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7 Habits of Effective Early-stage Entrepreneurs that are counter-productive to scale

There’s plethora available on success stories of mega corporations, on their genetic code and on how they operate. There’s also a lot of glamorous coverage on start-ups & start-up leaders as well. We hear of the best practices and management learning from successful large Enterprises, and we also have a plenty of advice for the Start-up leaders.

The Growth BumpHowever, the fact remains that only a miniscule number of all promising start-ups actually break-through to the big league. And for those who do, the script of their painful & paradoxical journey is often oversimplified or just plain uncovered. And one of the most important aspects of such successful transformations – from a successful start-up to a mega-business – lies in whether entrepreneurs are able to successfully transform the genetic code of the organization.

Entrepreneurs & Start-up leaders that are successful in the Jump-start phase are so because of certain effective habits that they either have or have developed during the initial phase. However, the same habits, if carried forward too long become counter-productive to scale for their business. The main reason being that once the business is off the ground, it’s not about the entrepreneur any more, but about the engine that propels the business. Also, entrepreneurs my find it harder to adapt because of the early successes. It’s tempting to think that the same characteristics that brought them a string of successes can continue to play their part as the business grows. And unfortunately, they cannot just bring in a new leadership to take over and do this for them. They have to start with themselves – precisely for the tremendous zeal with which they brought the organization to where it is – and, then infuse new leadership accordingly if needed.

Let’s look at some of such habits, why they are great for start-up and how they become counter-productive for scaling.

1.    The Jugaad Syndrome

JugaadEntrepreneurs are adept at figuring complex situations out, and to find simplistic “anything that works” solutions to keep going through the grind of early stages. That is one trait that’s critical early on when one has to contend with perennial set of challenges with minimal resources. However, this tendency, over time has to give way to intellectual freedom for others in the organization and also a more systematic set of problem solving techniques for the organization to scale. Consistency and Repeatability are important for scaling organizations.

The ability to simplify the complex situations is a great trait in general. However, as the growth requirements demands scaling up, business faces more complex problems posed by variety of employees & customers across the spectrum. A process and systems driven approach is called for, and while that doesn’t have to yield to a more cumbersome and rigid process driven organization, still a more structured approach to handling the commonly confronted situations is required so that people at various tiers can operate on their own at operational level. Hence, the “Jugaad” tendencies have to give way to more structured operations.

2.    Dynamic, or too dynamic for own good

Adapt on the flySuccessful entrepreneurs are masters at adapting on the fly. Early on, this is important because most times the foundations of the business are not validated with the real markets and real customers. Ability to change the direction as required by the market is important in the early stages, even at strategic level. This “Pivoting” is becoming even more critical in the fast paced technology environment, especially in the consumer markets where one cannot always be sure of the right combination of the product, pricing, positioning and promotional approaches. This dynamic thinking, earlier on, helps validate multiple hypotheses built into the business model. One pivots as fast as one can, and as often as one can, until a successful combination emerges or until one runs out of resources. However, once the business model is validated and organization is set to run in one direction, this tendency to shout the marching orders down the hall becomes unproductive because other leaders find it difficult to fall in line at the drop of the hat. This can get chaotic pretty quickly.

This argument against “too much agility”, however, should not be confused with the agility required to be watchful in a fast paced environment, where an empowered team would be able to pinpoint a change in trends and be able to adapt quickly to changing business conditions. The tendency that needs to be curbed is the one where the decisions are made at the drop of the hat without due consideration to how the organization needs to change in short term as well as longer term in response to a changing situations on the ground. And, more importantly, not to disrupt the process of building the operationally efficient organization in the business that is on path to scale.

3.    The Owner takes the ownership

delegationAn entrepreneur takes pride in taking the winning shot. It’s not just the pride or ego, but a sense of duty and sense of right, mixed in one. When the stakes are high, it’s abnormal to think of delegating the authority (looked upon as responsibility). However, this tendency gets deeply embedded in routine decisions. Unless a systematic transition to delegation and transfer of ownership happens, the organization remains a single-cylinder engine.

A scaling organization requires empowerment and that cannot come from “just assignment of responsibility” but through the “true delegation of authority and freedom to take important decisions”. However, what also happens is that by the time the realization to build an empowered team strikes, the entrepreneurs find themselves surrounded by other leaders who are too habitual to take the orders and are unable to devise the strategy on their own. It’s not a matter of competency in most cases, but the way the business leaders get wired into working in a certain way, and looking up for directions. They also get into a habit of kicking the issues and conflicts upstairs that makes the organization slower to respond to urgencies on the ground. Scaling organizations require the Entrepreneurs to let go of the sense of control and ownership, and empower the team in true sense.

4.    The Kingship

Crowning the selfThe initial thrust in business comes from the reputation & credibility of the entrepreneur. This leads to a cycle of further boost of personal branding, further resulting into more business driven in such a manner and so on. It very quickly reaches a point where the Business and the Entrepreneur become synonymous to each other. While that is great initially, an organization looking to scale into a mega-business needs to balance the company objectives against individual objectives earlier than later. In other words, the leaders need to put the organizational goals ahead of personal goals. Even as there is little doubt that success of the company is a passionate personal goal for start-up leaders, the way it happens most times is by putting their personal whims & fancies, and branding, at back seat, and let the organization harness the power of people at all levels. The earlier it is done the better.

Entrepreneurs that are more focused to the longer term scaling of the business need to ensure that the business or the product is branded explicitly with bigger intensity than the owners of the company. I had earlier highlighted on this paradox of Branding as one of the five paradoxes of successful product business. And this remains one of the things that are difficult to fix quickly since branding takes time and change of stance in branding from personal to business is often tough unless done from the initial stages.

5.    Juggling

Multiple HatsAn early stage of a start-up requires the leaders to juggle a lot of balls at once, making them a habitual juggler. It’s an invaluable trait to be able to juggle priorities, handle multiple things at ones across functions, to be able to venture into the unknowns and come out stronger. Great start-ups are known to thrive on minimal resources and require the leaders to be able to act on multiple initiatives at the same time, almost to the point of craziness.

