Couple of weeks ago I went out to have breakfast at Backpackers Cafe (Chandigarh) with Nandini & our daughter Sanaa. Backpackers is a fabulous place, we love going there to have a relaxed slow paced breakfast. So while I was enjoying my breakfast & generally relaxing, few thoughts walked into my head & have stayed with me long enough that I decided to blog them.

We visit Backpackers 3-4 times every month / bring many friends & recommend the place to everyone. We never notice how much we pay for the food. When we are done, we just ask for the bill / hand over the credit card / sign the slip / put in a nice tip & walk out. We always spend around 3 hrs at Backpackers & even after 3 hrs when we leave we are sad we are not staying longer. There are always a lot of happy customers sitting on other tables.

While thinking about all this, some questions came to my mind :

• Why do I like this place so much?
• Why can’t all cafes / restaurants be this good?
• What is so special about this place?
• What are they doing differently?

Answers that popped up :

• The place is just perfect : great breakfast (eggs, sausages, pan cakes, black coffee) /great ambiance / good service (cld be great) / great location / nice crowd
• In my crazily busy life, backpackers allows me to spend 2-3 hrs in a relaxed mood,  I am refreshed after every visit & I value that a lot
• The food is way better than the other breakfast places in Chandigarh
• Sanaa also loves hanging out at backpackers. She likes to eat the potato fries & the whipped cream that comes with pan cakes

Graudually, my thoughts moved to other brands I am in love with : Apple, Indigo airlines, Books & Brew (free wifi cafe near my home), Levis jeans, Cuban cigars, Jack Daniels, Live Saloon (Grt saloon near my home), Gmail, Flipboard, Radbox & many more.

Why am so crazy about these brands? What do all of them do differently?

1. All these brands add a lot of value to my life
2. The quantity & quality of value they add is way higher than available alternatives (not just incremental)
3. Basically, these brands are “Hitting the ball out of the park”

The Test

The message was clear. Every brand / company / startup that ever became successful / is successful today or wants to succeed in future has to pass this test.

Are you continuously hitting the ball out of the park when it comes to adding value to your customer’s life?

It looks simple & obvious on paper but is very difficult to achieve in practice, where it is all about cold, hard execution. That is why out of hundreds & thousands of ventures that get started there are only few who manage to pass this crucial test.

Here is the fundamental secret of founders who have built & will build businesses that are valued by customers :

• They are good at spotting important need gaps or problems in the lives of customers (even before customers themselves notice them)
• In most cases they are looking to address a personal itch that bothers them or a problem they personally care about
• They intuitively know that the first & the most important thing they need to figure out is “How to start adding loads of value to the customers life?”
• More importantly they manage to stay focused on adding that value
• Everything else can pretty much wait : b-plan / scaling / costing / hiring / fund raising / roadmaps / financial models / events / awards & other blah

Understanding value creation

It is not possible to define ‘value’ because it is different for every startup depending on the problem they are solving / the customer they are targeting & many other factors.

Here are some broad guidelines :

• Start by identifying an important need gap or a problem that is unsolved or a problem that has not been solved well
  • Google founders identified that none of the search engines provided accurate search results, as they went deeper they realized the results were grossly wrong and they had some good ideas to try & fix it
  • After the success if iPod + iTunes apple guys said to themselves “What should we change next?” and after some looking around they realized that all of them hated their phones
• Before starting the work on the solution, do a 1-2 week deep dive into the specific domain of the problem. You should know whatever there is to know about the domain inside out
• Do not do any market research activities, surveys & stuff, those are useless. Build real on the ground learning
• Various things you should learn :
  • What are the various solutions / products that are currently used to address this problem?
  • What are the alternatives & options that customers are using?
    • Before Tata Sky the option was local cable guy or before Tanishq the option were non-branded family run jewelry shops
  • Which players are selling & making these solutions ?
  • What do people like & hate about the available solutions ?
  • How well are the current solutions addressing the problem ?
  • Who are the thought leaders in this domain? What are they upto?
    
  • Are there any new startups trying to disrupt this domain? What approach are they taking ?
  • How large is the addressable market?
    
  • Is there really is a need for a new player?
    
    • If the answer to this last question is NO – be quick to drop the current idea and move on to something else
      
• While designing your solution do not look at just making something ‘incrementally better’ or ‘artificially different’ than the currently available options
  • Do you think there is any significant difference between Coffee day & Barista (I don’t).
  • Cafe Mocha was launched with a totally different experience & that is why it has a unique identity / loyal audience.
• If you want to create long term value & get a real edge, you need to change the game & do something completely different.
  
