The document discusses the evolution of the software industry, highlighting significant milestones and trends from the 1960s to present day, emphasizing the rise of 'product first' companies. It outlines the importance of user-centered design, viral distribution strategies, and the shift to recurring revenue models in the software as a service (SaaS) market. Key strategies for success include a focus on product impact, feasibility, ruthlessness in prioritizing features, and careful measurement of metrics to manage customer churn.

1. PRODUCT FIRST COMPANIES
@destraynor

2. The only constant for us is change

3. 1968 - the first software patent is issued

4. 1969 - IBM ‘unbundles’ its business into software & hardware

5. The most important software event in ’69 - effectively starting the industry

6. 1976 - ‘Letter to hobbyists’ by Bill Gates outlines a need for professional software

7. The floppy disk was how consumer software was distributed

8. Whereas B2B software looked more like this

9. CEO
END
USER
Software was ‘procured’ through the org chart

10. CEO
END
USER
Sales

11. CEO
END
USER
Sales
The buyer didn’t use it…

12. CEO
END
USER
The user didn’t buy it.

13. 💩
So the software was typically….

14. IBM
Unbundles
1969
Bill Gates
Letter
1976
World Wide
Web Started
1989
Birth of
SaaS
1999

15. 1999 - Salesforce starts selling access to software online

16. …with a complementary Zig Ziglar tape!

17. The only thing that changed was everything

18. The buyer
The seller
Cost of distribution
Go-to-market strategy
Core business metrics
The business model
The price
Customer support
Customer success
Shipping
Software development
The role of UX
Billing cycle

19. The first change:
What was once in your server room
is now in the ‘cloud’

20. Your old server box from the server room

21. It’s X but in the cloud.
“Works from anywhere”
“No install needed!”
Sign up ‘online’

22. Once you signed up it was the same junk software

23. The next change:
Designed with the user in mind

24. The iPhone changed the acceptable standards of product design

25. The entry point for a new SaaS app is very high

26. For some product categories it’s near impossible to stand out

27. The third change:
Bake distribution into the product

28. Facebook friendships in 2005

29. Facebook friendships in 2014

30. Your goal is to get one person to be passionate about your product

31. If they tell three other people…

32. …it’s game over.

33. Focusing on product tends can help most business problems
TractionRetention
Marketing Conversion
Engagement

34. Traffic to Intercom website before formal Sales and Marketing team

35. Slack Daily Active Users
3,000,000
14,600
February 2014 May 2016

36. Thousands of paying customers
on a $0 marketing budget

37. Dropbox viral distribution

38. Uber viral distribution

39. Intercom viral distribution

40. Sales first – work out what we can sell, and then try build it.
Different types of companies
Marketing first – work out what creates buzz and then try build it.
Technology first – create something new, and then try to sell it.

41. – solve a real problem with a great product.Product first

42. Product first
It’s not just what you do first, it’s what you put first.
It’s the lens through which you see all your problems.

43. Three mega trends have enabled product first
companies to grow so rapidly

44. The market is growing fast
1

45. This is what the
world looked like,
when I was a
teenager

46. This is the world today.

47. The market demand for software is ballooning
Tiny start-ups
Massive
companies

48. Tiny start-ups
Massive
companies
More companies at every size & scale buying software

49. SaaS is outpacing On Premises
(2.8%)
17.6%
100%
0%
80%
60%
40%
20%
2013 2014 2015 2016 2017 2018
OnPremises SaaS
2013-2016CAGR
Source:

50. Even ‘niche’ markets can hit ~$10M ARR

51. 0 200 400 600
Energy Financials Healthcare Industrials IT
ExxonMobil
GeneralElectric
Microsoft
Gazprom
Citigroup
BankofAmerica
RoyalDutchShell
BP
HSBC
Pfizer
Largest listed companies in the world (in $BN)
Sept2006
Source:Bloomberg

52. 0 200 400 600
Apple
Alphabet
Microsoft
Facebook
Amazon
BerkshireHathaway
ExxonMobil
Johnson&Johnson
GeneralElectric
Tencent
Sept2016
Largest listed companies in the world (in $BN)
0 200 400 600
ExxonMobil
GeneralElectric
Microsoft
Gazprom
Citigroup
BankofAmerica
RoyalDutchShell
BP
HSBC
Pfizer
Sept2006
Energy Financials Healthcare Industrials IT
Source:Bloomberg

53. Go-To-Market has evolved
2

54. CEO
END
USER
Sales
We don’t do this anymore

55. me
You sell to me

56. my team
If I like it, I’ll tell my team

57. my org
If they like it, they’ll spread to the organization

58. buy before you try
has become
try before you buy

59. Companies today can be started for near $0 and
distributed to an ever expanding market that
will happily adopt and evangelise the product.
What’s new about now?