This, however, gets deeply embedded in the habitual code as “uneasiness” and “impatience” with anything that requires systematic and long-term sustained focus. There develops a tendency to kick-off the new exciting projects on the periphery of the organization, which is difficult to do without affecting the focus on core business. Normally, operational leaders are appointed to sustain and expand the businesses that are doing well, which is fine but a scaling business also require the continuing focus of entrepreneurial mind in the core drivers of business. Successful large organizations have spun-off multiple businesses, but they do it upon the successful scaling of the core business, not at the behest of the core. Biting those bullets before the time comes is hazardous to the health of the business.

6.    Networking and Personal relationships

customer-relationsNetworking and relationships are the core strengths of a start-up business. Focus on relationships gets the best out of the organization in order to delight the first set of customers. Early-on in the life of the organization, relationships and personal networks play a critical role across all the areas of the business – hiring, business acquisition, delivery, financing, marketing & PR, and so on.

On Customers front, there are two sides to this coin. Acquisition of new business, as well as sustenance of existing business are driven through relationships, which helps because of the lack of early credentials and referencible successes. The flip side is that these relationships tend to be personal relationships. The customers expect the leaders to show up at the drop of the hat. It’s not scalable for an entrepreneur to show the face and shake the hands at every opportunity to build new business or when there is fire at an existing one. This needs to go beyond the leader at the helm. The organization needs to go beyond personal relationships into professional customer oriented relationship mindset – which is easier said than done once the organization is already growing.

Similarly, entrepreneurs find it hard to confront the performance issues among employees & partners due to the personal and emotional connects that hold most of these relationships together. These connections can quickly become a liability if the leaders (and hence organization) lose the ability to make objective decisions in these relationships.

7.    Heroism

Call-Your-HeroEntrepreneurs tend to demonstrate heroism, and inadvertently (or sometimes intentionally) promote heroism. Start-ups are replete with stories of celebrated heroism – Single-handedly acquiring a new customer, heroically defusing an exploding customer situation, over nightly launching an offering, and so on. Due to the nature of various functions, this heroism is found more in Sales, Marketing, and delivery of larger projects. Sometimes, plain pure planning & preparation – an aspect that gets often overlooked in a start-up scenario, also necessitate such heroism. This is partially also acceptable to entrepreneurs because a start-up typically takes pride in informality (bordering on casualness unfortunately) and flat (or absent) structures.

Start-up leaders themselves set examples of heroism that over time plays down a systematic, well-planned bricklaying approach that a scalable business is built upon. Many times, the heroism culture also inadvertently sabotages any chances of under-played sustainable success, because of the glamor and awards attached to such celebratory moments. However, it has been proven that the most sustainable and scalable businesses are built by behind-the-scene bricklaying executioners. It is important for entrepreneurs to make that transition in the genetic code of the organization. An emphasis on sustainable & repeatable success requires setting up the rewards & bonuses in line with a structured longer term approach, with due importance to the backend jobs in operations, deliveries and finances, while of course not losing sight of any heroics that really save the day in true sense.

Way Forward?

It is obviously a matter of perspective. The same traits that are huge leverage in one situation can be a liability in another.

The point is not whether these traits are good or bad, per se, but to understand where they are effective and where they get counter-productive. Business situations are often complex and it is difficult to pinpoint what is actually holding back the progress of a company. Most start-ups, when faced with complex situations like this, look for help from outside – in the form of funding, leadership talent, or even partnerships and exit plans. However, it is also true that most successful mega-businesses crossed the chasm between the start-up phase and the maturity phase with the core entrepreneur/start-up team still at the helm. While, upon introspection, some of these bottlenecks can be identified, it is difficult to ascertain how much impact some of these habits have on the overall results. However, it is safe to say that recognition of these and an attempt to consciously look at the transition can only help.

Happy scaling!!

PS: This post was originally published on YourStory as 7 Habits of Effective Early Stage Entrepreneurs that are counter-productive to scale

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Drinking from the firehose at iSPIRT PlayBook Roundtable (on Effective Product Management) at Delhi

When nearly two dozen product enthusiasts sit around a table passionately talking for 4-½ hours, expertly addressed by two product veterans – Amit Somani and Amit Ranjan, you can expect an information overload. And, it did seem like drinking from the firehose, trying to capture all the takeaways in the intense back and forth, where even a tea-break seemed imposed. A blast it was – this iSPIRT Playbook Roundtable Delhi edition on “Effective Product Mgmt & Delivery”, focused around learning for startups.

[This was the NCR session on Apr 13th. Initiated, as part of iSPIRT, by Avinash Raghava, and very ably facilitated & supported by Aneesh Reddy. Great facility and great Food by Eko Financials. Thanks guys, Awesome effort!!!]

iSPIRT Playbook Roundtable in Delhi (on Flickr)
iSPIRT Playbook Roundtable in Delhi (Click to see all on Flickr)

Thankfully, there was a structure, laid out initially across specific dimensions – Product Planning, Delivering, Hiring, Culture, Metrics, Customer. These themes kept repeating through the session with questions coming from participants across the breadth & depth of product management, and many times touching upon all the aspects of running a product company.

Here’s an attempt to sum up the takeaways from this long & exhaustive (not exhausting, yet!) session.

Planning & Delivering the Product

–       Product Planning in many start-ups is not an elaborate exercise. It is typically handled by one of the founders, and “build and adapt as you go” is the norm.

–       Delivering a great product is always an intersection of Engineering, Design and Product Management, with Product team in the driver’s seat. This intersection and collaboration is one of the critical factors in getting a great product delivered.

–       Getting the Engineers and Designers to collaborate is one of the key challenges. As per Amit R, what helped them at Slideshare was the fact that they always hired Engineers with a flair for Design. A great developer as part of the product team is 70% Engineer & 30% Designer, as per him.

