Building your business around customers

Fred Wilson has a great post about building a “customer-obsessed company” as opposed to a “technology-obsessed company.” This is good advice and reminds me of a number of companies built during the bubble period which were technology companies in search of a problem to solve. For early stage companies building their business, some of Fred’s advice includes investing “in the customer facing side of the business and in particular account management and customer service which are the “eyes and ears” of the organization and in product management (the “soul” of the organization) to synthesize this feedback into new and better products.” One important point when working with customers is to make sure that you do not support too many “one-off” requests. You must be extremely careful to make sure that the features and fuctionality that you build are “market-driven” meaning a number of customers or prospects support them versus one-off deliverables.

I was just at a board strategy session with one of our new investments where we are in the process of ramping up the business. As we reviewed the 2004 budget and dove into the technology department and product deliverables for the year, it was clear that the developers were getting pulled into many different directions. This is a common problem. Many companies that bootstrap their businesses tend to have developers acting as presales support, post sales support, and customer service. Every second a developer is out helping with a customer is a second not focused on advancing the product. Every second a developer is coding is time not spent answering customer support issues. As you ramp, this is not an ideal solution. So our recommendation was to make sure that the company created a separate presales group/sales engineering group to work with the sales team and to make the investment now to create a separate customer service organization to build for the future. As Fred mentions, too many companies overlook the customer support side of the business. Many times, putting the right customer support processes and organization in place early can mean the difference between success and failure.

And yes, product management is an incredibly important role to fill early on in a company’s life. This function should serve as the intermediary between market and customer requirements and engineering. If you have someone too close to sales performing this function, you may end up with a focus on short-term results where too many one-off requests are made to just close a deal. If your engineering handles this, you may end up with an over-engineered product that does not meet customer needs. Your product person should be in marketing with significant experience balancing the short-term and long-term needs of the various stakeholders. This includes gathering data from customers (direct meetings, customer support, sales team), prospects, analysts (yes it is a necessary evil), and your own team to prioritize the product “must-haves” for the next release.

Published by Ed Sim

founder boldstart ventures, over 20 years experience seeding and leading first rounds in enterprise startups, @boldstartvc, googlization of IT, SaaS 3.0, security, smart data; cherish family time + enjoy lacrosse + hockey

One comment on “Building your business around customers”

  1. Ed, currently enjoying your commentary, especially Fred Wilson’s post on being customer obsessed.

    While GSRobotics is still in the development stage if you will, we have really focused on listening to the market/markets while our engineers complete the core technology. That being said, I have undertaken the responsibility within GSRobotics acting as marketing manager(whatever you want to call it) meeting with end-user’s to determine what sort of products are absolutely necessary and more importantly to determine the level of pain. It’s a great experience and tool that has benefited both the development of our technology and overall business strategy. At the same time, it has also left me reading between the lines and obtaining third party opinions( within our industry) pertaining to pricing analysis.

    a brief post:

    First, if your market is saying there isn’t pain, then your solution is worthless. Basically all the quantitative data compiled while building a financial model is worthless if you do not have the qualitative data compiled from listening to the market. If the quantitaive and qualitative do not match up you have a real problem. I am not saying a financial model and quantitative information is not important- said in a different way, for a development stage company nothing is more important than listening to the markets and understanding certain industry nuances that do not exist in quantitative analysis. At the same time, the marketing manager must be careful formulating certain questions to ask these end-user when discussing pricing.

    While digging for information about pricing sensitivity, I have found( only my opinion and I have very limited experience compared with a VC) that if a market truly knows you have a real solution that can alleviate pain, they will try and beat you down on initial pricing no matter what value your solution brings to the table.

    This can be very difficult to decipher at times when you sit back and really listen to what the end-users are saying. For example, we offer a solution that is considered a replacement solution and/or a productivity increasing solution at the same time. If the end-user does not wish to accept the solution as a replacement product, our ROI/IRR model for end-users isn’t nearly as powerful, thus decreasing our solutions value and price point. So the dilema is, is the current value chain trying to beat down the small disruptive technology company or are they just saying the price needs to be down here, not up here. I could get really granular but I think this will do

    Who wants to go ugly early?

    Thanks again for you commentary,


    Tom Keratzes

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