Being Agile in a World of SaaS w/ Jason Tanner | Ep. 89

In this episode David and Gary talk with CEO and CO-Author Jason Tanner about all things Agility, SaaS and not getting hung up on perfection…

Links:

Jason LinkedIn

Profit Streams Book

Applied Frameworks

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David Baxter has been designing, building, and advising startups and businesses for over ten years. His passion, knowledge, and brutal honesty have helped dozens of companies get their start.

In Biz/Dev, David and award-winning Creative Director Gary Voigt talk about current events and how they affect the world of startups, entrepreneurship, software development, and culture.

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Transcript

David: 0:00

Hey everyone, welcome to the biz dev Podcast, the podcast about developing your business. I'm David Baxter, your host and I am joined, per usual by Gary Voigt, my creative director. Little known fact about Gary. I bet you didn't know he was in the reason John Wick movie.

Gary: 0:22

Fans pretty good stunt coordinator.

David: 0:24

No, you're being very nice. You were actually the testimony eight when they kept shot shooting. Yeah, that's just your to somewhere in the background, you're just a dead body.

Gary: 0:35

He could see my, the, like, one inch of my toe in the body bag in the far left corner in like 40 minutes in. That's about it.

David: 0:42

Nice. Nice. Next time I watch it, I'm gonna put a little circle around it. So I know that guy. That's the guy I know. Right there. All right, more importantly. That's right. Starting at the bottom. We are joined by Jason Tanner, who is the CEO of applied frameworks. How're you doing? Jason?

Jason: 1:02

I'm great.

David: 1:03

So you are. And I'm jumping right in here. Because you have your book, you have a new book. And it is a very interesting to me. So it is called Software profit streams. And oh, he's holding it up for those who are not on the video. Very nice. I wanted to just dive into that. Are we talking Software as a Service profit? Are we talking software development, like an agency like ours profit? What kind of profit are we talking about, you know, high level,

Jason: 1:36

the fundamental premise that really begins the entire book, and really underpins the whole thesis is that software is finding its way into everything. So the first part of the book really focuses on software enabled solutions, which could be pure software products. It could be data driven software, it could be software embedded into hardware, as well as software that is enhanced by humans. So there are some services which are driven by software, think about a concierge type service where the person on the other end of the phone, or on the other end of the chat is actually doing something with software to provide the service back to the customer. So we really wanted to go after this notion that there are a lot of companies out there that are just now getting into software, one of our clients has been in the security business for decades, they build some of the best locks on the market. Now they're looking at software enabled locks, for holistic security solutions for large corporations, like grocery stores, how can they monitor all of the locks and security of their stores through the software enabled locks? So it's quite comprehensive.

David: 2:55

So what is it that makes? I'm asking you to boil it down here? What is it that someone could do if they're needing software in their organization? Which of course 99% of people do nowadays? If you need software in your organization, how do you best practices to create some profit from those systems?

Jason: 3:16

Well, it starts with customer benefit analysis. And I think that the tie that we make in the notion of features delivering benefits that are defined by the customer, customer established the value to solution. And once it is a solution is known, then we can select the right value exchange model, whether it's a usage based model, a time based model, like a subscription, or some other exchange of value then leads us into pricing. And really the cohesiveness of what we've written in the book is that pricing is a system. It's not just a number. So choosing the right price for each of the target customer segments actually increases profitability so that you can provide just the right product with just the right set of features, at the lower end for one segment at a low price need provide your premium product at a higher price for different segments willing to pay for the for the more robust product. And that's really where the system begins to work and pay off in terms of creating sustainable product. Because the pricing has been optimized across the segments to deliver just the benefits that they're asking for.