Product Metrics

Amit S emphasized that metrics are very important for product managers. When the team grows (when you can no longer rely on people to just talk to each other and get things done), the metrics-driven product management becomes critical. Touching upon the right hiring in this context, Amit S insists on covering the candidate’s thought process around metrics (with open questions such as – what would be your primary metric if you were designing the Delhi metro).

Metrics & the Rule of 1/1/1: This is one rule around metric that Amit S follows. What will be your metric for 1 Week, 1 Month, & 1 Year. Break it down, with crystal clarity and follow it up religiously. (A great resource for B2C space around metrics is a presentation by Dave McCleor – Startup Metrics for Pirates).

Some learning around Metrics:

–       It is important to be clear of the vision, and how it connects to the primary metrics that you define. There’s a direct correspondence between identification of the key metric and the clarity of what the product is trying to achieve.

–       Relevance of the metrics to the specific goals through the product journey is important. As one goes along in the product journey, the dimensions on which key metrics are identified may vary. Initially it may be customer acquisition; And then it may be engagement; then conversion; retention; life-time value; and so on. 

All attendees at the Playbook roundtable iSPIRT Playbook Roundtable in Delhi

Customers

One of the key questions around customer aspect of product management is – What is the right spec for the product? One of the biggest mistakes product managers tend to make, as per Amit S, is when they confuse the “Customer Requirements” with the “Product Requirements”! Sorting this out is the core to the responsibility of a Product Manager.

Some of the tips & tricks around Product Specs:

–       When faced with a requirement, the first pass criterion (in B2B scenario) should be – if the requirement is relevant to at least 3 customers.

–       There are various tools to interact with customers, and get feedback: Surveys, Net Promoter Scoring, Feedback through the product interfaces, and so on.

–       Get the Information from Customers, Tone it down, Tune it further, and then arrive at the specs for “Engineering”.

–       What should the spec typically look like? Default Rule of Thumb – 1 Page Spec. It should be very focused, very clear, in what the feature is trying to achieve, and at the same time not too long.

–       A Good quality spec considers the “Least Granularity of time” with Clarity of thought. That’s from the Project Management perspective.  From the functional perspective, Amazon has a good model that can be followed. Every Spec at Amazon is a 6-Pager Document – forcing people to establish clarity of thought and articulation.

–       Another good alternative is the 1 Pager “Lean Canvas” by Al Ries.

–       Equally important is to figure out Non-Goals – “What is not in Spec”? What are the features you need to remove! (Cue Reference: Joel Spolsky on Functional Specifications and an example Functional Spec.)

–       It’s also important to be clear on “What” requires a spec and What doesn’t. Both at Slideshare and MakeMyTrip, the team goes through multiple “Lights-on” stuff that they need to perform to keep the business running on routine basis. And these are fast-track enhancements and modifications driven by immediate business needs and marketing requirements. The Lights-on requirements are different from Core Functional Specs for the product roadmap.

–       Another criteria that decides how detailed the spec should be is based on the number of users getting impacted.

–       How do you handle customer requests with investment requirements that are not justifiable on the ROI? There are multiple considerations to this. The “Life-time Value” of the customer is important, and if such investments allow you to enhance it and calculate ROI in longer term benefits, it may still work well. There are alternative ways to look at this though. In the experience of Aneesh at Capillary, they had divergent requests that led to a very different direction for the Product and transformed it from “Mobile CRM” to “Intelligent CRM”. Another possibility could be to look at partner ecosystem and see if there’s a synergetic way to address these needs.

–       How do you manage your customer requirements into “Not to have” features? How do you single out the noise? While it is nice to think of an ideal situation of getting the product requirements at the planning stage, when the customers use the product, they often come back with plenty of views that need to be funneled down. When you have to discard some requirements, it is important to “talk to a lot of people” to ensure weight. Also, some of the requirements die-down on their own, clearly indicating noise factor. It is a balancing exercise between reducing the hassles in customer feedback process and creating enough friction to dampen the noisy “Vocal Minority” (the term that Amit R uses to refer to the few customers that may be so noisy that their voice seems more important than is worthwhile for the product).

All attendees at the Playbook roundtableConversations on #prodmgmt

Hiring and Product Management Structure

As per Amit R, Product Managers should be (are!) Second-in-command in the sense that they decide the future of the company. Considering this, it is critical that one single product dimension doesn’t overweigh the hiring process. So, intake process for Product Managers needs to follow the 70% rule – The Product Managers need to be aware on all the broader and holistic dimensions of running the product business including sales, marketing, operations, design, and so on, with 30% depth on the critical Product Management areas.

Some of the specific tips on this from Amit S and Amit R, and some from participants:

–       Determine if the candidate can think holistically and de-clutter the thought process in the crowded set of inputs. Ability to deal with ambiguity.

–       Product management is typically a “common-sensical” thing. Look for common sense and intuitive angle.

–       A great product manager would do well on what can be referred bluntly as “dhandha” (Money part of the busines). You cannot afford to have a Great product with “no” money.

–       One of the participant companies built their structure around Customer Success. Majority of the Product roadmap is driven by the Customer Operations, Tickets, and resolutions – and driven by how customers used and viewed the product in B2B scenario. In such cases, they typically found it useful to move folks from Customer Success team into the Product Management areas.

–       In case of another successful participant company, the CTO is playing the role of Product Manager and it is working very well for them.

On the relationship between the CEO/Founder and Product Managers. As per Amit S, Product Manager is the CEO of the Product, while the CEO is (of course) the CEO of the Business. One of the challenges for the Founders is how quickly they are able to let go he Product Management and start focusing on the business and Product metrics. Amit R also emphasized that it can work cleanly with the CEO focusing on the business aspects while Product Manager focused on the Product aspects while maintaining the alignment. 

