I occasionally get very hands-on in accelerating a raw start-up. Typically this is when an engineer comes to me with an unquestionably clever idea and asks me — sometimes in very broken English — whether and how he can get rich from it. So let’s collect some thoughts on the subject.
This post can be construed as fitting into my “not-very-organized series” about the keys to success. In particular, it draws on my July, 2014 post about judging opportunities.
The product plan
A start-up product idea needs to satisfy multiple criteria. Awkwardly, they’re rather contradictory to each other.
- It should be obviously appealing to sufficiently many customers, and be worth sufficiently much money to them.
- It should be something the startup can do with very few resources …
- … but which much larger potential competitors cannot.
That usually means that the idea:
- Should be based on an architecture that is anti-strategic to incumbent players …
- … but which fits customers’ technology strategies just fine.
Criticisms I’ve made repeatedly of specific ideas include: Read more
Much of what I get paid for is advising early-stage companies, especially on messaging and marketing. So let’s try to pull some thoughts together.
For early-stage companies, I’d say:
- Even more than for larger companies, the essence of messaging is to achieve the contradictory goals of excitement and credibility.
- If one of those must be sacrificed, sacrifice excitement. It is by far the easier of the two to regain.
- Note: Both your product and your company need to be credible. When your company is new, both parts of that are formidable challenges.
- Notwithstanding how limited your resources are, don’t rely too much on outside PR. You need to control messaging and key influencer relations yourself.
- Notwithstanding how limited your resources are, you need to address multiple audiences, at least:
- Prospective employees.
- Knowledgeable influencers.
- Not-so-knowledgeable influencers.
- Sales prospects (business folks).
- Sales prospects (technical folks).
Of course, these subjects are much discussed in this blog. The top three overview posts for young companies are probably: Read more
Much of my consulting revolves around messaging, and in particular the need to have multiple specific messages for multiple audiences. Increasingly often, I find myself discussing that in terms of sales qualification, because there’s a strong duality between message crafting and qualification:
- The goal of message crafting is to find the right message(s) for particular audiences.
- The goal of qualification is to find the right audiences for particular messages.
Recall the layered messaging model, whose wording I’ll update to:
- Differentiated business benefits …
- … which are achieved because of …
- … superior technical features or SLAs,* …
- … the differentiation of which is achieved and sustainable because of …
- … fundamental product design.
A good messaging stack works well on all five of those layers. Read more
Marketing is commonly done to single individuals, influencers and sales prospects alike. A number of my posts reflect that reality. Most comprehensive are probably my 2014 post about presentations to small audiences and my 2008 survey of many kinds of influencer. Relevant bits of other posts include:
You can’t sell effectively without listening. This is one of the basic facts of business, yet shockingly many people forget it. You can’t pitch effectively without understanding how the prospect frames what she hears, and you can’t judge that unless you listen to what she says.
from a 2013 post about “fluency”,
If you are a small startup with innovative technology, put as little as possible between your own people who can talk with passion about the stuff, and whoever you’re trying to get coverage from.
from a 2011 quoted journalist rant,
the right person to lead an important relationship is:
- Usually somebody who can truly speak for your company, and specifically:
- Has the knowledge and ability to respond to pushback.
- Knows the influencer well enough to argue back in turn.
Occasionally an in-house press or analyst relations staffer. Almost never an outside PR person.
from a 2012 collection of marketing communications tips, which also makes the point that you should flat-out ask people how they like to work, and a variety of cautionary tales of how one can bungle meetings or other relationship moments.
The above can be summarized as:
- Respect the person you’re trying to impress.
- Treat the person you’re trying to impress as an individual.
- Listen to the person you’re trying to impress.
- Understand and cater to how the person you’re trying to impress thinks.
I could write a whole post on that last bullet point alone.
