Unlearning is harder than new learning. When you move from IT services to products, you learn many new things by unlearning what you know already. Many founders have taken the great leap. The transition is exciting and challenging - not least because of the things that are different between IT services & SaaS products.
Straight Talk at the NASSCOM Product Conclave 2021 brought together an eminent panel of SaaS leaders who have built successful SaaS products after spending years in the services industry.
The panel comprised Prasanna Krishnamoorthy, Managing Partner at Upekkha; Jaya Vaidhyanathan, CEO, BCT Digital; Sudha Bhamidipati, Co-founder, Worxogo; Derick Jose, Co-founder, Flutura; Vinay Nathan, CEO & Co-Founder, Altizon and Krishnakumar Natarajan, Co-Founder, Mela Ventures (earlier Co-founder at Mindtree)
This blog post carries excerpts from the speeches of the panel members providing valuable insights to those who are passionate about building a product.
Is your product a vitamin or a pain killer?
One of the three key learnings from a product management perspective is what type of problem are you solving? 'Is your product a vitamin or a pain killer?'
When we initially entered the oil and gas market, the Macondo blast had happened. We felt collecting sensor signals and alarming them to an impending explosion would be of immense value to our customers because that saves lives. We built the product and went into the market, and we found out that everybody liked the product, but they were not willing to buy it. We found it very strange.
When we dug deeper, we found two problems with it. One is that there was no allocated budget for the product.
Two, the link between our product and the safety outcome was not very tangible in our customers' minds.
So if it is tangible and a budget is allocated, call it a painkiller. If the outcome of the product is not the same as the outcome your customer wants, it is a vitamin.
Can an average salesperson sell your product to an average customer?
The second key learning is the definition of product-market fit. How do you define product-market fit? We debated many definitions. The best one came from B. V. Jagadeesh, a board member of Fluturo.
“If an average salesperson can sell your product to an average customer, then there is product-market fit.”
We were thinking of selling our product only to matured customers, which is intellectually stimulating, but the idea is not scalable.
Suppose you look at the above definition of product-market fit through a product management lens. In that case, there are three dimensions to it.
Feature-market fit: Product managers often over-engineer a product. The best way to identify feature-market fit is to remove a feature and see if the customer looks for it. Above all, are they aware that the missing feature can solve a high-value problem?
Message-market fit: Whatever you tell your customers should dilate their pupils in the first 15 seconds. Does the message evoke any interest? If not, then revisit your product-market fit.
Pricing-market fit: Is your product affordable for your target market?
If you have a feature-market fit, message-market fit, and pricing-market fit, there is a high probability that an average salesperson will sell your product to an average customer.
Can you make your product a habit?
One thing our team is obsessed with is making our products a habit among customers. How often does your customer use your product? Daily, weekly, monthly, or quarterly?
A product becomes a habit if you use it without thinking twice. We all send messages over WhatsApp. We all do Google search. Do we think twice? No. We do it. These products have entered our subconscious layer.
In B2B, PipeDrive has become a habit for many people for checking the deal size.
How do you make your product a habit?
In the industrial setting, one place where we have managed to make our product become a habit is Oil Well scoring.
For instance, a Well drilling operations manager manages around 200 wells with 30 to 50 engineers working for him. Every day in the morning, the manager puts a route on a piece of paper for the engineers to go to these wells.
We have simplified it with an application. With one click, the operations manager will get the route every day. This has become a habit. Currently, we are trying to make all our products a habit with our customers.
If your user is using your product weekly or monthly, it isn't easy to make it a habit.
The focus is to make things happen with a single click. Then the probability of your product becoming a habit increases. When the user finds your product easy to use with a single click, they will not think twice before using it.
When you start up a company, the thing that you realize is the number of functions that come into play. It is not just one or the other.
You start with an idea, convert it into an MVP, take it to a product, and then start to sell. When you sell, you need to think of pricing, contracting, security, and non-disclosure agreements with enterprises. Then you get into deployment, support, analytics, and usage of your product that can feedback into your product and improve it.
I haven't even started talking about things like people management and finance and accounts and administration, all of which need to go through.
Services people excel at all the things mentioned above. The thing that I haven't ever done in a services company is dealing with investors.
Apart from the inexperience of dealing with investors, people from the services industry are well-positioned to get into products.
With experience in all the different business functions, one thing that Sudha thinks is of great importance in a product company is focus.
All our co-founders at Workxogo had our hobby horses. We had three different products and wanted to sell them and see which one is better. We had differences in opinions. But the energy a startup should have is singular. Stay focused on what you want to achieve.
Sudha continues to add the most important lessons entrepreneurs must learn quickly in the product space
Configurability Vs. Coding: When you deploy your product at the site, are you making it configurable so that your customer can fix it? If it requires code, you must rethink it. It would be best if you asked how I can make it configurable.
