What's your defensable moat?
In the world of B2B SAAS, competition is inevitable, and the ability to maintain a competitive advantage is crucial for long-term success. For B2B SaaS companies, creating and sustaining a “moat” – a durable competitive advantage that makes it difficult for competitors to replicate or overtake a company’s position in the market – is essential.
There are many strategies by which you can create moats in B2B software
- Superior customer experience
Provide a much superior customer experience through the life cycle of a customer – sales, service, support and success. Create a motion that allows every part of your company to help your customers be successful. Even if it’s not related directly to your software. Sometimes customers may ask for help with their own processes – help them. Make your company an extension of the customers team. Show them your subject matter expertise. Guide them. And you will be indispensable.
Customers prefer working with companies who provide a superior customer experience and are willing to pay a premium. - Unique IP or technology
You have a very unique solution or technology advantage that is hard to replicate. There are many examples such as Shopify which provides a platform for eCommerce companies and their solution encompasses a deeper understanding of all aspects of eCommerce. - Unique Data
Related to IP/tech is the ability to gather, analyze and present data is very propiatary and unique for which customers are willing to pay a huge premium. Media analytics company such as Nielsen come to mind. Another example is Palantir, a software company that specializes in data analytics and intelligence, and its technology is unique in its ability to integrate and analyze large, disparate datasets across multiple sources in real-time. - Verticalization
Another source of advantage is focussing on a very specific vertical. There are many marketing or CRM solutions that are catered towards specific verticals such as real estate, property management, trucking and so on. Toast is a great example of highly vertical solution for the restaurant industry. I recently met someone who has built a solution specifically for physiotherapists. Very hard to replicate once you get traction. - Pricing
A competitive pricing that scales as you grows is a big differentiation. This requires a thorough understanding of the customers willingness to pay across their scale journey. AWS is a great example. - High switching costs
Many software like accounting, CRM have high switching costs. Ask a company to change their accounting systems. Systems of records type of applications typically tend to have a higher switching costs. Build something that is hard for a competitor to replicate and you will get a sticky customer. - Brand
While brand is an important moat in B2C, it also plays heavily in B2B. Remember the saying – you never get fired for hiring IBM. That’s branding at work. Let’s say you want to build a new CRM system for your growing company. What’s the first name that comes to your mind? Salesforce or maybe Hubspot. Brand does play an important in creating awareness and recall. However, the value of brand subsides in the evaluation stages somewhat. - Timing
Sometimes a moat just gets created due to timing. Zoom had been around since 2012 but Covid accelerated their need for a tech. They were ready. - Network Effects
Network effects occur when the value of a product or service increases as more users adopt it. While more common in B2C such as social networks, B2B SAAS can also leverage network effects. One area is in establishing standards such as Adobe PDF. When one company uses PDF and sends the file to another company say a project proposal, then the other company will find it their best interest to use the same format.
Another area for networks effects is in building a strong ecosystem of developers and partners. Enterprises will often decide in adopting a specific tech stack only on the basis of the strengths of it’s ecosystems i.e. how many people can help support the stack. Once upon a time, people would build applications for Windows but less for MacOS. More apps on Windows, more people will prefer Windows. Many enterprise software companies morph into platforms for other developers like Netsuite, Salesforce, Hubspot and many more.Often times the buying criteria from enterprises will include how many developer apps are available, whats the support and how many programmers are in the market.
Building a defensible moat using one of the criteria is important to keep competition away from your customers.
