Customer-obsessed companies

Ed Sim's post on Building Your Business Around Customers points to and also expands on a post by Fred Wilson. These are two very good posts for anyone trying to build a business - particularly anyone trying to build a software or technology business.

Fred says:

It's going to get harder and harder to build value in core technologies that have broad horizontal markets. The value is going to get created in providing technology-enabled solutions for customers. And if its the customer that matters most, instead of the technology, then I want to invest in customer obsessed companies, not technology obsessed companies.

AMEN says the choir.

Both talk about the importance of getting the customer-facing functions of the company implemented and working effectively early in a start-ups life. Fred says:

I was with the CEO of a company that I've invested in today. ... He was asking me where he should focus most of his energy and talent and hiring in the next 6 months. I told him 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.

Ed expands a little on the timing and reasoning for getting the account management and customer service functions in place:

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. ... 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.

Ed also talks more about the importance of getting the product management function in place early. I'll expand on my feelings about this and how to best do it in a separate post.

My last company was a great example of what can go wrong when the customer-facing functions are not put in place - or when they are there but ignored. I came in as CEO to this company when it was almost three years old. It had been founded as a dot.com/ASP and had gained no traction due to the total lack of a functioning business model and due to some invalid assumptions about the needs and desires of enterprise customers. The board/investors didn't want to give up on the concept and decided to reposition the company as an enterprise software play.

It sounded simple - the company had already built plenty of technology. All we needed to do was package it so that an enterprise could install it inside its own firewall. What could be simpler? It sounded easy when the co-founder/CTO laid it out. Reality was a slightly different thing.

This was a classic technology driven company. The original founder was a technologist but had done enough with real products to have some insight to what needed to be done. But to bring investors in he had brought on a co-founder who had promptly hijacked (with the acquiescence of the board and imported CEO) the whole product definition and development process. This CTO was a world-recognized academic expert in the particular technology that the company was trying to commercialize. Keyword in that prior sentence - academic. This guy, who was undoubtedly extremely bright, had not a clue about the needs of enterprise users or IT organizations. He had not a clue about the process of building a commercially complete or viable product. And while the form was honored - there was a person hired with the title of product manager - the substance of execution was lacking. All product decisions were held in the hands of the CTO and his chosen band of senior engineers (all mostly academic imports with no more commercial product experience than the CTO).

This went on for a a couple of years in the process of trying to build the technology at the heart of the ASP and then almost another year trying to repackage (that's what the Board thought) or rebuild (that's what was really going on) the technology. It was only when the early third generation "product" was allowed out into pilot installations that the reality started to be visible - at least to those who were willing to see.

When I finally arrived - replacing an interim CEO who had just started to figure out what was going on after six months of part-time effort - it was all ready to break down. Literally the day I arrived the poor woman who had been trying to fill the product manager role resigned in total frustration. The sales and consulting people who had been working with the two or three pilot accounts were lined up to talk to me - they had all kinds of good information about what needed to be done to actually deliver a commercial product but no one had been willing to listen. And the development organization was fractured into about three camps - largely grouped by distance from the customer problems/issues/needs filtered in from the account management teams.

The engineering group that agreed most with the account management teams happened to own the technology that actually interfaced with customers. The next two layers of groups (corresponding to two deeper layers of the technology architecture) were progressively farther away from direct customer contact and also more completely staffed by extremely bright people straight from academia, either having just graduated with their B.S., or M.S. or even Ph.D. (we had more Ph.D.s than any company I have ever worked for) or having been hired straight from a teaching or post-doc position. These two groups spent most of their time arguing about the most technically elegant way to build their layers of technology.

It turns out that it only took one decision, made at the end of my first week on the job, to get the bus headed in the right direction. I pulled a very experienced individual from the account management organization and made him product manager. He was given unquestioned authority over all product content and priority decisions. The key supporting decision was to focus all energy on delivering a fully packaged product - not just a bag of technology - based on the product manager's top priorities by a specified delivery date. The product manager got to put as many of his priority items in that release as would fit within the time available. It was somewhat arbitrary but it was the focus that we needed.

This really was a simple decision on my part - and it moved most of the critical decisions over the next month off of my plate (the brand-new CEO - this was still my first week on the job) while I learned what I needed to know and onto the product manager's plate (who had been around for 9 months and worked at least to some degree with every pilot customer). All I had to do was to continue to support the product manager. That took some work as everyone adjusted to the new focus, but it really wasn't that hard.

It wasn't hard because we put the focus where it should always have been - on the needs of the customers. Interestingly, this is what most of the engineering team had been looking for (very few engineers really want to build something that customers won't use, even if the technology is super cool). Even many of the inexperienced guys on the team were bright enought to sense that something was missing in the way that product content and design decisions had been made. And watching the process for the next couple of months and talking to the guys in engineering - at all levels - helped me understand who didn't understand the primacy of the customer. These guys ultimately had to be helped off the bus, but that came down the road after we shipped a finished product.

It really is all about customer focus. Even if you are trying to pioneer some ground-breaking and market-creating new technology, you must focus on the needs of those technology enthusiast visionary buyers that will give it a try. They'll help you reshape your technology into a meaningful product that you can take to the early adopter/early majority buyer as your market starts to develop. It sounds so darned obvious, but after 25+ years working on the vendor side of the software business and seeing several generations of new start-ups come and go after making all of the same mistakes as the prior generation(s) I've come to realize that one man's obvious is another man's hard won revelation.

So choir, repeat after me...It's all about the customer - sing it now - It's all about the customer...It's all about the customer...