The New SaaS Paradigm: Beyond the Inverted U
It turns out, the old economics paradigm of an inverted U doesn’t really apply to modern-day SaaS.
What’s happened with software today is that the ability to build an equivalent product has become increasingly commoditized.
In other words, it’s cheap to build a “me too” solution.
90% of people can build a product that has 80% the same functionality.
The real difference is being in those top 10% of products that have exquisite craftsmanship.
These come in two flavors:
Flavor 1 — The Design-led Challenger
Think:
1. Arc
2. Linear
3. Notion
These companies present products that have top 10% craftsmanship.
And that’s how they’ve won a devout and loyal following.
And this allows them to charge higher rates.
Flavor 2— The Functionally Superior
But you don’t only need to compete on being design-led. You could also just be more functional.
Think:
1. Oracle
2. Docusign
3. Salesforce
They just have superior functionality for enterprises. This brings them into the top 10%.
If you want to learn more, Enzo Avigo (june.so) and I explain everything in the deep dive.
The Result? Quantity and Price Both Go Up
What matters is: these top 10% of positioned products can charge much more, and they still get the majority of the quantity.
There’s a bunch of commoditized competition which experiences the inverted U.
But these premium products?
They live in a different reality.
One where they can charge a higher price and get most of the quantity.