Inherent Stickiness

In the startup community, especially among SaaS companies, there’s frequent discussion about making products “sticky”. While Health IT and on-premises solutions are often cited as naturally sticky, we need to examine what stickiness really means and how to achieve it sustainably.

Understanding Stickiness

Traditionally, a product’s stickiness is measured by its barrier to exit. Health IT is considered sticky because the barrier to entry is high, making it difficult for hospitals to switch products. Similarly, on-premises software is sticky due to lengthy implementation cycles.

But this common understanding is flawed.

Rethinking the Definition

A truly desirable product should have:

  • Low barrier to entry (easy to adopt)
  • High barrier to exit (hard to leave)

This combination is rare, as most “sticky” products have high barriers to both entry and exit. This raises an important question: How can we increase exit barriers without raising entry barriers?

The Power of Convexity

The answer lies in convexity - the non-linear growth of benefits from linear growth in cost. In simpler terms, a convex product offering incentivizes multiple product purchases by creating additional value through integration.

A Tale of Two Companies

Consider two enterprise software companies:

Rick’s Enterprise Software (RES):

  • Offers CRM, Supply Chain, and EAM software
  • Products are tightly integrated
  • Multiple products create more value than the sum of their parts
  • Exhibits convexity

SaaS Corp (SC):

  • Same product categories
  • Products are completely siloed
  • Linear benefit from each additional product
  • No convexity

The Strategic Implications

This difference in approach leads to interesting strategic choices. Consider two companies with equal market share:

  1. OPS: Decides to add on-premises options
  2. CPO: Chooses to add new products to their cloud platform

The convexity approach (CPO) creates natural stickiness without raising barriers to entry, while the on-premises approach (OPS) might increase both barriers.

Key Takeaways

  1. True stickiness isn’t just about high exit barriers
  2. Convexity creates sustainable competitive advantages
  3. Product integration can create natural stickiness
  4. Low entry barriers with high exit barriers is the ideal state
  5. Strategic product decisions should consider convexity potential

Conclusion

The path to creating sticky products isn’t through artificial barriers, but through thoughtful product integration that creates increasing value for customers. This approach allows companies to maintain low barriers to entry while building natural resistance to exit through genuine value creation.