Here are some further tips for productive single-person marketing and persuasion. Read more
I see many slide decks, a large fraction of which are screwed up right at the beginning. Here are some thoughts on doing better. This post goes together with others that relate to presentations or press releases, including:
- Presentations for small audiences (August, 2014)
- Short lists of concise claims (July, 2014)
- Faith, hope and clarity (May, 2013)
In the first post linked above, I wrote:
The most generic and reusable part of a slide deck is its beginning — the “setting the table” part. A natural sequence is:
- Whatever seems necessary to introduce and identify you.
- Some validation as part of the introduction — company size, customer logos, whatever.
- The big business problem/need you’re helping with.
- A little validation about the problem/need.
- Some common difficulties in satisfying the need, which are happily absent in your solution.
- Specifically how you meet the need.
Let’s drill into some of those points.
Tips for company validation include:
- If you’re big enough to have validation as a market leader, of course offer that. Analyst firms (industry or stock) are generally the providers of such validation, either directly (those stupid quadrant graphs) or indirectly (via market share numbers and the like).
- Customer logos are great.
- Also great are strong aggregate claims about customers, e.g. “over 70 of the Fortune 100″.
- Financial or fund-raising success is solid validation, and has the second benefit of suggesting you have the resources to deliver on your promises.
- Mere influencer mentions are a weak validation. Also, beware of insulting influencers by quoting competitive influencers at them.
- Founder resumes are validation only for companies so small they can’t be expected to have stronger kinds.
My dislike of slide presentations is vehement and long-standing. Even so, my consulting duties often lead me to critique vendors’ slide decks, hoping to make them a little more tolerable. Most of the precepts I rely on in these exercises can be encapsulated in “C” words:
- All messaging needs to be Clear, Compelling, and Credible.
- Credibility depends upon, among other factors, Consistency.
- All collateral should be Cleanly Copy-edited.
- A presentation should always be tailored for the specific audience and purpose (it’s not a crazy stretch to call that Context).
And at the risk of drowning in excessive Cs, slide decks are a primary venue for a recent post topic: Short lists of Concise Claims.
Let’s talk a bit about that tailoring. Some things are shown only to very specific audiences. For example: Read more
It is often necessary to produce a short list of concise claims. A large fraction of all PowerPoint slides fit that model. So does the list of news in, for example, a typical product press release.
Making such lists is hard, for at least three unavoidable reasons:
- Individual claims should be concise, clear, credible and compelling. This is a very tough standard to meet.
- Ideally, lists of claims would both be fairly complete and tell a coherent story. That’s a difficult challenge as well.
- Different parts of your audience respond well to different things. No one set of words will please, interest or convince everybody.
Even so, many claims lists are yet worse than they need to be.
To create or improve a claims list, it helps to establish goals by asking
- “Who are we trying to persuade …
- … of what?”
and also to check resources by assessing:
- “What proof points do we have to support our case?”
In the case of a product upgrade, answers often resemble: Read more
This is the first of a not-very-organized series of posts on two related subjects:
- What are the keys to success?
- Which efforts are (how) likely to be (how) successful?
Most of my posts can be said to touch on those areas, especially the latter one. But in this series I’ll try to be more direct about it.
Useful background may be found in:
- The strategic worksheet, perhaps my best-received post ever. Many companies and individuals tell me they have profited from working through it.
- The less well-known execution worksheet that followed it.
- My recent post about kidding oneself, Pitfalls for Pollyannas.
For a new company in a new enterprise IT product category, the path to success may be oversimplified as:
- Achieve early/visionary/bleeding-edge adoption.
- Then achieve substantial adoption in several niches.
- And then achieve either substantial adoption in many niches or …
- … dominance in at least one niche.
Q. What’s the primary difference between used car and computer salespeople?
A. A used car salesman KNOWS that he’s lying.
– A joke that was old in 1995
The technology business is difficult, so it’s natural for technology vendors to make mistakes. Many of these fall into two broad categories:
- Garbled or otherwise ineffective messaging. See, for example, this blog’s overlapping sections on marketing communications, technology marketing, and especially the layered messaging model.
