Category Archives: Marketing

The Balderton Founder’s Guide to B2B Sales

Working in my capacity at as an EIR at Balderton Capital, I have recently written a new publication, The Balderton Founder’s Guide to B2B Sales, with the able support of Balderton Principal Michael Lavner and the entire Balderton Capital team.  This guide is effectively a new edition, and a new take, on the prior, excellent B2B Sales Playbook.

The guide, which is now published as a microsite, will soon be available in PDF format for downloading.

I’ll put the opening quote here that the editors omitted because it’s nearly unparseable:

“I have learned everything I need to know about sales.  Sales is saying ‘yes’ in response to every question.  So, now, when a customer asks if the product has a capability that it currently lacks, I say, ‘yes, the product can’t do that.'”

— Anonymous CS PhD founder who didn’t quite learn everything they needed to know about sales.

In short, this guide’s written for you, i.e., the product-oriented founder who thought they founded a technology business only to discover that SaaS companies, on average, spend twice as much on S&M as they do on R&D, and ergo are actually running a distribution business.

The guide has seven parts:

  • Selling: what founders need to know about sales
  • Building: how to build a sales organization
  • Managing: how to manage a sales organization
  • Renewing/expanding: teaming sales and customer success
  • Marketing: using marketing to build sales pipeline
  • Partnering: how to use partners to improve reach and win rate
  • Planning: planning and the role of key metrics and benchmarks

While there are numerous good SaaS benchmarking resources out there, the guide includes some benchmark figures from the Balderton universe (i.e., European, top-tier startups) and — hint, hint — we expect to release those benchmarks more fully and in a more interactive tool in the not-too-distant future.

The guide is also chock full of links which I will attempt to maintain as sources change over time.  But I’ve written it with both in-line links (often to Kellblog) and end-of-section links that generally point to third-party resources.

I’ve packed 30 years of enterprise software experience into this.  I come at sales from an analytical viewpoint which I think should be relatable for most product-oriented founders who, like me, get turned off by claims that sales has to be artisanal magic instead of industrial process.

I hope you enjoy the guide.  Feel free to leave comments here, DM me on Twitter, or reach me at the contact information in my FAQ.

How to Fix a Broken Go-To-Market Motion Using a Steady-State Funnel

In my consulting and advising work, I’ve worked with a number of enterprise SaaS companies that get stuck with a broken go-to-market (GTM) motion.  What do I mean by broken?

  • Chronic plan misses, and not by 5-10%, but by 30-50% [1]
  • Weak sales productivity, measured either relative to the company’s model or industry averages (median $675K) [2]
  • Scarce quota attainment, measured by percentage of reps hitting quota. Instead of 80% at 80%, they’re more like 80% at 40% [3]
  • High sales turnover. Good sellers quit when they’re not making money and they perceive themselves in a no-win situation.
  • Poor pipeline conversion, closing perhaps 10-20% of early-period pipeline instead of 30% to 40% [4]
  • Poor close rates, eventually winning only 5-10% of your deals as opposed to 20-30% [5]

In such situations, it’s easy to conclude “that dog don’t hunt” when examining the company’s go-to-market.  It’s harder to know what to do about it.  Typical reactions include:

  • Fire everyone, a popular response which is sometimes correct, but risks wasting an additional year due to chaos if the people were, in fact, not the problem.
  • Pivot the company, making a major change in strategy or sales model. Let’s go product-led growth (PLG).  Let’s sell our platform instead of our application.  Let’s do only enterprise accounts and account-based marketing (ABM).  While these pivots may make sense, many companies should get called for strategic “traveling” because they pivot too often [6].
  • Hope it will get better. If I only had a dollar for every time that I heard a CRO say,” all the changes are on track, the only thing I need is time for them to work.”  Maybe they will, maybe they won’t.  But what are the tell-tales will let us know before we miss three more quarters and execute plan-A, above?

