Growth Partner, Emergence Capital
How to Go From a Single Product to a Multi-Product Company and Not Die
Doug Landis: The enterprise content management space is projected to be $67 billion by 2022 that's massive. Much like my good friend here, the big tusker elephant, whether you're focusing on a $67 billion content management space or the $700 billion trucking logistics space or the $12 trillion transportation industry, I believe a singular adage is still true and that is how do you eat an elephant? This is not a trick question. How do you eat an elephant one bite at a time, right, and I would argue that that's exactly the same approach that you have to take if you want to build a multimillion dollar software company or whatever industry that you're in one bite at a time. Now I'm going to venture to guess that most of you are are trying to service a market that is likely fairly large and then by by default you will likely have multiple products that you're going to offer to your customers, whether that's you through acquisition or through development.
Doug Landis: So knowing when to actually introduce a new product into your portfolio, knowing how to transition from a single product company to a multiproduct company and knowing what not to do is what we're going to spend the next 25 minutes talking about you. Cool. You with me? Now, some of you guys might be wondering what like who the hell am I and why I'm up here at why am I up here talking about this? Because the truth is I most definitely am not a product manager. I'm not on the product side. I'm a go to market guy, but fortunately enough for me, I spent the last 15 years at salesforce, Google, oracle box all in the early days when they were single product companies as they transition to multi product companies and I got to learn what works and what doesn't work because on the go to market side we unfortunately suffer from all the decisions that you guys make as product managers without telling us that it's a giant pain in the ass when you're trying to go to market on a product that you didn't even know was coming out or you didn't even know you were requiring.
Doug Landis: My current role today is I'm a growth partner at Emergence Capital. We are an early stage venture capital firm in the bay area down in San Mateo. We invest in series a and B stage companies. We're hyper focused on B2B enterprise. SAS companies were the first investors in salesforce, in box and Yammer and Steelbrick, ServiceMax, Success Factors, Veeva. We've done all right. It's all right. Fundamentally, we believe in investing in people, in companies that are focused on changing the future of work. Now as an early stage investor and as a former operator at some iconic companies, I think it's safe to say that I've learned a few things in particular. I can tell you the two primary reasons why early companies fail. One, lack of focus to hiring. What I mean by hiring is you hire the wrong person at the wrong time. When it box, when there was 300 people, box box.com right.
Doug Landis: Do you think that's a of a brand? You've got Aaron Levy, this crazy fanatical CEO who is like 22 at the time and yet at 300 people we had two VPs of marketing and a VP of brand. What? Why do you need that? Be Really careful about the people that you hire. Often, especially in early stage companies that I see, they think, oh, I need to go out and hire a VP of sales. Let me go hire somebody who from salesforce or oracle or workday. It's like, no, you don't because guess what? All the processes already been built for them. Their job is to go execute so they might not be a good fit for you. Get your first and early hires, right? Oh, by the way, your first hire had a customer success. Your second hire had a marketing, your third hire, head of sales.
Doug Landis: Crazy. I know, but it's true. We'll explain later. The other piece is focus. What I mean by Focus, and I'm you, this is so important, but make sure you just follow a single course of action until you nail it. Whether that's dominating in your market. We were just talking about this. Well that's dominating in your market or any particular industry or with a product, nail it. What we typically see is early stage companies that try to be all things to everybody. You get a bite from a big company, an enterprise, yet most of your companies, customers are on the SMB or mid-market space and you decide to go after that enterprise company. Maybe you're not ready yet. Maybe they're not ready yet. You're going to be really, really careful about when you go after a new industry or a new market or release a new product.
Doug Landis: So speaking about new products, let's talk about when, when to start to add new products to your portfolio, whether that's your acquisition or building them. Now, all those companies that I mentioned earlier have always lived by a certain ethos, which is when the battle that you're in before you go fight another battle. If you think about it, the company, the of the Oracles, the Microsofts, that salesforce is the boxes of the world. They all started off as a singular product and then over time they started adding more and more products, which makes things much more complex. The question then you have to ask is at what point did they decide to add a new product? At what point did salesforce say, okay, core CRM, this is good enough. I'm now going to go after customer service. We thought about it for a really long time, really long time, but there was a certain tipping point that said, okay, now it's time the market is ready.
