Tailoring Your Product Strategy: Tips for Early-Stage Startups, Scaling Up, and Mature Organizations

Introduction and Background

• The speakers, Donna Nitzki and Laura Marino, introduce themselves, sharing their backgrounds and experiences in product management, entrepreneurship, and venture capital, with Donna having worked at Sun Micro Systems and Laura currently being a general manager and VP of product at NewBank, the largest fintech company in Latin America (10s).
• The discussion focuses on how to approach product strategy, considering the type of product, industry, and maturity stage of the company, with the speakers having accumulated over 50 years of experience in the field (1m27s).
• The speakers identify three stages of maturity that companies typically go through: early stage, scaleup stage, and mature stage, each with its unique challenges and requirements (2m23s).
• In the early stage, companies focus on finding product-market fit, while in the scaleup stage, they aim to scale and grow within their segment, and in the mature stage, companies focus on maintaining innovation and growth while operating with an established business model (2m29s).
• The speakers outline the topics they will cover, including avoiding mistakes in the early stage, accelerating time to volume, transitioning to the scaleup stage, and aligning product strategy with company strategy in mature companies (3m40s).
• Donna Nitzki will discuss the early stage, focusing on avoiding mistakes and accelerating time to volume, while Laura Marino will cover the scaleup stage, and Donna will return to discuss the mature stage (4m28s).
• The speakers aim to provide guidance for product leaders and aspiring product leaders on how to tailor their product strategy to the specific needs of their company, depending on its maturity stage (1m45s).

Early Stage: Challenges and Focus

• Early-stage startups face unique challenges, including conserving cash, proving revenue models, and figuring out minimum viable products (MVPs) to get to market quickly, all while trying to acquire early adopter customers in a potentially non-existent market (4m40s).
• In this stage, the product strategy essentially equals the company strategy, requiring a super-focused approach to getting early products to market and acquiring first customers, rather than trying to do too much at once (5m42s).
• The product and market development processes are strategic, iterative, and must be done simultaneously, with one person focusing on building the product and another on finding the customer and market (6m14s).
• Building a new market is hard, and it's not like working in big companies where customers, products, and budgets already exist, making it essential to work together to build both the product and the market (7m6s).
• The "if we build it, they will come" approach doesn't work in real life, and instead, startups must build the market at the same time as the product, using their team, prototypes, PowerPoint slides, demos, and vision to get to market (7m46s).
• The power of vision should not be underestimated, as a strong, compelling vision of where the company is going and why the world needs its product can be exciting to customers, the team, and investors, ultimately contributing to the company's success (8m40s).
• Customers care about how a product will affect their lives, such as how it will make them look good to their boss or friends, rather than just the product's features and functions (9m53s).
• To establish trust with early-stage customers, companies need to demonstrate that they comprehend the customer's problem or opportunity, are competent in solving it, and genuinely care about the customer's success (10m35s).
• Building relationships with early-stage customers is crucial, and this can be achieved by putting oneself in the customer's shoes and understanding their needs (11m5s).
• In the early stages, companies should market themselves, not just their product, as the product is still in the exploration period (11m18s).
• To understand the market, companies should cast a wide net, talk to different market segments, ask questions, take notes, and listen to customers' answers (11m29s).
• The "player" concept is used to market a company in the absence of a product, and this will be discussed further (11m51s).
• Once strategic market opportunities are identified, companies should lock in customers step by step with their development process and invest heavily in those customers to make them great reference customers (12m9s).
• The market development cycle moves in tandem with the product development cycle, involving exploratory customer meetings, product feedback sessions, and building credibility with customers (12m52s).
• Paying customers are necessary to establish a market, as customers who haven't paid for a product do not become great references (13m12s).
• Common mistakes made by startups include starting to sell too late and overemphasizing the product, with the former resulting in building too much or the wrong product and delivering too late (13m59s).
• To avoid this, startups should identify their minimum viable product (MVP) and learn how to sell and seek out early customer partners who will become initial reference customers (14m35s).
• To achieve this, it is recommended to meet with at least 30 prospective customers over three months and ask questions covering two domains: product functionality and decision-making processes (14m57s).
• Questions to ask include those about pain points, current solutions, competitors, decision-making processes, budget allocation, and priorities, with a focus on understanding reasons why customers would not buy the product (15m9s).