It’s an utterly soul-sucking exercise to watch sales, marketing, and finance talk about these issues when the players are not all quantitative by nature, using the same metrics definitions, using the same models, all aware of the differences between averages and distributions, and all having a good understanding of ramping and phase lags [7].  That is, well, the vast majority of the time.

So, if you’re in this situation, what should you do about it?  Three things:

  • Agree on the problem, which is often shockingly more difficult than it appears
  • Build a steady-state funnel, which among other things focuses everyone on the present
  • Ensure your leadership team is part of the solution, not part of the problem

Agree on the Problem
You can’t make a coherent plan to fix something unless you have a clear, shared, data-driven understanding of what’s causing it.  To get that, you need to block a series of meetings with a single topic:  why are we missing plan?

You want a series of meetings because you will likely need to iterate on data collection and analysis.  Someone will assert something (e.g., saying that pipeline coverage is weak) and – unless your metrics are already in perfect shape — you’ll want to look at the data you have, clean it up, get historical data for trend analysis, and then reconvene.  It’s more effective to have a series of meetings like this than it is to have one mega-meeting where you’re committed to leaving the room with a plan, but you’re simply debating opinions.  As Jim Barksdale used to say, “if we have data, let’s look at the data; if all we have is opinions, let’s go with mine.”  So, get the data.

There will invariably be some blame games in this process.  Focus on the assertions, not who made them, and focus on the data you’d need to see to back them up.

Example:

CMO: “I think conversion rates are the problem.”
CEO: “Based on what data are you arriving at conclusion?”
CMO: “Overall pipeline is up, but the results are flat.”
CEO: “Please put up the slides from the last QBR on pipeline conversion.”
CEO:  “OK, this only shows one quarter so we can’t analyze historical trends, and it’s looking at rolling four-quarter pipeline so we can’t tell if actual current-quarter pipeline is sufficient.  Salesops, how can you help?”
Salesops: “I can make a trailing-five-quarter count- and dollar-based, week 3 pipeline conversion chart and make a pipeline progression chart that shows a better view of how the pipeline is evolving.” [8]
CEO: “Great, do that, and let’s reconvene on Friday to see what it says.”

Finally, ensure that you keep the conversion moving by forcing people to answer questions.  Call out people who “Swiss village” their answers [9].  Ask people who are being defensive to focus on the go-forward.  Interrupt people when they’re waxing poetic.  Time is of the essence and you can’t waste it.

Build and Focus on a Steady-state Funnel
To make things simple, concrete, and focused on the immediate future, I think the best thing you can do is build a steady-state funnel model.

If you’re missing plan consistently and significantly, there’s no need to have in-depth future hiring, ramping, and capacity conversations, phase-lagging lead generation to opportunity creation and then opportunities to deals.  That’s all besides the point.  The point is your model isn’t working and you need to get back on track.

Here are the magic words that change the conversation: “what if we just wanted to add $1M in ARR per quarter?”  No ramps, no phase lags, no ramp resets, none of that planning for future scaling that actually doesn’t matter when you’re presently, chronically missing plan [10].  None of the complexity that turns conversations into rabbit holes, all for invalid analytical reasons.

Think:  how about before we start planning for sequential quarterly growth, we start to consistently add ARR that closely resembles the plan number from two quarters ago that we never came close to hitting?  Got it?

Here’s what that steady-state funnel model looks like:

Let’s be clear, you can build much more complex funnel models, and I’ve written about how.  But now is not the time to use them.  The purpose here is simple.  Think: “team, if we want to add $1M in ARR per quarter …”

  • Can we get (usually down) to 7 sellers?
  • Can we get the deal size to $50K
  • Can each seller close 4 deals per quarter?
  • Can we generate 112 oppties per quarter?
  • Can we close 25% of early-period oppties?
  • Can we generate oppties for $3.5K?

For each assumption, you need to look at historical actuals, have a debate, and decide if the proposed steady-state model is realistic.  Not, “does finance think the math works,” but “can the GTM team sign up to execute it?” If you’re trying to move the needle on a metric (e.g., taking deal size from $30K to $50K) there has to a clear and credible reason why.

