Shifting from Product to Reaching More Customers
I recently read a great post by Seth Levine from Foundry Group about Shifting From a Product Company to a Sales/Marketing Company.
He was asking a question that I thought a lot about at Contour, “How do you shift your company from a product one to a sales/marketing one?”
Seth sees a lot of companies, which tells me there are probably lots of CEOs who have struggled with this same transition. Although Contour made physical products, I don’t believe this transition would be any different for a software company. Whether your product is virtual or physical, eventually you move beyond your initial customer base and begin spending a lot more time thinking about how to get more customers.
I agree with Seth’s points that early on companies are focused on their product, initial customers, and proving their business model. It’s true, a lot of founders are really great at building the foundation of the initial vision, product, and team. I also agree that at some point the focus begins to shift from proving the viability of the business to growing it faster. And as an entrepreneur that shift can often be a steep learning curve. He’s also right that the best companies find a way to make a smooth transition, creating tight feedback loops between departments.
Having lived this, I think there are three things you can do to help make this transition smooth:
1. Make A Clear Definition of Success
Early on, often before you raise venture capital, you want to create a clear picture of what the future looks like. That picture can include a range of things such as how you define your culture, values, employee morale, size, revenue growth, market domination, etc. Equally how you define success could range from world domination (e.g., Square) to building a small company focused on great products (e.g., 37 Signals).
Whatever the definition for success is, the best companies know this early on. They are already thinking about how they transition from their initial customers to growing the business. So when they do raise venture money they are clear about what the money is for and how they are going to use it to complete their ultimate vision.
At Contour we weren’t clear early on about what we wanted to be. At the core we were always focused on building great product, but along the way we didn’t shift our priorities from the best products to reaching more customers. We weren’t sure if we wanted to lead the market, follow the market, just make the best products, be a niche brand, etc. Instead we invested a little bit everywhere, never recognizing when we should shift from satisfying our early customers to a focus on how to reach a lot more of them.
2. Every Company is Building a Brand
Just because you are a product-focused or technology-focused company doesn’t mean that you aren’t building a brand. You are.
No different than Apple, your brand matters. The name, what it stands for, what it feels like, even what it smells like. Some of the best technology companies have built the stickiest brands. Look no further than Google, who through Marissa, was obsessed with its brand. I’m sure there was a lot of tension within Google about what was considered on brand, regardless she was consistent in protecting its image. Another great example is Intel. Technology at its core, they spend serious dollars to brand “powered by Intel” at a consumer level to make no doubt consumers wanted their technology.
If you recognize early on you are building a brand, it helps to lift your head up above the product/technology and begin thinking about how you are going to scale your platform.
3. Don’t Divide Your Organization
A traditional way to see the world is to divide the company between the functions: sales, marketing, product, finance, operations, etc. This is consistent with how we are taught to run a company and with how people view their roles within the organization. This is even consistent with how Seth phrased it, shifting from product to sales/marketing. I have come to believe it’s the wrong way to lead a company, especially early on.
It’s true your company will have specialists that can handle customer relationships, design things, write code, etc. But it doesn’t mean all of these people have to be working on different objectives.
If we remove the functional titles for a minute and talk about what the company is trying to accomplish it becomes much clearer. Early on you are finding your customer and building a product to satisfy them. As Seth says you are constantly cycling between customer feedback, improving the product, and getting more feedback. This process can sometimes take years until you have built a great product that your customer can’t stop using with a business model you think is sustainable. To do this well you often hire designers, engineers, and product managers. Before you know it your team is great at understanding the customer need and building a product.
Skipping forward you decide you want to really “grow” the business. If we forget the traditional functions of “sales/marketing,” and rephrase the objective, we’d say the goal is to get more customers. The more customers, the more revenue, and hopefully the greater the profits. There are a variety of ways you can grow your customer base. Getting new customers could be through adding new features (product), hiring people, traditional marketing efforts (social, advertising, SEM, etc), or even traditional sales efforts (sales teams, distributors, affiliates, new channels, etc). The important shift here isn’t the shift in hiring more sales people or more marketing people, it’s the shift to recognizing the most important thing is to get more customers. If the whole organization is thinking about this, including engineers, I bet you would come up with a variety of ideas and priorities to meet this. And instead of just the sales guys thinking about sales, you involve the whole team.
I believe the best companies focus the whole organization on a few priorities and therefore get the mind share of every employee towards the same goal.
Lastly, don’t rule out the need to shift the mix of your team mix, especially if your business isn’t generating enough cash flow to support the people you hired and your new growth objectives. At least by making these changes it would be clear to the whole organization that you are focused on growing your customer base.
In the end if a company is trying to make a hard shift, it’s a difficult place to be. It’s true the market can move on you and sometimes you are forced to make a quick pivot you didn’t expect. Evolving your focus from the needs of your initial customers to gaining more customers to support your growth, doesn’t mean you have to shift the soul of the company.