherd the right resources and change the company culture
   Transitioning to a marketplace requires a cultural shift within the organization. Employees who were previously focused on the needs of SAAS customers must now also consider the needs of a new customer base or a different business model. Founders must recruit new talent and leaders with a background in consumer product development to drive the marketplace initiative. By bringing in individuals passionate about the opportunity, the company can foster a culture that embraces the transition and ensures the success of the marketplace.

3. Confirm demand and align with existing business models
   One of the main reasons marketplace transitions fail is the lack of demand on the new marketplace platform. SAAS customers may not have a need to attract more buyers or may not benefit from a one-time vendor discovery. It is crucial for founders to thoroughly evaluate the demand side of the market and ensure that the engagement model aligns with both the company's goals and its customers' business models. Without a solid demand side, the transition to a marketplace may not yield the desired results.

In addition to these requirements, it is important to consider the characteristics of successful marketplaces. Most marketplaces are built on under-utilized fixed assets, meaning there is an existing supply side waiting to be connected with the demand side. Companies must also ensure that the opportunity aligns with the company's core competencies and strengths.

Now that we've explored the requirements and challenges of transitioning from a SAAS business to a marketplace, let's take a look at some actionable advice for companies considering this transition:

1. Prioritize the marketplace initiative and allocate resources accordingly. Make it a company-wide focus to drive the necessary changes and ensure the success of the transition.

2. Build a team with a consumer product development background and recruit individuals who are passionate about the marketplace opportunity. This will help drive the cultural shift and ensure the right resources are in place to support the transition.

3. Thoroughly evaluate the demand side of the market and ensure that the engagement model aligns with the company's goals and its customers' business models. Without a solid demand side, the marketplace transition may not yield the desired results.

In conclusion, the transition from a SAAS business to a marketplace is a complex endeavor that requires careful planning and execution. By addressing the requirements, overcoming the challenges, and following the actionable advice provided, companies can increase their chances of successfully making this transition. The key is to align the company's goals and resources with the potential of the marketplace model, ultimately driving growth and success in new markets and industries.