Where should the Product Manager Report? At high level one case say that it depends on where you are in the evolution of the product/company, and what the Product really means to the vision of the company. However, over time, Product Management needs to be separated from Marketing and Engineering. In essence, Product Manager shouldn’t report to the Engineering or Sales or Marketing. In corollary, there should not be a reporting into Product Manager as well. Product Manager is a “Glue” job, and is key to a healthy tension for the product direction.

Product Manager is WHAT of the Product – Defines what (functionally) should be built. Engineering is HOW and WHEN of the Product – Details out & manages “How” (technically) and “When” (schedule-wise) should the stuff be built.

One needs to also establish clarity on Product Management being different from typical Project Management. Also, there are strategic aspects of product that are owned by the executive management, however, you always need a “Champion” of the product that is independent of the other forces that drive the organization.

Importance of Data Guy! Another structural aspect that Amit R emphasized on (multiple times!) was the importance of a “Data” person in the Product Team. This role is almost as important as a Product Manager in the sense that Data & Analytics can play a key role in the product Roadmap definition. There are various flavors of the Data – Dashboards and reporting, Product Management level Metrics, Decision Science, for instance. Interesting to note is the fact that at LinkedIn, next set of products are heavily influenced by “Decision Scientists”. (Cue References: Hal R Varian, Chief Economist at Google and DJ Patil)

All attendees at the Playbook roundtable All attendees at the Playbook roundtable

While there was a whole lot of structure to these discussions, we had some extremely valuable side discussions that link back to the Product Management, and very important to address. Here are some! 🙂 

Positioning. For a clear direction for Product Management, the positioning of the product in the market is a key factor. How do you refer to the product? The answer to this question, in case of start-ups, seemed unanimous that the start-ups are too limited in resources/focus/energy to be able to create a new category. Aligning to an existing category with a differentiator is the key to early success. For instance, Slideshare referred to itself as “Youtube of presentations”, Vatika positioned itself as Parachute with Additional ingredients, “Busy” positioned itself as Tally with better inventory management and statutory reporting.

(Positioning is an important theme and comes with lot of related broader areas for considerations for Product Companies. We will have a round-table specifically around Positioning in near term) 

What’s a Product? (A rudimentary question, I know! But worthwhile to hear the perspectives! J) How do you differentiate functional Product Management from the technical side of it? As per Amit R, “Product is the core experience or core touch-point for your end-consumers with your business.” It is worthwhile to note that the various types of customers may have different ways to access the product and there may be different ways to define the touch-points for every segment. For instance, Slideshare follows a Freemium model where 5% of the Paying customers may have a different set of touch-point experience from the rest of 95% free users. So various segments, such as Free B2C, Paying B2C, Paying B2B, and Partner B2B may all have different touch points with the same Product.

How do you get the Product Managers to champion the cause of usability and aesthetics? As per Amit R, in case of Slideshare, CEO happens to be from the usability background and that helped a great deal, since the thought process permeates across. It is important to engrain the usability in the way of the product management, since you cannot bolt it later, as per Amit S. There are various ways MakeMyTrip tries to do that. One of the eureka moments, for instance, for Engineers and developers was when they were shown a “live session” of a user through the Screen capture tool. It also helps to have the live user sessions in front of the product team. Some of these approaches can build that appreciation for the user actions in the minds of product team, over time with sustained effort.

Retention and Customer Lock-in: Slideshare has learned the harder way that ignoring Emails as a mechanism for customer engagement and retention is costly. LinkedIn relies on Email based “Customer retention” and “Returning Users”. Jeevansathi.com uses a strategy to map the customers in various life-stages and uses various Email and SMS templates to engage them even through the very short life-time of 3-4 months.

The Mobile Storm: As per Amit S, having a Mobile Strategy through this year and next year is critical for the product companies. Web is no more the only option, and for some products, it is becoming a mere secondary. Mobile First makes sense. The transactional figures for Mobile are increasing at such a rapid pace, that an afterthought based Mobile based functionality may not work so well.

If this is any indication of the things to come, the product ecosystem will benefit immensely from the initiative. Looking forward to the furutre editions, and share more!

Please share your views!

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The Great Facilitation ballgame of Multi-sided Business Platforms

Let me start with a simple question. What is common among these, as of 2006 (and, for that matter, even as of today)?

– Visa
– Sony Playstation
– Orbitz
– NASDAQ
– Microsoft Windows

All of these are known examples of facilitation based multi-sided business models. These are not just products or businesses; these are platforms, in the true sense of the word. These platforms have, some even in industrial and so called traditional businesses, created value by “facilitating interactions & transactions” among various groups involved. They depend on network effect to kick in, and then thrive big time.

The concept of the two-sided markets is not new. In fact, the newspapers might have been among the first to exploit it, through low-priced subscription subsidized by the sponsors paying for advertisements.

Networking Events and conferences have been a great example of a non-tech two-sided platform, and they are sold on the same direct benefit as well. The sponsors subsidize the participants’ fees, and hence get presumably higher visibility. Participants get to network; sometimes get direct information or sales leads; and pay for it unless in some cases, fully subsidized by the sponsors.

However, these business models, as represented by the examples above, were still very few & far in between until few years back.

The business world, since, has changed. And, drastically so!

Google and Apple have become the most valuable brands in the world. Amazon, that revolutionized the Books & Publishing market through the e-Commerce strategy, has since transformed itself into a Platform company. Facebook, Twitter, Instagram, and recently Pinterest have become the household names, beyond the tech world. Travel, Hospitality & Commute have become well-integrated platforms driven businesses – driven through online technologies and ground-level operational integration.

HOW SONY FALTERED, AND HOW APPLE & GOOGLE PROPELLED

Let’s take an example of two companies that seem to be very similar on products stack otherwise. Apple and Sony. Sony actually brought upon the concept of music that you could carry, with its revolutionary Walkman. Apple came in very late, with iPod. Sony has had a premium quality tag in computing machines (with Vaio) for a long time, while Apple’s Mac slugged it out in its own creative/designer/geek space. Sony even had the earliest starts with its Reader as long back as in 2006! They even had a great idea of Reader being the platform, and got the leading publications in Japan to take note that time. Sony, a very relevant company even today in tech world with the quality and huge brand image to boot, (interestingly, it has had at least one product in platforms category in Playstation) has fallen to 31-Year lows. They continued selling products in silos on their own standalone benefits. They are a product company, still a great one, but that doesn’t seem to be enough!

