Where companies go to die
One of my favorite business books to date has been The Innovator’s Dilemma by Clayton Christensen in which he outlines research and…
One of my favorite business books to date has been The Innovator’s Dilemma by Clayton Christensen in which he outlines research and numerous case studies of how companies rise and die. The main premise of the theory is that established companies have to continuously engage in disruptive innovation and stay humble, or they eventually stagnate and die, taken over by startups that find creative ways to disrupt the current market. Numerous case studies provide examples of companies that go through the same process over and over again. It’s amazing that with so much information and documentation of this process, companies rarely take notice, and this narrative plays out again and again year after year.
Last week I experienced a company, which although currently a market share leader in the industry, is engaging in practices that will allow it to be disrupted and marginalized in the future.
As we are trying to refine our product development and UX process, I naturally looked for a tool to help us better understand our customers. I needed a tool that will allow us to record user interactions as they engage with our software and then be able to replay (relive) and analyze the engagement. Numerous tools exists to help you track clicks and other events (i.e. Google analytics, etc…) and provide reporting and analysis, but we needed more. Data is great, but you first need to know what questions to ask. Nothing beats actually living through the experience of someone engaging with your software. Visualizing users interact with your software is very eye opening. Your conceived notions of how a feature is used is usually refuted after you observe what the users are doing.
The tale of Clicktale
I looked around for such software by googling various terms. Of course the leader, Clicktale, kept coming up in search results. I gathered a list of providers and went on to research further. As with any new project, you have some ideas of what you want to accomplish, but not sure how you will get there just yet. I needed to try some software out, see how it feels. Does it provide what I need? Does it fit my work and thought patterns? Do I like the interface? How easy is it to use? Lots of questions need to be answered before I can decided on the value and even entertain buying it.
Most software today offer a way to try it out, whether for a limited time, or forever with a free limited plan. This allows someone to discover the value before they decide to commit any further. You want to go on a few dates (at least), before you seriously commit to a relationship.
I looked at Clicktale’s website. The marketing materials on the product looked promising, list of customers was reassuring, all looked good. Let’s try it. But wait, where is a list of plans and prices? How do I sign up? Ah, there is a free trial. Ok, a bit annoyed by the fact that I don’t know what the future holds if I like it, but I’ll try it. But wait again, I have to apply for the trial and then talk to a sales person? You have to have half a million page views a month to try it? This is getting annoying. Maybe I’m missing some web page that explains the plans and their prices and allows me to easily sign up. I call support.
Here is how the call went (reenactment of course with only relevant parts included).
Me: I would like to know more about your software. How do I try it?
Support: What is the current traffic to your website?
Me thinking: WTF? Why does that matter?
Me: We have x amount of visits. Traffic is seasonal (because of what we do), but obviously substantial in either case and above your qualification threshold. Before we go any further, can you tell me what your prices are?
Support: Well that would depend on many factors. That’s why we need to talk to you.
Me: Ok, but give me some hypothetical prices to get a better idea, like is it $10 or $10,000?
Support: Our lowest price is an annual contract for $25,000.
Me: Wow, that’s way above what I was thinking. I mean, maybe evantually if we value the software and have lots of uses for it, we can justify the cost. Do you guys have some lower end packages with some restrictions, like no support or less features? Some of your competitors offer plans as low as $40 — $150 per month.
Support: No, sorry, that’s because we offer Enterprise Software.
Me thinking: WTF does that mean?
Me: Hmmmm, ok, sorry to bother. Thanks for the info.
Right after the call, I found FullStory with a trial plan and $150 a month going forward. I can justify that while we try to figure out how to best inject this tool into our product development process. I signed up. Today our trial ran out and they successfully converted us to a customer (which I’m glad we are).
Clicktale provides a perfect example of a company ripe for being disrupted. Through some online searches, I did see that at some point they offered a free limited plan and other lower end packages to cater to smaller companies. Then they got big and decided to focus on only the higher margin accounts by providing “Enterprise Software”. But here is my prediction of how this will play out.
Clicktale has numerous large clients that yield high margins. In the meantime lots of startups and medium size companies are getting better and more streamlined in their product development and UX process as they grow. They need tools. Session recording tools are essential and innovative competitors like FullStory and Inspectlet provide an alternative. Does Clicktale offer a better product, more features, better support? I have no idea, how could I, they provide too many barriers to find out. I’m also not sure if I need all these features. So where do the startups and smaller companies go? To the competitors. Clicktale probably doesn’t care much, as they are enjoying their high profit margins from “Enterprise” customers. (Notice how much I love using that word.) But tides will turn. As the smaller clients grow while benefiting from using the competing FullStory and Inspectlet products, so will their usage and costs. In the meantime, they’ll also keep adding features/refining software. Pretty soon, some of their smaller clients, will not be so small any more and yield higher margins, and with features on par with Clicktale (with lower barrier to entry) they’ll start to compete on the higher margin accounts. Clicktale may seem like is on a yacht, sailing through the ocean. They made it. Large accounts, high margins, substantial market share. But trouble lurks in those waters. This is where companies go to die.
If Clicktale doesn’t take notice, they’ll be marginalized and watch their competitive advantage slip away. This narrative is the basis for Innovator’s Dilemma and will play out in this and future cases.