David: 4:24

When we talk to startups, one of the first things that just absolutely paralyzes them is pricing. So I think that it's really interesting that you guys are really digging in there. How does a new startup you know, they're created an idea that they think the market needs, right? We're figuring this out? How do you price it that first time

Jason: 4:46

so the starting point is really to understand the tangible and the intangible benefits and a lot of startups discount the intangible benefits a bit too much. So as the benefits For the customer being identified, we started looking at how can we quantify the value of those benefits. So one of the examples I wrote about was, I started with a lot of different ideas, that would resonate visually. Because there's a lot of graphics and book, we had a fantastic designer draw a lot of pictures to go along with whatever writing because we didn't want to write a standard textbook. So I started walking through a scenario that there's a painting company, and the owner of the company has 10 trucks and 10 painters. And one of the biggest problems that that owner has is trying to schedule all of the jobs for all the painters. So the software solution was this optimized scheduler for routing all of this service by the painters, and it can be applied to plumbers and other types of service companies. What's the point? The point is that when you think about it, from the point of view of the owner, what does that owner looking for, he's looking for the most possible jobs in a given week. So if I could add two or three more jobs to the week, or add a couple more sales calls to that owners time, that's real value. And we think about it that way, say, Okay, what's the value of a job? If I can add $200 a week to this owners business? Would that owner be willing to pay 50 bucks a month to use that solution? And that's the thinking that actually leads to better pricing for the product? In a nutshell, there's a lot more involved with start thinking about the strategy for the startup, are they entering a space where they're going to be competing, or they actually have a novel solution where they actually command a premium price? All of that is a starting point to then start thinking about, well, what type of metric am I going to use for pricing? If I'm, again, going back to the plumbers example? Well, whether they really valuing their valuing using the product day to day week to week, we start thinking that way? Well, a subscription really makes a lot of sense. On the other hand, if I think about credit card processing, like Stripe, well, the value is in a transaction. So that's how they identify their value exchange model as transaction.

David: 7:07

One of the things I find with startups is they're scared to price themselves, right? They, they're scared to put a number on the value of whatever they have built, whatever their idea is, and most of them aim low, rather than too high, because they are thinking, Wow, 50 bucks. That's, that's a lot. And I think, I think a lot of that comes from, they almost want their software to be an impulse buy, rather than something like you just described, which is a thought, right? Is it's a calculation, because it's an easy, it's the sales pitch isn't Instant Buy, because it's 999. And why not? I'll try it out for six months. And who cares? Rather than you have to have a sales process that says, Okay, you're, I'm saving, given you the ability to do three extra routes, three extra jobs a month, that on average is going to be 500 extra dollars, I am making you and I'm charging 50 bucks for the privilege or the you know that access to that. That's a harder sell Oh, no, because it's a bad sell. But because it requires thought and you have to think that the business owner that you're selling to is going to be logical and makes sense which a lot. They're not clients just oftentimes are too sensitive to that. But it becomes a harder sell. And I find startups really struggle with that. Because yeah, they might do exactly what you're saying where they're, the value is a no brainer. But a lot of their clients are still scared to do so though. So they'll take that same $50 product, charge 1999 for it, hoping that no one has to worry about it, people just sign up in droves.

Gary: 8:48

They also might be thinking they just want as many people as possible to sign up. So they're not expecting like a lot of people to make that commitment or make that, you know, step in thinking what the value is, or if they don't have enough potential clients that do understand that value. What's the difference between signing up, you know, 100 potential clients at a lower price point just to for them to try it versus 20 clients that will actually accept that higher value in the pricing?

Jason: 9:18

Yeah, I think we're seeing the pendulum swinging from grow really fast, grow big. Don't worry about cash flow and profit to more conservative thinking now we're going to grow more wisely, and actually start thinking more pragmatically about pricing so that we grow at the right rate at the right price. And again, I believe that this notion of establishing value first is what leads to the most success for a startup and frankly, any organization is looking to deliver a software enabled solution.