On the other hand, Apple had an iPod – as a standalone “take your music with you device”, around 2001-02. With iTunes, it took the first steps into a platform around 2003. However, it has since transformed into a true platform company, with its formidable all-integrated business strategy that brings together computing, entertainment, and business. iTunes is a comprehensive AppStore, and not just a music store. Apple is a multi-dimensional company at its best – it brings multiple beneficiaries together in this multi-facets products business. iOS developers and Applications users. Musicians, music companies and Music lovers. Local or global businesses and their customers and fans. We’ve even started seeing the serious Enterprises making Apple devices the central to their CoIT (Consumerization of IT) and collaboration strategy. iPod, iPhone, iPad, Mac, iCloud – they sell products but they’re a platform! And, in Feb 2012 Apple became the most valuable company in the world!

Google is an obvious name in the multi-sided platforms strategy. They took forward the newspaper ads model and applied it to search beautifully. And now, with the Enterprise businesses as well as their ever-growing list of vehicles – in GMail, Google Apps, Android, Chrome, Maps, Drive, and so on – have established themselves as an formidable Multi-sided platform. At this time, there doesn’t seem to be a limit on what vehicles Google can choose to drive their platform strategy. Microsoft is now fighting it out on its own turf while Google and Apple make inroads into its huge Enterprise foothold. (This also points to another trend that I’m planning to write about – the blurring of lines between Business & Personal Technologies).

SO WHAT?!

This era clearly belongs to the multi-sided Platforms based business. It’s important, however, to not confuse this with the traditional definition of platforms in technology space. The true business platform is the one that is driven by facilitation and network effect, and which actually has multi-sided business model in the sense of heterogeneous set of beneficiaries that are not directly connected to each other. It is also important to note that this disruption has been caused not only by technological evolution, but also the interlinked effect of the other disruptive patterns such as “Long Tail” and “Free”, both terms made popular by the very respectable Chris Anderson. I will touch upon these in the next couple of posts as noted in my cover post on Game-Changer trends.

If you’re in a business – whether technology or not, whether e-commerce or not, whether products or services – don’t ignore this trend. Think about how you can leverage on this model, or be part of this ever-growing multi-cog machine that benefits all its gears. But, if you really think details, it’s not just a marketing gimmick, and it’s not just a tweak in the product. It should become the foundation of how business of your product is conceived, strategized and operationalized.

PS: This post originally appeared on my blog, but I thought it’s worthwhile to post it here. Very relevant, hope you find it too!

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The little Spark with great promise – Inaugural #PNMeetup on Pricing for Enterprise Sales

When a bunch (around 45-50, I didn’t keep the count) of Product enthusiasts – with experience accumulating into decades – gather at a single place to share their learning on specific topic in a compact & well-moderated session of 2 hours, it’s worth every bit. That’s how I felt coming out of the inaugural session of #PNMeetup – Pricing for Enterprise Sales: Specific & Important Topic, Quality Participation, Richness of Experiences, and Quality Conversations.

The location, Hauz Khas Village in New Delhi, carries a constant buzz and energy. Very apt for a meet-up like this. Kunzum Travel Café (Thanks for being a great host for the event!), should be happy because participants used up every nook & corner of the place. Many of us had to settle down on the carpet with no more sitting or standing space left! Of course, the snacks & coffee was great too. But, that’s not what everyone coming in was specifically looking for (especially since the last 500 yards got harder to make with the traffic and parking situation ;-)).

We were looking for some great (practical, experience based, relevant) conversations and takeaways on Pricing. And, there was plenty of it, coming from speakers as well as from the participants. As much as is possible in 2 hours of time, that is, also thanks to some great moderating & counter-questioning by Arvind Jha during speaker sessions, and Rajat Garg & Vivek Agarwal in the un-conference session.

Tushar Bhatia, Founder of Saigun Technologies, set the tone for Enterprise Products Pricing by sharing his experiences on Pricing Strategies and Sales tactics. Tushar emphasized that Pricing is not a linear decision, but a complex process and subject to assessment from multiple parameters. He also differentiated the Pricing Strategy from Sales Process. Pricing, as per him (in the context set of Business Planning, Scalability, Consistency, Standardization, and a reflection of the Value Proposition) is a guide at broader level, while on sales tactics front, one should be willing to consider the customer & geographic circumstances as well. The decision matrix for Pricing decisions typically is pretty complex, and a product undergoes multiple iterations of pricing models

Pricing for Enterprise Sales
Pricing for Enterprise Sales – Tushar

before arriving at the sweet spot. However, various types of customers may need to be assessed in their own contexts when deciding on a deal pricing, especially in the traditional Enterprise Sales scenario.

Tushar also emphasized that the Enterprise Licensing deals should consider not only the product pricing, but also the other costs (such as, hardware) and provisions (such as, for Product Support). The considerations on TCO are critical, because the customers assess the products, not only functionally, but also very critically from an operational viability perspective in longer term. Tushar also laid out few questions that need to be answered while deciding the pricing model. The detailed presentation from Tushar on “Pricing for Enterprise Sales” can be found here.

The discussion, then, veered towards the product pricing strategies in areas such as Telcos, serving also as a cue for Tarun Anand (CTO & Co-founder at Semusi) to pitch in and provide his perspective. He shared his experiences in working with the big Telcos on working out product strategies and pricing models. They tried out various pricing models, in partnership with Telcos especially, and had mixed results over time before arriving at something that seemed to work. However, pricing remains a volatile when dealing with the larger partners and in more complex ecosystems, such as Telcos.