Accelerating Time to Volume

• The second big area is accelerating time to volume by avoiding the big company thought process, which involves a tactical approach to product development and launch (16m7s).
• A more effective approach for startups is to focus on strategic customer and market qualification upfront, choosing the right market and first customers, and ensuring that at least 80% of them pay for the product (17m35s).
• This early product testing is strategic, and startups should prioritize reference ability and ensure that their first customers are in the right market and willing to pay for the product (17m42s).
• Startups should focus on finding the right customers in the right market segment during beta testing, as these customers will be the true judges of the product and can provide valuable feedback for product development (18m4s).
• A wrong customer is one in the wrong market, with no intention of buying the product, and can lead to allocating scarce engineering resources to unique development that doesn't scale (18m49s).
• The three goals of early-stage product testing are to gather feedback for product development, select strategic customers, and establish a base of die-hard loyal customers (19m30s).

Scaling Up: Transitions and Challenges

• When moving from the early stage to scale up, companies transition to a stage of rapid growth, and 60% of companies that successfully end the early stage die in the scale-up stage due to the differences in scaling up (20m14s).
• To succeed in the scale-up stage, companies need to make several transitions, including moving from a small team with informal communication to embedding knowledge in processes, and from relationships to more formal sales processes (22m26s).
• The five key transitions companies need to go through to succeed in the scale-up stage include moving from a group of people who know everything to embedding knowledge in processes, and from relationships to more formal sales processes (22m28s).
• In the early stage, companies need to move fast and iterate to find product-market fit, and have a team that does whatever it takes to get the product out, but this approach doesn't scale as the company grows (21m12s).
• As companies grow, communication becomes more formal, and knowledge needs to be distributed more formally, rather than relying on informal sharing among a small team (21m44s).
• Building a brand recognized in the market involves five key transitions, including moving from an early product to a scalable product, leveraging partnerships, and thinking strategically about scaling (22m45s).
• The transition from an early product to a scalable product requires product leaders to be directly involved, as the product has already proven successful in a segment of the market and needs to be grown as fast as possible (23m21s).
• In the early product stage, product development involves moving fast, iterating, and testing to build features and functionality visible to target customers, with no time to think about scalable architecture or implementation tools (24m4s).
• The goal in the early stage is to produce as much functionality as quickly as possible, with engineers often rewarded for finding shortcuts to get something out to customers (24m38s).
• To secure early adopters, companies may be willing to do unique things, such as building customer-specific functionality, even if it can only be used by one or two customers (25m10s).
• By the end of the early stage, the product may resemble a building with a bunch of things built for specific customers, areas built poorly due to shortcuts and hacks, and a shaky foundation due to a lack of focus on scalability (25m20s).
• These problems, known as technical debt, can cause issues as the company starts scaling if not addressed, including customer-specific functionality, which can be a problem in both B2B and B2C markets (26m15s).
• Customer-specific functionality can be costly, as it was built to secure early customers, and may not be scalable or useful for a large number of customers (27m1s).
• Securing early customers is crucial for a product's success, and it's acceptable to accommodate their needs, even if they may not be important for the rest of the market, but this behavior needs to change as the company grows to avoid being controlled by those early customers (27m12s).
• If early customers take over the roadmap, the company risks missing out on building what the market actually needs, so it's essential to start reigning in those powerful early customers (27m35s).
• Communicating proactively to early customers about what the company is building and why is vital to prevent them from assuming the roadmap is a blank sheet of paper waiting for their input (28m5s).
• Leveraging customer councils can be an effective way to manage early customers' expectations, as seen in a company that sold software to the legal industry, where bringing together groups of peer law firms helped to identify trends and prioritize features (28m43s).
• Sometimes, it's necessary to say no to early customers, and being prepared to do so means being clear about the trade-offs involved in accommodating their unique requirements and communicating those trade-offs to the CEO and executives (30m7s).
• In extreme cases, it may be necessary to "fire" a customer if they are forcing the company to do something that's not in the best interest of the product or the market (31m12s).
• Startups need to learn to say no to certain features or requests to avoid diverting unique engineering resources and to focus on serving their target market and scaling, as saying yes to everything can lead to diverting resources and slowing down growth (31m23s).
• Technical debt is a natural part of every startup's initial stage, as building everything to be scalable and of high quality from the beginning would likely lead to running out of money before the first product launch (31m47s).
• However, when entering the scale-up stage, startups need to address technical debt, as it can slow down engineering teams and lead to issues such as crashes, poor scalability, and latency (32m17s).
• Technical debt can appear in front of customers, causing them to notice issues, which can be very dangerous for the business (32m55s).
• To address technical debt, it's essential to face reality and understand that the engineering team's allocation in the early stage is different from the later stage (33m9s).
• In the early stage, most engineering bandwidth goes to building new functionality, with a little going to maintenance and implementation support, but as the company grows, more engineering bandwidth is needed for maintenance and addressing technical debt (33m28s).
• As the company adds new customers and functionality, engineering needs to dedicate more time to addressing bugs, and building tools to allow other teams to handle implementations (34m45s).
• Companies need to adapt their mindset and operations to the new stage of growth, rather than continuing to operate with an early-stage mindset (35m32s).
• As a product leader, it's crucial to recognize when the engineering team's bandwidth is being consumed by maintenance and technical debt, rather than delivering new functionality, and to set expectations with sales and executive teams accordingly (35m47s).
• To address this issue, it's essential to partner closely with engineering to understand which areas of the product and code require urgent attention, and to prioritize work on those areas as part of the roadmap (36m46s).
• The product leader should be aware of where the engineering team is dedicating their time and should explicitly allocate part of that bandwidth to improving the architecture and paying technical debt (37m50s).
• It's the product leader's responsibility to sell the importance of investing in technical debt and architecture to executives and the sales team, explaining how it will benefit customers and improve performance and security (38m12s).
• Proactive communication is key to managing expectations and avoiding complaints from leadership, sales, and marketing teams about the reduced delivery of new functionality (38m41s).

