How, as an emerging SaaS company, do you nail your business model, get your engineers to truly understand customer needs and, finally, go toe-to-toe with legacy competitors? AppDynamics* former CEO Jyoti Bansal continues his discussion on these topics and others in his “SaaS Adventure” video interview with Battery’s Neeraj Agrawal. You can view the first three segments of the discussion here.
In segment 4 (above), Bansal discusses how AppDynamics approaches the classic software “freemium” model—offering a version of a product for free, then charging for premium services. Originally, Bansal says, the company offered AppDynamics Light, a limited-functionality version of its product, free on an unlimited basis. But the company learned that customers appreciated the product more if they used the full product first.
So now, AppDynamics provides the full version free for 15 days. After that, freemium users are converted to limited-functionality version. By experiencing the full functionality and value of the product up front, Bansal describes how the company has already “done much of the selling, without anyone even talking to us.”
Segment 5: Customer-centric engineering, and breaking down barriers
Are engineers and enterprise-software customers from two different planets? They are at many tech companies, but don’t have to be, Bansal says in the next segment.
Here, Bansal discusses the importance of engineers being familiar with actual customer problems so they can build better products to help solve them. At AppDynamics, this is called “customer-centric engineering.” Engineers are encouraged to sit in on phone or video sales presentations so they can get a feel for customer needs and preferences, and learn what aspects of the AppDynamics product seem to resonate with customers the most during demos.
“Engineers are smart people,” Bansal says. “If you make it easy for them to understand the problem, they will come up with solutions. Breaking the barriers between engineers and customers is the fastest way to innovate.”
On the sales side, Bansal counsels other founders to change the type of sales leadership they encourage through various phases of their companies’ growth. Leading sales at a company with under $20 million in revenue involves different processes than running the sales department at a company with $100 million to $200 million in revenue, and certainly more than $1 billion.
Segment 6: Competitive Advantages
Here, Bansal discusses his perspective on the secret to AppDynamics competitive success—fostering startups within a startup. Bansal’s philosophy, he notes, is that small teams innovate the best: “They are more customer aligned, more innovation aligned and you don’t need to build process around them.” He shares the story about how as AppDynamics began to scale and put more processes in place, he found that the company began to slow down. This, he states, was concerning. “The reason we are out- innovating the legacy companies, who have no shortage of money, is because we are small, nimble and fast moving. If we don’t remain that, our main competitive advantage goes away.” So AppDynamics split the company into small organizations of no more than 30-35 people to function as ‘startups within a startup’.
In this segment Bansal also discusses his approach to customer success, an emerging business function designed to ensure customers gain full value from a company’s products and continue to purchase from the company year after year. “Everything you do,” Bansal advises to fellow entrepreneurs, “you should do to make your customers successful. At AppDyanmics customer success is everyone’s job within the company.” This approach has gained AppDynamics a Net Promoter Score of 84; this measure of how likely customers are to recommend the brand is higher than scores gained by much-loved consumer brands like Apple and Amazon.
Jyoti Bansal was the second guest in Agrawal’s SaaS Adventure video-interview series. In the series, Agrawal, analyzes the ins-and-outs—and ups and downs–of building a breakout software company, offering lessons for entrepreneurs. To watch previous episodes of the SaaS Adventure series click here. And here is link to Neeraj’s inaugural SaaS Adventure blog post, which sets the stage for these CEO interviews.
*Denotes a Battery investment. For a full list of all Battery investments and exits, please click here.