Making the pivot upmarket with ScreenCloud’s Mark McDermott
Making the pivot upmarket with ScreenCloud’s Mark McDermott
Mark McDermott (00:02):
The reality is that most places are not digitally enabled in anywhere near how we currently exist. The wave of where software can go and where it can touch, we haven't even really got started yet. We are just living in our own world too much, we've forgotten that there's this big, big opportunity here, but they need help to get there.
Peep Laja (00:24):
I'm Peep Laja. I don't do a 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, and how do they win. This week Mark McDermott, Co-Founder and CEO of ScreenCloud,, a global digital signage platform, helping businesses communicate with their staff and customers using screens. Founded in 2015, ScreenCloud now has over 100 employees serving over 8,500 customers. And they're doing about 12.5 million in ARR, having bounced back from a temporary slump during the COVID 19 pandemic. In this episode, we learn what ScreenCloud is doing to differentiate from their low cost competitors and why they're looking out of market for their biggest expansion opportunities. Let's get into it.
Mark McDermott (01:11):
The opportunity was kind of came around by accident. We were trying to solve the problem ourselves in our own office to make the screens in our office at the time to show some key metrics. When we looked into it, wasn't a SAS simple way of doing that. And the market for screens and digital signage was mainly more kind of larger commercial installations and not small things. So what we noticed is there wasn't really a MailChimp for screens. And we felt that how could that problem not be solved? It seemed crazy that we could do what we could do with our phones and laptops, et cetera, but that we couldn't get this simple content up onto screens without breaking the bank and turning into some big audio visual installation. So really was kind of scratching that and realizing that there was an opportunity here to look at the market through the lens of software first.
Peep Laja (02:02):
When you built version of the product, how did your strategy change then once you had the first contact with the customer?
Mark McDermott (02:10):
The customer kind of pulled us in. At the time, we weren't really even looking to do a startup. It was really a product. We were an agency, a product agency. And so we just put this one out, just like any other product. We built hundreds of them over our time. And then I had a reaction from the market of, I need this now. Which we hadn't really necessarily had in previous products that we'd launched. So to a degree, they kind of just sucked us in and forced us to, rather than change our strategy. I suppose there was a change of strategy in the fact that we then decide to shut everything else down, sell off all the other products or kill them and just focus on this one thing, because I hadn't experienced a draw like that ever before.
Peep Laja (02:54):
What was the competitive landscape like back then and how has it changed over the years?
Mark McDermott (02:59):
The incumbent market is predominantly from the audio visual world. They're mainly interested in doing the largest scale commercial deployments of screens, the stuff that you see in Fifth Avenue in Dubai Airport, the really big multimillion dollar things. There wasn't anything mature at the lower end, and the incumbents weren't interested in dealing with the lower end because they were still making most of their income via a sale of expensive commercial hardware. So there was this kind of opening, which just no one was really working on at the time. So we kind of went in there. We adopted a consumer hardware approach to how we would make the screens work. So using things like Google Chromecast at the time, and Amazon Fire TV, which were brand new products like in that year. So we kind of surfed on that consumer TV wave, which really was a major fuel of growth for us.
Mark McDermott (03:49):
And the incumbents really were more in denial because that kind of undermined the philosophy that you had to spend a lot of money on hardware to make this work. Now, subsequently over time, I think we've been part of a category creation there and there's, inevitably, once the startup starts getting successful, there's a lot of copycat and a bit of a race to the bottom. So we've kind of moved away from where we began and where we were most successful, because now you are seeing a lot of clones coming in and sort of trying to drive the price right down, which to a certain customer, it's all about price. We are now moving way more towards the value that we're bringing.
Peep Laja (04:28):
Bigger players always get disrupted from below. Small upstarts start nibbling away at a low margin customers. The big guys don't mind much so they won't fight it and focus instead on their high margin customers. In this scenario, beating the category giants on price is a totally viable option. For instance, if you look at Intercom or Gong, they both have an army of copycats that deliver a similar core product at a much lower price. In my opinion, those startups should lead with messaging. We're like Gong, but cheaper. Or, where 90% like Intercom at 10% the price. This will take care of their positioning and differentiation at the same time. However, when you look at those startups, it's timid. They use messaging like easy or save time. Totally yawn.