Mature Companies: Aligning with Company Strategy

• In a mature company, the team is specialized, with experts covering most functional bases, and the company has been selling for a while with established budgets (39m42s).
• The characteristics of a mature company include having a specialized team, with experts in various areas, and having a well-established sales process with budgets (39m49s).
• For mature organizations, the main challenge is maintaining market leadership and continuing to innovate in a mature market without disrupting revenue streams (40m10s).
• Unlike early-stage companies, product strategy in mature organizations is just a part of a larger company strategy, which may be part of an even bigger corporate strategy (41m10s).
• It's critical for product strategy to align with company strategy, which involves considering the competitive domain, competitive advantage, and execution capabilities (41m42s).
• The competitive domain refers to the target market and existing competitors, such as the retail banking or luxury automotive space (41m55s).
• A company's competitive advantage is its "superpower," such as amazing brand loyalty, supplier relationships, or intellectual property (IP) (42m29s).
• Execution capabilities refer to what a company is uniquely good at, such as sales, supplier relationships, or customer data management (43m14s).
• A product strategy should be consistent with the company's competitive advantages, execution capabilities, and overall company strategy (43m50s).
• A company's overall strategy consists of multiple components, including marketing, operations, product, finance, and HR strategies (44m4s).
• Product leaders should leverage existing company assets, such as marketing promotions or distribution strategies, to support their product strategy (44m34s).
• Operations superpowers, such as high-quality manufacturing or fast turnaround, can also be leveraged to support product strategy (44m38s).
• A company's product strategy should align with its overall assets and capabilities, and there are various types of product strategies to consider, including Innovation and continuous Improvement, Market leadership and defense, efficiency and optimization, diversification, and sustainability and long-term planning (44m49s).
• Examples of companies with different product strategies include Apple and Samsung for Innovation, LVMH for Market leadership, Amazon and Walmart for efficiency and optimization, Coca-Cola for diversification, and the Auto industry for sustainability and long-term planning (44m59s).
• When developing a product strategy, it's essential to consider whether it aligns with the rest of the company, including its marketing strategy, operation strategy, and overall capabilities and competitive advantages (47m3s).
• For example, a high-end fashion company like LVMH or Gucci has a product strategy that aligns with its marketing strategy of reaching out to high-end customers and its operation strategy of premium product and content (47m21s).
• If a product leader at LVMH or Gucci were to introduce a fast fashion product line, it would not align with the existing marketing and operation strategies, highlighting the importance of alignment across the company (47m55s).
• Achieving alignment of strategy at every level, from product to company capabilities and ability to execute, is crucial for success and can be compared to a high-performance Formula 1 racing team (48m30s).

