Landing whales takes time, effort and a leap of faith. The benefit to the business is clear, but the path to get there can cause significant tension in a product shop.
Product people are passionate about meeting the needs of the market by creating solutions that address the pains of the majority. Acquisition teams are passionate about meeting the needs and addressing the pains of individual prospects and customers. Neither is right or wrong, they are just different perspectives that create an inherent tension: Do we prioritise the many or the few? Do we force an ‘off the shelf’ solution or allow heavy customisation? Do we build features / integrations specifically for that large and important prospect?
Tension can feel uncomfortable, but as long as we understand where the tension is coming from and the implications of our decisions, it can drive us to a place of comprimise that optimises the benefits for both.
Solutions customised specifically for individuals are better known as ‘Services’. Generic solutions taken ‘as-is’ for the many are better known as ‘Products’.
Services can generate high revenues (if charged for) but lower gross margins over time. They are significantly less scalable and far more consumptive of resource as the solution is customised towards 100% of the customer’s need. The individual customer always takes priority in this scenario. This makes it’s hard to find the time and resource to work on the product for the many. Services are about the opportunity today, the immediate value creation.
SaaS products create compound benefits. This means they generate high gross margins over time lifting the business value and ability to invest in future products. In a product business, market needs always take priority and can cause challenges in the acquisition cycle where the solution only meets say 80% of an individual customer’s needs. Products are about the opportunity of the future, the long term value creation.
You can see where the tension arises – if both teams are fully focused on what they’re passionate about, they are being impeded by the other and working to competing priorities.
In a SaaS business, the answer tends to be somewhere in the middle. There is no long term value creation without a product approach, but no short term benefit without an acquisition focus.
So how do we balance this? Each team must understand the context of the other, and respect that everyone is acting in the best interests of the goals of the business.
By taking inputs from the acquisiton teams, the product shop can finance specific builds with customer sponsors – there’s a real and immediate return as the whale lands and the whole business celebrates. The product team just need to be consious of validating the underlying problem and potential solution with a wider group to ensure it will have benefit across the many to create that lovely high margin recurring revenue of a product shop.
Both teams then need to know when to draw the line.
When the customer has selected an ‘off the shelf’ product, icnreasing levels of customisation creates ongoing resource drain and erosion of margins, as well as putting in place an ever increasing financial burden for that customer to evolve their unique application in line with the changes to the generic product.
The product people are best placed to identify when the customisation becomes too specfic or prevents the allocation of resource to future value creation. This is where they say no. Just as the product people need to respect the inputs that lead to opportunities for broader value creation, the acqusition team need to understand and respect this line where the inputs are not creating value in a sustainable way.
In short, there’s a win-win from landing and feeding whales, for both product people and acquisition teams, but it is not easy and definitely requires high empathy for each other’s context.
It needs understanding and a team approach.