Mark McDermott (05:18):
Before we got commoditized, we also had an insight into the fact that actually larger scale enterprise customers came across our solution and liked what they saw. Because the approach that we taken with the software was sort of universally appreciated in terms of being very simple, using modern web standards, not really requiring any kind of training, all of these kind of nice things, which actually all good software should adopt. So we had thought that the big customers wouldn't want to work with us because we weren't providing a full service. They were just coming in with the software component and compatibility. But what we failed to realize is actually a lot of screen networks already exist, or really customers didn't see the hardware challenges being such a big challenge anymore. And they were really looking for just excellent software to sit on top. So we were starting to get pulled up, but that comes with its own issues around, say security, the scalability of a product. All of the enterprise features.
Mark McDermott (06:16):
We actually took a bold decision in 2017, only a couple years after launch, to completely re-platform the product. Even though we were like tripling in size and growing really, really quickly, we knew that platform wasn't going to scale up to enterprise. So we rebuilt a platform whilst also tripling in size on the old one. And then funny enough, the things that everyone was cloning and copying was a platform that we'd already given up on. And then we relaunched that platform for enterprise and we are now really focusing much more on mid-tier and enterprise customers. And we still have our SMBs. They're still a significant portion of our customer base, but increasingly we are going upstream, both in terms of product, but who we are as a business.
Peep Laja (07:00):
I admire companies that abandoned the main ship they've been on for years to pursue a new direction or refocus on a new segment, the amount of guts it takes. It's better to do it to yourself before they pull the Nokia on you. Most businesses need to focus on innovation, not error prevention. If your goal is innovation, the biggest risk is not making a mistake. The biggest risk is becoming irrelevant. Once innovative features become commodities and margins erode, moving upmarket toward high margin deals is a strategy that most sales companies pursue when driving growth. To hire the best talent, to invest in product and innovation, you need money. Money is in better margins.
Peep Laja (07:46):
When you were still catering to the SMBs, what were acquisition channels like that worked? And how did they change since you made that small change?
Mark McDermott (07:55):
So with the SMBs, they're not high ticket. Like we were looking, I think, averaging around $40 a month kind of revenue, although they would expand typically, but again, they'll only expand as much as they can. I mean, it doesn't take much to max out a small business. So really you don't have a huge amount to spend there. Although, the lifetime values are pretty good. Like as in they stick around people don't switch their screen systems out frequently. So the best channel we had was content marketing. We were religious about putting out videos and blog posts, how to blog posts, especially, and really just capturing the demand on Google of people who were looking for a solution, but not necessarily knowing the right terminology. Like digital signage is not actually a well known category name. So it's things like how to put my menu board on screen, or how to put my dashboard on a Samsung, or something like it's very practical stuff.
Peep Laja (08:55):
What is it? That's the first question people ask in their minds when they see something new. When you're first out the gate in a new category, a lot of your marketing effort is going to go into educating your customers. Customers who often don't know what they're looking for yet. You need to evangelize the category, not your product. It's a common challenge in the early days of a new product. And one we heard about from Appcues co-founder and CEO Jackson Noel, on a recent episode of How to Win.
Jackson Noel (09:23):
We decided to start marketing during the very inception days of having that product. And, we started writing something called the user onboarding academy, because again, we were having trouble of getting people to latch onto this. Like, this is a problem I need to solve. So we were just like, okay, let's just go start writing and evangelizing this problem, getting more people interested in it, trying to shift the focus of the market.
Peep Laja (09:50):
And so this newer entrance to the market that we were undercutting you by price. Did they do anything better or smarter than you besides being cheaper?
Mark McDermott (10:00):
I don't think they've necessarily innovated in any kind of particularly special way, but I don't think they've done a bad job of cloning and optimizing the sort of work that we've done. It is more like attacking the brands that are trying to go upstream a little bit. I haven't in anything particularly impressive, if I'm honest. I mean, literally they'll give you 50% discount if you give them a five star G2 review. I mean, personally, that's not a game I'm particularly interested in playing. I want my reviews to be honest. I want my customers to be with me not just because of price. Back in the agency game when I did that for a long time, if you get pulled into a race to the bottom, you die, right? So you've got to move away from that. And I don't blame anyone for trying to do it.
