Introducing new "must-haves" to the market with Klue’s Jason Smith
Introducing new "must-haves" to the market with Klue’s Jason Smith
Jason Smith (00:01):
The biggest moat is if we can help establish competitive enablement as a clear category, build up that value prop for everybody that's doing this work inside of a client organization. If we can help lift the whole category, then I think we lift with it. And if we're doing the right job, we're at the top of that water tide.
Peep Laja (00:21):
Boom. I'm Peep Laja. I don't do fluff. I don't do filler. I don't do emojis. What I do is study winners in B2B SaaS because I want to know how much is strategy? How much is luck? How do they win? This week, Jason Smith, co-founder and CEO of Klue, a competitive enablement software. Since being founded in 2015, Klue has doubled or tripled every year and is now well into double digits in ARR with over 180 employees. In this episode, we hear how Klue designed their product with the value proposition of making their customers look good and introduced new must haves to the market, establishing a subcategory they could dominate. Let's get into it.
Jason Smith (01:03):
The background of Klue was I was running a SaaS company that was about 500 employees. We had created a bit of a market around market research, online customer intelligence. It was a competitor with a company like Qualtrics. And every time we went to talk to a prospect, they seemed to be more educated about our competitors than we were. And it was showing up, I think, in win rates where these prospects were like, "Interesting, huh? Your competitor does do that." And we were making these claims that were wrong. And I felt like we were losing trust with prospects as a result of frankly not knowing who the competitors were. So it was there that I just said to the products team, I was president of this company, and I was like, "Hey, product guy." I said, "We need to understand what's going on with the competitor set."
Jason Smith (01:51):
So they went out and did a pile of research and built a Wiki that was awesome for two weeks and then it's out of date. And so you get back to at the time Yammer and now Slack as kind of the go to to kind of share the knowledge. And I just thought, "There's got to be a better way." And then you kind of look at the macro trends of every market. It's just way more competitive than it was. You look at the MarTech stack. And I think what? We up to over 10,000 companies now, and what? 10 years ago, it was 300. So I looked at all of that and then said, "There should be a solution to really solve this." I poked around at what the existing solutions were. They tended to be more like a searchable database.
Jason Smith (02:30):
And then, I have a process by which I kind of look at starting companies and I call it 100 smart person meetings. And so I tried to beat the idea up across 100 smart people meetings, really trying to pull out the truth, because nobody wants to tell your idea's bad. Had got some hard feedback and then ultimately decided this is something that a lot of companies need.
Peep Laja (02:50):
Back then, when you got started, what was the competitive landscape? You mentioned some searchable databases, but there wasn't anything quite like what Klue is today?
Jason Smith (02:58):
No, it was a lot of competitive intel, was like what a company like Semrush would be doing. It'd be like more marketing metrics. It was very geared towards marketing. What kind of paid or search ads are they running? And how am I doing relatively? What was missing is the millions of salespeople that were getting asked a question every day of so how do you compare? Why are you different? Why are you better? Right? All of the brand messaging work and all of the product differentiation and all of the reasons why you choose a company and they were getting hammered. And so I thought, "That's the area where we need to fix it." So build battle cards and content that took the raw intel, converted it into an insight that a salesperson could use and do it. So back then nobody was doing that. It was really searchable database of how am I doing on a marketing vector compared to somebody else?
Peep Laja (03:47):
One Klue got started, there was no direct competition, but there were people who were trying to get the job of competitive intelligence done. This is how you find openings in the market. An important problem people need solved and a low satisfaction level with their ability to solve it right now. When you create a company solving for a new job to be done, you create a new consideration set in their mind. This is important because mental availability, being thought of by category buyers in buying situations is kind of the holy grail of marketing. For most categories, people's consideration sets are already full of tools and they're not looking for new ones, but you can carve out new openings by creating a new job to be done boxes in their mind. By focusing on a particular segment of the market. Klaviyo is now number one for email for e-commerce box and ConvertKit sits at top for email for creators. Klue takes competitor intel and makes it usable for salespeople. Here's the legendary thinker, Clayton Christensen, explaining why observing consumer behavior in order to identify jobs to be done is key when you're looking to innovate.