Scalability and Repeatability: To build a scalable business, founders should focus on their use case, know why their product is indispensable, create a case study, and carpet bomb the target market. One big challenge is that businesses have many moving parts, and often founders lose their focus. It is essential to focus and put all the moving pieces together to build a scalable business.
Ring-fencing product and operations team: Your operations team is about your existing customers. They are your day-to-day engine at work. Your product team builds the future of your business. You cannot say that your current customers do not matter to you. One of the management challenges is to find a way to ring-fence the product team from your operations team.
Product-market fit for us is the entire journey
In 2013, When Altizon started as an Industrial IoT platform when there was no market at all. The industry was in its very early stages.
We didn't know what product-market fit was then. The term platform sounded very exciting, and we wanted developers to come to our platform and build products using it. Initially, we didn't have a holistic solution to make enterprise sales happen.
Developers were using our platform, but no one was ready to pay for it. So we decided to build products on top of the platform without violating any 'API Karma' so that developers feel that they are using their own platform.
There are nearly 700 products that have come and gone in the last seven years. The reason we stayed afloat is the Indian market. Like many others, we also thought that India is a trial market where we can test our products and scale them globally. But an important lesson is not to discredit the Indian market.
India has a diverse set of factories from the most advanced to the least developed. You get an opportunity to work with all of them.
One more thing you should understand is that you cannot time the market. Sometimes, it takes years for the market to develop.
Our journey has been successful. It is a great learning experience evolving from a product platform to building a company that can scale. Today, the most significant driver has been 2020 as opposed to the previous six years.
Be prepared for the long haul, and things will work out if you have done the right hygienic things as you battle it out.
There is no alternative to customer development anywhere in the world. You find your customers, help them solve a problem, and you repeat it in the global market.
Sales in Services & SaaS
The services industry has grown by selling large ticket values to large enterprises. People who have worked in the services industry, especially on the sales side, have a significant advantage working in enterprise SaaS.
High-touch sales and go-to-market models are in the DNA of the service industry folks. They have a solution approach and a selling approach. With SaaS, an IT component can be tagged along with their rich experience.
In the product space, you close business deals, but you do not know how much revenue you will generate, unlike IT services. Your revenue is not decided by the number of people you add. You can scale a product globally without even adding many people, giving you a sense of freedom.
But in SaaS, ROI becomes your responsibility. You cannot ship and forget. You are going to have signups and churn. An annual license might not get renewed.
In services sales, you can say yes to everything. That never works in products. Because it's a show-and-tell model. Telling your customer that your product will do everything for you is a big mistake. In services, you can tell your customer that you can do everything for them.
The mindset of marketing
The marketing strategies you use in the service industry are not going to work in the product space. You can have case studies that portray one day's work as a year's work in the services industry.
But in the product space, you should know what you do and what value you generate for your customers. And you should be able to communicate the value across all the channels.
When you move from services to products, you should realize that 'there is a spend on marketing'.
Industry chambers and conferences worked for our go-to-marketing strategy in the Industrial IoT domain.
But it is a different ball game for product marketing when your users belong to various industries. There is a shortage of product marketing talent which you should prepare for.
Your path to entrepreneurship can be non-linear, but your experience is linear
Did you become an entrepreneur after having diverse work experience? Every job in your non-linear career path matters. You have been learning throughout your career.
Jaya started as an investment banker and worked in a management consultancy (Accenture) before working with core technology for banks. Jaya believes each of her career tracks has taught her something unique- which she calls ‘life lessons’- in selling a product.
Jaya is the CEO of BCT Digital, a risk management product for banks.
How to tell a story with numbers?
Jaya says the fundamental learning of working as an investment banker is to tell a story with numbers.
Numbers are something that you cannot use to beat around the bush. Numbers represent the single version of the truth.
You are selling a risk management product to a bank. You explain how it helps with compliance by giving you early warning signal alerts so that you will never have a non-performing asset (NPA).
The bank's rebuttal goes like this: we have some great people working with us for many years. Are you trying to take their jobs away?
If you make the pitch in terms of numbers:
The bank has an asset price of 500 million, and your NPA is at 10%, which means 50 million is at stake. Here we are trying to put an early warning system. Even if it achieves only one percent of implementation, you have 500 million at disposal. So we are talking about 2 million spent on this product. You are going to get 500 million as soon as the product goes live.
Now that's a story board members will listen. Learn to tell a story with numbers.
Put yourself in your customers' shoes
Management consulting teaches you to look at the business impact by putting yourself in your customers' shoes. You got to say that you are going to make their lives better with your product.
You tell your customers what problem you are solving for them.
In our case, we tell our banking clients that they have got an enormous burden of compliance, and we are going to help you knock off a lot of your penalties. What will take you 12 weeks is done in three weeks.
When you talk about your customers' problems in their language, they listen more to you.