Mark McDermott (10:43):
And there is a big market there who literally the price will be the number one thing and their needs are very, very simple and they're going to serve them very well. And, in fairness, I suppose to them, we've taken our eye off that ball a bit by moving in another direction. We've put a lot of energy and resources into features and parts of the company that ab SMB would never really benefit from. Like no SMBs is really going to do a security review or get into the weeds on enterprise network. They've just using basic wifi. They don't need a lot of what we are building right, right now. So they probably are better suited to those guys, but I think they ultimately... I know how that story usually ends.
Mark McDermott (11:24):
And my investors as well have been very wise in their advice, which is you can ride the SMB wave really well, probably somewhere up to maybe 15 or even 25 million ARR. But there's a point where this flattens out, because it is frothy, there is high churn compared to big customers. Because you can't really go upscale on the acquisition channels or change those acquisition channels out much, because it just doesn't make economic sense, you're sort of just replacing what you're losing at a certain point. And you do see a lot of these SMB focused platforms struggle. So we always knew it was a wave that we would surf, but not surf on forever.
Peep Laja (12:05):
Was there any particular insight that gave you the confidence that, hey guys, we need to just move away from this SMB and go up market?
Mark McDermott (12:13):
So it wasn't that we were seeing anything particularly bad. Like we had really high MPS score. You know, we did see that customers were price sensitive, but generally speaking, like we had a very good relationship. There was no friction there, but there was this general sense that this won't last forever. But the more positive element was the fact that we had these larger customers who were in there hacking around in the product and liking what they saw. And they were pulling us up and opening up our eyes really to the greater potential that we could serve. And so it was really more of a moment of enlightenment, and it wasn't just one customer. It was several. And once you start to see a few happen, there's just a point where there's all the data in the world can tell you something, but it's really just your gut is starting to say, look, I'm having these same conversations with these big customers, but there's work to be done.
Mark McDermott (13:00):
I think this is the time to move. And you always want to be moving earlier than when you're being forced. There's nothing harder than having to pivot and change under extreme pressure. This is actually one of my core philosophies with the company. I call it core and explore. So you've got your core work, which should take up about 80% of your time. And you should always have this 20% explore. Which is basically giving your future self a gift. And in 2017 we made a good decision to give our future self a gift, which if we hadn't done, we would be probably in a really tough competitive spot. And we've done that subsequently as well with other products.
Peep Laja (13:45):
Back in 2016, CXL my company, was a pure conversion optimization agency. We had steadily moved up market over the years and our pricing kept going as well as our margin. And our email list at a time was about a 100,000 people. I analyzed the subscribers and came to the conclusion that 99% of the people on that list will never become our customers, we'll never see a dime from them. They're just not a fit. So I asked myself, what else can we build to serve that 99%. Long story short, I ended up launching an e-learning arm of the business teaching the 99% the skills so they could do themselves what we would sell to the 1%. And in just four years, the e-learning business grew bigger than the agency. ScreenCloud decided to make a strategic move upmarket when low cost competitors began to flood the space. That's not at all a new idea and it's often a good idea, but as HubSpot CEO, Yamini Rangan reminds us, through trade offs to consider when looking up market.
Yamini Rangan (14:53):
When organizations actually go from starting up to selling to SMBs and going up market, the pull up market is undeniable. Great companies actually help you accelerate your revenue. Also selling up market actually means that you can very easily have predictable revenue streams. You can accelerate your revenue. They are much more sticky as a business and therefore good for you. But it's also undeniable that going upmarket means your company will get leg-pulled. You now actually have to develop feature that you didn't have in your roadmap. You may actually have to price and differentiate. You may actually need to build a sales team that can serve upmarket. And you may need to compete with more competitors that you don't have resources to really fulfill.
Yamini Rangan (15:47):
So the path up market is stretchers. There are lots of companies that have done it well. Salesforce started at SMB and they moved upmarket and they have really done a fantastic job. So has Slack, HubSpot, Marketo. So many of these companies have done well. And when they do well, they tell the tale. But for every one of those companies that have done well, there are hundreds of companies that do not actually go through that chasm.
Peep Laja (16:14):
So you made the move to go up market to change the product. Did your acquisition channels change from content marketing to more sales?
