So You’ve Out-Innovated Your Market

It’s 2013, and I’m running Product Management at Digby, a fast-growing mobile startup with a mobile marketing platform that allows you to send location-triggered notifications through your mobile app.

Retailers love it. “Wow!” they invariably say when we show them how a native app on an iOS or Android device can greet customers as they walk into store, send them a return coupon when they leave, or target anyone inside certain indoor or outdoor areas with a “blue light special.”

We’ve even signed contracts with a couple of very large retailers for very large money. Everything is awesome.

Then one day, one of our best salespeople gives me a call. “Doug, I was at the mall the other day and as I walked around I searched the Apple App Store for apps of different retailers. Do you know only about a quarter of the retailers there even had apps?”

“Yeah, that sounds right,” I reply. “But that’s just mall retailers and we still have a really big market. Let’s just focus on the part of the market where they’ve already got apps.”

The First Step is Admitting There’s a Problem

I was rationalizing. What I later came to realize is that committing to native apps was just the first step. Most retailers with apps still weren’t even using notifications with their apps, much less location-sensitive ones.

You see, everyone in your market will say “wow” when they see cool technology that could have a great impact on their businesses. But investing in it is a completely different thing, especially when innovations exist that have been around a longer time and are more widely adopted where they could choose to spend their money.

Our salespeople continued to report a lot of great first meetings, but few second meetings. We had a competitor who was making serious hay by focusing on simple blast notifications, not the cool location-sensitive ones. Despite our early success, it began to dawn on me.

We had out-innovated our market.

What’s a Product Owner to Do?

In this situation, the worst thing you can do is decide to hang around and think “the market will catch up to me.” The market moves toward innovation at a glacial pace. This is why so much of startup success is based on timing. You do not have enough time to wait, even if you think you do. Here are some real solutions you can consider:

Solution #1: Innovation Concierge

One thing you can do is essentially provide services that makes the innovation more turnkey. Don’t have a native app? We’ve got native-app-in-a-box with our tech already integrated! Don’t know how to write and execute on a marketing plan for mobile notifications? We’ll write it and we’ll even do it for you!

This can work. For us, it didn’t. There was too much work for the concierge to do for most of the market, so it was just too costly. We developed and tried to sell app-with-notifications-in-a-box, but it was too much for a retailer to chew on.

An example of where this DID work is for Bazaarvoice, the now-public-once-startup whose major success was launching product ratings and reviews for nearly every retailer who is online. A big hurdle for retailers was moderating those reviews. No retailer was equipped to filter reviews appropriately themselves, so Bazaarvoice just bundled that service with the technology. They made it turnkey, and it blew up (in a good way).

Solution #2: Expand Your Market

Early adopters make up 10% (or sometimes less) of any market. One way to keep the party going is to expand your market so that the 10% gets bigger. Ways to expand your market are diverse. You can extend out to a new persona/segment. If you are targeting the Fortune 1000, you can come out with a version of your product that is targeted at small-to-mid-sized businesses. This is an investment, but sometimes it can be a matter of packaging or small product modifications.

We thought about doing a few things in this direction, but ultimately there wasn’t any way for us to do it that was easy cost-effective. We were a bit too painted into a corner market and technology-wise.

Solution #3: De-Innovate

It’s the most painful thing that innovation-minded teams can do, but you have to build backward toward your market. If your product is the advanced course, build the introductory course and use that as a bridge to the advanced. Instead of being the core of your offering, your advanced tech becomes your differentiator.

This we did, and it worked reasonably well for us. We built backward to handle simple blast notifications, and started to add well-trodden features like ways to target segments of users. These were things that marketers at retailers were already doing with email, so this felt much more familiar and less risky. Being able to send blast messages on mobile first and then step up to location-based messages helped us unlock another part of the market.

Out-innovating your market is a common problem that kills many startups, but it doesn’t have to be deadly. The sooner you see the signs and adapt, the better.

In Sales, the One Big Difference Between a Coach and a Champion

In any complex sales process, whether it’s selling your product to a company or selling yourself in a job interview, you have to have a Champion.

Most popular sales methodologies include the concept of a Champion, sometimes called a Sponsor or even a Fox. The Champion, simply put, is the person that sells you or your product when you are not in the room. He or she is your “person on the inside” and is absolutely essential. When I have managed in enterprise sales, I haven’t allowed an opportunity to be forecasted at more than a 50% likelihood to close without an identified Champion.

The Champion is by definition not the Decision Maker / Economic Buyer, since when the Buyer and the Champion become the same person then it’s game over and you have won. The Buyer is undecided or objective, and the Champion thinks you should win and is not afraid to say it when appropriate.

But not everyone who likes you and your product at a prospect is a Champion. Oftentimes they are a Coach. What’s the difference?

Both a Champion and a Coach want you to win, but the Coach doesn’t have the influence on the Buyer to make it happen. The Champion does.

When recognized as Coaches, Coaches are great because they can guide you on who’s who in a sales process, what the true decision-making criteria are, and even what competitors are up to. They are often good people who you have a lot in common with — since you both clearly agree that you and your product are awesome.

But they can also be a dangerous distraction, because they can suck up time and resources that you could be using to build a Champion or access the Economic Buyer. And sometimes they might position themselves as your Champion, telling you they have the influence to help you win, when in fact they don’t. (By the way, this is not usually intentionally misleading, most of the time they really think they can help you win).

