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

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

In today's digital age, businesses are constantly looking for innovative ways to expand and grow. One interesting trend we've noticed is the transition from Software as a Service (SAAS) companies to marketplaces. SAAS refers to software that businesses access online and purchase via a subscription, while marketplaces are platforms where sellers provide their services to attract buyers.

So, what is driving SAAS companies to explore the marketplace model? One possible reason is the need to help businesses attract more buyers by aggregating them on a single platform. By doing so, these companies can aid in the discovery of buyers, making it easier for sellers to connect with potential customers.

However, transitioning from a SAAS business to a marketplace is no easy feat. It requires careful consideration and strategic planning. Let's explore some key points that founders need to keep in mind when embarking on this journey.

1. Changing the Incentive Structure: Founders have to change the incentive structure for all or a significant percentage of the company. When faced with the choice between optimizing the core business or taking a risk on a new initiative, it's natural for founders to lean towards the more guaranteed option. To overcome this challenge, founders can either make the entire company's growth revolve around the new initiative or create a separate team with distinct goals and reporting lines. This way, the focus remains on driving growth in the new business model.

2. Nurturing the Right Resources and Culture: Founders need to shepherd the right resources who are most likely to embrace the business model transition and change the company culture. Employees who have been focused on the core business may find it challenging to shift their attention to a new customer or business model. It's crucial to bring in new talent with consumer product development backgrounds and leaders who understand the opportunities and challenges of consumer-focused initiatives. This infusion of new blood can help drive the necessary cultural shift within the organization.

3. Confirming Demand and Alignment: Before making the leap to a marketplace model, founders must ensure that there is a demand side to the market and that the engagement aligns with their customers' business models. One common reason why marketplace transitions fail is the lack of a demand side. SAAS customers often make revenue through financial support rather than selling products or services that people actively seek. Additionally, founders need to consider if the marketplace opportunity is a one-time engagement or if there is potential for repeat business.

When considering the transition to a marketplace, it's essential to align with the characteristics of successful marketplaces. Most marketplaces are built on under-utilized fixed assets, and they typically emerge with the supply side first. However, hitting the minimum scope for the demand side is equally important and often overlooked.

In conclusion, the SAAS to marketplace strategy offers exciting possibilities for businesses looking to expand their reach and attract more buyers. By carefully considering the requirements outlined above, founders can increase their chances of success in this transition. It's important to remember that marketplace growth may require a shift in the incentive structure, nurturing the right resources and culture, confirming demand, and aligning with the characteristics of successful marketplaces.

Actionable advice:

1. Evaluate the potential demand for your marketplace and ensure it aligns with your customers' business models.
2. Create a dedicated team with separate goals and reporting lines to focus on the marketplace transition.
3. Seek out talent with consumer product development backgrounds to drive the necessary cultural shift within your organization.

With the right approach and strategic planning, your SAAS business can successfully evolve into a thriving marketplace, opening up new growth opportunities and expanding your customer base.