Doug Landis: Let's talk about what that tipping point is because every single company goes through this. The tipping point is when a company actually recognize this and determines their core products life cycle. There are four stages in a product's life cycle. You guys all know this. I'm not educating you on this. There's what? The introduction, the growth and maturity and the decline stage. I'm gonna talk about each one of these real quickly. It's important that you can identify where your product is today. If you're early stage, most likely you're in the introductory stage or maybe you're in the growth stage. If you are, congratulations, and if you're on that stage and you've got an Arr of roughly one to 2 million, come talk to me afterwards.
Doug Landis: Let's talk about each one of these stages real quickly. The introductory stage, when you're in this stage, you're focused on raising awareness. You're just trying to let everybody know that you exist. You go to conferences and you talk to everybody and then try and get people to try your product so they can give you feedback. All you're trying to do is get on the map, get on people's radars. It's kind of a fun stage. You get to test a lot of different things, so we were doing a lot of A/B testing and you should be taking copious notes on what works and what doesn't and make sure that everybody else in the company is on the same page. Super important. In the next stage, in the growth stage, we're now focused on accelerating the growth, accelerating our our market share, and really focus on market penetration.
Doug Landis: This is where we're putting all of our resources behind going quickly, right? This is when you go out and you raise your series a and you're like, great, cool. We need to go hire a whole go to market team. That's what I said before. Hire customer success first, then marketing than sales. Why? Well listen, think about it this way. If you're the founder seller, like what Pete was talking about as founders, you guys should be out selling the product. The first thing you want to do is once you get some customers is you want to make sure that they're wildly successful and happy. So hire customer success, success folks to make sure you do that. Then hire a marketer because all you want to do is make sure you can feed your sales people. If you're hire sales people too early, they're going to starve because guess what they're doing?
Doug Landis: They're just pounding the phones all day long looking hunting for business, customer success, marketing and sales. At this stage in particular, the next stage of your product development, lifecycle and evolution is what's called the maturity stage. Your task here is all about maximizing your profitability, so we've got significant market share and now we need to make sure that we're making as much money as possible and we're defending ourselves from all of those little ankle biter competitors. Now, the truth is, at this stage you may decide that you need to launch a new product and not focus on revenue from that product because all you're trying to do is block and tackle the competitor that is making a ton of noise in your space. That's okay. Just be really clear about why you're launching that product and what it's going to do for you and your organization. Super, super important. The last stage is the decline stage and this stage you're kind of thinking about, well, is there a way in which I can actually boost our profit margins once again? Or is it time to phase out that product? And to shift gears altogether? It's a really interesting question. Now, at what point should you be thinking about launching a new product, launching into a new market or focusing on a new industry? We've got what? Introduction, growth, maturity, and decline. What do you think?
Doug Landis: Thank you. Maturity Stage, right? Because you're maximizing your profitability are in a place where you're like, okay, cool. How do I maintain quarter over quarter, year over year revenue and growth and your investors and your board? All we want to do is see everything's moving up into the right, right? So when you start to get into the maturity stage, maybe it's time to start thinking about what's next or how do, what can we add that's not going to confuse the market.
Doug Landis: So do an assessment. Where is your product today? How long do you think it's going to take you to get to your next stage? What? What's it gonna take to get to maturity and then at that stage what makes sense next? It helps you in your planning. Yes, I am assuming that you have some sort of product market fit, which by the way you are doing when you're in the, in the the first two phases if you will, and the introduction and the growth phase actually introduction phase, you're really testing your product market fit. Once you have product market fit, then you go into the growth phase. Right now, now we're making cash, hiring all my sales people, right to go execute and now I'm hitting maturity. I'm hitting my stride. I'm now thinking about what's next. Yes, absolutely. Good point. Okay, so next thing you to consider, the reality is every product that you introduce is going to go through its own product life cycle.
Doug Landis: Some are going to be long, some are going to be short. The truth is every single product that you introduce, again, whether that's something that you acquire or once something that you build, you have to think it's going to have its own go to market strategy. It will. And so the interesting thing is making sure that those go to market strategies all align. Do not do this in the vacuum. Far Too often as companies start to grow, we create silos. Product is over here, engineering's over here, and then you've got sales over here and then customer success and support are way over here and nobody's talking to one of the, and that's a massive, massive problem. It will get you into all sorts of trouble. So before you think about launching a new product, buying a company or launching into new market, there are some very important questions you need to be able to answer. One, make sure you're clear about where your current product is and its product development life cycle.
