Dear Sourcing/Source-to-Pay/Procurement Founder: Please STOP Making These Mistakes! Part 3

In Part 1, we reminded you of the 12 best practices for success that we published last year and noted that, since this obviously wasn’t read enough (or properly) understood, as the doctor is still seeing founders make the same old mistakes year after year, he needed to do more. So, using his 18 years of experience as an (independent) analyst and 20 plus years as a consultant, during which he has researched and/or engaged with over 500 companies, of which 350 were publicly covered on Sourcing Innovation or Spend Matters (between 2016 and 2022), he’s decided to make plain at least 15 of the same mistakes he has seen over and over again, in hopes that maybe he can prevent a few founders from making them again.

Then, we covered the first four (4) of the 15+ mistakes we promised you, namely:

  • Assuming that because you were a CPO, you don’t have to do your market research. (Part 1)
  • Assume you can serve any company that shows interest in your product. (Part 2)
  • Assume you can go for disruptive or innovative first. (Part 2)
  • Assume you can take Tech Shortcuts and Fix It Later. (Part 2)

If the mistakes stopped here, we’d be done. But they don’t. So, today we’re going to cover the next two.

5. Assume that because you could run a Procurement Department that you can run a SaaS company.

When it comes to founding, running, and building a SaaS company, there are many truths you need to be aware of, including these four that are among the most critical:

  1. Using SaaS/software is not the same as building SaaS/software.
  2. Running a Procurement Department is not the same as running a Technology Company.
  3. Most importantly, running a SaaS company day to day is different from selling a SaaS company day to day and, most importantly,
  4. Growing a SaaS company is NOT the same as running a SaaS company!

What you need to understand is:

  1. effectively building SaaS and running a SaaS company takes mad tech skills, not just mad domain knowledge and mad management skills (remember, tech is the doctor‘s area of expertise)
  2. in Procurement you’re buying, in Tech you’re building; you’re managing architects and developers and testers, not process owners and users and stakeholders
  3. you don’t just need to build a solution, you need to sell, sell, sell it; remember, you were a buyer, NOT a seller (or a marketer or a demand generator etc.)
  4. you don’t just need to sell; at some point you will also need to raise money so you can scale (or at least take on some debt) … where your former peers are concerned, if you can make them happy and show them an ROI they believe, that’s one thing; but even getting the attention of an investor is another, and then keeping them interested through a pitch for a follow up conversation, then getting terms, and so on … and at the same time you either have to progress up the enterprise food chain in the pipeline or significantly increase the number of real prospects in the pipeline to keep those investors happy

It take s a lot to build a successful startup, and typically a lot more than a founder will even think of when they take the plunge. (For a very good overview, the doctor will again remind you that he recommends Garry Mansell‘s Simplify to Succeed.) And the reality is that most of us don’t have all the skills to be a successful growth CEO (and, more importantly, are much better suited to excel at other CXO roles and do an above average job when we are in those roles best suited for us). Thus, it’s critical that

  • you understand your weaknesses and bring in people to fill the gaps until
  • you are big enough to
    • add the right full time roles and
    • headhunt and hire your replacement (and step into the CXO role you are best suited for)

6. Assume you know the average process and technology competency in your potential customer base.

There’s a reason that best practice #6 was to understand your current customer process and typical restrictions and that’s because not all of your potential customers are at the same stage in their journey, and, more importantly, they might not all be similar to your experience. If your company was behind the curve in your vertical, you will need to develop more than you think to be relevant to your industry, and if your company was ahead of the curve, you will need to ensure your technology is as easy to learn, integrate, and use as possible. Even easier and more accessible than you thought when you started out. It may even need to disappear into their process entirely (with a lot of configurable automation). Every provider wants to be the portal the customer logs into every day, but while a company may need a dozen providers, there can be only one that provides the portal. (And if the portal doesn’t solve the key problem, it won’t necessarily be the most valuable solution. Remember, ERP isn’t sexy, but ERP and Big X consultancies get the biggest tech-related checks every year from traditional tech-consuming organizations.)

And while we still have many mistakes to go, we’ll stop here for today. Come back for Part 4.