Mark McDermott (16:24):
They're evolving? Now we have obviously had COVID, which has changed the whole landscape because digital signage and screens, they tend to be in public spaces, right? And for a while, those public spaces, a lot of them just weren't open. So it's been unusual market conditions, I would say. And we only really relaunched the product actually at the end of 2019. So we only had a few months of normal before some not normal. But yeah, what we are finding now with the marketing and acquisition is we now have an SDR team. We have an outbound team, we're doing a lot more in terms of thought leadership and events. So we've been running online events, more educational, strategic events. So there's been a bit of a shift in our narrative away from, hey, here's what the features are and what you can do, towards here's what you can achieve.
Mark McDermott (17:13):
And you sort of start to begin to downplay the features of the platform and switch up more into what you can achieve by committing to something like this and using it in the right manner. So it becomes more of a strategic positioning piece. Now you're still capturing the same way through paid social, particularly LinkedIn. We do a lot around that, because we can quite specifically target the job titles of ideal customer profiles. But then what we're finding is that they will probably touch lots of bits of content. And we have a very heavy demo process in the sales thing, which again, before it is more like pushing to free trial, now it's much more pushing to discussion and demonstration, but the awareness is still coming through broadly similar channels. We're just upping our spend quite a lot and being a little bit more outbound targeted on our key verticals.
Peep Laja (18:04):
As the competition is intensifying. What kind of moats are building, if any, how are you thinking about winning against competition?
Mark McDermott (18:12):
I still believe that actually in what we are doing the vast majority of the time we are replacing offline technology. We are replacing, as I said, like literally a notice board on a wall with bits of paper on it, right? This is one of the things about the tech sector that I think we sometimes really fail to appreciate, is that the real world is not debating whether cloud is already over or Web 3.0 is going to be the thing. Web 3.0 or die. For them, moving to Excel might even be a step forward. The real world is nowhere near as technically advanced as we think it is. Even wifi, wifi doesn't work that well. In most of the locations that we are working in, we have to run and operate offline because the wifi is so bad.
Mark McDermott (18:57):
That's one of the big challenges for the screens is just, is not relying on the connection that you're getting because you are in environments that have very, very poor connection. And so I think that we sometimes overthink what the other competitors are doing. And as far as I'm concerned, that would be a fight over a small percentage pool of the opportunity for screens globally. So I don't think too much about them, but that doesn't mean that we don't want to differentiate ourselves. The key area that we are doing that is the majority of my industry are still leading on a hardware oriented play. They're still thinking and obsessing about the how. How are we going to make your screens work? How are we going to do this? How are we going to do that? I'm switching the narrative for us to say, look, the hardware story was a tricky one 20 years ago, but that's no longer the truth, right?
Mark McDermott (19:54):
And that's a common truth with hardware. Is that over time it gets commoditized. It gets simpler. You don't need to panic about that. 20 years ago, yes you did. That's legit. Now you don't. So I'm pushing on the, so we just focus the conversation more on what's going on on the screen and less about how anything gets to that screen in the first place. And just accept that bit has now been taken care of. And let's think more about impact. Let's think more about what are we achieving with our customers, with our employees, our communication objectives. I mean, there is some technical things that we are working on. We're actually producing our own hardware. Just something I never thought we would do. We're actually now doing that. And that's been one of our biggest, best innovations, but it's all about just trying to smooth the process out and make it as effortless as possible. Because if you reduce all of that friction, the expansion opportunities are crazy. But if this expansion is tricky for the customer, they'll find ways not to.
Peep Laja (20:53):
95% of the market is not actively looking for you, and they won't buy for months or even years. So what do you do? Give up? Focus on the 5% who are in market and ignore the 95% who aren't? No. You should focus on the 95%. The out of market buyers, the focus should be on building mental availability, so when they do have a need and budget one day, they think of you, and you achieve this through brand marketing. Here's Paul D'Arcy, CMO at Miro, discussing the key factors he makes sure to include when designing messaging to target out of market customers.
Paul D'Arcy (21:33):
When we think about brand building, we're really speaking to that next billion plus people. Brand building is emotional priming to make people more likely to solve the dot. We very rarely buy things that we don't know. And so the job of brand building is to communicate with a really large audience so that people know about us. They think about us. The communications job is relatively simple. What we're trying to do is communicate to them very basic things. What is this thing? It's a whiteboard. What is it called? Miro. When should you use it? When you're collaborating with other people. What does it look like? And to do that in a way that helps people think of us at the moment that they have a problem. And that may happen a month from, now a year from now, or a couple of years from now, but it's how we speak to that billion plus people who aren't users and aren't the near term users that we're targeting with direct response.