Clayton Christensen (04:58):
The customer is the wrong unit of analysis when you're trying to innovate. Rather than the customer, you need to understand what it is the customer's trying to accomplish. What's the job that the customer's trying to get done? And a job is a very stable thing. It exists whether or not there's a market for products that could be hired to do the job. Everybody makes cars and everybody's trying to copy the best features of everybody else's cars. And as a consequence, they're very difficult to differentiate. But if you watch what people are trying to accomplish when they drive a car, there are about six jobs for which a car is hired. There are no cars that are designed to be an office, even though there are between five and eight million people a year who have to work out of their car. And this job exists. There's no market yet because nobody's developed a product for that job, but just watching what people are doing, you can imagine what extraordinary opportunities a car company would have to design the cockpit of a car to work perfectly as a mobile office.
Peep Laja (06:17):
Tell me about the road to first million in revenue.
Jason Smith (06:21):
Yeah. First million is fricking hard. Let me start with that. That first million is always the most challenging, but it's also the most fun because you're kind of oscillating and iterating your way to the perfect product and getting that fit. I didn't want to rush it. So I took it slow of what is it? And I looked at three areas. One is what's the intel we need to collect? And then second, how much do we need to convert the raw intel into some kind of insight? Like instead of the press release about the AI feature, what's that mean to the company? And then lastly, how do you present that? Should we just send them to another PowerPoint? And so in the early days, we were like everybody else. Like more of a searchable database that we thought would be interesting. A crunch base on steroids.
Jason Smith (07:04):
And then very quickly, in talking to the market, they're like, "I got this thing called an inbox or a Slack Channel. And everybody in the company sends me stuff around the web that is interesting and I trust my inbox a lot more than your searchable database." So we're like, "Well, we've got to combine those two worlds. The internal data flow with the external data." So that was our first aha of going internal data plus external data. What are your employees finding? And what could our bots find? That combination of the two. Because everybody trusts humans more than they do bots. And they certainly trust their own employees more than they do a third party system. So that combination of internal/external was the first. The second was I relied way too much on AI in the early days, thinking that I could build a magic button to convert raw intel into insight and turns out it's a really hard problem.
Jason Smith (07:56):
So we spent millions of dollars, actually, in venture money to try and actually solve it and then figured this is going to be always a human in the loop problem to solve. So we built an interface that they could easily create cards. They could move from the raw intel that connects one or two bits and create a card on their own. And then we could also have some automated cards that self updates. So this mix of they could create cards, we could create cards was the second thing. ML curation, and human curation. And then the last thing, which I don't know if it was the tail end of getting to a million or if it was just beyond that, was for us figuring out how do people digest this? And if they just did another PowerPoint deck, no salesperson was going to open a 17 page deck sitting on a drive.
Jason Smith (08:38):
So we had to figure out how to create and chunk some of the great intel that might have lived in those decks into a different format that maybe could be embedded where those salespeople are, inside Salesforce, inside Slack, inside Highspot, or through a Chrome extension that they could quick search. And that presentation layer became the last pivot piece that now locked everything. Create the intel, curate it and then enable and distribute it. When we linked all three of those things, that's when the market really responded.
Peep Laja (09:12):
Questions to ask when developing a product, how confident are you that you know the three primary problems your target market has? Can you name the top gains they're trying to achieve? Where have you substituted your judgment for what you want to deliver for what the customers actually want to receive? Fill in the blank for your customers. I really want to blank. If you don't know, do customer research. If you think you do know, validate via message testing to check for message market fit. Getting crystal clear on your objectives as Jason and his team did at Klue is key to getting to product market fit. Was the market knowledgeable about competitive intelligence? Did it resonate right away that, "Oh yes. You solved this problem that I'm very aware of." Or did you need to educate the market?
Jason Smith (10:06):
Yeah, very much in education. So I think there's a lot of talk about category creation these days. And I think the market for competitive intelligence existed. It was kind of backroom, not boardroom. It was the librarian that you kind of wanted to talk to you, but not really. Wasn't strategic and it needed kind of a reinvention or a subcategory of saying, "Look, it's not just about the look up database. You got to enable different departments. The product team needs to be enabled with the content. The sales team needs to be enabled with the content, the marketing, even the HR team needs to know how they're competing against Amazon and Microsoft from a salary and compensation standpoint or a culture standpoint.
