23 principles of successful product companies


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In this paper, we present 23 principles of successful software product companies. These principles cover product development, organizational design, sales and other process that propel product companies to grow and excel in their domain both in domestic and international markets

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23 principles of successful product companies

  1. 1. Browne & Mohan Board & CEO Advisors, Management consultants23 principles of Successful Indian Software Product Companies Dr T R Madan Mohan
  2. 2. Browne & Mohan Board & CEO Advisors, Management consultantsWhat has made some companies to grow and techno-entrepreneurs undaunted by the magnitudesustain momentum tick in the tough times? What of risk, and efforts have pursued their dreams incommon principles underlie their success? Copious creating and sustaining India based softwaremanagement literature exists on why some product development. Newgen, Nucleus, ESS,companies grow and some not. Kim and Vishesh Infosystems, Ramco, Tally, ICICI Infotech,Maubrogne (1997) identified differences in five Polaris, iVitesse, Pramati, Trio, EX, Wings, FACT,major dimensions of strategy between high growth Busy Infotech, Godrej Infotech, Base Information,and other companies. Accordingly, the high growth Srishti, Druvaa, Subex, Infrasoft, Zoho, and manycompanies attempt to change the industry more Davids have taken birth to challenge theconditions, focus on bettering themselves than just Goliaths of the world.beat the competition, let unprofitable customersgo, shed commodity resources/skills and think in Amidst, the high growth of software servicesterms of offering total solutions to the customers. industry, from self-doubt and bureaucratic apathy,Hagel and Brown (2005) argue that growth Indian software product industry has grown inopportunities will be monetized by companies that years. From just about $113 Million in FY 1999-00,deepen distinctive internal capabilities, mobilize the Indian software product industry revenuesresources of other companies and accelerate (both domestic and exports included) has grownlearning. Garud et al., (2003) have established the about $1.81 billion in FY2011-12. There were aboutvalue of modularity and standardization in meeting 228 companies earning revenues from productdemand variety. Collins (2001) in his widely related delivery and services. In 2009, the numberacclaimed book “good to great” identifies, the of companies had almost doubled, their numbersvalue of executive leadership, getting the right touched 549. However, the last two years havepeople, focus on what a company is good at and been quite challenging. While there are severalcreating a culture of discipline, as the core companies that have done well, there are equalprinciples of great companies. On the product numbers that have found the going tough in lastdevelopment side, Reis (2011), Brown and two years. Many companies have been vanquishedEisenhardt (1998) have brought out the value of because of 1)Lack of domestic industry support,building core (Minimum viable product or MVP) to 2)Lack of implementation of set-aside forreduce time to market and patching modules government and defence procurement,against market opportunity. Leonard (1995) 3)Inappropriate policies, 4)Lack of penetration inhighlighted the value of maintaining creative international markets, 5)Aggressive GTM of MNCs,tensions in high-performing teams. 6)Branding and other issues. However, few companies have survived and grown even in theseStarting and growing a Software product company tougher times. Newgen Software exhibited ain India not a mainstream activity as the industry is healthy bottom line and top line growth. Polarisdominated by service companies. With benevolent bagged some prestigious projects in domestic andmarkets service companies found it easy to attract international markets. Srishti software found globalpeople to be shipped off-shore, and many qualified OEM partnering for its HMIS solutions and evenand otherwise IT resources found it easy earning in Chinese hospitals adopting a truly India builtforeign currency, often doing routine maintenance product. Zoho, the trailblazer in cloud offeringsjobs. To attract and retain talent, offering them consolidated its growth by offering newer solutionsintellectually challenging development was not around CRM, and productivity tools, ofteneasy. Academic institutes failed to instil the rigour, competing and winning against the global giants.regimen and approaches required for product Druva Software, Pune based back up productdevelopment. Rather many college managements company, acquired over 120 customers in the lastinvested in rudimentary soft skills preparing their year and its products insync and Phoenix has seenwards for service industry absorption. Early huge traction across enterprise, SME and Sohofinance, till recently did not exist and institutional segments. Sapience (earlier known as Innovizetech)banking at best avoided investment deeming witnessed demand for its productivity product evensupport for these ventures risky. However, few in the tougher times as companies realized the
