Ton Dobbe on The Remarkable Effect

Subhanjan Sarkar  

Thank you. I’ll drop off and leave the stage to you and take it away.

Ton Dobbe

Okay, all right, good. Sorry for the glitch. Always last-minute things come up that you don’t expect, but welcome to this session, and I’m honored to speak to you today about my book and about the thoughts behind it.

The title of the book says it all, “The Remarkable Effect.” I want to stand still here with this slide, indeed, about this word ‘remarkable’. Because if I look at the dictionary of this, what it stands for is something that is worthy of attention. It’s striking. It’s worth making a remark about. And if you’re creating a business and you’re creating products that are worth making a remark about, then you’re on the right track. And that’s what I wrote my book about. I wanted to understand, and I wanted to get on paper why certain B2B SaaS companies, because that is my background, software companies, why certain software companies are the ones that we start talking about and keep talking about, and why others don’t get in there and what is behind it? What’s the difference? Because at the end, running a business is about execution, but there’s a little bit more than that in order to become remarkable.

So if you go to the next slide that’s already alluding to the point that Subhanjan made. What the research indeed shows is that 90% of all startups fail. And I came from Unit4, the company I used to work for in the product marketing, product management function. It was a large company, and I started there pretty early in my career when it was around 100 people. When I left, it was about 4,000. I wanted to start up my own business, and I wanted to not work for another startup or for another large company anymore. I wanted to help those companies out there that are struggling not to fail. And of course, you can see this number, it’s a huge number. And that’s bad. If you go to the next slide, what’s even possibly worse or more striking is that 75% of scale-ups fail. And these are companies that are actually supposed to have product-market fit. They’ve got customers that are paying for it. They are moving forward. They’re getting towards maybe even profitability. Still, 75% of scale-ups fail. That’s where the whole motivation came from, the idea that started to build in my head, and I needed to write a book about it.

If you go to the next slide, my big question was, why do so many software companies fail, and why do we so often ignore the power of the word remarkable? And the next slide is then how that came about in my book. And the book is, as you can see there— it’s about “The Remarkable Effect.” It’s the essential book for what I call ‘tech entrepreneurs on a mission’. It really explains why your business isn’t as good as it could be and what to do about it. It’s a very practical book at the same time.

The book is built upon what I call ten traits. What are the ten traits that characterize those remarkable software companies? I can go through them very quickly. They realize they can’t please everyone. They offer something valuable and desirable. They strive to be different, not just better. And the list continues right there. But for today, I want to focus particularly on the first three. But let me first explain how I built up the structure of the book.

So remarkable SaaS businesses stand out and scale up around three different stages. And this is also how I put structure in my book. The first structure is talking about the value foundation, the traction foundation. The second part is about building momentum. And then the third part is about building resilience. I put the word traction in front of it because at the end, for a software business, it’s all about creating predictable traction. First of all, to get your software business and your software products to be bought. But then later on, when it starts to decline in growth, how do you get that growth back on track? And what I found from all the case studies that I included in my book and all the companies that I spoke to through my podcast, for example, is that a remarkable software company is characterized by having more focus, more fans, higher margin, and higher velocity of deals going through the process. But typical software companies focus more on the total addressable market— the TAM. They add more people to solve a particular problem. They struggle with more churn, and they also end up with more tough conversations, although they, of course, gain customers and do business as well.

So there’s a big difference between them.

It’s a very hard thing to do at the end. But if you focus on the right ingredients, it doesn’t have to be hard. What I see with a lot of software companies out there is that they get stuck in a vicious cycle, and very often they end up desperately chasing funding. But that’s a completely different argument. What I see there is that they start off on the wrong side of the marketing part. So they get the wrong leads into the funnel. Conversion is low, all of those types of things. So the marketing metrics are underperforming. What they end up doing is, yes, they feed the funnel, and sales needs to then follow up on that. And they’re creating a huge problem for sales because there’s a lot of waste in the funnel. 80-90% of the leads that are in there, “leads”— aren’t going to buy anyway. So you have to sift through that. What you then see is that there are long deal cycles and people struggle to close the deals.