So how do you really know if you have a Coach or a Champion on your hands? Here are some hints:

  1. Coaches typically have more time for you. Coffees, lunches, calls. Champions typically don’t. Champions tend to be less available. This is not because they want you to win any less, it’s because they have earned a Buyer’s trust they are careful not to damage it by being too buddy-buddy with you.
  2. Champions can get you appropriate, direct access to the Buyer.Champions don’t feel threatened by the possibility of being “out of the loop” because they know the Buyer will involve them in any decisions anyway. Coaches may hinder your access to the Buyer because they know if they don’t keep themselves in between the Buyer and you they might not be involved at all. Coaches may be using this process to build a relationship with the Buyer, Champions already have one.
  3. Champions lead you. Champions tend to have leadership skills and you will sense this in working with them. One of the best Champions I ever worked with had me put together a whole custom ROI model for her to use with her boss (the Buyer) to sell our product. I was more than happy to do it, as I knew to trust her instincts on what would work to get the sale. Coaches will tend to have great information but won’t be proactive about what to do with it — you’ll need to lead them.

Ultimately, beyond these tips you just have to use your intuition and look for clues that tell you whether you have a Champion or a Coach on your side. If you aren’t sure, don’t be afraid to challenge your new ally to help you get to the next step — the way you would challenge a good teammate. If they respond and you make progress together, it’s a great sign.

Don't Get Stuck on Product Defense

It’s 2014, and IBM’s Enterprise Content Management software practice, built around the very successful but aging FileNet on-premise document management software, is feeling the heat from the Cloud. Dropbox and Box, among others, are starting to bridge into the Enterprise and poach customers.

As a response, IBM puts together a team and issues a mandate — build a cloud-based product to compete with Dropbox and Box.

So the new IBM team does what most good product leaders do when they plan a product — some version of a cost-benefit analysis. What should we put in the product that enhances the core value of the product the most and costs the least to build?

This works well, but using this filter alone ignores a very important part of the roadmap equation: your competition. A properly paranoid product leader knows that there are other people like them out there building similar products, and those people probably have more resources and are at least as smart as you (and may be better-looking too).

One very simple way of looking at your product roadmap from the perspective of competitiveness is to ask a basic question: which features are offensive, and which are defensive?

Offensive features are features that further enhance your differentiators, things that your competition doesn’t have and can’t easily make. They press your winning advantage.

Defensive features are features that your competition has that you don’t, where you’ve admitted you must fill the gap in order to compete better. These plug places where you are leaking customers.

Mark every feature in your roadmap as offense or defense. Be honest with yourself. How does your game look? Is it balanced? Is it too focused on only offense or only defense?

There are many ways to match your mix of offense and defense to your market position, but the main sin you want to avoid is playing too much defense. If more than 1/3 of the time your team is spending is on defense, you are starting to “chase the competition” and that is where products (and their companies) go to die.

The IBM Team built and launched a product called IBM Navigator. I got to use it, and it was a good product. The promotional video is still up on YouTube.

The problem was that the product was 95% defense. “Build something to compete with Dropbox and Box” had become “Build something like Dropbox and Box.” And as such, it was dead on arrival. A year later IBM smartly decommissioned Navigator and announced a partnership with Box.

So check before you build a product, check while you build it, check after you’ve won and are tempted to sit back and stop pressing your advantage.

Stay (mostly) on offense and if you have to lose, lose making something unique.

How to Price Your Product

Pricing is part science, part art, all anxiety. No one wants to leave money on the table by going out too low or get no takers by going out too high.

The good news is that regardless of where you end up, you’ll have opportunities to adjust. And the process itself helps you understand the monetary value of what you are doing, and can generate tools and spot problems that have nothing to do with what you are going to charge.

No process for pricing is perfect, but here is a good general approach that I like to use based on the many mistakes I’ve made . . .

1. Start by determining your Cost-Plus Price. Understand everything that it takes to provide your product or service, and then add in the margin that you need to cover overhead and make the business operate profitably. You probably (hopefully) won’t use this as your price, but this is a very important starting point. Even if you decide to price at a loss temporarily to gain market share, you need to know you are doing it.

2. Now build a Value Model for your customer. You should already have an intimate conceptual understanding of the problem that you are solving, so now your job is to figure out how that solution results in tangible money being made, or money being saved (or sometimes both). What are the value mechanisms in your solution? You have to get this into a spreadsheet, which can be painful but worth it. Key Tip: Build this as if it was something your customer would build to justify buying from you, even show it to them and test it with them. This model has to be realistic, not optimistic.

3. Derive your Value-Based Price from the Value Model. Now that you understand how much value you are creating, what do you think you can charge for that value? In tech I think a good rule of thumb is that your price should be 10% or less of the value because tech investments are risky to buyers, but it depends on what you are selling.

4. Look at Comparables. Now that you have Cost-Plus and Value-Based Pricing, the third key input is to look at other similar solutions. Competitors are obvious comparables, but you should also look at similar solutions in other industries or other contexts. Products that are in the market know things that you don’t, and your cost structure and value model might be wrong. Even if you are right, one terrible thing about startups is that you might have a big competitor who is underpricing, either intentionally or accidentally, and that fact alone can override all of your beautiful spreadsheets.

5. Put One-Offs Aside. You may have that one early customer that wrote a unexpectedly huge check for your tech, or you might have asked a few friendly customers what they would pay. We have a tendency to weigh that information heavily, but those data are fraught with sample size and biases. Ignore them for this exercise.

6. Set the price. More than likely you will be charging more than Cost-Plus and probably less than your highly optimistic Value-Based model.

That’s the science, the rest is art. Your pricing must align with your go-to-market strategy. Are you premium? Your price should be higher than comparables. Are you the low cost provider? Obviously you should be cheaper. Your price sends a message, so make sure it makes sense when taken in combination with the other messages you are sending.

Now test, adapt, and make that money!