If you can’t convince yourself that you can deliver against the model, then maybe it’s time to let the company find someone who does.  It’s far better to part ways with integrity than to “fake commit” to a model you don’t believe in and then unsurprisingly fail to execute.  Or, if the whole team can’t commit to the model, or you can’t find a model to which they would commit that produces an investable CAC ratio, then maybe it is time to pivot the company.  These are hard questions.  There are few easy answers.

Ensure Leadership is Part of the Solution   
As you move forward, you need to ensure that your leadership team is part of the solution and not part of the problem.  This is always a difficult question, not only for relationship reasons, but for more practical ones as well.

  • If you replace an exec, what are the odds their successor will be better? If you have a solid, competent person in place, odds are the next person (who will be knowingly joining a company that’s off-rails) will be no better.  But who’s to decide if someone’s solid and competent?  Board members, your peer network, and advisors can certainly help (but beware halo effects in their assessments).  So-called “calibration meetings” can help you make your own assessment, by simply meeting – not in a recruiting context – other CXOs at similar and next-level companies.
  • If you replace an exec, how long will the resultant turmoil last? Four quarters is not uncommon because the new person will frequently rebuild the organization over their first two quarters and then you’ll need at least two additional quarters to see if it worked.  A failed replacement hire can easily cost you (another) year.  It’s criminal to incur that cost only to replace reasonably-good person X with reasonably-good person Y.

Other questions you should consider in assessing if you want to weather the storm with your current team:

  • Do they really believe in the plan? Execs can’t just be going through the motions.  You need leaders on your team who can enlist their teams in the effort.
  • Are they truly collaborating?  Some execs don’t internalize the Three Musketeers attitude that’s required in these situations.  You need leaders on your team who want to see their peers succeed.  One for all and all for one.
  • Are they still in the fight? Sometimes execs decide the situation is hopeless, but lack the nerve to quit.  They’ll pay lip service to the plan, but not give their best effort.  You need leaders on the team who are still in the fight and giving their best each day.

If you’re going through a rough situation, my advice is stay strong, stay data-driven, leverage the resources around you, and demand the best of your team.  Focus on first diagnosing the problem and then on building and attaining a steady-state funnel model to get things back on track.

It may feel like you’re going through hell, but remember, as Winston Churchill famously said, “if you’re going through hell, keep going.”

# # #

Notes

[1] Plan meaning New ARR bookings and not Ending ARR balance.  The latter can mask problems with the former.  If we’re trying to measure sales performance, we should look the amount of ARR sales pours into the SaaS leaky bucket and not what happens to its overall level.

[2] New ARR per seller per year.  Remember this is a median across all SaaS companies and my guess is enterprise is more $800K to $1200K and SMB is more $400-500K.  Introducing ramping to this discussion is always a superb way to burn a few hours of your life.  The pragmatic will just look at ramped rep productivity, excluding momentarily the effects of ramping reps.  Pros will use ramped req equivalents and then look at ARR/RRE.

[3] See prior point.  The pragmatic will look only at ramped rep attainment.  Pros will look at attainment relative to ramped quota.

[4] For companies on quarterly cadence:  new ARR booked / week 3 new ARR pipeline.

[5] Don’t confuse early-period pipeline conversion with opportunity close rate.  The former looks within one period.  The latter measures what closes in the fullness of time.   Example:  you can have a week 3 pipeline conversion rate of 33% (which suggests the need for 3x starting pipeline coverage) and an opportunity win rate of 20%.  See my post on time-based close rates for more.

[6] In the basketball sense that a player is called for a traveling violation when they pivot off more than one foot.

[7] Phase lags here meaning the time between generating a lead and it becoming an opportunity or generating an opportunity and it becoming a deal.

[8] This begs the question why those charts aren’t in the QBR template.  Hopefully, going forward, they’ll ensure they are.  Odds are, however, that they don’t exist so hopefully a good debate and a Google search on Kellblog pipeline will help people find the analytical tools they need.

