Yaw Aning (Malomo): Building Your Company On the ‘As a Service’ Part of SaaS
May 25, 2022
There’s no one right way to start a SaaS business. Most first-time founders are tasked with learning as they go, following their intuition, and making decisions on the fly. Without experience under your belt, success is a process that takes plenty of trial and error.
It’s become increasingly common for SaaS founders to pivot to software after building an agency. This way, they can gain deeper insights into their customer’s pain points before beginning the process of developing a product. With any luck, they can learn to mitigate some of the challenges related to founding a SaaS company.
Yaw Aning, CEO and co-founder of Malomo, the shipping tracking platform, is a prime example of an agency-founder-turned-SaaS-founder. He recently joined Blake Bartlett on the BUILD podcast to talk about his journey as an entrepreneur, providing agency services and ultimately building a product, and what he learned along the way.
The transition from agency founder to SaaS founder
Yaw attributes much of his entrepreneurial success to the lessons he learned in his agency days. Over seven years, he had already worked for dozens of companies and had a good idea of what led to success and failure.
When Yaw was ready to start his own SaaS business, like many entrepreneurs before him, he chose an ambitious endeavor. The idea for Malomo was to create a shipment tracking platform for e-commerce to connect several large-scale software systems in an e-commerce merchant’s tech stack before they could even go to market.
Malomo worked on knitting together customer order data from Shopify, data from the global delivery network, and integrations with marketing platforms so they can craft and trigger the right messages regarding order transit.
At this point, the market for this kind of shipment tracking solution was purely hypothetical.
“We didn’t really know if people would use it—if this was a problem that people had. And even if they used it, would they be willing to pay us for it?” Yaw said. “We really wanted to prove those two things out before we went down the path of spending any energy on this.”
So Yaw and the Malomo team did what all their successful clients did: they launched an agency.
“It was a post-purchase agency, we kept the focus pretty broad, we were going to help our customers understand how to drive down support tickets related to people asking about where their order is,” he said.
Before creating Malomo, he had a chance to observe the clients that succeeded and the ones that didn’t. During these agency days, Yaw noticed that clients were running into the same challenges time and time again. Seeing them repeat these lessons, Yaw was able to condense the major learnings from their experience into three core lessons:
Lesson 1: Do one thing 10x better than everyone else
Entrepreneurs and founders are ambitious—it comes with the territory. But it’s also easy to be too ambitious, especially for a first-time founder.
“The first big mistake that we saw founders make was that they tried to build their seven-year vision today,” explained Yaw.
He recalled client-founders coming to him with 10-page specs for product features they wanted to build. To Yaw, this was a red flag.
“You often think nobody will want your product unless it has all the bells and whistles in it. But the best early-stage products? They don’t do everything,” he said. “They aren’t trying to be everything for everyone. They do one thing and they do it extremely well.”
In fact, being able to achieve this focus on a single core feature can be foundational for an early-stage product’s success.
“People typically buy products from early stage companies because they are 10x better along one single dimension that’s super important to a very specific segment of the market,” said Yaw.
For many of today’s biggest tech companies, this was core to their success. Take Instagram, for instance. They took Facebook’s photo-sharing feature and made it 10x better—so much so that Facebook had to acquire them to stay relevant, said Yaw. Slack is another example. They made team communication 10x better than email or any other existing alternative. It wasn’t until these businesses grew from this initial success that they began layering in more complex features.
This doesn’t mean that entrepreneurs should abandon being forward-thinking and having an ambitious product roadmap. Ambition, after all, is an entrepreneur’s superpower. It’s all about applying it to the right place at the right time—and not letting it become a distraction.
“Having a seven-year vision isn’t bad,” Yaw affirmed, “In fact, it’s required to build an iconic, category-defining company. But you have to be able to separate the vision of where you’re trying to go with the realities of where you are today. And if you can’t take the most important part of that seven-year vision and boil it down into something that you can deliver in three to six months, you’re going to have a really hard time building anything that matters.”
Lesson 2: Follow the technology adoption curve
The next pattern Yaw observed was misalignment between product development and the technology adoption curve.
Yaw defined the technology adoption curve as a “mental model for how new technology is adopted in a market. And the way that this happens is there are groups of people that adopt the product in a particular order.”
“You’ve got the innovators, early adopters, the early majority, late majority, and laggards, and all these groups have very different needs and expectations when it comes to adopting new tech,” he said.
According to Yaw, companies that succeed end up staging out their progress to match this technology adoption curve. “The early innovators—they’ll signal to the early adopters what’s new and upcoming and hot. And then those early adopters will signal to the late adopters again and so on and so forth. So it’s really important to target the right customer at the right stage you are as a company.”
Many founders come into their business with a preconceived ‘dream list’ of customers. Unintentionally, they begin developing their product with these customers in mind. The issue is that these ‘dream customers’ will not be the first ones on your product.
“Most of the time, as the entrepreneurs, we all want the types of customers that would fall in the early or late majority category. They’re usually the more established companies in the market, the logo clients, and really you have to get those customers in order for your product to go mainstream, no matter what,” Yaw explains.