Doug Landis: Yeah, to make sure you can answer these four questions. Very important. Question number one, do the new products actually fit into our corporate vision and strategy? Is this going to be a distraction? Do they fit into our corporate vision and strategy? Actually, guess what? Let's take, go rewind for a second. Do you actually have a corporate vision and strategy? A lot of the companies that we work with in series a, the one of the first things we do is like, what's your mission? What's your purpose? Why do you exist? Why do people want to come work for you? Because the problem is in the early stage, in the seed stage, what are we doing? We're just trying to build a product where we can get to product market fit and then all of a sudden we get some success and we're like, sweet, let's go hire a bunch of people.
Doug Landis: Cause we raised some money. And they were like, okay cool. But why do you exist? What's that North Star? Right? So if you're going to, when you kind of reached that maturity stage and it's time to go out and buy a company, when you SalesLoft as an example, series c company and one of our companies, they went out and bought a company called note Ninja because they're in that mature stage of their core product and note Ninja. The company actually fit really well into their vision and strategy as an organization. So first question, does this new product or new company that you're thinking about acquiring fit into your vision and strategy and it's not really about a matter of will they cause distractions from achieving or achieving our goals? The question is is how do we manage those distractions? Because anytime you buy or introduce a new product or buy a company, there's going to be some distractions, period. How do you mitigate that and handle that as super important? Third question, is it going to confuse your existing customers?
Doug Landis: I don't know why enough people don't stop before they make a big decision and actually go talk to their customers and try and understand what do you think by adding this product or buying, buying this company actually will do for us and for you. This is going to be beneficial to you. Do you care? Because what you're trying to do is figure out, well, how are we going to position this? Is this going to be something totally separate and different from what our core offering is or is this going to be integrated and deep into a cohesive story? If you're not thinking about these things, you're making us on the go to market side. Really sweat bullets cause guess what happens? All of our existing customers are gonna pick up the phone and call and be like, what is this? And we're like, I don't know.
Doug Landis: There's nothing worse than that. All your SDRs that you hire pain in the ass to experience. The last thing, of course, the last question you have to answer is where's the trade off? In early stage companies all the way until you are salesforce and even at salesforce is stage. There's always trade offs. Every decision that we make, there's going to be a trade off, so resources, resources. How is this going to detract away from what it is that I've got my people doing now? Because guess what? You build a new product or you buy another company. You've got to take some of your resources and reallocate them. What are the implications of that is that all of a sudden now going to put you behind your competitors? It's going to create more of a gap. What's that going to do to your existing business? Really, really important that you answer these four questions.
Doug Landis: So first thing, look at where your product is in the product life cycle. Second thing, answer these four questions. You would've me head nodding. Cool. All right, I like it. We're rocking the next thing. Okay. Resource allocation is really, really important. How do you determine where to where and how to allocate your resources? I would say allocate them based on the overall market opportunity. Ooh, but then the question is, is how do you determine the overall market opportunity? We're gonna talk about that as we get to how to transition. So First Section we just talked about when to actually introduce new products. Here's the summary. There are five steps. One, use market research and talk to your customers. Please get out there. I read an interesting statistic, I don't know if it's true or not, and you guys could probably validate this, but something like 70% of product managers and engineers never meet with an actual customer.
Doug Landis: That's insane. It's totally insane. So small company, you have customers, bring them to your office, have them meet with everyone in your organization. Better understand. It's important that even as an engineer, you understand exactly how your customers are using your capabilities. Make sure that you understand exactly the value that you're delivering to your customers. What is in their words, not ours. Far Too often we build products for our customers that we think they want because we did it in a hackathon and it's cool. Guess what? That doesn't really turn into revenue in many cases that really it doesn't turn into revenue, but it's fun. Number two, step number two, make sure you're evaluating all the competitive products out there. So before you release a new product, I'm sure you probably already know this. Then of course, determine your core product life cycle. Answer the four key questions and validate the present level of demand and the best channels for distribution.