[9] The expression is based on this quip: “When you ask them the time, some people tell you how to build a watch.  Some tell you how to build a Swiss village.”

[10] To state the obvious, for your company that magic number might be $2M, $5M or $10M – but the same principle applies. Let’s pick a steady-state, per-quarter, net-new ARR number and keep focusing on it until we start to achieve it.

You Can’t Fix a CAC Payback Period: The Operator vs. Investor View of SaaS Metrics

Just a quick post to share the slides for the presention I gave today at SaaS Metrics Palooza, entitled You Can’t Fix a CAC Payback Period: The Operator vs. Investor View of SaaS Metrics.  (For those with Slideshare issues, Google Drive share is here.)

The presentation discusses:

  • The ways VCs can use metrics in discussions with founders and CEOs.
  • A deep dive into CAC payback period (CPP) itself, how it’s defined, what it measures, and how its often “corrected.”
  • How investors like compound metrics (e.g., CPP, Rule of 40) whereas operators are best focused on atomic metrics — e.g., you should set accountability and OKRs around atomic metrics.
  • How some metrics are stealthly more compound that you might think — e.g., CAC based on net-new ARR or gross profit (or both).
  • Why I like to say, “you can’t fix a CAC payback period.”  It’s a compound metric which can be driven by at least 5 different factors.
  • How to apply my observations to everyday SaaS life.

The slides are below.  Thanks to Ray Rike for inviting me to the palooza!

The Decomposition of Marketing

To adapt Julius Caesar’s famous opening line of the Gallic Wars:  marketing as a whole is divided in three parts.

  • Product marketing (prodmkt), responsible in a word, for the message and how well it resonates with customers in the market [1].
  • Demand generation (demandgen), responsible in a word, for generating opportunities (oppties) to feed sales [2].
  • Corporate communications (corpcomm), responsible in a word, for communications, including branding, public relations, and corporate-level messaging [3].

Two important notes:

  • There is an optional fourth part, sales development, i.e., managing the team of sales development reps (SDRs) who convert MQLs into stage-1 oppties.  Whether this team should report into sales or marketing is a separate debate.
  • The lines between these parts are not black and white.  Social media advertising is demandgen, but posting is either comms or prodmkt.  Prodmkt helps provide content for demandgen campaigns.  Content marketing is a form of light prodmkt.

Marketing leaders grow up [4] in one of those parts and thus take one of the three basic flavors. But just as few CFOs grew up in legal, few CMOs grew up in corpcomm.  So it really comes down to two:  most CMOs either grew up in product marketing or demandgen (just as most CFOs either grew up in either finance or accounting).  The point being that virtually no one grew up in both.

It was this realization that led me to create “pillar profiles” for marketers — a score from 1-5 on each of the three (plus one) pillars of marketing: prodmkt, demandgen, corpcomm, and sales development.  The trick is you only get a maximum of 15 points to assign [4a].  While I’ve never blogged on pillar profiles, I did cover them in my SaaStr 2021 talk, A CEO’s Guide to Marketing.

If you’re searching for a CMO, the first thing you should do is identify your target pillar profile [5].  Remember that you get a maximum of 15 points and, harder yet, you’ll find that {5, 4, x, x} and {4, 5, x, x} candidates are very hard to come by.  Usually you’ll find {5, 3, x, x} and {3, 5, x, x} candidates.

In the past, this forced startup CEOs to choose between a prodmkt- and a demandgen-oriented head of marketing.  But, with marketing ever more accountable for building pipeline [6], it was a Hobson’s choice:  most picked demandgen-oriented leaders because without pipeline, well, everything stops.  It’s the physiological needs level of marketing.