Jason Smith (10:46):
So every department was kind of doing it and we recognized that we just needed to tie it all together and maybe brand it differently. So we keep using the term competitive enablement. That's necessarily a Klue term. A lot of people have started to adopt that, but it's saying, "Look, there's this searchable database, competitive intelligence. And there's this thing called sales enablement or revenue enablement or CS enablement or DevOps. And that's all enabling your team with the right type of intel. So let's combine those. Let's call that competitive enablement." And that's what's starting to resonate for folks. It's making it at actionable, usable, not just sitting in a deck, not just sitting in a database that one person has access to.
Peep Laja (11:24):
Klue is trying to create a new subcategory in the competitive intelligence space, competitive enablement. When you're creating a new subcategory, you must create a new must have. So winning is not based on brand preference or better, but rather on being the only, or at least the most relevant brand for a subcategory. Competitors lose because they lack the new must haves this subcategory brings. The prerequisite to subcategories is feature parity with the traditional categories. For instance, Tesla needed to argue that their battery range is adequate before people would seriously consider the new subcategory created. And then Tesla set new must haves. It used to out compete. Ludicrous Mode accelerated more than just cars. To find an opportunity to develop a new subcategory, you need to create a new set of must haves. Offerings without those new must haves, won't be considered as relevant, visible, nor credible. Here is brand strategy specialist, Professor David Aaker explaining the concept of must haves and why creating subcategories with new must haves is so preferential to competing on brand preference.
Professor David Aaker (12:34):
My concept is that the only way to grow, with rare exceptions, the only way to grow is to own game changing subcategories defined by new or markedly improved customer experiences or brand relationships. Must haves are really critical to the ability to create growth subcategories and engage in subcategory competition, as opposed to brand competition. Incidentally, my brand is better than your brand competition almost never generates growth, almost never. And it's so not fun. Must haves are our benefits, attributes, or programs that create and define growth subcategories. So a must have is something that a customer is very reluctant to buy an offering that doesn't have a must have. It's different from nice to have, that you'd like that, but you're not going to walk across the street to get it or pay more.
Peep Laja (13:41):
What did you do to educate the market? Was it webinars, events, typical things, anything different?
Jason Smith (13:48):
Yeah, so we leaned heavy into content. And so you'll see Competitive Enablement Podcast. We actually did our first competitive enablement conference, we thought maybe 50 people might show up. We had 1500 registrations to that. It was quite a successful first time event. We started to talk and shape what job postings would look like and started to share that with people. A lot of people were like, "How do I hire for this?" And we started to say, "Well, these are the things that we see needed."
Jason Smith (14:18):
And actually started to create connections for people, like help people find jobs to the point where I think we're going to launch a job board to help people actually kind of move between companies. So classic kind of growth content marketing work, where we just said, "Focus on what it means to do a great job to do competitive, not necessarily bragging about Klue, but what is competitive?" So we gave away what it means to build a battle card, what it means to actually create great content, what it means to have a seat at the table, what it means to kind of filter it through and just push that out in content. And it took many years for that to get soaked up into whether it's organic search or just the vernacular for people and companies. But now it's starting to flywheel. Now, we're adding paid on top of that, but lots of content focused on category, not Klue.
Peep Laja (15:09):
Do you have like a competitive strategy of where you're trying to position yourself and why would somebody go with you over other players?
Jason Smith (15:17):
Like every category, as soon as you prove that there is some value, more competitors come in and some new ones either are starting up or they're just bigger ones are shifting and adding a module and saying they can do that. And I think that's going to continue with our announcement and of our latest funding. Our approach has always been that knitting of collecting internal and external, curating machine and human, and distribution and enablement on the presentation layer. Those three things have always been our core and we kind of just keep tripling down on those things.
Jason Smith (15:48):
And still nobody is doing all three really effectively. We've had our competitors chip away at maybe better intel collection or one present the data better, but nobody has connected all three in kind of the bar that we've set there. So that's still the combination of those three, find it, curate it and get it out there so it's actually used, has been the differentiator. The other piece is that the content where you focus on the category, where you're educating everybody, has really resonated with people actually trusting the Klue brand to actually help them understand what they need to do, elevate their career, get a voice, show the organization what it means to be competitively enabled. Now, we've leaned into kind of the authenticity of kind of some irreverence and humor that we try and bring to a lot of the marketing that we do. We try and be really real.