Peep Laja (22:39):
If most of the market is still non-consumption market, they're not using anything. So, that means to me that it's a race to build up mental availability. So when they become aware that hey a better digital signage solution exists, that they come to you as opposed to somebody else.
Mark McDermott (22:57):
We do rank very highly in G2 and Capterra. I think it does matter a lot that you do put effort into social proof. We do have a multi-stakeholder customer relationship, but fundamentally, we are part of the IT network. So, IT is a big part of the customer. Now, obviously the content doesn't tend to originate from it. So there are other people involved, but these screens are running on an IT network. So ultimately they're the people really responsible for working with us on this. Now in that industry, trust matters, because if you're going to go and roll out across hundreds of locations, and if it's going to be unreliable, it's going to fall back on IT as being a failed project. So you really have to address the trust issues about how reliable this is going to be, how easy it's going to be. And how compatible it's going to be and word of mouth matters.
Mark McDermott (23:49):
So we do get a lot of referrals internally from people talking to each other and recommending each other, probably through WhatsApp groups or something like that. And we get a lot of recommendations and also quite often our customer will leave and go to a new job and bring us with them as well. So there's a big part to be done around trust and social proof, reviews, case studies, things like that. And also I think in the sort of proof of concept phase, being extremely available to them for anything that might go wrong, any hiccups, that's another key part of the process. You've got to be like... If you front load a huge of effort, you win in the long term because you iron everything out at the beginning and build that bond and relationship. And then you just become part of the toolkit. And that's when you can really flow and switch into more of a strategic relationship than a kind of supportive one.
Peep Laja (24:40):
Looking 10 years into the future and beyond, what are you betting on to come out as a winner on the other side?
Mark McDermott (24:47):
We're betting on the fact that right now the reality is that most places are not digitally enabled in anywhere near the kind of way that we think we are, or maybe how we currently exist. I have been working in the internet since I was a teenager. I'm in my forties now. Never been against the web, is a general principle of mine. And also things are much slower than we ever really realized. I started doing first cloud products and work back in 2007, 2008. It is 2022, and only now as some of these very large manufacturing companies adopting cloud as a principle. Things take time, the wave of where software can go and where it can touch. We haven't even really got started yet. We're just living in our own world too much. We've forgotten that there's this big, big opportunity here, but they need help to get there.
Mark McDermott (25:43):
And it has to be straightforward. They're under resourced. The comms people are super stretched. They don't have sophisticated systems internally and they're slow to change, which means that you have to march to their beat. So the bet that I'm taking is that we will care enough about things like that. And we will obsess less with the technology and care more with how we make the adoption of this absolutely seamless and simple. And also to bet that in 10 years time, I don't think people will be pinning pieces of paper to a wall anymore to communicate with their teams. And right now that's how billions of people around the planet find out what they've got to do today.
Peep Laja (26:24):
So what is ScreenCloud's three winning strategies. One, from the beginning, they focused on content marketing and educating their target customers.
Mark McDermott (26:37):
We were religious about putting out videos and blog posts and really just capturing the demand on Google of people who were looking for a solution, but not necessarily knowing the right terminology.
Peep Laja (26:50):
Two, when they saw the opportunity to pivot up market and focus on enterprise customers, they acted fast.
Mark McDermott (26:58):
There's just a point where there's all the data in the world can tell you something, but is really just your gut is starting to say, look, I'm having these same conversations with these big customers, but there's work to be done. I think this is the time to move.
Peep Laja (27:10):
Three. They stopped trying to compete in features and started winning with story.
Mark McDermott (27:16):
There's been a bit of a shift in our narrative away from, hey, here's what the features are and what you can do, towards here's what you can achieve. And you sort of start to begin to downplay the features of the platform and switch up more into what you can achieve by committing to something like this and using it in the right manner.
Peep Laja (27:36):
One last takeaway from Mark?
Mark McDermott (27:38):
You always want to be moving earlier than when you're being forced. There's nothing harder than having to pivot and change under extreme pressure. This is actually one of my core philosophies. I call it core and explore. So you've got your core work, which should take up about 80% of your time. And you should always have this 20% explore, which is basically giving your future self a gift.
Peep Laja (28:01):
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.
