Member Brad Freitag Speaks: Go Direct, Go Small, Learn Lots

The Challenge:

The case at hand was brought by an SVP whose company was reinventing itself as a cloud provider offering SaaS in place of their current hardware/software package. He wanted to convince his CEO that a SaaS model doesn’t support their current three-tier distribution system due to lack of margin.

If you were in this situation, what would you do?

If I were you, I’d partially circumvent your three-tiered distribution and “go small” with new market research. Direct sell to a small slice of your existing verticals and to SMB’s (a new market) to assess the viability of a direct approach.

Your boldness is a great countervailing force to your CEO’s risk aversion. Given your Board’s demand to keep spending low in this experimental phase, I recommend you “go small” with market research. Conduct a small A/B test that bypasses your current three-tier distribution and direct sells to (A) a slice of your current verticals and (B) a small segment of SMB’s. By doing so, you’ll get a direct sense for product/market fit and pinpoint the additional value a SaaS model truly brings your customers. You’ll also sidestep the need to train distributors and resellers to sell to SMB’s and quickly assess whether this potential new vertical holds promise.

Your effusive and likable personality will help you convince the CEO and Board to adopt this low risk approach and get answers to key business questions without overspending or risking current business. Solve the disagreement between you and your CEO — does multi-tiered distribution work in a cloud business? — by creating irrefutable data from real market tests. You may well convince your company to abandon what is now merely working and discover breakthrough strategies in new markets.