So what you see is that at some point they get desperate and they start giving discounts. That’s another problem that I see a lot. But they end up bringing the wrong customers into the business. Yes, they are customers. Yes, you can help them with your functionality, but they’re never going to be fans. And what these companies typically do is they keep you very busy on the implementation side because they don’t want to do what it is on the customer success side. It’s hard to get their early wins going. Also, for example, on the R&D side, because they ask for features that you will never build in your product. But because these customers are asking for it and you want to make them happy, that’s what’s going to occupy your backlog. With that, R&D is getting behind in releasing products to the market that are not so good because they’re fixing bugs and problems that no one really cares about. Well, at least your right customer does not. So adoption is weak. That is going to influence all the metrics—NRR (net revenue retention), churn, profitability, and so on.

All the way, I’m talking about a vicious cycle leading up to unpopular measures, whether you do that yourself or whether you’re forced to do that by your investors.

What you see is that it all starts with your foundation. That’s what I call it. I call it your traction foundation. And that’s about three key ingredients—the first three chapters of my book. What you see there is that remarkable software companies acknowledge that they cannot please everyone. So it’s all about niching down almost. The second thing is that they offer something valuable, but more importantly, they offer something desirable. And these two things are really important together. And then the last thing is they aim to be different and not just better. Because if you try to be better than your competitor, it’s a never-ending game because you cannot outcompete the Internet. These days, there are so many competitors out there. They’re all releasing their chat GPT stuff to the market. It’s very hard to differentiate.

What I’ve seen with all the customers that I work with, and also in my own work at Unit4, is that a lot of big mistakes are made when people talk about their ideal customer profile, their ICP. What they end up doing is defining it by demographics and firmographics—how big they are, how much revenue they have, how many employees they have, what regions they are in—all the things that you can find on LinkedIn. What you need to realize is that, for example, if you focus on the service industry (which is what I was focused on in the beginning at Unit4), no service organization is the same, wants the same, or acts the same. Yes, they all want to improve a number of key metrics like bottom line and top line, and they want to be better in operational excellence and customer satisfaction—the three things that you see there, and then more of those.

But what you do see when you go to the next slide is that how they go about it is radically different. And if you understand that, that’s where you can create a winning strategy. This is a slide for one of my customers, TopDesk, for example, who sells to service organizations and typically starts with IT because they’re in the ITSM (IT Service Management) space, competing with the likes of ServiceNow and companies like that. When they were selling to companies and later on tried to understand what was going wrong, they typically found out that the company where they had deal slipping, poor win rates, high discounts, project overruns, and all the things in the red box. Although these companies looked exactly the same on the outside as their best customers, what they found out is that these companies are often top-down organized, very process-oriented, departmentally focused, and all of those types of things.

On the other hand, the companies where they had very short sales cycles, high win rates, premium deal values, and everything in the green box, these companies had a completely different characteristic. They were promoting the bottom-up motion, like employees know best. They were promoting people to focus on improving outcomes. They were really supportive and applauding for cross-departmental synergies rather than keeping everything in the department, etc.

What it means is, if you define your market too wide (and a lot of companies think it’s exactly right and it’s wrong), what I typically would call your ideal market profile rather than your ideal customer profile. This is something that is an interesting one. Once you start understanding that, you realize that what you’ve actually done is you created your ideal market profile and you have win rates around 10-15%, 20%, maybe 25% if you’re lucky. The moment you start to organize it around what your ideal customer is all about and the characteristics that they have, your win rates will really go up to the 80s and 90s. That’s what we experienced when we started to do that.

