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Building a Profitable, Sustainable Product Company


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In this paper, our consultants share common strategies to be pursued to be build a sustainable and profitable software product company

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Building a Profitable, Sustainable Product Company

  1. 1. Browne & Mohan Board & CEO Advisors, Management consultantsBuilding Profitable and Sustainable Software Product Company
  2. 2. Browne & Mohan Board & CEO Advisors, Management consultantsWhat common principles underlie success of Imitate, not Innovatesoftware product companies such as Newgen,Nucleus, Tally, Polaris, Srishti, Mindmill, Quest While it is fashionable for academics to talk aboutinformatics, Druvaa, Infrasoft, Zoho etc?. Kim and first-to-market, most successful product companiesMaubrogne (1997)in their analysis of high growth are strategic imitators. They allow the first-movercompanies found that these companies focus on to discover the key features, educate earlybettering themselves, continuously let unprofitable customers, but ride on a me-too quickly tocustomers go, and shed commodity capitalize on the market growth. This helps in lowerresources/skills. Hagel and Brown (2005) argue that S&M costs and improved ROCE.growth opportunities will be monetized bycompanies that deepen distinctive internal Let ideas fly from all, but focus to design for fewcapabilities, mobilize resources of other companies Successful product companies seek ideas fromand accelerate learning. Collins (2001) in his widely multiple sources, beta clients, product demoacclaimed book “good to great” identifies, the teams, end users, etc. But build the product lookingvalue of executive leadership, getting the right at where the friction is highest, pain is unbearablepeople, focus on what a company is good at and and intension to pay is highest.creating a culture of discipline, as the coreprinciples of great companies. On the product Design a product for reuse and as platformdevelopment side, Reis (2011), Brown and Design the product for big picture, but strip downEisenhardt (1998) have brought out the value of to basic version to design first and market test.building core (Minimum viable product or MVP) to Later modules must be used for versioning andreduce time to market and patching modules bundling. Build modular products and products thatagainst market opportunity. could be used in cloud or on-premise environment.In this article, Browne & Mohan consultants Focus should be on minimizing customization, andsynthesize their learning of working and helping reduce variety at early stage to benefit from lowsoftware product companies grow. code, feature and support variety.Operative Market selection Exploit Ecosystem to maximize reachWhile many product companies start off as services Successful product companies must learn to exploitcompanies and later productize-their services, the product ecosystem. Whether it is thesuccessful ones are those that operate in markets technology OEM you have an ISV relationship with,with periodic changes in regulatory requirements, analyst relationship, or a sales partner, they arewitnessing newer investments to scaling and good levers to reduce investments in your set-upgrowth of enterprises in the industry and (people and other paraphernalia). Align your salesoperational friction exists due to proprietary resources to maximize the self-interest of partners.approaches or tools. Long term sustaining software Align with OEM account manager to acquire newproduct companies also look at markets where customers and “sales focused” no productlarge MNC products exist, product acquisitions are companies in international markets to expand.on raise and MNC’s are unable to address non- Partners and resellers help in market coverage,behemoth companies in that sector. delivery and post-deployment support. Invest in marketing and vendor management resources, processes including training and certification
  3. 3. Browne & Mohan Board & CEO Advisors, Management consultantsrealised better results. Use every platform provided winning reference customers is a must, not allby technology OEM to brand and reach out to clients must be treated as Right pricing, adopt versioningAcademic institutes and interns are a good Use versioning or hosted vs on-premise or CPU vsplatform to explore open innovations. Ideas fornew products, GUI modifications, market research, instance prices appropriate to the productpricing and competitive intelligence and in fact environment. Create sufficient variants to allowproduct development can all be areas where customers to do self-selection and a feeling ofqualified resources can be employed to your’s gain. Limited budget, Impactful MarketingKeep sales structure lean and mean You do not have to splurge a lot to be