David: 9:53

One analogy I heard it was during COVID, but it was irrelevant or COVID. They were saying it It was just a retail company, but it would apply just about anywhere, is they you know, you have a small shop. And let's say you're selling clothes, and there's 10 clothing shops in your area, you know, small boutiques, and nine of them when you're when the economy is bad, and people are scared, the initial thought is to lower your prices, right, I'm going to lower my prices to keep bringing people in, keep bringing them in. And so they'll say, let's say 10%. And then there's one shop who says, Well, I'm gonna raise my prices by 1%. And because they know, they've got a core group of people who come in, and that 1% won't be enough to matter. And so they're going to still come in, in the end, I make more money, rather than we you've go down 10%? Well, you have 10 customers, that's a lot, right? If you lose two customers at that 1%. And you just keep your existing customers at the temperature, you make a lot more money. It's just, it's a really interesting thing that I mean, price theory is a whole, like, college course. But it's really interesting, how fearful I think people are about pricing in general, because they just they don't like you're saying the intangibles are lost. A lot of times, it's purely nuts and bolts, like we just found when we talk to competitors of ours, we find out that we're pretty cheap. It's not on purpose. But compared to our some of our competitors, who we have a open relationship where we can chat and, and be honest about this kind of thing, which is fun, I recommend everybody do that. Find some competitors that you're not scared of and just chat with them. But when you do that, we find that we're not all that expensive. And but if I asked my clients, they think I'm expensive, right? When I do bids, they think I'm expensive. So that the difference between us and them is not necessarily that they are cheaper or more expensive we aren't, it's the clients they're going after, aren't as price sensitive. And that's a big difference, right? If you're, if you're looking for a $500 website, those clients in our experience, are the hardest, because they need to squeeze every dollar every penny of value out of that $500 When someone paying $20,000 for a website, is just gonna say you're the Pro, I'm paying you a lot of money, go forth, do your thing. It's really interesting. How all that kind of merges together?

Jason: 12:28

Well, it does. And that was one of the challenges of writing the entire section on on pricing was really to separate all this apart. Because I think you touched on a couple of different things, the dynamics of a, b to c solution, right? A solution for consumers, is dramatically different than the dynamic dynamics of a b2b solution where we're selling to a business. Even that alone introduces some uniqueness and add to think about pricing. On your last point there about the idea of some customers just want the best and they're willing to pay for the best every time they're going to seek the premium product. They want the the reassurance that they're getting the best that they've got a reliable, high quality solution, and they're willing to pay the most they can to achieve what they want. As opposed to what you just described, they're trying to squeeze everything they can to get the best possible deal. So one way we decompose that was in how we talked about policies, and the idea of getting into the negotiation, and for every concession we make to the customer, we get something back in return. So the customer asked for a 10% discount? Well, maybe I'll offer that 10% discount if they prepay for two years, right, I'm gonna get something in return or instead of 10% discount, why don't we keep the price the same. And I'll add five hours of setup time one on one with all of the administrators of the new systems, I can get them up to speed and using the product quickly. One way that a lot of companies make big mistakes. And I saw this when I was a software product manager is that sales needs policies, we need to have clear guardrails and guidelines about what concessions are automatic. I can tell my sales leaders look, if you're going into a competitive situation, you're authorized to offer up to 5% without talking to a manager, anything else need to escalate, that policy in itself can protect pricing alone.

Gary: 14:43

I'm assuming the book is written in the perspective for both the people who create software and the people that consume software buyers and sellers. Or is this book written basically for the people selling software?

Jason: 14:56

It's really for the solution providers. It's for people trying to Figuring out how to develop the solutions, how to price it, how to come up with the right relationships for licensing, and ensuring that there's compliance with the licensing.

David: 15:11

So pivoting a little bit, I want to know where this book came to be. So you run applied frameworks. Tell me a little bit about that.

Jason: 15:20

So we're a strategic management consulting firm, we're, I guess we will you call a boutique firm. And the company actually started in 1993, as one of the first agile product management, consulting companies around and we went through a couple of different phases. The name of the company was in Theosis. And we really started pursuing a lot of agile adoption type work. So I'm a scrum trainer. I teach a lot of classes for Scrum, to product owners, and Scrum Masters. And that led to working with really large companies trying to adopt Scrum. And then we got into the Scaled Agile Framework are safe. And we started growing. So we have very large, safe adoptions going on right now. And we still do a lot of Scrum training. But one thing that we saw that was missing in just about every one of our engagements was a real focus on defining value. And that's what led to developing the book, we realized that we had something unique to offer, we actually went back to a lot of our old work and refreshed it did a lot of research brought in a lot of new ideas and organize everything differently. To provide something I think there's gonna have a lot more value to all of the product leaders and teams out there they're really trying to get to value is we're not just cranking out features for the sake of building things, building things is fun. It's cool. We want to delight customers, but there's got to be some economic value for both parties, in all of the software development that's happening. So that's really what we're trying to address is helping to be very clear about what features will deliver the most value, which will lead to the most profitable solutions that are sustainable over time, we really believe in this connection of sustainable businesses are profitable businesses. And we want to help those companies that pick up the book and look at the tools that we're offering, as an opportunity to really improve what they're doing so they can last for a really long time.