Initially, we were always competing at Unit4, for example, with companies like SAP and Oracle. The moment we saw them coming into a deal, it was almost like, but how can we win from those guys? They got all the functionality, they have big marketing budgets, they got far bigger brands— until we got this right. And this is where everything changed.

“What was this all about?” will, your question likely be. Well, it was about going beyond demographics and firmographics. And you can see a glass and a cocktail glass right and left. If you are focusing on the demographics and firmographics, you’re creating a glass of water. It’s good. There’s water in there. Your customers will be somewhere there. There is no taste to it. And you have to search for what’s good in it. The moment you go and find out what your ideal segmentation cocktail is, you start to put in the right ingredients that really characterize your ideal customers. What are the dynamics that define them and define their business? Are they in a business that’s maybe heavily organized around regulations? Are they in a business that is heavily impacted by mergers and acquisitions? All dynamics in the business that they either do themselves or that the external pressures are putting on them give them different problems than the other people in the marketplace.

Another ingredient to that cocktail, is understanding what they stand for. Do they stand for speed, agility, or do they, for example, stand for quality and reliability—two completely different things. You cannot see that on the outside. What do they value, for example? Do they value long-term customer relationships, or do they value rapid growth? Do they value customer loyalty versus high profitability? All of these types of things. What are the things they really value? Because once you understand that, it starts to hit the right nerve with them. What do they secretly want? It’s always good to understand. They say this, but in the back of their mind, they want something different. What are their aspirations? What are their hopes that will happen once they start working with a new solution?

Another ingredient would be, what risks do they tolerate? What is non-negotiable for them? Is it quality or reliability? Think of all the types of words that you can start to think of. The moment you start using those words, your customers will say, “Hey, that’s me.” If you now see the next slide, look at what it looks like for a company that I recently worked with. This is a company in the kitchen retail business called Sinkley.

Out of all the markets that they were selling to, they realized they were not the best fit for every kitchen retail supplier, and there were different sub-verticals underneath. What they were really gaining a lot of traction with, was quality-committed kitchen professionals. Now, if you look at this and you’re a kitchen professional, one thing you will say is, “Okay, that’s me,” or “that’s not me.” Where it gets even better is the three things on the side. Companies and people that value three things: being dependable, delivering experiences, and financial security. What we found after interviewing a lot of customers in that space is that these things really bubbled to the surface. Now that we started to use that, this is where the click is going to be, and you can start to hit the right nerve with them.

This is where I’m going to move onto trait number two. Trait number two, is to create something valuable and desirable. Once you know what your ideal customer is all about and what they secretly want and what they stand for, what they value, these types of things, this is going to be very important.

In the next slide, I’m going to introduce you to my triangle. In my book, I talk about it on page number 24. By the way, you see a little buy button there. It actually goes to my website. You don’t have to buy it there, you can actually download it for free. But what you see here is a triangle. Jonathan Stark, whom I interviewed at some point on his podcast, actually called it the broken triangle because if you get it wrong, it’s broken. The triangle is at its strength, at its top strength, when all three bars are equal in size. What you want is for there to be high values. It’s about three simple questions. Look at all the problems your customers have, make a list of 20, 30, 40 problems. Then start to look at each problem and say, “Okay, how valuable is this for your customer to solve it from their perspective on a scale of 1 to 10? The second thing is, how urgent or critical will it be for them to solve this problem on a scale of 1 to 10? And then the third question to answer is, what is your ability to exceed the expectation of solving this problem on a scale of 1 to 10?”

The moment you start looking at your full list of problems like this and you have these three columns laid out, it becomes a formula. The first two, value and critical, become the value perception for your customer. The moment you start multiplying them together, you end up with a number between 0 and 100. You want to focus on everything that’s above 80. The moment you bring in your ability to exceed expectations with your solution, that is where you really identify where you are remarkable for them because it’s about exceeding expectations. And when you multiply that with that mix, you end up with a number between 0 and 1,000. I can tell you, everything above 500 is where you can really start to nail down and home in on what makes you remarkable and really start to tune your value proposition around it. That is exactly what this trade is all about—offering something valuable and desirable whereby, of course, you will stand out.