- Over-optimism, in partnering, sales, marketing and development alike. That’s the subject of this post.
In particular, vendors commonly overestimate their (current and future) competitive positions. This isn’t just for public consumption; often, they fool themselves as well. Popular forms of overestimation include (and these overlap heavily):
- Overestimating the prevalence of specific use cases. In a classic example, Mike Stonebraker and others on the early Vertica team seemed convinced that — 20 years of contrary industry experience notwithstanding — most analytic RDBMS users would be content with star schemas. They were wrong.
- Underestimating the requirements for product completeness. This is the flip side of the same error. You know all those features that the other guys have and you haven’t gotten around to building yet? Those features were built because of (actual or anticipated) customer demand.
- Underrating the competition’s current and future product. Vendors frequently think that their features and performance characteristics are unique, and may long remain so. They’re usually wrong, except in the case of features that convey little market advantage.
- Underestimating the work in maturing a product. In 1993, Sybase held a press conference in New York to announce that Version 1.0 of a new C-oriented application development tool would surpass all competition in performance and reliability, after a 3-month beta cycle.* I scoffed; the company took umbrage; my relationship with them went from bad to worse. And the tool? That failed so completely I no longer remember its name.
The dictum Fake it ’til you make it bears a certain relevance here, all the way down to its Alcoholics Anonymous associations.
From time to time over the past 30+ years, vendors have described to me pricing schemes in the vein:
- Calculate a measure of your customer’s business improvement, for example cost savings, revenue increase or marketing lift.
- Take a fraction of it for yourself.
That sounds like a risk-sharing win-win kind of deal, in which your customer’s costs perfectly mirror the benefits achieved.
The naive form of that argument is wholly ridiculous, however; what customers pay you is only a portion of their total cost of ownership, and in most cases not close to the majority. The plan has more fundamental problems too, and experience shows that it rarely works in practice.
Last May, I summarized and explained my standard pricing advice by:
- There should be 2 or more simple pricing algorithms, so that …
- … the price for any given customer is the lowest of those choices.
Generally one pricing algorithm will be suited for most of your customers, while the others will be meant for minority or edge cases. …
Core reasons for that approach include:
- Simplicity. Your salesman on the account should be able to quickly determine which pricing approach will apply. The prospect should be comfortable that there won’t be hard-to-foresee “gotcha” charges.
- Fairness and match to use case. For any particular prospect, there probably will be a pricing scheme that fits well.
- Competitive flexibility. Nothing in this strategy puts much of a floor or ceiling on your pricing. You can do whatever you think is economically best.
Benefit-sharing pricing, by way of contrast, can be simple or fair, but it has great trouble being both at once. So if you propose it, messy negotiations will ensue.
For example, suppose that Tweedledee Inc. mirrors Tweedledum Corp. in all ways but one: Tweedledee uses your best competitor Humptyware, while Tweedledum runs the far inferior Dumptysoft. Thus, if Tweedledee implements your Frabulizer, their rate of rattle-breakage will drop from 2 percent to 1; but if Tweedledum buys it, their rate will drop from 10 percent to the same 1. Should and will Tweedledum really pay you 9 times as much for the same thing as Tweedledee? Not a chance. So if you try to price on the basis of measurable outcomes improvement, you’ll probably just get into a huge price negotiation mess.
I do see one scenario in which I might consider benefit-sharing prices — when you’re in a messy price negotiation anyway, and benefit-sharing could close the gap. For example, if you want $1 million for what you claim will be a $20 million benefit, and the customer offers $750,000 for what they more conservatively estimate as a $10 million outcome, you could let the last $250,000 ride on some agreed-upon metric tracked over time. But even that is a questionable stratagem, in that it amounts to a bet that your salesman’s optimism will actually prove to be correct.
Bottom line: Keep your pricing simple, which it isn’t if it depends upon your customers’ internal operating metrics.