Doug Landis: So make sure you're validating, you're validating, validating, validating. This is why this all exists. Lastly, you've got to make sure you're doing your homework with the analytical eye, analytical sense. Okay, so that's the when. When are we going to introduce a new product? Now we want to transition into the how. But before I do that, I love this quote from Mark Cuban, which is like, look, the truth is, is you only have 24 hours in a day. Really, and to be honest, those 24 hours should be spent on winning your core business because it will pay off a lot more in the long run. Without question. It's super easy to be distracted by the next new thing, right? The little shiny penny, I call it, it's a, it's a disease called SOD, and we all have it, especially here in the Bay Area. It's called shiny object disease.
Doug Landis: Ooh, look, squirrel. Ooh, look at what's that new tech, new code, whatever it may be. Gotta be really, really careful about that. Okay, so that's when, now let's talk about the how, how to actually make that transition. And this is a little complicated. It's a little meaty. Don't worry, you guys have copies of all these slides. Uh, so it'll be, it should be fun for us. How do we make this transition? Well, the truth is, is adding a new product or extending a product line to replace it, an existing product and one that's in decline. Most likely we do this because it's necessary for us to maintain our growth. Right? But the transition is not necessarily easy. Here's something that can help make it easier to follow these four steps. Step number one, step number one, determine the specific and the exact needs of your customers.
Doug Landis: What do they want and what do they need? Back to what Patrick (editor: Patrick Campbell) was talking about before from profit. Well, and then of course, what are they willing to pay for? It's one thing to want it. It's another thing to actually want to put money behind it. It's this transition between being a nice to have versus a must have if you're in the nice to have space. Oh, it sucks. As a sales person, do you know how hard it is to sell something that's nice to have versus something that you must have as a customer? So step number one, determine exactly what your customers want and need by market segment. What your customers in the SMB space need and want might be very different when your customers in the mid market enterprise and even your partners to be really clear about buying market segment what they want need step number two, identify the products or capabilities in groups that meet those requirements and those needs.
Doug Landis: What's going to be most attractive to them? What are they willing to pay for? Step number three, create a unique value proposition for this. This is where you need to put your marketing hat on and say, okay, why? Why are they going to want to buy this? What's our positioning for this? How is this extending our core capabilities versus how has this a whole wholly own different product? And then step number four, determine the distribution channels, whether that's direct or indirect sales or distribution channels. Very simple and straight forward. This is how we start to make this transition first. We do our homework. We understand what our customers want, we build what they want, we position it correctly, we get it out to the sales people. Simple, right? It doesn't always work that way. I wish it did. The truth is, when it comes to allocating resources, we're going to allocate them based on product and market potential as we're talking about products that we might actually release.
Doug Landis: So how do you calculate that? The good news is there's this beautiful tool out there and make note of this. It's called the growth share matrix. And what the growth share matrix does is it applies a scatter graph to rank products based on the relative market share and their growth potential. I'm going to show you what it is. I'm going to give you a real life example. ABC Corp right here, their product portfolio yields these results. By the way, the circles represent the revenue potential in sales. So we've got four categories here. You've got on the upper left stars with product three on the right. Question mark from product to bottom, left cow's, also known as cash cows on the bottom left and then dogs on the bottom right. Let's talk about what each one of these mean. And by the way today with your current products, put them into this category.
Doug Landis: North and south axis market growth, east and West axis market share, relative market share. So product three, product three is a star. Whoo. We like stars. Interesting thing about stars is the, they have the highest market share with the in rapidly growing markets. So what do we do with stars? Invest, invest, invest, high market share, rapidly growing market. That's great category. It's kind of like the opposite of the magic quadrant because this is the upper left, but invest like crazy product. Two question mark. There's still some unknowns. Question marks have lower market share, but in markets that are growing, so you've gotta wonder, should we invest more or should we invest? What are we doing with product two? We'll answer these questions in just a second. I think there's a lot of potential for product two to actually become stars, but they could also become cash cows, which is fine, but there's a certain period of time where you want to stop making those investments.
Doug Landis: Product one is what's called a cash cow. Cash cows. You have to be really careful about, you're making a ton of money off of them, but guess what? The market's not necessarily growing right, and a lot of people have a tendency of like, let's over invest in this because we're making so much money. Let's make more, or let's make more. But if the market's not growing, guess what? It's not going to serve you well in the long run. It'd be really careful about cash cows, the product manager and the owners of the cash cow products. They're super sensitive. Don't mess with me. Give me more, feed me more. Right? That's what happens. But unfortunately that tends to wane rather quickly. The last product is product four that's in the dog category, the dog category, well, low market share and slow growth markets. So what do you do?