Understanding your customers' challenges is a critical skill in the products industry. You need to articulate why your customer is paying you. Is your product indispensable to their business?
In the services industry, you listen to your customers differently. Let me know your needs, and I will do that for you.
But in the product space, you become an expert advisor. You know all the challenges faced by your customer, and you are offering them a solution. You act as a visionary in the industry.
To know customer challenges like the back of your hand, you need to learn continuously.
In our case, compliance requirements change constantly, and we need to catch up with these changes to stay relevant in the market.
Similarly, continuous learning is critical for every product leader to keep up with the changes.
When you build a product, you learn what you never knew
I thought she knew technology only until I started to build a product.
When you build a product, you will unlearn and learn many things you didn’t know about technology because you get into the fundamentals of all the nuts and bolts that make a good product.
Your product must handle 250,000 transactions per second. How do you ensure your coders do the right thing to achieve the goal. When you sit with coders to understand how you do, you will unlearn and relearn new things about technology.
When you answer questions like why can’t you scale up, why is the architecture we use is worthy of time and effort, and how do you migrate from on-prem to cloud, you fundamentally unlearn and rethink.
How do you let the world discover your product?
When you have a vision, you must articulate it. Your vision makes it easy for you to focus on what you are doing. Let the world know what your vision is.
It isn't easy to get discovered at an early stage. That is why you must articulate your vision and become a thought leader. Publish thought leadership articles so that everyone can read and understand your expertise and vision.
We wrote 72 thought leadership articles in a year. Leading media companies picked up our writings. We wrote about the Jet Airways crisis from a risk management perspective and what should have been done from a governance perspective. I would ask the CEOs to identify their thought leadership areas that will resonate with their audience and create a brand identity around that.
Write your expert point of view on everything happening in your industry, not only in India but across the world.
You must learn continuously and become thought leaders for all your stakeholders - investors, customers, and employees. You build your thought leadership around your vision, write your perspective, and do brand building around it. When you resonate with your stakeholders, your product gets discovered.
Capital allocation in services are products are different
The distinction between services and products businesses is blurring. But still, the capital allocation and capital journey are different for them.
You require incremental capital in a services business. When you reach a particular revenue generation stage in a services business, you do not need a large amount of capital to grow further.
The time required to make money and break even in a services business is shorter than in the product business.
The capital required for a product business is a step function. You raise an angel investment or get money from your friends and family to build a product.
If you want to establish a solid product-market fit, you need a large capital investment that is not sufficiently generated by the subscription revenue from your customers.
The second key difference is capital deployment. In the services business, capital is deployed to the core business.
You recruit people to deliver a service to a customer but not to build an AI model to solve their problem.
In products, you can deploy capital outside the core areas of business. For example, in the services industry, you do not pay much attention to marketing, social media, content writing, or publishing blog posts and their reception among influencers.
Be a good storyteller of the problem
Some of the qualities you build in the services industry are equally important in products, for instance, customer focus. The service industry teaches you to be customer-focused. It's not any different in products.
Customer focus is about understanding their problem and articulating it with good storytelling skills in the product space.
I often force entrepreneurs to tell the problem they solve in 25 sentences and make it as dramatic as possible. The storytelling exercise helps me understand how passionate they are about solving the problem for their customers.
Architecture, Technology and Cost value equation
In the context of the services, your client has a mainframe or a client-server, and you decide the architecture and technology of your solution accordingly.
But in the product industry, you need to decide which architecture and technology will solve the problem better for the customers.
The next important thing is, 'What cost value do you provide to your customers?'. In the services industry, many times, you are not even aware of the value you provide.
Even if you know the value of your services, you tend to make it higher.
But in the products space, you have to deep-dive and think if you are creating value for your customers. Only then will the product become sticky and become successful.
Closing words by Prasanna
I've seen many people who have a built mobile app solution builder or have worked with McKinsey or Accenture, or have run marketing agencies become product entrepreneurs.
One common thread that has helped all these entrepreneurs stand out and become successful is their desire to learn and ability to unlearn. Many skills which have helped them tremendously in their old roles might serve them poor in their new product roles.
In the products industry, 95% of your potential customers would say no to you. They can be enterprise customers with a million-dollar budget. You cannot say yes to everything.
As a product entrepreneur, you must firmly believe that you solve the right problem from your customers even if you listen no from 95% of them.
In the products space, you are making a difference in your customers' daily lives by solving their problems.
Often, you cannot solve the problem the way you think is right.
Many people get stuck in 'either it's my way or the high way'. In that case, they think they are right, and they don't care about what others think.
You have to stay with your conviction even after listening no from 95% of the potential customers. That 95% cannot become 100%.
These are some critical things that help product founders differentiate themselves from their earlier avatars and become successful.
Watch the full session Straight Talks at Nasscom Product Enclave 2021