Key Takeaways and Additional Insights

• Key points discussed include mistakes to avoid when creating a product, accelerating time to volume, transitions startups must make to scale, and aligning product strategy with company strategy in mature organizations (49m24s).
• When building a product, it's essential to build the market simultaneously, as it takes two to tango, and avoid big company thought processes in early testing cycles (49m31s).
• Startups must make transitions to scale, and early-stage strategies may not be effective at a larger scale, requiring adjustments to product challenges, reining in early customers, and addressing technical debt (49m57s).
• Mature companies need to align their product strategy with their company strategy, ensuring consistency with operations and execution capabilities (50m27s).
• The role of a product manager is not just to get the requirements right but to change the world, requiring coordination among many people within and outside the company (50m50s).
• The rise of generative AI will fundamentally affect product strategy for companies, especially in the tech industry, and must be considered across all aspects of the company (51m36s).
• When using generative AI, companies should focus on what they're trying to achieve and how AI can provide fundamentally different value to customers (52m15s).
• Product managers in consultancy companies or internal products should consider the unique challenges of their context, which may be similar to but not identical to those of early-stage startups (53m10s).
• Donna has experience working with startup companies and venture capital, where her role involved providing funding and guidance to startups (53m32s).
• When developing a product strategy, it's crucial to identify the target customers and understand their needs, as well as involve everyone in the decision-making process to ensure a smooth transition, especially in early-stage companies or when introducing new products (53m40s).
• For internal products, the target customers are the employees within the company, and it's essential to go through the same processes to understand their needs and challenges (54m55s).
• Consulting organizations building products for their customers often face the challenge of creating a product tailored to one customer, rather than building a product for an entire market (55m28s).
• When it comes to external funding, it's recommended to bootstrap as far as possible to gain momentum and leverage before seeking funding, as this will allow the company to keep a bigger share and deal from a position of power (56m26s).
• Successful entrepreneurs are not commodities, and having a business off the ground will give them more leverage in raising funds, but taking B and C funding comes with high expectations for growth, which can be challenging to meet (57m0s).
• It is beneficial for startups to postpone funding until they have gained some traction and are showing growth, as this will put them in a better position when seeking funding. (57m52s)
• When raising funds, it is essential to think about what exactly will be accomplished with the money and make a commitment to investors. (58m24s)
• Startups should have clear objectives for what they plan to achieve with the funds, such as acquiring a certain number of customers or generating a specific amount of revenue. (58m38s)
• As startups raise subsequent rounds of funding, they should clearly define what they plan to achieve with the new batch of money, such as expanding into a bigger market or entering a new country. (58m53s)
• Knowing exactly what will be done with the funds and committing to it will make the fundraising process smoother. (59m9s)
• Delivering on commitments made to investors is crucial for successful fundraising. (59m15s)
• The webinar discussed product management and related topics, with more information available on the website at online.stanford.edu. (59m33s)