Doug Landis: Kill them again if you're the, yeah, right. If you're the product manager though, it can be personal and emotional. It's like, don't kill my baby, call my baby ugly and that's no fun. As you think about this growth share matrix, and by the way it's, it's on the public interwebs, you can go find it. Some questions you need to answer. If you're just looking at this example in particular, should we invest more in product three we've got great market share and high growth potential. Should we continue to invest more? Is that where we push our money or do we push more of our money in product two? Can we actually take product two from a question mark and turn it into a star or even a cash cow? What do we do about our cash cow? How much more do we continue to invest in the cash cow and then of course for the last one product for do we kill it?
Doug Landis: What are we doing? You should plot your products on a graph like this and again, the size of the bubble determines the size of the potential revenue, the sales revenue. Now your products, this also could be, it could be helpful in terms of helping you think through what products you actually want to invest in potentially buy or build. Okay. So how do you determine what your actual market share is or could be? There's another fun little formula to introduce you to. It's called the p p h or the p p p. H. Just an extra p. That's all. So here it is. Product line coverage. I know it's Kinda hard to read in the back. What percentage of market does the product actually target all of the overall total adjustable market? What actually percentage of the market is this actually targeting? What is that second p presence?
Doug Landis: What percentage of time do you actually get to present this product? Right when, when, uh, so we'll call it a, I'm just gonna use Box as an example. Core Box probably core boxes talked about 95% of the time. The other products that they have, security workflow automation talked about maybe 5% of the time. It's not a, it's not a lead, if you will, into our customers. It's something we have to add on. So should they continue to invest in those? Some may be more so than others. The third P is preference and that's if you have a channel partnership or a channel distribution strategy. What preference a percent of market share do you have with your partners when Box did a partnership with IBM, IBM was actually reselling. They did a 10 year deal with IBM. IBM is going to resell Box. Guess what? They didn't do shit and do anything cause they're like we got 82 other products to go sell. Why are we going to sell this one? We don't really care and by the way it costs nothing compared to everything else that we sell. So we didn't really have a whole lot of market share with our partners. Last one is hit rate. How often do we, when we're, when we're actually out positioning this product, if you multiply all of these, you will get a market share factor that can be used to evaluate the effect of different market strategies. Cool.
Doug Landis: Don't worry. This is all in the deck. You can study it later. It's a lot of information to try and absorb. We talked earlier about when, now I'm going to give you a little summary on how and then I'm going to give you some things of some things that I've learned not to do in my last 60 seconds. Then I'll open up for questions. Cool. You with me? More head nods. Okay, I see. Mostly I can. Good. All right. Four things to make this transition, the first thing we have to do is make sure you follow the four steps. What were the four steps? Do your homework on your customers. Understand what they want, need. Make sure you actually deliver on that. Build out your messaging and positioning and then of course make sure you're clear about your distribution channels. How are you going to get this product to market?
Doug Landis: Second thing, allocate resources. If you're going to allocate resources, you have to understand the grocery or metrics so you understand where you're going to invest. Where does your existing product today live? Is that a star? Is it a cash cow? Is that a question mark? I don't know. If you don't know that, then how do you know where to invest? Therefore, how do you know when to release or launch a new product or buy another company if you don't know where existing products that actually live in this here or matrix. And then number four, use the PPP h a model to evaluate the effects of your marketing strategies. Whew, we've covered a lot when to actually launch a new product or actually a buy a company. How to actually do that. Now I'm going to tell you what not to do. This is the fun stuff because this is the stuff that actually affects me on the go to market side.
Doug Landis: Number one, there are eight of them. There are eight things not to do. I will go through each one. Number one, please do not launch a product without actually engaging marketing and sales period. Don't even start thinking about launching a new product without actually introducing marketing and sales to the idea cause I tell you what, they have their own set of priorities. You have your set of priorities. The more siloed you become, the more difficult it becomes to actually get these things to market. Number two, do not launch a product without educating sales on the product itself. Do you know how hard it is when there's an announcement? Och launches this whole new product and you know the SDRs are fielding calls on this new product. I have no idea what it is. They don't know how to talk about it. They don't know how to sell it.