David: 17:24

So you use a lot of acronyms and goodies in that in that little section there. I want to make sure we break that down a little bit. So you are talking about agile, tell me what that is? How does that reflect, you know, in software?

Jason: 17:38

So agile was really defined in 2001, when a group of different practitioners have been working on new frameworks in a real really trying to solve the same problem. How do we build software quicker with lighter weight frameworks, the concepts at the time were slow, and we were labeled waterfall, their phase, they were gated, and it took a lot of time to gather all the requirements, approve the requirements, come up with the architecture approved the architecture, and then we'll build at that point, we've already burned a lot of money and a lot of time. And it could be six months a year before customer actually even sees anything at all, let alone something that's tested. And what all of the individuals that were building these lightweight firms trying to do was accelerate time to market get feedback quicker. So one of the frameworks was called Scrum and other one was called Crystal. Another one was extreme programming, they all got together and they talked through what was common and what they were trying to do. And that's where agile came from. So this idea of agile was really defined in the Agile Manifesto in 2001 is a set of values and principles, we kind of think of agile now as the umbrella. And we're trying to become agile, and we choose a framework. And when again, this framework could be scrum Kanban, XP, or any other framework that people are inventing, that are again, trying to just get more things done quicker with high quality, get the value in short interval. That's really the point. What was the safe one is the most popular scaling frameworks. So scaled, agile framework is for enterprises, that's where the E comes from. So scaled, agile framework for enterprise is very popular, it is very robust it is it really defines a wide range of practices and roles and relationships to really manage everything from the portfolio driven by the strategy of the firm all the way down to the team level. So we have this cohesion between the investments that we're making the portfolio level, the fund, the multi team development trams, this notion of an agile release train really brings the five to 10 teams together so they plan together and deliver together when we've got these really big products to deliver.

David: 20:00

As a lot obviously we've heard of agile, we we adopted a cut very customized version of agile for our own development. We are a fixed fee shop. So agile and fixed fee kind of don't work well together in a lot of ways, because it's an ongoing changing process that Agile does. But we did adopt some of it. So we've used it before. And one of our PMS is a scrum master officially. He has been trained and certified and all that good stuff. But I want to make sure my wife lets me know that sometimes, we are talking with acronyms and stuff that our audience does not necessarily understand. So I wanted to make sure we clarify that. Sure. So how did y'all you guys have grown? You guys are good size. How did y'all get started? I mean, it's 99. Three, that means was that 30 years? Am I doing that math? This is your 30th year?

Jason: 20:57

I say 93? I apologize. I think 2003. If I said 93. I was probably thinking something else. So we're just talking about when we got married. We got married in 93. Luke started the company in 2003. My apologies.

David: 21:11

Okay. 2003. So still 20 years. That's still pretty, very cool. Did you guys do anything cool for your 20th

Jason: 21:19

That's coming up. There'll be an October. Nice. Okay. So we're talking about last minute. Very cool. So Luke, was in Silicon Valley, he had been a software product manager and VP of engineering. He's got quite a, an extensive background. And at the time, this is his fifth book that he's written, and at the time, he was working on his next thing, and that's when he decided to do some consulting and went out on his own and really started pursuing the idea of of product management consulting, he landed a really big client, Qualcomm. And that's when the company really took off. So I, I met Luke, about 2006 or seven, he recruited me, he called me out of the blue, he saw a webcast that I did when product management webinars weren't so popular. But I talked about how I experienced the transition from waterfall to Scrum. And that's why I called me and about a year later is when I started working with them. And from the rest of history really, we started working together, he spun out the innovation games company, which is a software driven collaborative platform, which was eventually acquired by Scaled Agile. And now he came back to work with us.

