Fail to Scale — Part 2
Thinking that you know your customers
This is the 2nd part of a 4-part series on why early-stage tech startups can fail their first few years trying to get into business, due to common and unfortunate circumstances created by their founders, that should, in this day and age, be easily avoided.
In the first part of this series, we explored why domain expertise, the most revered quality of a new startup founder, can hinder or destroy product development if it is allowed to control all aspects of the product business from day one — especially when you start hiring others into the company.
In this part, we are going to explore how Boards, CEO domain experts, and other executives end up driving the business from sales, and beliefs that they are the only people that understand their market and their future customers desire.
Can we at least agree by saying that there is no shortage of people out there who want to influence your product company, or your product teams, to ship (on include) their brilliant ideas? The bigger your business is, the more people will want to contribute to its success. Do we agree?
I think this aspect alone is what makes working in the product world sexy, and desirable to most people who are exposed to it!
Creating compelling things that people want to buy from you (selling like hotcakes) is an intoxicating game to play, and an exciting one to win at — even just a little bit. There is something about this game that makes people revere you. And who doesn’t want to be a household name these days?
So, please bear with me on this one while I tell you a short story about how this game is played in big tech companies first, and then we will see how this game is played in small startups, and why the comparison at all.
In Big Tech Companies
I’m now talking about large, global, multi-product companies, like Apple, Microsoft, Google, Adobe, Samsung, etc. Where those companies create hundreds of products and have hundreds of product teams inside them. We are not talking about startups here. We are talking about product teams at scale. These companies already know how to do “product”, and surprisingly for many, they make plenty of failed products too.
With these giant companies, there are literally thousands of people who are lining up daily to influence their product teams on what features and opportunities (of theirs) those product teams should be going after. Not just people from outside those organizations, but also people internal to their companies too! And it is not just the customers of those products, but it is people from everywhere in the ecosystems built around those products, as well as usual fans, and critics too.
Ignoring the fans and critics (and the commentators), let’s look at three of the more intentional and supported groups, that you would certainly see if you were working in the product function of one of those giant companies.
The Early Adopter / Alpha Tester
Starting on the far left, are the early adopters (the alpha/beta program users) and the large account customers. These are the first group to get most of the attention of the product teams, because the product teams are intentionally validating a new opportunity in the marketplace with their product, and these people are willing subjects (in a credible position) for the product team’s initial discovery work.
Those early adopters, as individuals themselves, love to be seen to be helping out the product teams from these giant companies, by sharing their ideas about their vision of the product and what it could/should do. Why is that? Well, sometimes it’s because it’s more exciting work than their day jobs, which might be mundane to them, and sometime’s they are bemused as to why a renowned company is interested in how they do their boring day job. Sometimes, it's just cool to be able to say that Apple or Google added that new feature to their [well-known] product because they suggested it!
After all, who wouldn’t like that sort of attention? from these tech giants?
Yeah?, No? Let’s see.
Let’s say that I worked as a Principal at Apple, and I invited you, all expenses paid trip (flights included), to come to visit the Cupertino campus for a week in Silicon Valley, and have you share (with an audience of top product designers in the world) all your brilliant ideas about how to improve Apple’s new innovative mobile product.
You’d probably find a way to make sure you made that trip, for sure — am I right? Yeah, I thought so.
So whilst you may never have had that experience, and possibly can’t really relate to it, it is happening every day all around the world for a bunch of people. This is what it is like to be an active early adopter, and have the attention of a big-tech product team.
Enjoy your free lunch, the swag, networking, and the taste of the cool aid!
The Sales and Services Reps
The second group is the Sales and Services reps. These are consultants, account managers, and pre-sales folks who will be selling the product as part of their own sales or services engagement — that they have in their pipeline. They need their client to buy this product (whatever it is) so that they can close their proposed “solution deal” with that client.
These reps can be part of the same product organization's “sales and services” business unit, or they can be 3rd party resellers or from sales partner networks, or from other such organizations.