In reality, the early and late majority customers have significantly different needs than the innovators and early adopters. They also have a much smaller appetite for risk.
“There’s a common joke in the enterprise: nobody ever gets fired for buying Salesforce,” he continued. “Salesforce is the juggernaut, it’s a proven product in the market. When people adopt technology, they’re putting a little bit of a personal stake in advocating for that solution inside their organization.”
Most of these bigger, more established companies in the late majority group aren’t going to purchase a solution before seeing other people succeeding with it. When founders design their product around these hypothetical customers, they are forced to build out more complex features for a much smaller shot at actually winning them.
Another warning against building too much too soon. “The more you build, the riskier the proposition becomes that what you’re building is the wrong thing.” This may be the most important reason to start product development with your innovator and early adopter segments in mind. These users will be instrumental in helping to develop an effective product roadmap.
“It is oftentimes much better to launch with a ton of feature gaps and then have your customers actively participate in the development process by telling you, ‘Hey, these gaps are missing. And they’re really important to me that you fill these gaps in.’ And so the best customers to do that with are not mainstream customers, but they’re rather the innovators and early adopters,” Yaw explained. “They’ll also forgive your early missteps, the feature gaps you have, they will give you the benefit of the doubt, because they really are focused on also seeing that vision come to life.”
Lesson 3: Start as a service before you build the software
Even after clients identified one dimension of their product optimization and determined their first target users, most were eager to start building immediately. According to Yaw, this was often a mistake. In fact, Yaw recommends that founders resist the urge to go build their idea as soon as it manifests itself.
“You should take the opposite approach of trying to build nothing for as long as humanly possible,” said Yaw.
At first glance, this advice seems counterintuitive. Software companies make software products, after all. But the most successful companies are user-centric, which means they approach the solution from the customer’s perspective.
“Customers don’t buy software, they buy solutions to problems,” Yaw explained. “We actively pay for problems to go away. I think that’s a really subtle mindset shift that founders need to have.”
And for a lot of use cases, you don’t need to develop software to deliver a solution to a customer. You don’t even need a product to get to revenue. Clever entrepreneurs know that they can make money by providing a service regardless of how it’s delivered.
“The companies that we worked with that just killed it came to us having started their businesses basically as consulting firms,” Yaw shared.
“They were already working with a customer base to solve a problem through a service that they were offering, and they came to us looking to build technology to automate the things that they were currently doing manually. And they succeeded because they understood the problem so deeply that their customers faced. Because they were the ones actively solving the problem on behalf of the customers.”
These companies relied on manual processes or stitched together two or three off-the-shelf solutions to manage the delivery of their service. Despite cobbling together these solutions, they were able to see huge benefits in the long run.
The insights they gathered from being so close to their customer’s problems gave them a much clearer idea of how to start building an effective product.
Carving out a role for services in SaaS
“It is so easy to follow the money with services,” Yaw warned. “And it’s hard too, because customers will ask you for a lot, they will want a lot. And you will want to give it to them because you want to keep the ARR (Annual Recurring Revenue) in the business. But there be dragons there—it’s really hard to not get caught into this place you don’t want to be.”
However, there is still a place for services in SaaS. At Malomo, services are still in the company’s DNA. Yaw is a strong believer that SaaS companies shouldn’t develop products with the aim of replacing higher-touch services completely. In fact, providing services that add a layer of value on top of a product can unlock a powerful opportunity for SaaS companies.
“Software is super rigid, right? It works exactly how you design it to work,” he explained. “So if you’re wrong, even slightly, you’ve lost time, you’ve lost money, potentially lost trust with your customer—it can be costly to go back and rebuild. When you provide a service, you can adjust instantly, on the fly, so you can try multiple different solutions and see the different angles of how they impact results.”
“SaaS is software as a service. ‘As a service’ is the important thing. Software is only the delivery mechanism, and so if you are providing a service repeatedly that customers are paying for, it could signal that it’s a feature they’ll continue to pay for,” said Yaw.
Four ways to feature services in a SaaS business
In terms of how services can be incorporated, Yaw gives four pieces of advice:
- Use services to increase customer success and drive adoption. Oftentimes it takes demonstrating the value for them to commit more internal resources to adopting the product, especially if they are resource or time-restrained. In this case, a service can be a way to activate a customer initially.
- Fill in short-term feature gaps. Services can take the place of feature gaps, especially if the value is there but some product resources are required to build the feature. “Can we provide the same outcome through services until the product team can catch up?’” On the flipside, you have to be diligent about services that don’t align to the short-term roadmap. If you don’t plan to automate it down the road, avoid providing the service.
- Make informed choices for repeatable services to productize and features to develop. “Is it something that we can do for a customer month after month? If so, then we might want to turn it into a productized service. And then, if enough people opt into that productized offering, it’s a good signal that you should actually turn that into a feature too.”
- Explore potential avenues for developing a competitive advantage. “You should use [services] to get insights on your future product vision. Can we learn something new from the service that will give us some unique, competitive advantage in the future? Or can you use them to test out early ideas for the product? So, that’s how we try to look at services.”