David: 22:40

How does and one of the things we focus on a lot on the podcast is how you get started. How that first ugly time of making people care and, and getting out there, but you're saying that Luke the founder, right, if I'm understanding correctly, got a huge client like Qualcomm? I mean, was he beyond up? Did he have a team of people at this point, was still just him? How do you land a fish like that? When you're just getting started,

Jason: 23:12

great networking, you know, our business is driven by reputation, and really good relationships and connections and connecting other people being open to meeting new people and talking about how you can help and helping others. And I really think that's been part of our DNA since Luke started company. And then I joined when I joined, it was really a two person company for quite a while, and then it became one and a half people. When he spun out the innovation games company really started building software. And I was on my own. And I really just followed in a way a lot of the practices that I learned from him and from my previous roles in software companies where I got to thank an early mentor, Mike miracle, who basically told me one day I need you to go out to California and go get into Cisco Partner Program, like, Well, how do I do that? Well call this guy Paul. And he'll take care of you. Okay, I got into plain and met Paul. And suddenly we're in the Cisco Partner Program, which unlocked a whole lot of value for us. We got access to a lot of tools we got listed on our website, we're suddenly a solution provider, affiliated with Cisco. And then he says, well go do the same thing with VMware. And did same thing. Phil Stark was the connection there. So I quickly learned from Mike that the power of technology firms like ours is in the relationships that we build throughout our careers, which allows you to tap into not only those people that you already know, but the people that they know, because when they hear someone has a problem that you can solve. Don't make the reference to make the referral and whether it goes We're not, may not be the point. But you've established yet another connection in your network that you can talk to in the future. And we continue to be amazed that some of the conversations we will have today, we may not win the business, but two years from now that person may come back either the same company or another company saying, Hey, I talked to you, before, we want to move forward, we couldn't demo now we want to,

David: 25:22

one of the things that I have learned and learning when it comes to networking is, the more you can be a pass through, the more that will pay dividends. And what I mean by that is, it's similar to what you're saying, but it's, I am meeting Guy A, and he's talking and we're chatting. And he triggers something in my mind that I know a guy B, who might be able to help whatever he's trying to solve, right? And connecting a and b in that case, and I'm not really getting any business out of it at all right, I'm kind of just there. But you will find if you can do that, especially you get good at it. I mean, there's some people that this is like their entire career. But just even on a smaller level, if you can get good at it, you'll find that either A or B will call you and refer you to C or they might themselves need something because you provide value. And there's something inherently human about wanting to pay that back. And you're not doing it. I say that, I have to caveat that if you're doing it just for the hope for the later on. People will know that right? If you just seem calculated in the whole thing, as opposed to genuineness genuinely wanting to connect people that will bite you in the butt. But generally speaking, if you are a genuine person trying to really connect people, and you're paying it forward like that, it will pay you back, it might be really slow. And the sad part is a lot of companies die before that. Train gets a movement, right? Because it takes time. And your startup needs stuff. Now, I mean, that's a classic startup story. But I just find that when the networking, that's a super important thing to pay that forward to think about how do you connect these people, not just take take take take, that's where networking will die? So just reiterating what you're saying just in a different way, probably well spoken. But

Gary: 27:16

I had a marketing question. And this just comes up because a lot of the people we've talked to interview that work in the tech industry, their number one source of new clients is networking, and relationship building, not really outside marketing. So I was wondering, is your company involved in a lot of outside marketing? Or do you guys just kind of keep that close and don't really expand too much into that marketing budget just as long as you still have some brand recognition? Are you relying basically on referrals and networking for clients.