For example, at Microsoft, we had a worldwide business unit called “Microsoft Consulting Services” containing technical consultants, and we had the “Microsoft Sales” team containing account managers and technical pre-sales in every country around the world. Together they were affectionately called the “field” of Microsoft. Then on top of that, Microsoft has a gigantic partner network of other sales, services, and consulting companies, all selling Microsoft products as part of the services that they provide and sell. For example, the Cap Gemini and Accenture’s of the world are examples of the big ones, there are thousands of smaller companies in every country doing the same kind of thing. They all consider themselves to be tech services companies. You name them, just about every software solution provider in the world — there are hundreds of thousands of them around the world.
Now, the clients of these sales and services organizations are generally medium to large enterprises that could be buying hundreds/thousands of licenses of any given product — from a vendor like Microsoft, Apple or Google. Therefore, the sales/services reps will be wanting the product teams of those companies to make their client feel special and cozy, and well taken care of, since they are spending millions of dollars with them. There is nothing quite as good for the ego of these CIO’s to have a tech giant build a special feature just for the CIO’s company— whatever it may be. If this sweetener isn't on offer, or the product team doesn’t want to play these games, then the client may not feel all that special anymore, and since these deals are generally massive in terms of revenue, those clients may simply decide to select another solution that includes another similar product from a competitor vendor, and trying to get a better deal from them. This is what keeps those Sales and Services Reps up at night, when trying to close these big deals.
We called this game “My Customer” at Microsoft. Where the currency of these negotiations is “how much perceived lost-revenue FOMO” can a sales/services rep induce, to coerce the product team into including their brilliant ideas into their product, so that could land this one client deal, and others like it?
From the product team’s perspective, this is a brutal game to be playing. Can you imagine how many of these kinds of these “peacock” and “dog and pony” shows a product team has to endure? each and every year? and how many clients and partners do they have to endure listening to their guesses about what will work for the mass market for their product?
Obviously, if you think about it, those product teams can’t be including all of these customers’ feature requests into their core product. It would be an absolute disaster for their product. Therefore, they are necessarily very good at saying, “No — piss off”! Much to the frustration of the Sales and Services reps who are trying to impress their clients!
The Job Seeker
Finally, we have the humble Job Seeker, who simply just wants…..to get a new job on the cool product team.
They probably like the product space or the vision of the product, and they may even have some affinity or expertise in that product space or its direction. They sure like the idea of getting kudos for designing and shipping all the new cool features of that product themselves. The more of them they can claim was designed and built by them, the better.
Nothing wrong with that, but they, too, will be smooching up to the product teams and sharing their ideas, as a way to demonstrate their interest in working in the same team, with like-minded people, who care about the customers or domain of the product.
OK, so now you have seen three identifiable groups of people, in big tech, who want to have their ideas make it into a company’s product. Who all think they are in a unique position to influence and predict the future success of a product based on their own ideas.
Now, let’s go back to the startup world, and see how this relates in that world.
In Startups
Well, it turns out that the same influencing groups do, in fact, exist in all startups as well!
They are just at a wildly different scale, with different names, and with people that you may not expect to have the same motivations!
Perhaps I don't really need to describe these groups in detail to you. They are all familiar players. You may have all three of these groups, or only one of them in your startup, depending on the scale and maturity of your startup.
Unlike in big tech, these groups are, in fact, “committed” to the success of the product business, in one-way shape, or form. So, that’s good, but, this is also bad because their ideas and suggestions are, thus, far harder to ignore (as certainties) by the product team unless the product team has strong and experienced product leaders on board early in the startup, who can challenge and negotiate effectively with these groups.
And this fact alone is the most dangerous part about startups that have no strong independent product leadership — and who just leave this job to the CEO, along with sales, finance, and payroll.
For those that don’t have strong product leadership, a CEO domain expert will likely be driving what gets built (in “their” product) based upon confirmation bias of the [fluid] ideas in their heads. Who constructs appealing solutions on the fly, derived from conversations, deals, and sales meetings made with whomever in the market will engage with them on any part of their current vision. Then, when the business is struggling to make revenue in some arbitrary time frame, and the CEO reports (to the board) that it is because no one is buying the functionality that they have, then it opens the door to board members and other execs who might be willing to step in and offer their suggestions and ideas about what will sell to whom, for sure.
All these influential groups may not yet understand that pushing their ideas into the product can actually be damaging to the future of their own product company. Because that distracts and randomizes their own product teams from doing their own discovery work in the market, and pursuing the opportunities and truth that come from the market.