  3. 3. Browne & Mohan Board & CEO Advisors, Management consultantsneed to manage the resources more efficiently. eschew in a client premises. From here, strip downHome grown CRM companies such as PK4 with its to basic version that forms the core of all theirImpel CRM discovered their light features and right product modules, develop that first. Questpricing building traction in economic downturn and Informatics for example, looked at complete after-customer adoption growing. Banking software sales enterprise processes right from service toproduct companies TCS, Infrasoft, Lasersoft, repair process and developed core sales, serviceMindmill, and Polaris have benefited from demand and parts processes. Only three Parts of thefrom domestic Co-operative banks and SAARC. In products with some extensions could morph intothis article, I summarize twenty-three principles warranty management, field service management,that I learnt through my years of association with etc. Plan Product Technology Road map, versions,the successful product companies. and features.Principle 1: Friction, Product Opportunity and Principle 4: Build modular productsimitation While it is important to have features and ideasSuccessful product companies identified markets from multiple perspectives, product developmentbased on 1)IT adoption, 2)Regulatory requirements, has to be a controlled innovation. Choices have to3)need for operational efficiency, 4)scaling and be made on prioritising the features, support, UI,growth of enterprises in the industry and 5)friction etc. to ensure the core properties of the productsdue to paper-human interfaces. All successful are eschewed and available for early users to try.product companies were “strategic imitators”, Successful product companies build modulardeveloping an available solution or an offering to products. Quest Informatics mapped 16 productslocal market. This helped them to ride on the for its after-sales ERP, and identified 4 coremarket making activities carried out by other firms. business processes cutting across all these modules. The basic core was developed first, andPrinciple2: Bricolage Product ideas the market priority modules were released later. While cloud and hosted models are expected toThe companies sought ideas from multiple sources, thrive, many enterprises may resort to in-premisebeta clients, product demo teams, end users, etc. deployments owing to regulatory and otherCrossdomain while designing its cloud based requirements. Distribution of products through“PeopleWorks” involved CFO, HR directors and CEO various channels would require different customerto understand the requirements from individual engagement cycles, information contentperspectives, evangelized the beta with few (brochures), and support. Idea is to develop onlycompanies, actively sought the improvements and the core that could be supported through differentquickly built a robust product meeting all customer delivery modes, somewhat similar to MVPrequirements. Glomantra in pursuit of its VPA proposed by Eric Ries. Glomantra and Questproduct found the feedback from India’s largest Informatics tried this approach successfully whileportal very useful as the enterprise application of developing their Virtual personal assistant (VPA)search and personalization was similar to the VPA product “Mybantu” and Field service managementtool they were developing. Use of the product in (FSM) product.enterprise environment offered very useful insightsfor the team to develop and fortify the product Principle 5: Disciplined Product developmentagainst the global competition. Focus should be on minimizing customization, andPrinciple 3: Design for a platform not product reduce variety at early stage to benefit from low code, feature and support variety. Average time toWhile conceptualizing the product, the architects establish stable beta with maximum featuresvisualized the extant product form, more like a happened about 26 months and companies thatplatform encompassing several products. This controlled variety prospered. Srishti software,helped them to see the big picture, what all process Polaris benefited from the economics of scale inand activities would the product or its modules design, bug removal, improvement and delivery.