Peep Laja (16:40):
So according to Tech Ranch, when you raised your latest B round, it was only like a year gap between the A round and B round, and you grew three times during that time period. What it's behind that growth? What's driving it?
Jason Smith (16:56):
Yeah. I think there's a bunch of things. So one is, there's a market maturity. So it's going from the handful of super early innovators. It's still at the front end of this curve. Like 99% of companies don't have a compete solution, but that early adopter is now proliferating through the organization. And they're moving around. The average tenure in a company maybe is two and a half years. And so they move to a different company and they bring with them this edge that they learned when they used Klue there, they're bringing Klue into that. We have a couple other venture funded competitors that are also making noise in the market. And so between us, there's more noise that says, "This is a viable advantage that companies can have." We're not quite at the edge where people realize if they don't have it it's like being the last house on the block without locks on your door, and an alarm. More and more companies are getting a competitive enablement solution.
Jason Smith (17:52):
And so if you're the company that doesn't have it, you're kind of at a understanding and insight loss compared to the salespeople that do have it. So if you've been a salesperson or a compete person at a company and you move over to another one and you don't have it, you immediately feel a little more vulnerable. And then the cold hard reality is it works. So the data proves itself out. We've literally looked at cohorts where some people in the company adopted Klue. Some people didn't. Cohort A has a higher lift in their win rates, in their time to close, and often even in the deal value, not always but often. Where cohort B doesn't. And so even if adoption might be lower in a company.
Jason Smith (18:33):
Even if 30% adopted, if those 30% are closing and winning more deals at a higher value, then it becomes like, "How do we get the rest to adopt that?" And because we've seen that ROI directly attributed to usage of Klue, more and more companies are like, "Well, this is a no brainer." One or two wins in a dog fight deal pays for the software. So across 500 salespeople, can we tip a couple more dog fight deals? That mask gets a lot easier to do when you see more case studies.
Peep Laja (19:06):
The power of proof as a marketing tool cannot be overstated. Once our customers are seeing results and you can publish those, it gets much easier to convince new prospects that they actually assume more risk by not buying you. If they come to you with a false belief, like, "I'm not seeing growth because the game is rigged, maybe too little funding," you can overcome that false belief by supplying them with a better story. Facts alone rarely change minds, but telling stories of how company after company seeing success after adopting a new story, you just might have a fighting chance. Tell them why the old way is not working for them and that's not their fault. And that they need a new strategy to get to their destination. Offer your best evidence that this is the case through example stories, case studies, et cetera, and present your product as a winning goal to win with this new strategy. Proof makes it easier for them to have that epiphany that your tool is the winning goal they need to win.
Peep Laja (20:09):
Let's talk more about the competition. So, strong competitors start positioning each other and pushing each other into different spaces. So, oh, you go into SMB and I go to enterprise. You mentioned that your tool has a more, let's say, a comprehensive overview, let's call it the full product strategy. So is it that based on what the other players in the category are doing that impacts your product strategy where like, "Oh, let's go all in with this complete solution thing." And also, "Oh, look, they're enabling from the bottom of the market. And so let's us go closer to an enterprise." Or how do you think about that?
Jason Smith (20:47):
It's always tempting to chase all aspects of the opportunities in your market. I think at different stages of your organization, you have to be very careful about how far you stretch that elastic band. So Klue has always been more geared for mid-market at enterprise. Last year was the first year we actually went downstream a little more and started to offer Klue to companies. Well, maybe 200 employees to 500. And it's where our major competitor tends to live in that smaller side, despite their positioning on their website, that's where the cluster of their clients live. And so for us, it was a very considered experiment four years after starting the company to start to move downstream. The system could produce a little more automated insight than it was something that required a pilot to steer the plane. So we looked at it from a technology standpoint and went, "Let's not oversell what the product could do." Which our competitors had done.
Jason Smith (21:43):
And so we were able to go in and win a lot of business by saying, "Now, we have the product that can do this. If this works for you, then this is a good one to look at." And I think the honesty of that product pledge was met with the reality of what it could do and more and more clients kind of grafted onto that. So if I think about somebody on your show listening to this and thinking about how far they should extend, its like, make sure you have the product that fits it, not just follow your competitors downstream or upstream. Ultimately, if you're going to take a pile of venture funding and try and win the category, you're going to end up up and down that ladder. But just do it very considerately, when you have the right infrastructure, product, and money in place to kind of chase it and we waited till four years to go slightly more downstream.