These groups in startups need to understand a few truths about themselves and their biases:
- They are not actually the customer of the product being built (end-user or buyers). They never were, and never will be the customer. So whilst they may have well-informed guesses, based on past experiences and information they gather, “guesses” are still what they are. They are not certainties, and so acting on them as certainties, often just results in wasting more precious resources, and increasing the anxiety of everyone who is already under much pressure.
- No one, no one, can know ahead of the product-in-market, who will actually buy it (and for what price) and when, for what reason— until those buyers see it first, or see hard, hard evidence that others have sworn by it, before them. This is why it is so important to get something imperfect to market, rather than hold it back from the market by trying to perfect it first.
- Making suggestions and projections about how the product should work (in terms of features) is simply not the job of the Board, CEO, or Sales/Marketing/Finance executives — no matter what the extent of their domain expertise is. Tech product innovation does not come from executives. It comes from the “makers” of the product. Those makers need to be fed vital information from various sources (sales and customers) to inform the creation of those innovations. But it needs to come in the form of problems, struggles, and pains that customers actually have. Not in the form of solutions, ideas, and guesses that assume certainty in success from executives. Sales and Marketing are, in fact, supporting services for the Product, not the creators of the Product.
- Lastly, knowledge about how the market behaves is best understood by those building directly to the market's existing behavior, from those using the product that is already in the market. Not derived by promises made at the negotiating table of future Sales. This kind of work is best done by the product function of the business, to discover, refine, and improve based on actual evidence in the market. Good salespeople know that what is said in a Sales context is not an accurate predictor of an actual Sale. It’s a game of managing objections and looking for a win-win. So acting on delivering things to those negotiation points does not guarantee a sale.
Second-guessing and then dictating features of a product (from positions of authority in an organization) is highly risky since it automatically assumes success without validation, rigorous testing, and solution refinement in-market. Without these processes, it is just all about the delivery of a “bet” that has already been refined and placed by an individual acting alone.
As explained in the previous part of this series, senior influential people in a product organization do this kind of thing are risking that no one else (that they command) gives a second thought about the outcome of their mandate. Which is not really an effective and sustainable way to grow a new product company, or refine a product focused on a specific market.
And this is what is so risky and dangerous about this approach in general. Indicative of a company culture that still believes that the brain of the company resides at the top of the company and that those people can second-guess markets based on their own prior experiences, instead of basing it on real-world effects (that actually controls markets).
In Summary
Everyone (you name it) everyone, wants their idea to be the one that makes a startup business go “gang-busters”– it is an intoxicating pursuit.
Not necessarily just for the bragging rights, but also because it is quite some fun participating in the creative, and innovative problem-solving process itself. Especially if it turns out that your particular idea can be attributed back to what actually turned a struggling business around!
We’ve now seen who in startup companies enjoys playing this game the most, and we’ve seen that scaled up to larger companies with similar groups playing the same game. It boils down to the same personal motivators no matter what the scale of the company.
What really can be entertaining, in startups is when you see Board members, CEOs, and sometimes company executives (Head of Sales, Head of Finance etc), all highly experienced people in their fields, who like nothing better than to meddle in this game themselves. Some of them still consider themselves proficient “on the tools” still or consider their advice in this area as somehow supreme.
My advice to all board members, CEOs, and execs of tech startups who are utterly convinced that their ideas will work in the market — without testing and refinement — and just using prediction, is this:
- Publically, put their titles and positional authority aside for a time,
- Roll up their sleeves, and
- Jump in the trenches with the product team and rigorously do their innovating by following the teams’ rigorous design and discovery processes.
- Anticipate that their idea may not work as initially designed and that the job is to prove it actually works in the market, based on evidence, not just to find supporting evidence to show it will work ahead of doing that validation work.
One thing is for sure, those product people in their organization, who are doing this hard process every day, could certainly use those “experts” domain expertise and entrepreneurship, doing their hard work side-by-side with them every day.
In the next part of the series, we are going to see how other aspects of CEO DE’s affect how they behave, and the consequences and outcomes of that.
Next up is about how old habits of serving the customer’s wants, are likely going to destroy your aspirations of making a scalable product company.