noticed. InSuccessful product companies need sales teams fact, many a business papers have paucity of goodwhere the client opening meetings may happen stories to tell on innovation, India based product orthrough marketing events or resources on street, E-governance product. Invest in couple of resourcesclosures can only happen if they have sales team to engage actively with media and also createthat can inform and influence at senior levels of appropriate noise on social media.organizations. Named account strategy will work if Many successful product companies has HR talkingthe client organizations can be identified a priori, about the culture, what is unique and so on. Brandthey are far and few and the sales team has the all aspects of the company. See in what way yourability to penetrate those accounts at all levels. unique induction program can become a businessInvest in sales operations case study or women employees returning from maternity or other long breaks can immerse intoSuccessful product companies invest in sales the organization becomes an impactful article.operations units, often led by a visibility into lastmile was high and the sales teams were mean and Hire for attitude, perseverance and initiativelean. Successful software product companies do not need hire noble prize winners, but committedCredible and Consultative Pre-sales people who would embrace common ambition ofTo be a successful product company, invest in pre- the firm. They come with openness and curiosity tosales who enjoy problem solving and consulting. learn, improvise activities within their control andUse various platforms to positions them as solution innovate over time.providers, thinkers, etc. Arm them with couple ofcertifications, it helps to open many a closed minds While academic degrees and honours may matter initially, what matters is positivism and many parts of world. Choose employees who are keen to dirty theirProfitable license sales hands, shoulder a bit of other roles and open to unlearn. Incentivize employees to attempt,Many companies do not have the mix of license, appreciate failures and set them for and deployment worked out in detail andwith sales pressures may accept clients where thelicense fee has been abnormally discounted. While
  4. 4. Browne & Mohan Board & CEO Advisors, Management consultantsRein in service cannibalizing product Hagel, J and Brown, J.S. The only sustainable Edge: why business strategy depends on productiveService revenues that come with product friction and dynamic specialization., HBS Press,installations can be very tempting and wean away Boston, 2005.the focus away from the product if strongly notreined. Many successful companies find themselves Johnson, R. and Soenen, L. Indicators of Successfulin service cannibalization over time and lose their Companies, European Management Journal, 2003,long term sustainability. Limit your services play 21(3), 364-369.and consciously promote partners to support roll Kim, W.C and Mauborgne, R. Value innovation: theout and de-risk yourself. strategic logic of high growth, Harvard BusinessRisk Management Review, 1997, Jan-Feb, 75(1), 1012-112Product companies that grew and sustained Kopitov, R and Faingloz, L. Ways of transformingmomentum measured the risk and impact of their aims into results at Successful companies,actions, though mostly subjective. Senior Technological and Economic Development ofmanagement insisted on developing an approach Economy, 2008, 14(3), estimate risks, their impact, howeverrudimentary across organizations. Explicit Kotter, J.P, Leading Change, HBS Press, Boston,identification and evaluation of risks helped the 2008.companies question their assumptions and prepare Leonard, D. Wellsprings of Knowledge: Building andfor back up plans. Sustaining the Sources of Innovation, HBS Press,De-risk, invest in R&D Boston, 1995.Product companies must de-risk from technologies, Morgan, M. Levitt, R.E and W. Malek, Executingproducts, markets and customer segments. Look Strategy: How to break it down and get it done,out for related product usage areas where the HBS Press, Boston, 2007.product could fit, refurbish the features Schnaars, S.P. Managing Imitation Strategies, Freeappropriate to a specific industry and monetize Press, New York, 1994.extension of the product knowledge acrossdifferent customer segments.Bibliography Browne & Mohan insight are general in nature and areBrown, S.L. and Eisenhardt, K.M. Competing on not refereed papers. Open Universities and otherEdge: Strategy as Structured Chaos, HBS Press, academic institutions may use the content but with priorBoston, 1998. approval of Browne & Mohan.Collins, J. Good to Great: why some companiesmake the Leap… and others Don’t, Harper Business © Browne & Mohan 2013. All rights reserved Printed inPress, New York, 2001. IndiaGarud,R. Kumaraswamy, A and R.N. Langlois,Managing in the Modern Age, Blackwell, Oxford,2003.