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Seeing Potential in the Passion to Innovate: Why SaaS Platforms May Have an Edge

In the course I teach right now on International Business and Global Strategy, we’re covering how the leading companies from different industries seek to nurture innovation.

Reverse innovation from General Electric which begins with the customer’s needs is a fascinating concept and is mentioned by Beth Comstock, Senior Vice President and Chief Marketing Officer of General Electric in the video below.

Innovation the Google Way

Anjali Joshi, Director of Product Management at Google, discusses how the rule of 20% is contributing to a more of a flexible mindset in the company as well.  From her remarks the key take-away emerges that the rule of 20% is really about giving employees the freedom to pursue projects they are passionate about.

While she does not come right out and say it, you get the sense the freedom of the rule of 20% also nurtures trust and much greater levels of collaboration.  The result: over 50% of revenues at Google are now from projects initiated in this program.

Why SaaS Platforms My Have an Edge – Evaluating Sales-Per-Employee

Discussing innovation with my class and debating if the rule of 20% could be slotted into any company we came to the conclusion that there needs to be much more than just a willingness to experiment with this program.   There has to be the right business model, the right selling strategy, and most importantly, a very clear, well defined and respected process for translating concepts into products fast.  Most of all we agreed, a company has to have a healthy appetite for rapid, at times even radical, change for the rule of 20% to be real.  These all sound like attributes of a SaaS-based business.

So how well do SaaS vendors translate the passion their engineers, designers, software engineers, sales and marketing teams have to innovate?  To see if I could find an answer to this I did a comparison of seventeen SaaS vendors, comparing their sales-per-employee trending from 2006 to 2009.  The companies included in the analysis include Concur Technologies, Constant Contact, DealerTrack Holdings Inc, DemandTec, Google, Intuit, Kenexa, LogMeIn, NetSuite, RightNow Technologies, Salary.com, Salesforce.com, Skillsoft,  SuccessFactors,  Taleo, Ultimate Software Group, and Vocus.  For ease of reading four of the more dominant SaaS vendors are included on the following chart followed by the table of analysis.

Salesforce.com continues to see revenue-per-employee increase from $237,620 to $301,129, while NetSuite and RightNow Technologies appear flat.  Intuit is a clear leader in revenue-per-employee performance, jumping from $312,307 to $408,018 in the period.

Why Salesforce.com continues to rise can be attributed to many factors, the most significant being their pace of new product introductions, ability to quickly sense market opportunities and translate them into services, and their focus on how to be the trusted advisor to anyone wanting a CRM system. Likewise, Intuit is well known for their customer studies and how deeply they engrain the customer experience into software development and engineering teams.

Conclusion


Companies who see the potential in their employee’s passion to innovate get out of their way and give them opportunities to get involved in projects they deeply care about.  Often exceptional results emerge from these efforts, leading to entirely new businesses.  That’s the key take-away of the rule of 20%.

For software companies delivering apps on the SaaS platform, the potential for getting immediate customer feedback is turning into an entirely new source of innovation.  The speed of customer feedback possible also opens up the potential of giving employees the chance to test new concepts immediately, nurturing innovation in the process.

Thanks

Louis Columbus

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