Now, let’s go to the next slide because I realize time is skipping by.

Then we move to trait number three, be different, not just better. And this is all about taking a position. Too many software companies forget to take a position. If you don’t take a position, the market will position you. Your customers will position you in a way that you might like, but most often you won’t like it. What’s worse is that your competitors will start to position you exactly how they like you to be positioned. So the best thing you can do is to position yourself and take a position and claim the space that you can own.

Next slide. So you come from the cocktail. If your ideal customer profile, your ideal segmentation cocktail, you know exactly what are the problems that are highly valuable for them, that are highly critical for them, so mission-critical almost, and where you can make the biggest difference. Based on that, you can then start to say, “Okay, we might not be the best solution for everyone in the marketplace,” which is the red ocean that everybody is in, as you can see at the bottom there, “but we are the best when it’s about two things.” And then name the desires, the ones that your customers are really going to be vulnerable for. When they say, “Okay, yeah, I want this and this,” but ultimately, this is what I really want. And this is where you can start to position yourself and take a position around those two criteria. And because it is about high-value, high-critical problems, and it’s about how you can exceed expectations. So what makes you remarkable? Where is your defensible differentiation? Your competition will immediately be at a distance.

What you typically see is that a lot of us in the software space think about their competitors and start to compare them on a function-by-function basis, where you realize that everybody in your competitive space is already doing 90% to 95% of the same type of functionality. But you also have to realize that none of those solutions were created equal. How they were created is completely different. So how you solve a problem with the functionality is going to be different. And that’s where you can take a position. So this is where we found out that we could compete extremely successfully against the likes of Oracle and SAP. To that extent even, they started to qualify out, when they realized that we were in,— in the right deals, obviously. That’s how powerful it is. You become incomparable.

So what you see, what I’ve been talking about, are only three parts of my book. And if you start to blend these three together and acknowledge you cannot please everyone, offer something valuable and desirable, and then aim to be different, not just better, the power unlocks when multiple forces join. And you see the big wave again, which I also started with. If you read my book, by the way, this is about a story within a story. And it’s actually the journey that I made here from Spain, from Gabia, all the way through Valencia, to Barcelona, to Porto, all the way to Nazare in Portugal. This is where they have these enormous waves, sometimes over 100 feet. That’s remarkable. It’s unique. And that’s something that you can create in your back that pushes you forward.

If you do these things, if you start to do these things right, that’s what I would recommend you to do. So you have a choice, obviously. You want to be remarkable or you want to be typical. If you read my book, you will definitely have high chances of meeting that bar of becoming a remarkable business.

So over with that, I want to close the session with Q&A. If there’s any questions, let me know.

Subhanjan Sarkar  

Hey, Ton, I think that was really remarkable. I think there is so much in the last 20 minutes that it actually tells me that deeper thinking is required than just following playbooks of what worked five years back. I think situations have changed. Unfortunately, we have no time to take in questions. And yeah, thanks. I appreciate it.

I really think that this format looks very exciting to me. This was the first presentation and I really loved it. Ton, thank you so much. Sorry about the glitches that happened. We did try but, it happens from time to time, right?

Ton Dobbe 

Exactly.

Subhanjan Sarkar  

I really appreciate it.

Ton Dobbe   

Yeah. I mean, everybody is online. I see there’s already… Well, it’s not a question, but actually a remark. Thank you for the remark. If you have any questions, reach out to me on LinkedIn, for example, and we’ll talk further.

Subhanjan Sarkar   

No, actually, if you post your questions, I will ensure that these questions are sent out to Ton and we get the answers back to you.

Ton Dobbe 

Perfect.

Subhanjan Sarkar

Okay, let’s do that. Thank you, guys. That’s the end of this session. See you in a bit.

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