Common Mistakes for First-Time Product Managers

Voltaire's chateau at Ferney-Voltaire, France.

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One of the co-founders of a startup should take ownership of the product management role. Product management encompasses everything from customer discovery, feature planning, roadmaps, QA, strategy, wireframes, documentation, and more. After building several commercial products personally, as well as helping other startups, I’ve seen a number of mistakes first-time product managers make repeatedly. Here are a few of those mistakes:

  • Overcomplicating the product (I still have a tendency to do this) knowing that Voltaire’s quote “the perfect is the enemy of good” holds true
  • Waiting too long to deploy changes out to the production server (startups should do continuous deployment or at least daily deployment otherwise it leaves room for a culture of monolithic development)
  • Inconsistent capitalization in button and link labeling (e.g. “Edit user” in some places but “Edit Object” in others)
  • Not appreciating that window dressing and subtle niceties in a UI contribute toward the user experience
  • Creating complicated interfaces that don’t employ progressive disclosure of advanced functionality

My recommendation is for first-time product managers to pick up a book like Designing Interfaces and really be a student of the art of building a great product.

What else? What are some other common mistakes for first-time product managers?

Spray and Pray to Find Potential Customers

He spent too much time squawking about how his...

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Testing a thesis and iterating quickly is one of the central tenants of lean startups. One of the ideas that lean startups should also employ is reaching out to many different potential types of customers while they build the product with feedback from a core group. Spraying and praying, based on educated guesses, isn’t employed as much as I would have expected.

The idea is pretty simple. Take the core value proposition of the product, with feedback from the potential prospects who’ve helped guide development, and start reaching out to other groups that might be a good fit. Ideas to try include:

  • Related industries/verticals
  • Different job titles within those industries
  • Factors like revenue size, number of employees, and geography

The idea is to pick out chunks of 25 contacts, pulled from LinkedIn/Jigsaw, in each potential area and start talking to people. Over time, patterns and fruitful opportunities will emerge. Once momentum has been achieved in an area, double down on it and maximize the value.

What else? What are some other ways to find potential customers?

Junk Bonds for Startups

Cover of "Liar's Poker"

Cover of Liar's Poker

After reading Michael Lewis’ latest book, The Big Short, this weekend it got me thinking more about junk bonds. Michael Lewis referenced his first book, Liar’s Poker, which chronicles the rise of the junk bond industry at Solomon Brothers, several times in the new book. Ted Turner’s autobiography, Call me Ted, talks about how junk bonds were the only way he could finance the growth of his empire without giving up control of his namesake business.

Why don’t we see the equivalent of a junk bond industry for startups?

Financing for startups typically revolves around angel investors (three Fs – friends, family, and fools) and venture capitalists with the occasional bootstrapper thrown in. I don’t see junk bonds working for pre-revenue companies as bonds are predicated on the ability to pay interest as well repay the whole amount at maturity. But for startups that have moved from the seed stage to early or growth stage (e.g. at least $1 million in revenue), knowing the gross margins for software and SaaS companies are typically north of 70%, there should be opportunity for junk bonds (e.g. high interest loans) to finance growth. The bonds would be senior debt such that failure to repay or refinance the bonds would potentially turn ownership of the company over to the bond holders, there’s sufficient collateral in the form of company equity to back the financing.

Here are a few reasons why we don’t see a junk bond market for startups:

  • Reporting, auditing, and other controls for startups are typically weak giving little transparency to potential financiers
  • Many technology startups that reach $1 million in revenue already have investors and are on the investor train (e.g. once you raise institutional money, and things are going well, you’re going to likely raise more and more rounds of equity financing)
  • There are so few startups looking for this type of financing that connecting the buyers and sellers would be prohibitively expensive

We’re not going to see a junk bond market for startups anytime soon but I believe there’s a need in the market for profitable, fast-growing startups to be able raise debt financing without collateral (e.g. real estate or physical assets) backing it up.

What do you think? Is there a market for startups to do debt financing with asset-lite businesses?

What’s your Net Promoter Score?

Several years ago a friend of mine gave me the book The Ultimate Question as a colleague of his at Bain had written it. After reading the book we immediately started to implement it as part of our quarterly client check-in calls. The Ultimate Question, according to the book’s author Fred Reichheld, is as follows:

Would you recommend this product/service to a friend or colleague?

The theory is that it isn’t whether or not a customer is happy but rather how likely they are to rave about you to others. Too often people will say they are satisfied when they are indifferent or don’t actually care. The most profitable and successful companies, like Apple and Google, have the most rapid fans.

Calculating the net promoter score is fairly easy (see this online calculator). Ask customers to answer The Ultimate Question on a scale of 0-10 with 10 being the highest. Once you have the scores, categorize the responses into promoters (9-10), passives (7-8), and detractors (0-6). To determine the score, take the percentage of promoters and subtract the percentage of detractors (the percentage that are passives are ignored). That’s it. Companies that score above 75 are considered excellent, and yes some companies have negative scores.

My recommendation is to consider using net promoter score as way to measure how successful your company is with your customers.

Defining a Great Corporate Culture

tape measure from Sweden.

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Several times now I’ve said that a great corporate culture is the only sustainable competitive advantage. How do you define a great corporate culture? Here’s how we define and measure our culture to determine if we are doing a good job:

  • We measure ourselves against the core foundation of good work, good people, and good pay:
    Good work – fun, interesting, and challenging
    Good people – positive, self-starting, and supportive
    Good pay – well above average compensation with strong benefits
  • We have an anonymous quarterly survey sent to all employees asking if they agree or don’t agree that we meet the core foundation (last quarter we had 100% somewhat agree or agree and we typically have 92%+ agree) as well as asking the Ultimate Question (how likely are you to recommend this as a place to work to your friends)
  • We measure employee turnover and typically only have one or two employees leave per year
  • We require unanimous consent for any new hires (anyone in the hiring process can say ‘no’ and the candidate will not move to the next round)

Defining a great corporate culture is hard. We’ve set out our own standards and methodology and feel confident we have an awesome corporate culture.

So Much to Give Thanks For

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Entrepreneurs are typically half-glass-full types of people and I’m no exception. I have much to be thankful for and Thanksgiving is a great time to reflect. One of the best parts of being an entrepreneur is that there are so many opportunities everywhere you look.

I’ve mentioned most of these before but it is important to give thanks as a company. Here are a few of the things we do to give thanks and celebrate our success:

  • Thanksgiving pot-luck lunch the day before Thanksgiving
  • Weekly catered lunches (free food Fridays)
  • Monthly heroes ($100 cash plus a cool lawn ornament for the month)
  • Quarterly celebrations (e.g. Braves game, bowling, Piedmont Park picnic, etc)
  • Quarterly community service projects to give back (e.g. Junior Achievement, clean a park, etc)

I think it’s important to give thanks and we’ve incorporated it into our corporate culture.

Success Recipe: Great Corporate Culture with Strong Engineering and Sales

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There is no recipe for success in startups. Every startup is different. There is a pattern for success I’ve seen many times: Build a great corporate culture with strong engineering and sales teams. Yes, all departments like marketing, services, support, operations, and finance are critically important. The reality is that engineering and sales are the most difficult to get right.

A product doesn’t have to be the best to win but it does have to be good. Engineering teams matter. As much as B2B tech entrepreneurs would like to have self-service products, people buy from other people. Sales teams matter.

The corporate culture is the over-arching fabric of a company and the only truly sustainable competitive advantage.

Build a great corporate culture with strong engineering and sales and you’ll be successful.