  4. 4. Browne & Mohan Board & CEO Advisors, Management consultantsPrinciple 6: Align with larger technology platform became a globally recognised challenger in Web based Content Management system with its KreatioWhile a complete platform agnostic is a desirable product.state, companies that limited their productavailability on to two dominant platforms were Principle 10: Focused sales approachable to manage their releases and upgrades easily.The objective is to reduce transaction cost of Successful product companies emphasizedmanaging change. Increased market acceptance, alignment in sales structure – process andand network effects of technology platform benefit incentives. Companies invested in all three salesproducts. motions, inside, indirect and direct. Sales process and measurement focus differed significantlyPrinciple 7: Offer multiple Product variants and across the three different motions. For insideover time reduce the tiers teams the emphasis was on “intelligence”, indirect sales team was on “partner meets and funnel” andWhen feature and price point relationships are direct team was on funnel quality and conversion.fuzzy or the customer segment contiguous, it is a Product companies built their sales team quicklybetter strategy to offer few product variants. While and reviewed continuously.many companies start with at least 3 (typically,silver, gold and platinum), or 5 variants, over time Another unique aspect of successful productcustomer preference converge to not more than 2- companies is related to the sale approach they3 variants. Too many variants confused customers, used. All them pursued named account strategyburdened sales personnel and increased the cost of than corporate bombing as a strategy and sufficienttracking and monitoring usage. Tejas, Ramco, Sage intelligence went into the segment definition, andand others also pursued versioning and hosted named account identification. Successfulmodel in tandem to reach out to customers. companies spent more time planning their targets than unsuccessful ones.Principle 8: Incremental innovation and relatedplatform diversification Principle 11: Harvest and CropAverage investments required to develop a world Product sale, unlike hardware or solution saleclass software product in Indian environment requires harvesting the clients in a season andhappens to be around $3 Million and the break- enchasing them later. Engaging clients with latenteven happens only on the 4th year. Successful needs, preparing them for the adoption and roll outproduct companies pursued continuous required patience, high dose of common sense andincremental innovations extending the features and plain old relationship management.products in the same markets right after twosuccessful client roll outs and the product is Principle 12: Bottom heavy top-led sales teamsstabilized. AurinPro successfully pursued this Many companies believe in investing heavily in topstrategy to benefit from related platform end resources for product sale and do not investdiversification. sufficiently in middle and lower levels. A uniquePrinciple 9: Plan for unrelated diversification after structural aspect of all successful product3rd year of existing product line companies was, they had more numbers in inside sales teams, but led by senior direct teams. SalesSuccessful product companies initiated unrelated visibility into last mile was high and the sales teamsdiversification into newer verticals or completely were mean and lean.unrelated product areas in the 3rd year of existingproduct lines. The companies benefit from Principle 13: Marketing led Sales: Successfuloverlapping of growth-maturity cycles of different software product companies investing in marketingproduct lines. Polaris found great success in activities that supported and facilitated sales.payment exchange product. Srishtisoft extending Improved branding, community connects, PRits learning from KM products and consulting, (including brought awards), was useful in creating
  5. 5. Browne & Mohan Board & CEO Advisors, Management consultantsthe mindshare and sales appointments in both services revenues, they were cautious in overdomestic and international markets. investing on services resources. Srishti, Tally, Tejas Networks limited their services play andPrinciple 14: Scale through Partner consciously promoted partners to support their roll out and de-risk themselves.Successful product companies used partners notjust to increase their scale of operations but also Principle 18: Create and maintain healthy internalconsciously serve specific segments that did not competitionjustify their own resources and investment.Partners and resellers help in market coverage, Successful product companies sustained healthydelivery and post-deployment support. Companies competition between teams and key businessthat invested in marketing and vendor leaders. One aspect all companies abhorred wasmanagement resources, processes including middle level managers bottling up talent fromtraining and certification realised better results. bottom. Companies crafted novel structures thatProduct companies had to plan for version that were time bound to legitimize