In Tarun’s experience, one needs to ascertain that the partners in the ecosystem are ready to take your product to the market if that is the expectation. It is also important to ensure that the pricing terms & conditions are clear, and you are able to hold the customers as well as partners accountable in the operational limits as much as you can. After all, you want to focus on running the business and do not want complications of financial & legal nature. In the context of Pricing and products strategy, in areas such as VAS, as per Tarun, one needs to be very careful. “VAS is dead” in his words! 🙂

Tarun also emphasized “there are takers for product at ANY price point”. One need to clearly understand whom one wants to target, and also understand that it’s not only a question of moving the pricing point up & down in inverse proportionality with the volume of customer base. There are various triggers for the pricing, one of which is the “premium value perception”, and also the fact that once you move into a market with a particular price point, increasing it later on is almost impossible without hurting your customer base and overall strategy.

App Pricing Tactics
App Pricing Tactics – Prashant

The heat in the Mobile Apps makes the App Pricing a very sought after topic, and that’s where Prashant Singh (Co-founder at Signals) came in and provided a good framework for the high level App pricing approach. There are two clear distinct possibilities – Free & Paid. Complete Free, as per Prashant, directly leads to an Ad based model for revenue that shouldn’t be a preferred model as such for most app developers. In fact the question is not whether to go Free or Paid. Question is when is the user ready for monetization. “You hit when the iron is hot, as simple as that”, Prashant says.

Prashant provided a high level framework to judge which approach should be adopted by the App Developers, based on the two parameters: “App Life Span” and “Time to Realization of Value”. Based on a combination of the two, one can decide on the high level strategy (Portfolio/Platform/Utility/Device Embedding/Brand Apps…) and Pricing model (Advertisement, Paid, Transaction based, Freemium, Development level, and so on). Check out this presentation – App Pricing Tactics for more details.

One key point that drew interest was around the Price Point for App at the launch time. Contrary to the normal belief, Prashant says, one needs to launch the app at a price point that is higher than the Median price point for the App store. That provides the App Store an incentive to showcase the App, and it is important since App Stores control the downloads more than the “content” or “quality”, at least until critical mass. Growth Curve of the app can be maintained around Median and depending on the value prop of the App, the baseline pricing can be used at sustenance phase. Another strong point of view from Prashant came around the Advertisement model, which as per him is the last to be considered. And if Ad model is considered, his advice is to “not” let the control away – “Always have your server in loop”.

While all the content and discussion, and few laughs in between, served well to our appetites, snacks were served amidst a quick “Unconference” session moderated by Rajat and Vivek. We discussed and debated on some great points. I’m finding it harder to capture every bit here and I don’t want to be partial to only what I remember right now! I hope that if you attended and are reading this, you would be able to add your takeaways in comments section! 🙂

Overall, I had a great time. The highlight of the session, for me at least, was the richness of experience and passion for products. And I met some really cool folks! Many of us hung out until later in the night and continued the conversations, which is a great sign. A small impetus can go a long way, and I’m very excited that Avinash has triggered this spark that all of us as a community have to fuel into a passionate ecosystem around products. Great initiative, ProductNation! Looking forward to the next edition on Jan 19th 2013!

PS 1: And, there was a cake-cutting for Avinash on his Birthday! Great gesture!

PS 2: Some Tweets from the session!

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How far should you go with Professional Services in your product business?

For any products company, product support is a given, and part of the products business fabric. However, almost all Enterprise Products Companies end-up offering the professional services beyond basic product support. These services could range from simplistic implementation support, to integration, to solutions-building, to architectural consulting, to IT advisory support. The decision to perform professional services could be driven by customer-demand, or by the intrinsic need of the product being sold, or even driven by the business strategy itself to generate peripheral revenue.

It’s important to understand where the boundaries lie, and what goal does a certain type of professional services serve. The decision to commit to a particular type of professional services needs to be driven by a conscious thought process. This is important because the time & resources required to build various skills & operating models for serving the various flavors, change dramatically from one to the other.

Professional Services in Products Business

1. Product Support

This is the core to the products model and serves as just that – support to the main products revenue, and to ensure customer satisfaction. While the core strategy for any product should be to make it so good that it requires minimal support, there’s always a need for support – offline and real-time for the customers.

2. Implementation Services

An ideal product is ready-to-use off-the-shelf, however, in case of Enterprise products the need to configure & customize could wary. Most times, customers demand for an implementation service packaged in the license deal initially, in order to ensure success. Most times, products businesses have to employ this mechanism also to close sales cycle and to ensure a consistent source of post-sale revenue from such services, and also indirectly to ensure expansion of the product usage through consistent personnel presence on the customer premises.

3. Integration Services

This is where it starts going slightly further away from the core skills that the organization may possess organically. Integration with the existing IT systems and other products at the customer premises would require the skills & management practices beyond the core areas of the organization. An extra source of revenue is one of the temptations, but there are also scenarios where integration of the product is critical to the success of the product, making such services mandatory. This is especially true if the product interfaces are not built with open-standards, and require the integrators to know the details of how the product is built internally. The correct approach would be to build the product interfaces in a way that doesn’t force the business into such compromise to induct professional services for integration. There’s an indirect impact of diversion of core product resources to such integration projects unless such professional services are pursued by design, and resources built accordingly.

4. Solutions & Consulting Services

This is where the game gets strategic, and resources expensive. And the reasons to do this are not any more intrinsically important, but strategically targeted to higher value to the customers and hence, access to the larger pie of the wallet. However, this is easier said than done. Unless there’s enough scale & case in the existing business to allow the focus on such services, strategic, and by design, a business is better off focusing on building the core products business stronger by investing resources there. This makes sense for the products, which are more like Platforms that provide larger leverage than in a Point-solution product.

