Startup Secrets - Turning Products into Companies

Proprietary and Confidential

START UP SECRETS

An insider’s guide to unfair competitive advantage

Turning Products into Companiesby Design & Architecture

@underscorevc startupsecrets.com


Startup SecretsSeries

Company Formation CultureHiring

Value Proposition Go-To-Market Strategy

Strategic (Brand, Positioning, Segmentation etc.)Tactical (Driving your Marketing and Sales Funnel)

Business ModelTurning Products into CompaniesPerfect PitchRaising Funding


The problem…We get MVP

We get product market fit

YETWe don’t get enough momentum…

To build a company

We have a product company GAP!

startupsecrets.com Turning Products Into Companies 4


The Product Company GAP

GAP

Company




GAP

Company

startupsecrets.com Turning Products Into Companies

Go to MarketBusiness Model

Execution

6



GAP


Go to MarketBusiness Model

ExecutionGAP

Solidworks

7


Your product…



It’s all about the product right?


Proprietary and Confidentialstartupsecrets.com Turning Products Into Companies

Your expenses will flipFrom All R&D, engineering…

Development

STARTUP Sales & Marketing

10



to prove market acceptance, gain, repeatability

Development

Market Acceptan

ce

Sales & Marketing

11



to prove market acceptance, Then repeat & scale using Sales & Marketing

Development

Sales & MarketingSCALE

12



to prove market acceptance, Then repeat & scale using Sales & Marketing

Sales & Marketing = 2-3x (!) Development

Development

Sales & MarketingSCALE

14


So, why not plan where you want to be when you get there?

EG look at CARC, your Business Model, GTM and how your PRODUCT will influence it?

15


Software & Services Model

62%61%

53%43%48%

29%21% 19%

43% 50% 45% 44%19% 14% 11% 11%

L/T Model based on profitable subscription based software company

62%

48%

43%

19%

51%

29%

65%

14% 11%

45%

21%

53%44%

19%

44%

11% 10%35%

15%25%

Sales & Marketing = 3x Development

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What if…You thought about this upfront!

LET’S DO IT!

17


Closing the Product Company GAP:by Design & Architecture

• Design• Product Go To Market Fit

• PVP• MVP• MVS• MRP

• Architecture• Business Model

• SLIPPERY Products• Russian Doll Pricing and Packaging• Whole Product• Services

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Design for Go To Market fit

PVP – Primary Value Proposition

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Value PropositionBEFORE you build

-- What problem are you solving?-- Who are you solving it for?

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Focus your value prop!Find a PRIMARY value prop for a single audienceMulti faceted are harder

-- Chicken and Egg problems-- Serving too many masters

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PRIOR to MVPCheck, recheck and triple check your Value Prop

-- If you’re not solving a valuable problem…

-- YOU’RE NOT SOLVING A VALUABLE PROBLEM !

-- And unsurprisingly you won’t build any value

-- VIABLE does not always mean VALUABLE !!

22


Qualitative Evaluation

Before

After

Acute Pain

Absolute Joy

Vitamin vs. Penicillin

23


Value Prop: Recap & Intersection

- 3D Solution• Discontinuous• Defensible • Disruptive

- 4U Need • Unworkable• Unavoidable• Urgent • Underserved market (For targeting,

Segmentation)

Unique

24


Qualify the need

Is it “blac” & white?- (B)latant- (L)atent- (A)spirational- (C)ritical

Blatant

Latent

Aspirational Critical

WhiteSpace

25


Qualify the need: B2B vs. B2C?Is it “blac” & white?- (B)latant- (L)atent- (A)spirational- (C)ritical

Blatant

Latent


BlatantCritical

B2C

Best for B2B

26


It’s just a big iPod…

Is it “blac” or white? (L)atent (A)spirational

Blatant

Latent


BlatantCritical

iPad

visionexecution



Example - Apperian

• Increase revenue by 40% at counters

• Saved $2.5M+ in direct IT costs

• Roll out 17,000 iPads• Deliver worldwide no IT touch

required



Example - Apperian

• Increase revenue by 40% at counters

• Saved $2.5M+ in direct IT costs

• Roll out 17,000 iPads• Deliver worldwide no IT touch

required

GAIN

PAIN



Design for Product Go To Market fit

MVP and introducing MVS, MRP



The Product Market Fit

MarketProduct

Fitstartupsecrets.com Turning Products Into Companies 31


MarketMVP

The Product Market Fit



Adding to Lean Startup thinking…Minimum Viable Product (MVP)

MVP



The Product Market Fit Problem

here?

here?

here?

here?

Fit ? Stretch

?

MVP

MVP ++

here?

Market



The Product Market Fit SolutionMarket

not here

not here

not here

not hereFitMVP

MVS

MVP

MVP

MVP

= same NEEDS



MVS

MVP


+ Minimum Viable Segment (MVS)

Repeat?



MVS

MVP

Adding to Lean Startup thinking…

Minimum Viable Product (MVP) + Minimum Viable Segment (MVS)

Repeat for …

= same NEEDS



MVS

MVP


+ Minimum Viable Segment (MVS) = Minimum Repeatable Product (MRP)

MRP

Repeatable

MRP

= same NEEDS



MVS

MVP


+ Minimum Viable Segment (MVS) = Minimum Repeatable Product (MRP)

Smaller target to reference lead, dominate

MRP

Repeatable, Referenceable

MRP

= same NEEDS



Minimum Viable Segment…

Maintains MVProduct footprint• Same functionality needed by all customers

People reference according to the same NEEDS • Customers can compare solutions

Potential for leadership, domination• At least initial Beachhead

Segment according to the same NEEDS

MVS

MVP

= same NEEDS MRP

MRP



vs. Office Worker

vs. White Collar

vs. Sales

vs. Office Equipment

vs. Medical Clinics

vs. Diagnostics

+ Blatant Critical need if possible:

Mobile ProfessionalsField Workers

Services

Hospitals

Critical Care

Medical Equipment

Targeting, Segmentation



No longer just Product Market Fit It’s about Product Go To Market Fit

• Narrow your target• Segment it by need• Focus your product

Vital for• Positioning, Messaging, Communication• Packaging and Pricing• Channels & Distribution, Partner Alignment

Enables• Reference selling, network effects, virality• Overall Business alignment



Narrow as possible to start!• Think small targets to dominate

Which would you rather…• Expand on success?• Contract on failure?