competition andwould be supported by partners, design right innovation, and abandoned them once their goalspartner payoffs and engage them continuously. were met.Principle 15: Institutionalize “Do-Improve- Principle 19: Create Sense of ownership andInnovate” work Discipline urgencySuccessful software product companies do not One common hallmark of all successful productneed noble prize winners, but committed followers companies was that they created a sense ofwho could first do activities as told, improvise ownership across the organization. Teams andactivities within their control and innovate activities members had their explicit goals, and focused oneven when interdependencies exist. Newgen and delivering the outcomes. Board and seniorSrishti founders picked bright engineers from non- management invested in inducing a sense ofIIT’s, trained them in product development and urgency not so much in sales, but in new productimbued in them product company culture and over development, delivery, & customer responsiveness.years have developed a second line of architectsand innovators capable of developing new Principle 20: Design appropriate Incentivesproducts. Successful product companies had incentives notPrinciple 16: Hire and promote for positivism and just for sales, but also for technology teams. Mostattitude companies used relative incentives as the group sizes were small. Some companies had dispensedAcademic degrees and honours did matter, what away with quarterly performance incentives, buttilted the scale on employee selection and growth tied the overall incentives by per project basis. Thewas their positivism and attitude. Product sales team motivation and performance were highcompanies, especially those started with limited as they would receive their incentives as soon as afunds, value prudence and shun ostentations. They deal is closed. Technical teams and delivery teamsprefer employees who could strategies, dirty their also had outcome based incentives that ensuredhands on coding and shoulder a bit of other roles. innovation pipelines were robust, andSuccessful product companies like Srishti and implementation smooth.Adventnet grew their architectural strength bygrooming individuals with lots of initiative and Principle 21: Power of Governanceproblem solving approach, rather than fancy Successful product companies practiced goodacademic degrees. governance principles. Independent boardPrinciple 17: Rein in services revenue growth members were brought for both technical or domain expertise. Weekly, monthly and quarterlyWhile successful companies sustained through reviews were religiously followed, intermittent
  6. 6. Browne & Mohan Board & CEO Advisors, Management consultantscorrections were made and reporting structures Kim, W.C and Mauborgne, R. Value innovation: theevolved continuously. They defined few measures strategic logic of high growth, Harvard Businessacross the functions, but ensured continuous Review, 1997, Jan-Feb, 75(1), 1012-112measurement. Kopitov, R and Faingloz, L. Ways of transformingPrinciple 22: Risk Management aims into results at Successful companies, Technological and Economic Development ofProduct companies that grew and sustained Economy, 2008, 14(3), 312-327.momentum measured the risk and impact of theiractions, though mostly subjective. Senior Kotter, J.P, Leading Change, HBS Press, Boston,management insisted on developing an approach 2008.to estimate risks, their impact, howeverrudimentary across organizations. Explicit Leonard, D. Wellsprings of Knowledge: Building andidentification and evaluation of risks helped the Sustaining the Sources of Innovation, HBS Press,companies question their assumptions and prepare Boston, 1995.for back up plans. Morgan, M. Levitt, R.E and W. Malek, ExecutingPrinciple 23: Engage less costlier PR activities Strategy: How to break it down and get it done, HBS Press, Boston, 2007.A common trait across all successful productcompanies is they engaged in high impact low cost Schnaars, S.P. Managing Imitation Strategies, FreePR activities. Many companies rode on the PR Press, New York, 1994.budgets of large IT vendors as ISV’s, or mediaattention gained through balanced analystevaluation. Peer to peer feedbacks and breakfastmeetings were the most impactful platforms forproduct companies to reach out to new customers. Browne & Mohan insight are general in nature and are not refereed papers. Open Universities and other academic institutions may use the content but with prior approval of Browne & Mohan.BibliographyBrown, S.L. and Eisenhardt, K.M. Competing on © Browne & Mohan 2012. All rights reserved Printed inEdge: Strategy as Structured Chaos, HBS Press, IndiaBoston, 1998.Collins, J. Good to Great: why some companiesmake the Leap… and others Don’t, Harper BusinessPress, New York, 2001.Garud,R. Kumaraswamy, A and R.N. Langlois,Managing in the Modern Age, Blackwell, Oxford,2003.Hagel, J and Brown, J.S. The only sustainable Edge:why business strategy depends on productivefriction and dynamic specialization., HBS Press,Boston, 2005.Johnson, R. and Soenen, L. Indicators of SuccessfulCompanies, European Management Journal, 2003,21(3), 364-369.