by Saeed Khan
I recently received the following question from a reader – Adam Turner. He wrote:
I am looking for a little guidance on this one.
I have recently taken over PM of a product that generally requires a complex sales and complex services engineering to commission, however, the company’s sales and services are used to simple widget sales.
Should Sales and Execution capabilities be taken into account for a product’s strategy?
The general answer is a resounding Yes. I heard this definition last year. I don’t remember where, so I can’t attribute it properly, but it goes something like this:
Q: What’s the definition of a startup?
A: A company that is still in search of a repeatable sales model.
Every company, whether startup or not, has to address this problem when they introduce a new product. So why not think about it very early on. Once a strong sales channel is built, new products that can be sold via that channel have one less hurdle to overcome. But what if a new product needs a very different channel?
My answer below is in the context of a B2B software company, but the general principles can be more widely applied.
Companies decide to build (or acquire) new products for basic reasons: expansion and new revenue generation. Expansion could be into adjacent segments or into completely new markets.
A not-so-hypothetical scenario
Consider this scenario – modeled somewhat on Adam’s situation – but also something I’ve experienced firsthand in a couple of companies.
A company with a set of smaller (mostly transactional) products sold via inside sales teams is looking to grow. They decide to build a higher value (and relatively sophisticated) product that will be sold into an adjacent market by an external direct sales force and VARs.
The target Average Deal Size (ADS) of this new product is about 10x that of the current transactional products. Investments will be made to build a field sales force, with experienced sales consultants. A channel manager will be hired to help build a VAR channel.
Have you seen or heard of something like this before? It seems like a logical way to expand and “move up the food chain”. I’ve seen it several times, and unfortunately in most cases, it ended up in failure, or at minimum, had a significant negative impact on the company.
And the impact is…
Let’s assume (and this is a big assumption) that the company has the skills, internal experience and discipline to build version 1 of this more complex product. That’s great, but it’s only 1 part of equation. Let’s look at everything else that needs to happen:
Marketing an “enterprise” product is very different that marketing a transactional product. Collateral, campaigns, events and other activities will be needed to support the new product. The buyers, influencers and users will almost certainly be different that those for transactional products.
Presales activities in conjunction with marketing will also be different. POCs (Proof of Concept) or bakeoffs will need to be addressed.
The Sales process will be fundamentally different for obvious reasons. Customer budgets and budget cycles will have a much higher impact for this product. One large hurdle that the company will have to overcome is whether they have any credibility selling expensive products into a large organization. Enterprises need to know that the company they are buying from can properly support and service them after the purchase is made. i.e. the sale doesn’t end with the PO.
Implementation (i.e. post purchase) services will need to be delivered. This could be done by the vendor or by a partner (VAR etc.), but either way, staff will have to be trained and deployed and able to deal with surprises that are always found in customer environments.
Customer Support must function differently as well. Enterprise customers, particularly larger banks or similar organizations can be very demanding when they encounter issues and a Support team used to smaller customers will have to adjust significantly to deal with these new accounts. Also, the types of issues that need to be addressed will almost certainly be more complex given the complexity of most enterprise environments.
And let’s not forget Product Management who will have it’s hands full working with early adopters of version 1, while simultaneously helping sales to convert likely prospects, as well as collecting requirements for v2, that balance the needs of existing customers, while looking ahead to new prospects. Issues around security, availability, scalability, reporting, platform support, auditing and performance will all show up. These are all typical “enterprise requirements”, that have little to do with direct functionality, but everything to do with playing nice within the enterprise IT environment. A small (and likely understaffed) PM team will almost certainly be gasping for air with all of these new responsibilities.
Lessons to remember
While the above list of differences is not complete, it gives the highlights of what people need to think about. If you look honestly at the differences, the new product almost requires a vastly different company behind it, staffed, structured and focused on different tactics. The overall goal is the same — product success — but the required execution is very different.
The interesting thing here is that experienced Product Management should be able to assess all of this and inform Sr. Management of these issues right at the start. (I’m assuming that Sr. Management doesn’t truly understand the full complexity and risk in the strategy to go “enterprise”.) It sounds simple when sitting around a board room table, and I’m not saying it can’t be done, but it’s not easy at all. Go ask anyone who’s been through it.
I hope this answers Adam’s question. If anyone else has an opinion on this, wants to add to or challenge anything I’ve written, I’d love to hear from you.
Saeed
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