Increasingly though, I see startup CEOs interested in changing the rules so they have both strong prodmkt and demandgen leadership.  They’re doing this by decomposing marketing and reconstituting it in various ways:

  • Generally hiring demandgen-oriented CMOs [7].
  • Moving product marketing to report into either the chief product officer (CPO) or the CEO directly.
  • Occaisionally moving demandgen under the CRO, leaving behind either a prodmkt-oriented CMO or additionally putting prodmkt under product, leaving a corpcomm-oriented CMO.

I think all of these options can work in different situations, so let’s review the pro/cons of four different marketing org structures [8].

New, Traditional Marketing Structure
I believe the new traditional structure [9] is to hire a demandgen-oriented CMO and put prodmkt under that CMO.

The new, traditional marketing structure. Demandgen-oriented CMO with prodmkt reporting in.

The strength is that you get to hire a strong demandgen leader in the CMO slot and they will likely do well at filling the pipeline.  It may, however, be difficult to attract the level of prodmkt leader that you want because they may feel like “they understand the business bettter than their boss,” even if they lack the demandgen skills required for into the CMO role.

Prodmkt Under Product Structure
In this structure, your hire a demandgen-oriented CMO and move prodmkt under product.

Prodmkt under Product marketing structure. Demandgen-oriented CMO who also runs comms.

The strength here is that you get to hire a strong demandgen leader as CMO and — if you happen to have the right CPO — then prodmkt can work quite effectively under product.  This works best when the CPO is a great outbound communicator who has both a genuine interest and prior experience in prodmkt.  Never, ever force-fit this.  Some product leaders just want to manage the backlog [10].  I would note that large-company general manager (GM) positions, e.g., the one I held at Salesforce, are effectively “product management on steroids” and those steroids include taking over a lot of product marketing duties.  In such organizations, product marketing also exists outside the business units, but it is staffed at a lower ratio, and more product-line and campaigns-support in nature.

Prodmkt Under CEO Structure
Here again you hire a demandgen-oriented CMO but move prodmkt directly under the CEO, instead of under the CPO.

Prodmkt reporting to CEO structure. A demandgen-oriented CMO runs DG and comms.

I like this structure for early-stage startups because it lets the CEO have their cake and eat it, too — i.e., they can attract strong demandgen and prodmkt leaders.  This structure also keeps the CEO close to the action during the early days when the company is still evolving its message frequently.  It gives the CMO a chance to keep their job while still subtly giving the VP of Prodmkt the chance to earn the CMO job if they work well with the CEO, crush the prodmkt role, and demonstrate significant understanding of demandgen [11].  A little internal competition keeps everyone on their toes.

Fully Decomposed Structure
Fewer people contemplate this structure, but I have seen it once or twice.  Here you move demandgen under sales, prodmkt under product, and hire a corpcomm-oriented head of marketing.

Fully decomposed with DG under sales, prodmkt under product, and a corpcomm-oriented CMO

I’m generally not a fan of this structure because I don’t like marketing reporting into sales [12].  The strength is theoretically alignment:  by putting demandgen under sales, the CEO can effectively delegate responsibility for aligning demandgen to the CRO.  This structure may work for product-oriented founders who have little interest in go-to-market (GTM) functions [13].  The weakness here will be potential difficultly in finding good people to staff both the head of demandgen and the head of prodmkt roles.  Additionally, I’d guess that only 1 in 5 CPOs are good fits to run prodmkt.

Conclusion
In this post, we covered several topics:

  • The idea that marketing fundamentally has three parts — product, demandgen, and corpcomm — and that sometimes there’s an optional fourth, sales development.
  • That we can and should make pillar profiles to identify, at the start of a CMO search, which pillar profile we are looking for.
  • That startup CEOs are increasingly exploring alternative organizational structures to have their cake and eat it, too, when it comes to hiring marketing talent.
  • We examined four different structures and quickly discussed the strengths and weaknesses of each.

# # #

Notes
[1] A more detailed list:  positioning, messaging, high-value content (e.g., collateral), sales tools and training, support for public relations (PR) and analyst relations (AR).  Because the latter is fairly product-focused and time-intensive (e.g., extensive RFPs, briefings, and demos), you increasingly see AR split from PR and often reporting into product marketing.