Balance Vision vs. Execution• See post on startupsecrets.com

NUMBER ONE Startup SecretDon’t be afraid to FOCUS!

#1startupsecrets.com Turning Products Into Companies 43


Closing the Product Company GAP:by Design & Architecture

Design• Product Go To Market Fit

PVP MVP MVS MRP

Architecture• Business Model

SLIPPERY Products Russian Doll Pricing and Packaging Whole Product Services



Architecting for Business ModelSLIPPERY Products



Gain/Pain ratio• Revenue • Cost savings• Time• People• Competitive

advantage• Reputation• Etc..

• Inertia• Switching

costs?• Default = do

nothing• Alternatives?• Good enough =

good enough!• RISK on a

startup

• Find (See)• Try• Buy• Implement• Deploy• Own – eg TCO

Inertia,RISK

Gain

Pain

>10startupsecrets.com Turning Products Into Companies 46


Gain/Pain ratio• Revenue • Cost savings• Time• People• Competitive

advantage• Reputation• Etc..

• Inertia• Switching

costs?• Default = do

nothing• Alternatives?• Good enough =

good enough!• RISK on a

startup

• Find (See)• Try• Buy• Implement• Deploy• Own – eg TCO

Inertia,RISK

Gain

Pain

>10

Product Lifecycle



Get To Market – product facilitation

What if you could literally slip into the lead?



• Simple• Low to no initial cost• Installs easily• Proves value quickly• Plays well with others• Easy to use• ROI is obvious• Your customers can’t live without it – it’s

stickY

Friction Free, SLIPPERY products



Simple



SimpleComplexity

Simplicity

FIRST PRINCIPLES

Advantage

Disadvantagestartupsecrets.com Turning Products Into Companies 51


SimpleAdvantage = Innovation / Complexity

Complexity # Simplicity

Advantage = Innovation * Simplicity

Advantage # Disadvantage

Disadvantage = Innovation * Complexitystartupsecrets.com Turning Products Into Companies 52


Even Simpler = Less is More!Microsoft APPLE



ExampleKnowledge Management vs. Note Taking



Simple Simplify to your C.O.R.E. value [link on

startupsecrets.com]• Create a whole product with partnerships• And or Open Source etc

CapabilitiesOfReallyExceptionalValue

Focus on it!C.O.R.E.Value



Low to no initial cost Potential for

• Frictionless trials• Lower initial CARC• Self identifying Freemium prospects

http://www.wired.com/techbiz/it/magazine/16-03/ff_free


“Freeconomics"

56


Low to no initial cost Potential for

• Frictionless trials• Lower initial CARC• Self identifying Freemium prospects

Free-fall, free-fail ?• It’s worth what people are paying for it = nothing

= no proof of value• And perceived value can also be zero• Ultimately have to upsell



Low to no initial cost

• Value

• Network

• Monetization



Installs easily, integrates well Slippery not Trip-up-ery!



Installs easily, integrates well Reducing the Pain for customers to try, adopt,

deploy

Inertia,RISK

Gain

Pain

>10



• Integrates well– “Embrace & Extend”

Open & Extensible…

Installs easily, integrates well



• Integrates well– “Embrace & Extend”

Open & Extensible…

• Assume– Change = risky, painful, time consuming & costly

Incumbents far and wideApplicationsOperating environmentsBusiness processesHuman skills

Installs easily, integrates well



Products that integrate, play well with others…

Encourage others to play with them…

®

LINK Technology Partners


LINK program

63


Proves value quickly

Consumer• Instant gratification

Enterprise, • Rapid payback

≤3 months is great >12 months is bad



For example• If your product is about improving a process…

Provide proof as part of the product!• Baseline current before the product usage• Provide key metrics, visibility into progress • Integrate analytics, dashboards• Clearly surface reports that prove the value

Self proving value



Package and progressively disclose value

VS.



Package and progressively disclose value Example: Acquia, Drupal Gardens



Package and progressively disclose value Example: Acquia, Drupal Gardens – results…



Easy to use and apply “OOBE!”

• Out Of the Box Experience• Delight & entrance users



Example Salesforce.com vs SIEBEL

VS.

Easy to use and apply



ROI is Obvious Quantifiable

• Increase revenue• Reduce time, resources, costs

Or• Reduce risk• Drives competitive advantage

(ties to fast payback)startupsecrets.com Turning Products Into Companies 71


ROI is Obvious(Supported by Self Proving Value)

Example: Unidesk



StickY Your customers can’t live without it! Fulfills a real need Leaves customers

wanting more !



Friction Free, SLIPPERY products• Simple• Low to no initial cost• Installs easily• Proves value quickly• Plays well with others• Easy to use• ROI is obvious• Your customers can’t live without it – it’s stickY

Think of how this improves the

Gain/Pain Ratio in our Value Proposition

Workshop

Gain

Pain



T 617.303.0064 @underscorevc

53 State Street, 10th Fl Boston, MA 02109

75

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