Owning the Control Point
Explaining the three types of "Gravity" in Vertical SaaS products
As a primer to today’s post, check out the podcast I recorded with legendary Vertical Software investor Dave Yuan of Tidemark.
He’s served on the boards of Toast, CCC, and LegalZoom.
Dave and his team are working on something near and dear to my heart - benchmarks. As a vertical software CFO, I’ve always been frustrated by how VSaaS just doesn’t have access to the specific benchmarks required to think through expansion paths…
Have you ever wondered:
What the next product you should launch is?
How you should forecast the attach rate of that product in the first year?
How you should be pricing/bundling it?
Tidemark is building the database to help all operators answer those questions. I’d love it if you could contribute alongside me.
If you had to walk around your office and turn off each system one by one, which would you kill last?
That’s probably a leading indicator as to what your tech stack’s “control point” is.
The concept of a control point is particularly useful in SMB and Vertical Software, where merchants rely heavily on one software provider for core jobs to be done, opening up expansion opportunities for the vendor within their other workflows.
A control point in the context of vertical software refers to a system or platform that holds significant sway over a company's operations and decision-making processes.
Let’s explore the three types of “gravity” that characterize a control point: Data Gravity, Workflow Gravity, and Account Gravity.
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“Data gravity, think of it like the Oracle database, which is you're the biggest pool of data. The data that is the most mission critical.” - Dave Yuan, Tidemark
Data Gravity refers to the centrality of systems that manage critical business data.
In a hotel, for instance, the property management system can be seen as having data gravity since it holds essential data like room availability, employee information, bookings, and customer details.
In businesses where financial transactions are core, systems like the General Ledger (GL) or point of sale systems, which manage financial and sales data, exhibit strong data gravity.
“Workflow gravity is the automation that allows you to do the most important things, right? Think about the most important jobs to be done. A lot of times it's finding customers” - Dave Yuan, Tidemark
Workflow Gravity pertains to the significance of systems that streamline and automate the most crucial operational tasks of a business.
For instance, in a logistics company, a supply chain management system epitomizes workflow gravity. This system is essential for coordinating transportation, managing inventory, scheduling deliveries, and tracking shipments. It consolidates various logistical tasks into a single, efficient workflow, crucial for timely delivery and maintaining customer satisfaction.
By centralizing these critical operations, the system becomes the backbone of the company's day-to-day activities.
“What's the most important, what has the most mind share with the owner? The nice part with within SMB customers is that oftentimes the owner is the user or certainly very close to the products. And so you have a lot of mind share with the owner. It allows you to sell that owner multiple things.” - Dave Yuan, Tidemark
Account Gravity focuses on the influence and priority given to systems that align closely with the strategic interests and decision-making processes of business owners or top management. In other words - which application does the owner care about the most? Where do they spend most of their time?
For example, in a digital marketing agency, the campaign management platform holds substantial account gravity. This platform is pivotal for planning, executing, and monitoring marketing campaigns across various digital channels. It's where the business owner or senior managers spend a significant amount of time analyzing campaign performance, making strategic decisions, and optimizing marketing efforts.
The system’s direct impact on client acquisition and revenue generation makes it a primary focus of the business leadership, embodying strong account gravity.
The path to multi product
Owning the control point paves a path for businesses to embark on a multi-product journey more effectively. It gives the vendor more of a “right” to expand into other workflows, as they are already at the heart of what the organization does day to day.
But it’s not a cake walk. A system of record is really hard to replace - and that includes pen and paper.
Identifying what the control point is the first step. Unseating the incumbent, or teaching a new behavior, is the second. And that takes hard work, and some creative strategies to ingratiate yourself within the hearts and minds of the vendor. Dave and I hit on some of those cool stories on the pod.
A word from our sponsor - Brex
The recent influx of “digital transformation” cash must have dried up before accounts payable’s turn. Because today, 4 in 5 companies still use paper(!) checks and invoices to pay their vendors.
But outdated AP processes are not just a finance problem; they’re a business efficiency problem. Manual data entry, late payments, and slow vendor onboarding will grind growth to a halt. It’s time to throw AP a bone.
Brex bill pay transforms accounts payable by automating:
Bill drafting (get 10x greater accuracy)
PO matching (prevent fraud, streamline compliance)
Approval workflows (cut the red tape)
Finally, AP gets a little TLC.
Quote I’ve been pondering
"When you want something, all the universe conspires in helping you to achieve it."
The Alchemist by Paulo Coelho