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Des Traynor on how to create a product first company

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At the Nordic Business Forum 2016, Intercom co-founder and Chief Strategy Officer Des Traynor discusses creating a product first company.

Published in: Software
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Des Traynor on how to create a product first company

  1. 1. PRODUCT FIRST COMPANIES @destraynor
  2. 2. The only constant for us is change
  3. 3. 1968 - the first software patent is issued
  4. 4. 1969 - IBM ‘unbundles’ its business into software & hardware
  5. 5. The most important software event in ’69 - effectively starting the industry
  6. 6. 1976 - ‘Letter to hobbyists’ by Bill Gates outlines a need for professional software
  7. 7. The floppy disk was how consumer software was distributed
  8. 8. Whereas B2B software looked more like this
  9. 9. CEO END 
 USER Software was ‘procured’ through the org chart
  10. 10. CEO END 
 USER Sales
  11. 11. CEO END 
 USER Sales The buyer didn’t use it…
  12. 12. CEO END 
 USER The user didn’t buy it.
  13. 13. 💩 So the software was typically….
  14. 14. IBM 
 Unbundles 1969 Bill Gates Letter 1976 World Wide
 Web Started 1989 Birth of SaaS 1999
  15. 15. 1999 - Salesforce starts selling access to software online
  16. 16. …with a complementary Zig Ziglar tape!
  17. 17. The only thing that changed was everything
  18. 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. 19. The first change: What was once in your server room is now in the ‘cloud’
  20. 20. Your old server box from the server room
  21. 21. It’s X but in the cloud. “Works from anywhere” “No install needed!” Sign up ‘online’
  22. 22. Once you signed up it was the same junk software
  23. 23. The next change: Designed with the user in mind
  24. 24. The iPhone changed the acceptable standards of product design
  25. 25. The entry point for a new SaaS app is very high
  26. 26. For some product categories it’s near impossible to stand out
  27. 27. The third change: Bake distribution into the product
  28. 28. Facebook friendships in 2005
  29. 29. Facebook friendships in 2014
  30. 30. Your goal is to get one person to be passionate about your product
  31. 31. If they tell three other people…
  32. 32. …it’s game over.
  33. 33. Focusing on product tends can help most business problems TractionRetention Marketing Conversion Engagement
  34. 34. Traffic to Intercom website before formal Sales and Marketing team
  35. 35. Slack Daily Active Users 3,000,000 14,600 February 2014 May 2016
  36. 36. Thousands of paying customers on a $0 marketing budget
  37. 37. Dropbox viral distribution
  38. 38. Uber viral distribution
  39. 39. Intercom viral distribution
  40. 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. 41. – solve a real problem with a great product.Product first
  42. 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. 43. Three mega trends have enabled product first companies to grow so rapidly
  44. 44. The market is growing fast 1
  45. 45. This is what the world looked like, when I was a teenager
  46. 46. This is the world today.
  47. 47. The market demand for software is ballooning Tiny start-ups Massive companies
  48. 48. Tiny start-ups Massive companies More companies at every size & scale buying software
  49. 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. 50. Even ‘niche’ markets can hit ~$10M ARR
  51. 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. 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. 53. Go-To-Market has evolved 2
  54. 54. CEO END 
 USER Sales We don’t do this anymore
  55. 55. me You sell to me
  56. 56. my team If I like it, I’ll tell my team
  57. 57. my org If they like it, they’ll spread to the organization
  58. 58. buy before you try has become try before you buy
  59. 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. 60. Recurring revenue is the new norm 3
  61. 61. February 1990 $895 $19.99/month September 2016
  62. 62. How to create a product first company
  63. 63. 1 Your product’s impact must be core to your company’s success
  64. 64. Vision Mission Goals Strategies Tactics Activities
  65. 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. 66. 1 Many Abstract Specific Vision Mission Goals Strategies Tactics Activities
  67. 67. to make internet business personal
  68. 68. to increase the GDP of the internet
  69. 69. to build the best way for people anywhere in the world to shop for groceries.
  70. 70. 2 Your product must always be feasible, viable, and desirable
  71. 71. Feasibility Viability Desirability Canitm akem oney? Canitbedone? Does anyone want it?
  72. 72. cake base filling icing
  73. 73. cake base filling icing cupcake cake wedding cake versus
  74. 74. 3 You must be ruthless when focusing on product work
  75. 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. 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. 77. This is the core of our strategy. It’s hard work. It’s meaningful work. It works.
  78. 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. 79. 4 Charge for the value you create
  80. 80. Not every good product creates a good business
  81. 81. BIG PROBLEM RAREPROBLEM SMALL PROBLEM FREQUENTPROBLEM ✓ ✓ ✓ ✕ ✓
  82. 82. HIGH VALUE PER ACCOUNT LOW/NO TOUCH ONBOARDING LOW VALUE PER ACCOUNT HIGH TOUCH ONBOARDING ✓ ✕ ✓ ✓
  83. 83. 5 Follow meaningful SaaS metrics
  84. 84. $500K 0 0→$500K (MRR) in 18 months
  85. 85. But beware of churn – it is literally the make or break factor
  86. 86. New MRR + Expansion MRR Cancelled MRR + Contracted MRR The Quick Ratio Can you reliably grow revenue?
  87. 87. Product first companies need to worry about churn more than growth. Your bet is that most people are loving your product.
  88. 88. 6 Be Patient for Growth
  89. 89. Intercom’s revenue growth 2012-2014 Q2 2012 Q4 2012 Q2 2013 Q4 2013 Q2 2014 Q4 2014
  90. 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. 91. Thanks @destraynor from @intercom For more articles like this:blog.intercom.com

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