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In a classic blogger’s example of “I wish I’d written that,” here is a great piece by David Skok on metrics for running your SaaS business with a focus on information that is meaningful and useful:

Metrics for metric’s sake are not very useful. Instead the goal is to provide a detailed look at what management must focus on to drive a successful SaaS business. For each metric, we will also look at what is actionable.

The piece also includes some guidelines. Did you know, for example, that the lifetime value of a customer should ideally be greater than three times the cost to acquire that customer and that you should aim to recoup the cost of acquiring that customer in less than a year?

Skok’s article is a crash course in SaaS economics. If you’re serious about a SaaS business, read the whole thing.

SaaS organizational success is the latest chapter in the story of flatter, faster organizations in mainstream American business.

Delivering software as a service is much more than a technological challenge. It is, fundamentally, an organizational challenge and its lifeblood is coordinating business activities at a scale and cost efficiency that packaged product can’t touch.

Case in point: When I made my first foray into SaaS in 2002, the principal problem I was solving wasn’t a technical problem, but a business problem:

• How can a small company that can’t afford to build traditional sales channels possibly compete with a larger competitor with the resources to put boxes on store shelves?
• How can we afford to shorten our product cycles and accelerate our pace of innovation when upgrading customer installations is patchy and error-prone?
• How can we keep the cost of development and support down and provide high reliability regardless of customer hardware and operating system?

We answered these questions with SaaS. I didn’t think we were forging a revolution in software at the time; we were just trying to deliver value to the customer within the resources we had available.

I had one advantage at the time that played well to the strengths of SaaS, though it took some time to recognize that: Our relatively small team size meant that the communications burden across company functions was quite low. We could literally make interlocking strategy, marketing, sales, product, and technology decisions within hours and implement them within days.

When taking an existing application to the SaaS delivery model, one with an established customer base and company sales and marketing apparatus, I find that making these interlocking decisions quickly and effectively is probably the most important hurdle that you face, and the key area to pay attention to if you want your SaaS products to succeed. 

When the company needs to succeed in SaaS product delivery, I make it my priority to break down communications barriers and build teamwork and cooperation. 

Of course, setting teamwork as a goal and achieving its benefits are two different things. To know when we’ve achieved our goals, we need metrics. Here are some of the areas of measurement you should thinking about if you want to know whether your efforts are bearing fruit:

• Trial Provisioning Speed
  How long does it take, in minutes and seconds, from the time when a prospect requests a trial to the time when their trial is ready?
• Customer Provisioning Speed
  How long does it take, in minutes and seconds, from the time when a customer purchases to the time when they are online and able to use the offering?
• Content Management Speed
  How long does it take for changes to the web application content or the surrounding marketing web content to be edited, reviewed, approved, and published? Does it take a full product release to change some of the content?
• Value Creation Speed
  How many times each year can your team deliver new features, improvements, optimizations, and enhancements?
• Deployment Speed
  How quickly can you deploy your application once a complete installation package is ready?
• Customer Support Speed
  How long does it take for a simple customer support request to be answered and closed? How long does it take for a complex request?

These are the first things to examine because speed is a key part of the service that software as a service brings.

SaaS is about reducing and removing the cost and friction involved in conceiving, designing, building, deploying, evaluating, buying and using great software.

When you’re doing SaaS right, you’re going faster.

Of all of the captivating talks I saw presented at this year’s Gnomedex, some of the most surprising and enjoyable were delivered in five-minute chunks by the ladies and gents of Ignite Seattle and Ignite Portland.

The Ignite community challenges you to answer the question:

If you had five minutes on stage what would you say? What if you only got 20 slides and they rotated automatically after 15 seconds?

Ignite chapters have now begun in cities all across America.

My favorite of the Ignite presentations that we saw this weekend was delivered by Jason Grigsby and was entitled “Cup Noodle: Innovation, Inspiration, and Manga.”

If you view the video, you will see what made this presentation so amazing. The story of instant noodles in a styrofoam cup turns out to be a business legend that demonstrates some of the key themes of Agile development, and best of all it’s captured in a manga, a Japanese comic book.

• Have a compelling vision and lead passionately
• Accept the challenge and embrace the constraints
• Design with the user in mind
• Iterative, collaborative design and constant improvement
• Use diversity to your advantage to bring in new ideas
• Unbox your thinking and look for answers in unexpected places
• Understand your unique selling proposition
• Celebrate your victories along the way

A product that has nourished billions and even been used for disaster relief, and yet it still has things to teach. The Agile models we use today have their roots in Japanese post-war business and their drive for rapid, constant improvements.

So make yourself some instant noodles and kick it old school.

Scott Menter, that is. Scott is a college buddy of mine and his new blog on People-Centered Leadership is worth reading. Check it out.

Go on, don’t make me tell you twice.

Serena Software’s TAG Conference begins on September the 7th and attendees can take advantage of a special giveaway from Serena and Valtech: Free Agile Mastery training.

This two-day training course will immerse you into real-world learning scenarios where hands-on exercises and interactive discussions will dominate the class time. As Valtech’s core Agile course offering, Agile Mastery prepares team members for the realities of working on a project where daily stand-ups, burn downs, relative estimation, users stories and much more are the cornerstones of everyday life.

If you’ve looked into Agile training, then you know that a course like this usually costs $1,400 per person.

… when you didn’t get what you wanted.

In that vein, check out this pithy posting from James Geshwiler for Xconomy Boston listing some of the ways that companies can flame out. What may seem like an invitation to schadenfreude is in reality a useful exercise, especially for those who work in resource-constrained environments like startups.

Right at the top of his list are problems with scaling up too agressively:

Only about 1 in 100 companies that pursue venture capital money get it. Probably the worst thing you can do right after the financing is then to blow this precious resource. Yet, there is tremendous pressure to scale the company for a large market quickly.

It’s easy to underestimate the pressures that building an unproven sales model add to the pressures of building an unproven technology. That constraint gives every problem a short fuse. People unused to the necessary pace of problem resolution in a startup can get blind-sided by this very quickly.

To Geshwiler’s nice list, I’ll add this general observation, which is applicable to companies of any size: constant and effective internal communications of the company mission, strategies, and tactics is critical to success because no business leader can be everywhere all at once to guide the actions of all team members.

Indeed, the days of the business leader as central decision maker and authority ended with bell bottoms and wide lapels. Your teammates will face decisions with make or break impact on the health of the company. If they haven’t been a part of the mission and strategy discussion, they may make crippling mistakes.

I have seen companies where no two people can give the same product description, or name the top accounts, or credibly compare the features of the product to that of the competition, or even articulate the company’s core values.

Agility without direction is just schizophrenia.

If you’re used to the old advice to handle a complex problem by sleeping on it, some new research from the University of New South Wales may be a wake-up call:

Neither snap judgements nor sleeping on a problem are any better than conscious thinking for making complex decisions, according to new research.

The finding debunks a controversial 2006 research result asserting that unconscious thought is superior for complex decisions, such as buying a house or car. If anything, the new study suggests that conscious thought leads to better choices.

The new study points to a few ways that unconscious judgments can be skewed.

… our research suggests that unconscious thought is more susceptible to irrelevant factors, such as how recently information has been seen rather than how important it is. If conscious thinkers are given adequate time to encode material, or are allowed to consult material while they deliberate, their choices are at least as good as those made ‘unconsciously’.

Something to keep in mind the next time you’re tempted to give a too-quick answer on something critical like project duration or cost.