Your feedburner passthrough does not seem to be working. Just FYI.
Interesting and informative post Dharmesh!
I'm going to begin tracking 37Signals immediately. More specifically I'm going to research and evaluate regarding their marketing initiatives.
Here's a question... Are they making a profit?
BTW although I check your blog daily (typically early morning) I enjoy getting Gmail notices from you regarding new Onstartups posts... Thank you for including this useful functionality.
Thanks for the kind comments, Dharmesh.
Sheamus, 37signals has been profitable since its inception in 1999.
I'm not sure why startups, venture funded or not, should be particularly interested in competing 37Signals. Is their market now hot?
I also admire what 37signals have managed to accomplish with their approach, thinking and products.
It doesn't seem quite right, however, to not compete with them - there was a time when Altavista (or some other such search engine) was considered the be all and end all - where would we be if that hadn't have been competed with?
I think the imminent competition towards 37signals will only drive better performance from everyone involved - 37signals set an admirable precedent, but it's likely someone will come along and beat them at their own game; excelling by surpassing the standards laid down by the 37' guys.
We could all have them to thank for a soon to be seen influx of simple, usable & powerful platforms which are bound to be just around the corner!
(Not a dig at anyone, just an opinion - I use Basecamp to manage some of my stuff and love it)
I've always regretted never taking advantage of their services when they were still just a web design firm, rather than "a software company".
But I must admit my jaw drops admiringly that they've made an art form out of selling nothing - when feature requests are often refused (and occasionally ridiculed) with a response along the lines of "it's a fantastic, wonderful thing that we DON'T have feature X, and we did an amazing job not putting it in, it's all about simplicity...(etc.)" - it's mind boggling. I never even considered that I could actually sell non-features.
> I read somewhere (can’t recall where) that as a startup you ideally want your competition to be big and stupid.
I know I must be daft... What do they sell?
Is there project management THAT much better than anything else? There IM is that much better than AIM?
I'm at a loss to understand the compelling element of what it is there selling.
"So, my hat is off to the folks over at 37signals. "
So please dont compete with my HubSpot.com ;-)
Startups should not compete with cults. Period.
I happen to be reading their book right now in another browser window. Being a small "boot strapped" startup, I find their approach is perfect for what I am doing.
Clearly they have mastered the art of delivering clean, simple web applications that are quite usable and profitable. I just started using Basecamp and I am impressed by it's power and simplicity.
I agree, you should not compete with them, but use their model to build your own business...
37signals is like joelonsoftware. They are NOT a startup. Apples and Oranges. Why would anyone in their right mind want to compete with them?? That;s like saying "Don't compete with Paul Graham".
Yeah they're profitable but so are most consultants I know. These guys fit into the same category. Not that there's anything wrong with that.
I read all of your articles and find them very informative. This one though, left me asking for more. (I also read all of svn and loudthinking as well so seeing the two combining here with a post from DHH is interesting).
I agree with your point Dharmesh, that 37 signals has almost inimitable marketing magic. I have lots of ideas on what makes it work for them and will shoot them out in another post. I wanted to first ask a clarifying question:
Don't compete with 37signals sounds like practical business advice. Yet I am left asking what is a 37signals competitor?
- a book about web-based development
- project collaboration, group chat, organization, collaborative writing, to-do list and CRM software
- a "less is more" approach problems
- web-based, subscription-based software
- an awesome web framework (Rails!)
I don't think you are saying no one should ever try to do these things again though. So we find ourselves in a middle ground. While I would not recommend a company positions themselves as "buy from us, not 37signals" or "even *less* than 37signals :)", I don't think it's healthy for an industry to say that one company has it all figured out.
As someone who runs a website that directly competes with some aspects of basecamp, I have to disagree that you can't compete.
FIirst of all, they charge their users a monthly fee so you can always compete on price or even free. Second, they already have an established userbase along with expectations on what their software does and how it will continue to work in the future. The web equivalent of 'backwards compatibility.' This prevents them from straying too far from their existing functionality, which keeps their users happy, but also restricts them from trying radical new ideas. Lastly, the world is big enough for many, many 37signals. If you step back a little, you can make the same argument for google against 37signals.
What 37signals is tapping into is the screaming need for simple tools that work well in our ever-complex world. Good for them - and while competing with them is none too bright, taking the same approach makes very good sense for micro-ISVs.
I think 37 signals is going to have a lot of competitors now who are following the same principles as 37 signals.
One most important thing pointed by jason fried in his talk at ITConversation was about hiring people.
"Hire curious people. Even if they don’t have the exact skill set you want, curious, passionate people can learn anything."
I think this is very important for startups because their success relies on people not process.
competing with 37Signals is not really required but
Consulting firms do have divisions that sell software. It is not the most natural thing for consulting firms to do. I was a 37 Signals fan from when they were just a web design firm.
On the low cost of sales, there are many software companies that really don't understand how to capture their increasing return. They market to their existing customers at the same cost that they market to new customers. They use the same comission structure for sales to existing customers and new customers. They let their sales reps throw away existing customers, because they can't make substantial commissions from them. They decide to shoot themselves in the foot.
So while selling to new customers is done cheaply enough by 37 signals, other companies can make more money on subsequent sales by taking the actions necessary to ensure that the 90%-60% upside on sales to existing customers is actually captured, rather than wasted.
37 signals is selling software to the late market masses. Most geeks sell software to themselves, so you end up with feature bloat. When companies finally reach the late market, they would make more money if they arrived with a refactored application, so the view and controller components of their applications could be replaced with something that fits the market. Customers don't know and won't ask. Those customers are usually going to be early market customers, so asking them won't help.
Competition drives new innovative and simpler solutions, which is exactly what 37 signals stands for. Simple, elegant solutions.
Competing with them is incredibly difficult, but adopting their strategies in your own arena is beneficial. It's worked beautifully for us.