It’s no secret that I’m a big fan of 37 Signals. Love their products, their blog, their books. I get teased a little bit for my ardent appreciation but I don’t mind. Their business model of taking the byproducts from their client work and creating SaaS (Software as a Service) products is a beautiful business model. But I have started to think 37 Signals may have made a strategic error along the way- they stopped doing client work.
On the surface this isn’t necessarily a bad thing. They have been able to build a highly profitable business around solutions they first created to manage projects (Basecamp) or sales leads (Highrise) but in the past 3+ years they haven’t introduced any new products outside of a design gallery and a job board- not really products but nice services.
So when 37 Signals stopped doing client work and focused on products they also stopped getting ideas for products. The client was their Golden Goose and the eggs were the byproducts that came from that client interaction.
No clients=no new product ideas.
I’m sure the 37 Signals team has considered how removing themselves from the client/service world has essentially put a cap on new product ideas and chances are they are fine with that. The company is almost ridiculously profitable and they have done an excellent job continuing to refine their 4 core products: Basecamp, Highrise, Backpack and Campfire. Maybe they have some new products in development but it appears that they have moved from product ideation to maturation.
Small Box is looking to follow a similar path but with a twist. We are starting a new company that will be focused solely on products which come out of Small Box client interaction. Look for an announcement soon. Our hope is that having a separate company and team focused on products while Small Box stays focused on client work (services) will allow us to keep the Goose happy and producing those golden eggs for years to come!
Good thinking, Jeb, and tough to do. But you’re right: you can’t let the search for new products hamper your service business, and vice-versa. Can’t wait to hear about the new company.
Exciting stuff – can’t wait to hear the news and see the work!
Thanks Ken, we are excited about this new company as well!
Congrats Jeb – looking forward to hearing about the new biz.
I’m a huge fan of 37S as well. On the one hand, I can see why they don’t want to do client work – they wouldn’t be the “boss” and they are a very opinionated group. They also make a nice living already.
You make a great point though because I don’t seem them improving the aesthetics as much as I think they could. They also lost the inspiration and connection with the current needs of the people the products are built for.
Good luck with the future company.
The idea that “no clients = no new product ideas” does not apply to 37 signals. Not at all.
Just how many creative ideas can be gained by being the only group of individuals with 24/7 covert access to every private Basecamp, Backpack, Highrise, and Campfire account in existence?
Profit from sales is the tip of the company valuation iceberg.
Think about it ;^)
Andrew, that is kinda genius! But I have to say it’s a little cynical to think of the 37 Signals team prowling through the messages, to-do lists, designs and content of their users. I think you do hit on a sensitive topic. How much can we trust these SaaS companies? We have seen the flare up over Facebook recently and I have to wonder how far that questioning will go- we know Google’s computers are reading our emails and serving up keyword triggered ads, how different is that from a human reading our emails? Where are the lines?
Privacy is certainly the new battle. It’s not clear where or how far that battle will go.
Back when I worked for an ISP we in tech support had direct access to every customer’s pop email accounts. Is email private, confidential, & sensitive information? Sure! Did we bother reading it? No. Reading OUR OWN email is usually a waste of time. Much less bothering to read someone else’s spam collection.
Sensitive topic, indeed.
We stopped doing services and chose to focus solely on our SaaS, and it has improved our product much more than hurt it. First, when you stop doing services, you don’t suddenly become stupid, and forget what you’re trying to build. Second, if you have great customers (which we do), you’ll have more great ideas than you know what to do with. The difficult problem becomes which ones to implement and which ones to hold off on. Third, you become incredibly focused, and you produce even more. That seems to be the case so far for us. Also, for us, services was more of a rotten egg than a golden egg, distracting us from what we love doing most, making an amazing product for our customers.
As a former Product Manager in the software space, this is a great move!
I don’t think it’s efficient or wise to rely on client requirements as a primary source of new innovations. Sure, they can yield some great features, but they can also pigeon hole you into a corner/niche. Been there, done that.
The RIGHT move for 37S would be to run a crowd-sourcing campaign and/or enable a feedback option (“Got Ideas?”) within their existing SaaS services.
I would envision that …
In 12 months, client requirements might yield 8 potential new features
– vs –
In 6 months, crowd-sourcing might yield 24 potential new features
File under “Two Heads Are Better Than One” (or, 2,000 people are better than 10 clients)
My .02,
Dave
Good feedback. Obviously not doing client work doesn’t mean that you are going to suddenly forget how to create products for clients but I do think that seeing first hand what is needed can bring a different clarity that would come with reviewing lists of ideas via crowd sourcing sites.
Ideas in themselves are pretty worthless. It is the execution that matters. I think having an end user mindset can be the difference maker between a good and great app. My concern is losing this mindset.
I’m a huge 37 signals fan as well. Hate Rails and never really liked their products, but I love their ideas in business and product development.
I think you are missing the one client they are not losing, themselves. I couldn’t find the original piece I remember reading about them talking about their “Eat your own dog food” type of development but it is brought up again in post by Jason F.
http://37signals.com/svn/posts/904-why-we-disagree-with-don-norman
I think they will still come up with new things that will compliment their current products when they see a need themselves. Will they miss other things that clients might come up with? Sure, but I think they also have a ton on their plate with supporting and enhancing their current products that to continue to take on work might hurt that more then it will help.
As well it leaves the door open for other people to jump into these markets they are missing. There are lots already doing this and integrating with 37′s products so I’m pretty sure it will all work out for us in the end.
Richard, I have no doubt that 37 Signals will continue to be successful. I think they can roll with the current product line up for years to come and continue to make money. They are fortunate in the sense that they don’t really need new product ideas. But since necessity is the mother of invention I think removing the necessity, created by client needs, will decrease the invention as well.
I have used their products before but quickly left when you cant simply integrate Basecamp and Highrise…maybe they have fixed it…but really they should combine the two. IMO. This is not completely a fail on 37 Signals alone. All of the cloud services have one particular draw back that prevents me from paying for the service.
When i checked, other people were wanting the same thing with integration but didnt seemed like they cared too much. Shame as they were my favorite out of the bunch.
We have more product ideas than we can actually produce. There are no shortage of ideas here. And as our company grows, we find new needs and new uses and new ideas to fill those holes.
But for now we’ve chosen to continue to improve our existing products. Lots of tweaking, polishing, improving on the small little things that make a big difference to the overall experience.
Hi Jeb,
We actually stopped doing client work a little less than a year after launching Basecamp. Since then we’ve launched Ta-Da List, Writeboard, Backpack, Campfire, Highrise, Sortfolio, The Job Board, Draft, and of course countless of internal apps and revisions to what we have.
The client relationship gave birth to the idea of Basecamp, but everything since then has come from other sources. But always what do we need that others might find helpful too.
Good luck with the new venture.
Jason & David, thanks for taking the time to chime in on this thread. I’m not surprised that 37 Signals has a lot of ideas in the tank. Care to share any?
Do you miss doing client work? Do you see any advantages to having a foot in the service world and the product world?
Jeb
Great post, Jeb. Looking forward to hearing more about your product-based biz!
Nice post about the strangulation of innovation at 37ignals through sole focus on the manufacturing/sales funnel. I’ve always had issues with their products, but like them and have used them internally and externally at companies. My issues have always been more like the sticky gearbox on a car you love to drive.
I’d sure like to know more about your SmallBox – send me your press clippings!!!
@socialamigo