Doug Landis: They don't know how to position it. They don't know how to price it. They don't know how to handle objections. They don't know who the competitors are. It happens all the time. It's terrible, terrible, terrible idea and practice number three, do not launch a product without actually having the right assets or materials available for the rest of the organization. It's one thing to have the assets available to the masses. It's another thing to make sure that your internal folks, especially customer support and customer success because they're the ones with the closest relationship with their customers. They have to understand what's going and how everything fits together. Number four, do not launch a product without customer validation on price. Go to profit. Well, help engage them to help you figure out what the price should be. Number five, do not build a product without meeting with customers, period.
Doug Landis: It shouldn't put that all in bold. You cannot launch a product without meeting with the customer. Number six, do not launch a product with just your partners. It's just weird. Your direct sales organizations like why are partners actually selling something different that we sell? It's all under the same company umbrella. Unless that's your model. Unless 98% of your revenue is going through your partners, then maybe that's different. Number seven, last two, do not launch a product before your core product actually reaches maturity in less. You feel the need to launch a product when you're in the growth stage to offset or block and tackle the competitor. That's the one caveat. It's okay to do it in the growth stage. Certainly not in the introduction stage. You're still trying to pull your head out of your big toe, but in the growth stage you may need to launch another product or buy another company to block into a block off your competitors.
Doug Landis: And then number eight, do not launch a product. Do not launch a recent product that was do not launch a product that was just recently built in a hackathon because most of the time that's just cool factor for you internally and it hasn't really been validated or tested with your customers. And oh by the way, go back to number one, you're not going to do that because you need to get marketing and sales involved and everybody else in the organization involved. Even though it might be really cool that it's solving a problem that you guys have been struggling with for a really long time.
Doug Landis: Huh, that was a lot.
Doug Landis: You'll have the deck. I've got 46 seconds for questions. Yes. Very relevant in that space. Product market.
Doug Landis: Yeah, yeah, yeah. So pre product market fit, you're not necessarily, I mean you don't have enough customers to say, well is this an actual question mark or a star? Because you just don't enough revenue and you don't have enough repeatability to say, well, did we continue? Because if when you're in that pre product market fit, you're all, your investment is going there and oh by the way, in the pre product market fit, you're in the introduction phase, right, of that of your life cycle that you should be focused on one product in that phase, right? And it's not until you get enough traction, they can go, hmm, okay, this is, this might be going over to the dog category or this actually it might be turning into a cash cow. It's just really important to recognize that it could fit in in other places because if it starts to turn into a cash cow, it's, it's easy to get blinded by the fact that you're generating a bunch of revenue from it, but the market itself may not necessarily be growing. It may be shrinking, right? So at that stage, like, okay, cool, we're going to make a whole bunch of money off this. It's kind of like companies that launch a, a consultant or a consulting business and then they build a product. It's like I'm going to keep doing the consulting business to feed the revenue to build the product. Right? So the consulting business is kind of like the cash cow if you will. And then I'm building the products that I can turn that into a question mark and maybe hopefully a star.
Speaker 4: Cool. Yes. You mentioned to tackle the like one battle at a time. So what do you think about this, that this advantage? Sure. You introduce a new product here, the decline stage. Yep.
Doug Landis: Ah, so decline stage. Yeah. When you introduce a new product and a decline stage, it's, you kind of have to go through the process of re-educating the whole market itself, right? Because the market knows, you hear the product starting to decline. It's almost like Oracle, like think about Oracle, right? All of our EC, I used to work at Oracle too by the way. Who um, what does oracle do to kind of maintain their margins? Right? They buy companies one, one eight one one one of their product lines is starting to hit that decline phase. They're like, well, how do we re lift the company or re lift the product and go out and buy somebody? Most likely, most often, once you're hitting, once you've hit that decline phase, if you have nothing else already in the works that it's just more work to get back up to that growth and maturity phase, uh, with a net new product, it just takes longer. Okay. I'm at Doug Landis or just firstname.lastname@example.org. Find me on LinkedIn if you have any questions. Um, thank you guys so much for your time. Appreciate it.
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