5. Advisory Services

This is important for the products that are targeted for larger ticket sizes and are built for Enterprise-wide deployments. The IT strategy alignment as well as the strategic positioning of the product becomes important, and it also requires much larger IT leadership level involvement. For Enterprise Platforms, or even for departmental level strategic investments, this approach to professional services can bear fruits. However, building it into a business line requires the core product business to be strong, ready for the leap.

So what?

While the Businesses can look at starting off with the lower scale of Professional Services and build up over time, the decision is very strategic and long term. Professional Services, while offering additional top-line, could actually be a resource-intensice and money-draining proposition if not built properly. The mindset that governs the professional services line of business is drastically different from the product side of business. The operational efficiency is paramount, & profitability can very quickly take a hit. Even more importantly, professional services are more intensely people-driven and the skill sets required to build and sustain this business over long term are not trivial. Look, think, and think hard, before you leap.

PS: There are other considerations on Professional Services that directly or indirectly impact the core product business. I will cover in those in the next post. Until then, hope this helps! 🙂

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Why aren’t more developers creating serious Mobile App Products?

Mobile Apps

These are the times, when every third person that you meet in Technology world has an idea for an App. It could be every alternate person if you’re hanging out in geeky groups or among heavy Smartphone users.

The Industry trends suggest a phenomenal surge as well. According to Gartner, Mobile Apps Store downloads worldwide for the year 2012 will surpass 45.6 billion. Out of these, nearly 90% are free Apps, while out of the rest of 5 billion downloads majority (90% again) cost less than $3 per download. This trend has a strong growth curve for the next five years. (See Table 1. Mobile App Store Downloads, courtesy: Gartner) 

Another report suggests that 78% of US mobile App Companies are small businesses (based on the Apple and Android App Stores based research). The typical apps that dominate this market are games, education, productivity, and business.

Mobile App Store Downloads - Gartner 2012

This comes as no surprise. There is a huge divide between the Enterprise Mobility (dominated by the Enterprise Architecture, existing platforms and mobility extensions to the platforms that ensure business continuity) and End-User (Consumer) Mobile Apps dominated by the App Stores supported Small and Mid-size App Development Companies. The barriers to entry in the Smart phone Apps Market seem pretty low with the supporting ecosystem from Apple, Amazon, Google, and Telecom carriers.

However, let’s get back to the fact that majority of these Apps “do not” generate direct revenue.

While the entry seems without barriers, there are multiple hurdles on the race track:

1. Developers need to focus on the User Experience. The smartphone apps pick-up is highly skewed toward Apps that offer a good user experience even for minimal functionality. After the initial success, the App makers end up adding functionality for sustained interest, but the User Experience tops. It’s difficult to focus on UX while still trying to do everything right at the underlying architecture level for long term.

2. Marketing is important. Getting the early eyeballs is key for the App developers. Any serious App needs an immediate initial take-off, and among the things that they need to do to make it happen is to market the App beforehand and to get the authoritative reviews in place.

3. Initial Take-off is just the first hurdle. App needs to be able to handle traffic bursts, it needs scale with increased traction, support virality & social connects inherently, and also build an effective User ecosystem. None of these may seem like the core functional features of the App, but are most critical for the broad-based success.

4. The Freemium model is very popular, but it can kill the business if the marginal costs are not sustainable. The paradox of the Free model is that unless the 10% paid users are able to pay for your 100% costs, every additional user takes you closer to the grave. With this come in two questions – how do you keep the infrastructural costs low, and how do you build additional revenue models around the app.

  • IaaS can solve some of the infrastructural headache, but doesn’t provide you with the other functional layers that every App needs. You need to still build them. PaaS providers provide the scalable platform for building Apps, but you still need to build some of the functional features such as Gaming Rooms support, Messaging, User Authentication & authorization models, and so on. Mobile developers are still doing a lot of repetitive work across the smartphone Apps that can be consolidated into a framework.
  • Supporting the additional revenue models require integration with external Ad-services, Payment systems and more importantly the bandwidth to deal with this even more fragmented set of agencies.

5. The End-point device platforms are fragmented and getting even more so. A typical model for App developers is to develop an Android App, iOS App or a Windows App and then support the other platforms as they go along. However, keeping up with these multiple platforms is only getting more and more difficult with the speed with which Apple, Microsoft, and Google keep rolling out the OS. There’s tremendous pressure to release the App within the 1-3 days window of the release of the underlying platform.

Hence, while there are millions of people developing smartphone Apps as we speak, there are only a fraction that get built at serious level, and even smaller fraction that gets built for sustainable business success.

And considering these hurdles, the arrival of the Backend-as-a-Service (BaaS) is a blessing for the App Developers. Forrster’s Michael Facemire refers to them as “The New Lightweight Middleware”. He goes ahead and lists out some of the basic tenets of what makes a Mobile Backend as a Service, but I see this list evolving as the vendors offer more and more functionality to the customers leading to en ecosystem.

And the term “ecosystem” is going to be the key. That’s because a successful mobile App doesn’t stop at the user starting the app, using the app, and leaving the app. A successful App creates an ecosystem for the viral growth, user engagement, social functionality, in-built broad-based connectivity for multi-user interactions, and more importantly the ability for cross-platform usage. In a Gaming scenario, the user interactions and the relevant immediate feedbacks are paramount. Most successful apps build an ecosystem. Instagram, 4Square, Pinterest are the common household examples today.

ShepHertz App42 Cloud API is complete backend as service to help app developers develop, buid and deploy their app on the cloud.While Michael lists out the usual suspects in his post, most of them in the Silicon Valley, there is a very interesting player in Shephertz’s App42 platform, right here in India. The ecosystem approach that they have taken seems pretty much what may be required for serious app developers that need a robust backend provided as a service, so that they can focus on the app functionality, user experience, and more importantly the marketing aspects of the App.

Now why, still, aren’t more and more developers building even more serious mobile App products? Why shouldn’t they be? I think, they will!