Peep Laja (22:32):
In your fundraising announcement, you said that most of that money is going towards product development. There are also voices on the market to say, "Hey, winning on product is increasingly difficult, if not impossible." Yet you seem to be doubling down on product rather than, I don't know, brand.
Jason Smith (22:52):
It was a 62 million round. And so we're going to spend a disproportionate amount on product mainly because there's two things that I think are happening on the product side, which I'll come back to. But speaking on the brand side, we're clearly going to be spending money on go to market and brand. We're going to be expanding more aggressively in Europe. We have 35 clients organically. We now have an Amsterdam office. We now have a London office. We're going to start to accelerate in MIA more so. And we're looking at different verticals. We've been strong in the tech vertical, but the financial services, insurance, manufacturing, CPG, retail, there's another bunch of verticals that are starting to open up for us. So we're going to go go to market for sure. But the brunt of product, why I say it's important is in our world, there's this big trend of machine learning that's going to crack the back of unstructured data.
Jason Smith (23:40):
It's hard. It's an iterative process. Every year, you get a little better at it. And it takes really expensive people to figure out how to crack the take raw intel and create insight problem. And so we've done enough manual people powered work now to know what needs to be made more automated. And that just takes money, flat out money to do it and experiments where this didn't work. Try that next experiment. So on the ML trend, it's just expensive and you got to invest in it because it's the long term moat. As our flywheel gets more and more companies in, as we understand more of what patterns work, we just become a better insight generation machine. But second thing, and this is, I don't know if it's often overlooked, but you can't just live as a standalone tool.
Jason Smith (24:27):
It's all about APIs. And it's all about data traveling between tools now. The fight to be the tool that everybody uses only, I think, is a fools game. I think you've got to live in all sorts of other tools. I think Klue data should surface in a gone call. It should surface in a duly note. It should surface in Salesforce or Slack. So from my point of view, yeah. I want people to come to Klue, but let the data live where the people want to live. So we're spending a lot of money on integrations and connections into other ecosystems to supercharge those tools with compete content because we're going to be the number one in providing killer compete content for their people.
Peep Laja (25:11):
People want a beautiful smile, not braces. They want unified customer data that helps them do hyper personalized marketing to get better results, not just integrations for integration sake. It's easy to forget this stuff and focus on what it is instead of what it enables you to do when selling. Wade Foster, co-founder of Zapier, explains the benefits of staying clear on what you want your integrations to achieve so you don't end up throwing money away on functionality your customers don't really want or need.
Wade Foster (25:42):
So integration is a really loaded term. Depending on who you talk to integration can mean various different things. Some users might think this means like a web UI widget. Others might think this is like pushing data from one app to another. Others might think this is a two-way sync. So talk to your users, figure out where your holes in your product are and understand how maybe an integration or an ecosystem partner can help make your product better. This helps you in a couple ways. One, it makes sure that when you go to look at your product roadmap, you're going to be building the right types of things. And it also helps when partners approach you for potential partnerships, right? You can say like, "Hey, that's great. That actually doesn't match up what we think our users need." And you politely decline versus if they say, "Hey, we want to do Y and your customers are all about Y." You might have a really good partnership there.
Wade Foster (26:30):
So if you have these kind of use cases known up front, it really helps you make sure you're kind of building the right types of partnerships that are going to help your users out. And it also helps you build an API that's ultimately going to be most beneficial for your developers, because they're going to be able to build the types of experiences that you know that your users are going to want.
Peep Laja (26:48):
The other players in your category. What have you done differently to succeed where they haven't?
Jason Smith (26:55):
Oh, there's one secret. No, it's never one thing as you know. I think at the core of it, you have to have a great product. And as you said, over time products start to look pretty similar. UI, there's fundamentals on your architecture and your UI that are going to attract over time or detract over time. And so massive investments on what that UI looks like, what it feels like as you navigate through it. Does it feel simple? Does it not? And the biggest compliment is it just works. So I still think there's differences in UI in how that, and in our system, how you can surface insight. So product, no question, there's a differentiation there and fundamental architecture, fundamental approach. But the other piece is we're finding our brand voice, not being afraid to open up our employee brands as an example. We actually encourage every single person that joins Klue to be open about what it's like to work at Klue.
