An interesting trend we have noticed heading into the 2020s isn't a rise in software. The last two decades have been defined by software, software, and more software. We even created a name for it, SaaS, Software-as-a-Service. But the pure software play has become so crowded, that in many instances the competitive edge is price, and that leads to a race to the bottom. But what if we put human experts back in the mix? Could the next generation of great software companies actually use software to automate, streamline, and empower humans to actually service customers and do so in a tailored and profitable manner?
Tech-Enabled, Service Led is a new generation of startups that we have seen starting to grow in numbers. They typically are aimed at solving challenges that have historically been complex and software alone typically results in a poor customer experience. Complex topics like legal, he/compensation, customer data and others are better untangled by human experts who can tailor and exception handle better than computers have historically been able to, why? Context. Context is tricky for computers and AI/ML to understand and often leads to nuances being missed resulting in a poor customer experience and missed customer-value alignment.
Lawyers, HR Experts and Data/Customer experts can better exception process. But historically, humans are expensive, especially experts in their fields. So how do we build a business that can help serve these complex challenges while also being profitable and being able to build and scale a business? That is where software shines. All these human experts will tell you that parts of their job could easily be automated. And once automated it would make them far more efficient and able to spend more time on the nuanced work so they can over-deliver and delight their customers.
We have seen and spoken with the founders of several companies building in this model and it offers several interesting advantages over the pure software play based on their feedback. First, customer satisfaction is much higher. Customers feel much more taken care of and that their business's unique concerns are addressed as the human “delivery” feels more…well human. Second, much higher margins and ACVs. With human delivery and strong customer-value alignment means customers are willing to pay more because they know the job will get done. Higher ACVs and stickier customers meaning that customer economics tend to be stronger, usually to the point of profitability and enabling the business to finance its own growth.
The future of software is startups that utilize software tools to empower their people. Those people will delight their customers, leading to stronger customer relationships. Those relationships will drive more involved engagements (expansion) and customers that stick around (retention) which are the two hallmarks that defined the success of the software giants of the last 20 years. Tech-Enabled, People Led.