Every startup leader must read Geoffrey Moore’s “Crossing the Chasm.”
Especially for a SaaS startup in growth mode, the book explains how early users adopt new technologies and how businesses can make the leap to the mainstream market. Moore perfectly explains why so many companies fail — they fall into the wide gap between the tech-savvy early adopters, and more cautious, mainstream consumers. Many SaaS businesses are simply unable to cross this chasm.
The Technology Adoption Curve
One of the key strategies for any company looking to cross the chasm and reach mainstream adoption is the Beachhead Strategy. In the book, Moore draws a comparison between building a new business and World War II. He explains that when the Allied Forces stormed the beach in Normandy, they targeted a small beachhead and won it. Then, they were able to spread out to the rest of France, and then the rest of Europe. But it all started by winning over just that small section of sand.
The same concept applies to SaaS startups. Many companies have big dreams and try to go after a huge market segment right away. However, that is a recipe for failure. Rather than trying to target a huge market with limited resources, startups should focus on a small, niche market, and then expand from there.
I’d like to examine a few well-known SaaS startups that have successfully crossed the chasm, and look specifically at their early target market — their Beachhead Strategy. There are many different ways to gain traction and find a foothold in the mainstream, and each is interesting to examine. By understanding the ways that these 3 top SaaS companies found success and crossed the chasm, hopefully you can refine your strategy and chase the right target market for your business.
Beachhead: Small, high-tech businesses
The Zenefits story is an impressive one. Started by Parker Conrad in 2013, the HR software company is one of the fastest growing SaaS companies ever. In just two years, Zenefits reached $20 million in run-rate revenue, and became a member of the billion-dollar unicorn club.
But how did they get there? Zenefits was able to cross the chasm with ease by specifically targeting small companies that couldn’t afford a full-time HR employee. Zenefits offers free software to users, and then charges service providers like insurance companies a lead generation fee. Small companies with limited resources jumped at the chance to use Zenefits’ free software to take the place of HR, and Zenefits grew their user base rapidly.
For an effective chasm crossing, companies have to be even more granular than “small business” in their target market. One of Zenefits’ earliest customers was Cotap, a tech startup which bought specifically to manage stock options for early employees. This type of small startup was the ideal customer for Zenefits to gain early traction. By quickly gaining a number of early, high-tech adopters, Zenefits crossed into the mainstream and began to steal more and more business from large companies like ADP that do payroll processing. Now, as they’ve crossed into the mainstream market, their customers include industries as diverse as hospitals, nonprofits, and e-commerce.
Beachhead: Businesses with data security concerns
Less than 10 years ago, every company had an on-premise share drive to securely store internal files. Today, Box has replaced the traditional corporate file server for many businesses, but it wasn’t an easy transition. Box CEO Aaron Levie co-founded the company in 2005 and spent years working to grow the small startup.
At the beginning, the major choice for Box was whether to directly target consumers or businesses. Unlike other cloud storage companies, Box shifted their focus in 2008 and decided to specifically target businesses. However, the company first had to convince businesses to trust in the security of a cloud application — easier said than done in the early phases of SaaS. But by focusing specifically on security, Box was able to win over the market. Some of their earliest corporate customers included law firms and investment firms that handled sensitive information.
Box was able to cross the chasm by working well within highly regulated industries like healthcare, becoming HIPAA-compliant in 2012. From there, growth exploded across corporate clients who learned to trust Box with even their most closely guarded files. With a recent IPO, the company has shown their beachhead strategy was extremely effective.
Beachhead: Tech developers and IT departments
Atlassian offers customers a wide array of products for internal productivity and collaboration, including Pivotal, Confluence, and HipChat. The company recently filed for IPO — a true marker of crossing the chasm. However, when the company first started, it had far fewer products to offer users. Atlassian first targeted software developers with their core project management product, Jira.
Developers are a great beachhead target because they are often early adopters of products, and invested in finding useful technology. The company actually opted not to hire salespeople at all, and instead relied on developers to push for the product from within. After developers, Atlassian targeted IT, since they choose the internal communication products to use across the entire corporation.
With strategic acquisitions like HipChat, Atlassian become the go-to provider for internal productivity. Atlassian was able to expand from IT, and reach a huge high tech market in the B2B space. Now, some of their biggest customers are companies like Cisco, Twitter and Verizon.
Find Your Company’s Beachhead
Each of these 3 companies took a very different route to conquer their own Beachhead and expand into new markets. Each SaaS startup was able to succeed in their own way, and find the strategy that worked best for their business. As you plan your own Beachhead Strategy, look for a narrow niche that you can dominate, and then plan how to expand from there. With this in mind, your SaaS startup will not only cross the chasm, but become the next great success story.