Jason Smith (27:54):
What are the challenges? What are the ups and downs? We've had some real hammer shots from our employees of like, "This was really not great. Our benefits up until last year were free pepper. We didn't have a benefits program." Literally you could have free pepper or salt. That was our benefits. So that was an issue. But we try and address it over time and we just try and be open about it. And so I think more and more clients and companies want a great product, first of all, that solves their needs. But they also want to deal with a company that they trust. And how do you build the trust? It's being authentic and honest and having integrity with every interaction. And I think a lot of companies just get tripped up in like trying to be too much of what they are instead of acknowledging what they're not.
Peep Laja (28:42):
When you're competing in a saturated category, you need to take a differentiated position in the market. In addition to the big differentiation angle, you can sprinkle a lot of things on top. Be 10% better or different in multiple departments, including being more real and human. Folks are done with fake corporate bullshit. They yearn for authenticity. They want to see the people behind the company. Show customers that authenticity and you are more likely to win their trust. It's another thing that can help you tilt the scales when people are comparing options. What kind of decisions are you making in terms of product and brand and other things to build moats around you?
Jason Smith (29:26):
So the number one thing, and the sounds obvious, is if we can't help our clients be amazing in what they're doing. Then you can't build a moat and what's that mean? That means the product needs to save them time. The product needs to make them look good. The product needs to solve a very clear problem and then any product is going to have rough edges. So the next layer beyond that's going to be the services team that's going to solve the problem that they had. That the data that they deleted, that went missing, we find. That the presentation that they need to put together, we can scramble to help with. There's a softness on the edges of a product that are people, that are going to be real, that are going to have your back. And so there's a support layer not to underestimate those people.
Jason Smith (30:13):
And we're investing significantly in the services to make sure that these people are helping our clients, but at the root of it it's how do I help our clients? That's a great product. That's a great UI. That's great machine learning and insights. That's integrating it in other products. Second is the people side. Third is I do think elevating this category. I think the biggest moat is if we can help establish competitive enablement as a clear category, build up that value prop for everybody that's doing this work inside of a client organization. And that we could see somebody that starts as a competitive enablement manager, end up a CEO one day or have what is now hundreds of jobs turn into hundreds of thousands of jobs in competitive enablement. If we can help lift the whole category, then I think we lift with it and if we're doing the right job, we're at the top of that water tide.
Peep Laja (31:05):
Boom. So what three key strategies has Klue implemented to win? One, they educated their market on a new must have, creating a subcategory.
Jason Smith (31:19):
Look, there's this searchable database, competitive intelligence and there's this thing called sales enablement or revenue enablement or CS enablement or DevOps. And that's all enabling your team with the right type of intel. So let's combine those. Let's call that competitive enablement and that's what's starting to resonate for folks.
Peep Laja (31:35):
Two, they focused on user research to learn how their product should work and realize the importance of integrations.
Jason Smith (31:42):
You can't just live as a standalone tool. It's all about APIs. And it's all about data traveling between tools now. The fight to be the tool that everybody uses only, I think, is a fools game. I think you've got to live in all sorts of other tools.
Peep Laja (31:58):
Three, they focused on a specific customer segment and didn't chase every opportunity out of the gate, but carefully consider timing when it came to expanding downstream.
Jason Smith (32:07):
Make sure you have the product that fits it, not just follow your competitors downstream or upstream. Ultimately, if you're going to take a pile of venture funding and try and win the category, you're going to end up up and down that ladder, but just do it very considerately when you have the right infrastructure, product, and money in place to kind of chase it.
Peep Laja (32:27):
One last takeaway from Jason.
Jason Smith (32:29):
I have a process by which I kind of look at starting companies and I call it 100 smart person meetings. And so I tried to beat the idea up across 100 smart people meetings, really trying to pull out the truth. Because nobody wants to tell your idea's bad, got some hard feedback, and then ultimately decided this is something that a lot of companies need.
Peep Laja (32:48):
And that's how you win. I'm Peep Laja. For more tips on how to win, follow me on LinkedIn or Twitter. Thanks for listening.