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Five Paradoxes of building a successful product business

Building products is hard. Building a successful product organization is even harder. Start-up ecosystem is replete with ideas and prototypes. Few of them reach the market with a product and very few turn up as successful. And, a minuscule number of product businesses are able to demonstrate sustainable success. While there could be many factors why this is such a hard thing to do, it boils down to the fact that building product business is full of paradoxes. A successful product business requires effective navigation through this paradoxical maze, especially early-on and through the first growth curve.

I believe there are five basic paradoxes of building successful product businesses. There could be more, but these are my five!

Paradox 1: Self-­Conviction | Customer Voice

Customer Voice, Market Research, A/B Testing, Surveys have been the tools for marketers through the history of business. However, we have plenty of examples of successful products that no one thought anyone would ever buy. These Black Swans look possible in retrospect, transforming the lives of the people behind the product. Then, we have Steve Jobs who, with his combination of clarity, conviction & genius has openly declared over and over again, with successful products, that he knows better than the customers themselves about what they want.

It’s easy to think, egoistically, that one can do what Steve Jobs did. However, reality strikes everyday in form of a customer complaining about a feature. It’s a routine tussle between what the customers think they want against what the business is planning to build. Even a scientific, and algorithmic approach to getting the features weighted out before inclusion in the product lifecycle, is not guaranteed to get the customers what they want.

The best way to get this done is to test out the hypotheses of Feature preferences as quickly as possible. It is also important to dissect the Signal from the Noise in such feedback. Many times, product teams get disoriented based on the feature requests from “free” users due to sheer number of such demands. On the other hand, a handful of paid customers who provide you cash cannot be ignored. In case of Enterprise products, the early customer weigh in heavily on the way the product shapes out, sometimes very differently from what Product makers envisioned. This is where the conviction of one’s vision is critical and should be used as the yardstick for deciding what to build. One useful approach is to Invest energies into building frameworks that help ongoing experimentation possible to validate the user inclination. A rapid experimentation, prototyping approach backed by strong analytics is a great leverage for any product.

Paradox 2: Personal Branding | Company Branding | Product Branding | Product Promotion
At the face of it, this may look like a no-­‐brainer. Any activity that the business performs toward Product Promotion would enhance the branding of the Product and hence the Company’s. And, a lot of business owners actually leverage their personal brand for the Product promotion and vice—versa. The problem is that a Promotional activity is targeted to the Lead Generation and Conversion, while any branding activity is targeted to an emotion of enhanced value or an emotion of relatedness in the minds of prospects & customers. It’s only in some cases that a promotional activity also does full service to the branding activity.

Even more difficult is to judge whether the efforts should be subjected to branding of employees, of the company, or of the product. Every day in the life of a business is replete with decisions to choose one over the other. And the right balance comes only with the long-­‐term clarity & conviction around what’s important. In Consumer oriented products especially, the product brand becomes more important than the Company brand. The branding of people behind the product happens organically, if at all. However, in case of Enterprise Products, the Company Brand and credentials are critical, and so are the people behind the product. Hence, a distinct & precise decision has to be made very early on in terms of where the branding focus should be.

Paradox 3: Keeping Options Open | Focusing Efforts

We all know that every product should be envisioned with solving a specific problem for a specific and well-­‐defined target segment. While that is true, the process to validate and revalidate the solution against this target segment is not straightforward, and there are multiple adjustments and adaptations that the product as well as it’s positioning may go through before hitting the so called “sweet spot”. In the process, through the experimentation and iterations, however, the tangential options may emerge. Any of these options, unless validated are only hypothetically promising. Such validations require effort, while the main product path requires fully focused effort & resources in order to ensure that any invalidation of the central idea is not due to the lack of effort.

We often get disillusioned by the examples of successful enterprises – most of them end up having done multiple things over time. What we forget is that very early-­‐on, the success was a derivative of strong focus on one area. Diversification happens after the central business is profitable.

At the same time, one cannot spend infinite time & energy in validating an idea. As they always say “fail fast or succeed surely”!

Paradox 4: Technology | Marketing | Sales

It’s intriguing to note that most businesses, once the product creation really kicks off, end up getting sucked into the Product Lifecycle and Technology aspects while that actually is the time, the Marketing needs to kick in with the same intensity. Even more awkward situation that most entrepreneurs face is that by the time the product is ready for alpha or a beta, the pressure to generate cash forces them to leverage “sales” efforts instead of marketing.

In the last year or two I have met plenty of entrepreneurs with a single question: How do I generate cash quickly today so that I can continue to pursue the dream of building what I want to, for tomorrow? And this question seems to be independent of the amount of time the company has been in business. Of course, I have seen and met some who have balanced this beautifully by doing certain things in the starting phase of building the product as well as the company. The right balance of Marketing, Product Development, and Sales efforts is the key, and you can do that only by developing a team that can focus on these areas as you grow. A Super hero approach falters and fails, since time-­‐slicing is not an option, it’s about parallel efforts.

Paradox 5: User Adoption | Cash Flow

There are going to be 45 billion App downloads from App Stores worldwide in 2012. Out of which, only 10% are going to be paid for. Out of the paid ones, 90% would have the price of $3 or less. With this ticket size, the marginal costs per user need to be drastically low. However, while this cost equation is easy to understand, more and more businesses are falling in trap of the Freemium model and burning cash and resources in the hope for another Heroku or Instagram. The examples of Twitter and Wikipedia, even though valid, sound misplaced to most businesses.

Any business needs to have a revenue model from day of inception. While, many companies got everything right and got a valuation for their efforts based on the user mass, we wouldn’t hear from people who close down the business and start off something else everyday. While there’s nothing wrong with the User Adoption game, cash flow is critical for the business. This cash could come in returns to the benefits any customers get or in returns to intangibles and futures that investors see for a while. But, a product eventually needs to be useful for customers that are ready to pay for it. Cash flow is what businesses need to run for, and that’s the number one priority that should drive the decisions in short term and long term.

PS: These are my five, I’m sure you’d have gone through many such decisions. Do you have any experiences that you can share?