• Create something that is light years ahead of other alternatives
  • 37signals completely changed the paradigm of project management / salesforce.com turned CRM market on its head
  • Players like LG/ Samsung/ HTC kept doing phones which were incrementally better than Nokia one way or other
  • Where as the first generation iPhone’s were light years ahead of ‘most advanced’ nokia phones
• If you manage to change the game, you also get to make the rules of the new game. Which is strongest ‘entry barrier’ anyone can create. This barrier can not be overcome by muscle or money
• Suddenly the current market leaders do not know, how to play the game & are found struggling
  • Yahoo or Microsoft could never catch up with google in web search or email
  • Nokia / Blackberry are looking at extinction in two years unless a miracle happens

Summary:

If you are doing a startup (or planning to), stay away from the zillion distractions. Just focus on the below mentioned basics & do them really well.

1. Figure out a sure shot way to add lot of value to your customer’s life & continuously keep hitting the ball out of the park  
2. Figure out a way to monetize the value (right pricing takes some experimentation) 
3. Build & deliver the value in less money than what the customer will pay you 
4. Be in a market which has large / growing number of such customers whose lives you can improve

Notes:

1. Thanks to Nandini, Praveen Singh, Siddharth & Niraj for reviewing & providing inputs. Thanks rest of the morpheus gang for reviewing it
2. The post is written mainly in context of startups but most of the concepts also apply to established businesses
3. This article assumes free market forces & does not apply to conditions like monopolies / unfair govt. regulations etc.

I just finished going through my copy of The SaaS Edge – a fabulous book on SaaS by Sahil Parikh/ Founder / Deskaway, a portfolio company of The Morpheus. Sahil sent me signed copy of the book couple of months ago with a personal note, I read it in parts in between my travels & other things that kept my busy – it was never easy to keep it down.

I have known Sahil for over 2 years & one thing that stands out about him is that he has extremely clear thoughts about things that he cares about . This includes his startup Deskaway / colleagues / family / friends / vacations / work life balance etc. His thoughts on all these subjects are very clear – no confusion what so ever. And to the delight of all the readers – he has brought the same clarity to the book, that is what makes it “Simple but very powerful”. The book starts with basics and it really holds the hand of the reader while taking the him through the fascinating world of Web 2.0 and SaaS. It does not let the reader get scared or over whelmed by the jargons. Every concept is introduced using simple but relavent examples / qoutes / diagrams. After learning the basics reader will effortlessely move into the more advanced levels.

• SaaS for you
  
  • One part of the book talks about tools and platforms available for an individual
  • It gives an intro of web 2.0, covers things like blogging / twitter / FB / LinkedIn in a very practical manner
  • If you are already using these tools – the book can help you get more out of them
  • If you are someone who knows browsing but has never used these tools – get the book, you can get started & starting benefititing in no time
  • I have recommended the book to my dad. He uses his laptop regularly for reading news and doing email. He does have accounts with FB / twiiter /linkedin but does not know how to really use them – I am sure the book will help him
• SaaS for your business
  • Again in a very simple manner concept of SaaS is introduced as “renting software via the internet”
  • It talks about the common tasks that your business accomplish using different SaaS applications like blogs / wikis / google apps / sales force / get satisfaction etc
  • It talks about Myths around SaaS / advantages of SaaS and leaves you with a sense of power of SaaS
  • Armed with this book and a willingness to change any business owner can transform his business

I was an early adopter of SaaS & for last 3+ years I have hardly used any desktop application. Every thing that I use is either a SaaS app or an iOS app – mails / social networking / video / productivity apps / music / contacts / calender / blogging – abosultely everything. Not using desktop applicitons is very librating, becasue you are no longer tied to a particulat laptop or desktop. I purchased an iPad a month ago , before that I spent almost 6 months without a laptop. Most of my things I did on my iPhone and if needed I could use the browser on any laptop / desktop around me.

For Morpheus, right from beginning we have used SaaS for everything – mails, docs, CRM, blogging, managing portfolio. It allows us to be wagabond & bootstrapped, while we use high quality products.

I find SaaS so practical and good that I think this is only way software should be build or used. So if you want to start your journey or get better at harnessing the power of SaaS go right ahead and place your order with Jumadi.  Jumadi is an online bookstore (morpheus portfolio company) you will get 25% discount on the book & if you mention discount code SAHIL you will get another 5% off.

Everyone in the Morpheus Gang (partners & portflio founders) is very proud of Sahil for writting such an amazing first book and believes that he will keep producing high quality work well into the future.