60. Recurring revenue is the new norm
3

61. February 1990
$895
$19.99/month
September 2016

62. How to create a product first company

63. 1
Your product’s impact must be core to your company’s success

64. Vision
Mission
Goals
Strategies
Tactics
Activities

65. What does the future look like because of us
What are we here to do
What specific outcomes are we aiming for
What is our plan to get there
What means are we using
What are we
doing day to day
Vision
Mission
Goals
Strategies
Tactics
Activities

66. 1
Many
Abstract
Specific
Vision
Mission
Goals
Strategies
Tactics
Activities

67. to make internet business personal

68. to increase the GDP of the internet

69. to build the best way for people anywhere in the world to shop for groceries.

70. 2
Your product must always be feasible, viable, and desirable

71. Feasibility
Viability
Desirability
Canitm
akem
oney?
Canitbedone?
Does anyone want it?

72. cake base filling
icing

73. cake base filling
icing
cupcake cake wedding cake
versus

74. 3
You must be ruthless when focusing on product work

75. ALL
OF THE TIME
MOST
OF THE TIME
SOME
OF THE TIME
VERY LITTLE
OF THE TIME
FEW
OF THE PEOPLE
SOME
OF THE PEOPLE
MOST
OF THE PEOPLE
ALL
OF THE PEOPLE
Track Time
SMS Alert
Enter Milestones
Search for Files
Search for People
Use Calendar
Import ICS
Setup Time Tracker
Post Message / Reply
Create Project
Add / Complete Tasks
View Dash
Schedule Meeting
Add Team / Company
Archive Project
Change Permissions
Account Settings
Edit Project
Merge Projects

76. ALL
OF THE TIME
MOST
OF THE TIME
SOME
OF THE TIME
VERY LITTLE
OF THE TIME
FEW
OF THE PEOPLE
SOME
OF THE PEOPLE
MOST
OF THE PEOPLE
ALL
OF THE PEOPLE
Track Time Enter Milestones
Search for Files
Search for People
View Dash
Schedule Meeting
Add Team / Company
Archive Project
Change Permissions
!
Kill any features that few people are using very little
!
!
!
!

77. This is the core of our strategy.
It’s hard work.
It’s meaningful work.
It works.

78. When a good org is mature,
there’s not a lot of work here.
We need to stay way out of here.
Avoid snacking on low impact, low effort work
This is the core of our strategy.
It’s hard work.
It’s meaningful work.
It works.

79. 4
Charge for the value you create

80. Not every good product creates a good business

81. BIG PROBLEM
RAREPROBLEM
SMALL PROBLEM
FREQUENTPROBLEM
✓
✓
✓
✕
✓

82. HIGH VALUE
PER ACCOUNT
LOW/NO TOUCH
ONBOARDING
LOW VALUE
PER ACCOUNT
HIGH TOUCH
ONBOARDING
✓
✕
✓
✓

83. 5
Follow meaningful SaaS metrics

84. $500K
0
0→$500K (MRR)
in 18 months

85. But beware of churn – it is literally the make or break factor

86. New MRR + Expansion MRR
Cancelled MRR + Contracted MRR
The Quick Ratio
Can you reliably grow revenue?

87. Product first companies need to
worry about churn more than growth.
Your bet is that most people are loving your product.

88. 6
Be Patient for Growth

89. Intercom’s revenue growth 2012-2014
Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014

90. Have a strong vision
Keep a feasible, desirable, and viable product
Ruthlessly focus your product work
Capture the value you create
Measure your business
Be
patient

91. Thanks
@destraynor from @intercom
For more articles like this:blog.intercom.com