Jason: 27:48

So we are very cautious about how we spend on marketing. The vast majority of our marketing is content marketing. So we tried to publish a lot of really useful, valuable material, whether it's written blog posts with downloadable frameworks, hence the name applied frameworks, we want to deliver value through the frameworks republish, we do a lot of webinars, both our own and with guests. Right now we're partnering with Miro, to run a whole series of agile webinars for distributed or remote teams that gets their name out there. And because we do so much work with large companies and do so much training, we have a really big email list just keeps growing and growing with every class that we teach. And we try to stay in touch with all of those people through the newsletter to keep offering them value, they may not be following our blog, but they'll at least be aware of something they may find useful. And they may also know other people that want to, you know, take our class. So a lot of it is really just, I call it the grind, right? We grind through being really disciplined about creating something new, creating new content, delivering it. So we've been doing the book before the book was ever published. We started talking about the things we're writing and actually led to a lot of really great feedback on a lot of the content. That's how we think about marketing. We don't do any paid media. We do we do post on LinkedIn, both as a company and as individuals.

David: 29:27

I want to wrap up today with our question that we always ask. And that is, if you were meeting yourself or someone who was just getting started in your industry or out I don't think it really matters, but what three pieces of advice would you give that aspiring founder.

Jason: 29:46

So the first that I reflected on is the idea of growth at the right pace, so I would say grow wisely. And one way to think about that is keep doing everything that you can to keep the business started until it's no longer practical. And you actually need to hire somebody to pick up some of the load. And that may be yours. So for a long time I was it. Right, I was delivering services, I was selling services, I was teaching classes. And I was also running our systems, our website, our LinkedIn, our back end for processing payments for classes, I was smart, I did hire a bookkeeper a part time contractor to do our bookkeeping, that's something that is worth outsourcing. But otherwise, we didn't make our next big hire until I was literally out of energy and out of time, and had to scale by hiring. So each hire should almost feel like it's not the right thing to do. Because you're really trying to avoid growing too quickly, which I think is a little counterintuitive, from maybe the popular ideas of growth, but I really advise on being cautious with growth because cash is king. That's the second thing I'd say to any startup founder. And I got this from Scott Galloway, who I don't know if you're familiar with the prophecy podcast, but he talks about throwing around nickels like they're manhole covers. So being very, very conservative with cash and being really focused on not overspending at all and really being cautious with with money. And then the last I think is related to our ideas about agility. And we know that there's a few things that we might have missed in the book. And we've already found a one or two little issues with the book. Well, we shipped it. So my advice is ship less faster. And what I mean by that is still deliver really high quality product that just enough to keep moving in small intervals. So the faster you can get something out there with high quality, the better off you're going to be. Now I'm not suggesting to be a perfectionist, that's just going to slow down delivery, what I'm saying is do the best you can on a little bit, get it out the door, and then ship your next release in your next. And I think that's what's going to lead to faster feedback, faster time to market, more insights from customers, because we could have held on to this for another couple of months. But we picked the date is October, we said we're shipping first week of April and we did is it perfect. Not as perfect as we'd like. But as sure is good enough that we were able to get the best seller listing, we got it out in the world. We have partners, we have a community that we're establishing. And from there, I think everything else starts clicking into place.

Gary: 32:54

And how can people get that book?

Jason: 32:57

Amazon?

Gary: 32:59

If they wanted to learn more about you or applied frameworks? Where can they reach out LinkedIn and your website?

Jason: 33:06

Yes, supply famers.com. I'm active on LinkedIn. So just look for me, Jason Tanner, and you'll find me and then profit dash streams.com Is everything about the book and all the new things coming, like our community and additional classes that we're offering as well as our partners.

Gary: 33:24

All right, we will include all those links in the show notes as well. So people will have those.

David: 33:29

Well, Gary, if they wanted to get in touch with us. How would people do that?

Gary: 33:33

We don't have a book yet. But

David: 33:36

we should have a book Gary get on that.

Gary: 33:39

Now they can reach out to us. They can send us an email Hello at the big pixel that net, they can leave a comment below this video or they can connect with us on any one of our social media channels. All those links are below as well.

David: 33:50

Well, thank you so much, Jason, for joining us. It's been a lot of fun. It's always interesting to dive into pricing and and those sorts of things. I think that's real help to a lot of people. Appreciate your time. Thank you both. I appreciate it, guys. All right. And we're out of here guys. Thank you so much. We'll talk to you guys next week.