[2] I contemplated, but deliberately did not pick “pipeline,” because sales must be responsible for the pipeline.  I could have said “generating pipeline,” but that’s two words and marketing is only one of four sources for so doing.

[3] As companies get larger and have multiple products, the need emerges for a corporate-level capstone message that transcends product line messages.  Note that I contemplated but deliberately avoided chosing “brand” as the single word, because it’s highfalutin for an early-stage startup.  See my post, practical thoughts on branding.

[4] Meaning specifically, had their formative career experiences working in and thus both have a deep knowledge of and the embedded point of view of that given department.  Finance people generally look at the company differently than accounting people.  Ditto for product marketers and demandgen people.

[4A] On the rough theory that, “the universe doesn’t make those,” so if you’re actually going to hire someone you need to realize that even 15 points is a pretty good score.

[5] As a board member, nothing is a bigger red flag on a marketing search than when the three finalists bear no resemblance to each other, e.g., a {5, 3, 3, 2}, a {2, 5, 3, 4}, and a {2, 3, 5, 3}.  If you need a {2, 5, 3, 4} then all finalists should be pretty close to that pillar profile.  You’ve effectively deferred deciding what you need until picking, which wastes time and changes your final decision from, “of the three people who look like what we need, which one is best for us,” to “what type of person do we need again?”

[6] It may be hard to believe but 25 years ago, before the widespread adoption of CRM, marketing had largely tactical and poorly measured responsibilities on lead generation.  Here’s my take on the evolution of software marketing.

[7] While I know early-stage startups don’t often have CXO-style titles, please consider CXO here to be a compact notation for saying “VP of <function>” or “Head of <function>”.

[8] I’ll leave the SDR question to the side as I view it as orthogonal and addressed in this post.

[9] I suppose I could just say contemporary, but “new, traditional” strikes me as more precise.  It’s now the “traditional” way, but yes, it’s still fairly “new” from where I sit.  Neotraditional doesn’t work as that means a new adaptation of a traditional thing.

[10] Becoming an incrementalist is the occupational hazard of a career in product management.

[11] In which case the CMO would have no functional job change but get put under the prodmkt leader. If this is a possiblity far better to call one VP of Prodmkt and the other VP of Marketing, so when that occurs it’s a promotion to CMO for one of them, but not a demotion for the other.

[12] There is no doubt some religion in my dislike, having been CMO of three companies for over a decade.  I think the rational argument is that you don’t need to put marketing under sales to align marketing with sales, and such, doing so is rather a brute-force approach that will result in a smaller candidate pool.  Moreover, most CROs know little about marketing and are not able to add much value when they manage it.

[13] Of course my general advice is to develop that interest.  The typical SaaS company spends twice on S&M what it spends on R&D.  Thus, while you may think you founded a product company, you actually founded a distribution business.  So go figure it out!  (And it’s fun.)

Playing Bigger vs. Playing To Win: How Shall We Play the Marketing Strategy Game?

“I’m an CMO and it’s 2018.  Of course I’ve read Play Bigger.  Duh.  Do you think I live under a rock?” — Anonymous repeat CMO

Play Bigger hit the Sand Hill Road scene in a big way after its publication in 2016.  Like Geoffrey Moore’s Crossing the Chasm some 25 years earlier, VCs fell in love with the book, and then pushed it down to the CEOs and CMOs of their portfolio companies.  “Sell high” is the old sales rule, and the business of Silicon Valley marketing strategy books is no exception.

Why did VCs like the book?  Because it’s ultimately about value creation which is, after all, exactly what VCs do.  In extreme distillation, Play Bigger argues:

  • Category kings (companies who typically define and then own categories in the minds of buyers) are worth a whole lot more than runner-ups.
  • Therefore you should be a category king.
  • You do that not by simply creating a category (which is kind of yesterday’s obsession), but by designing a great product, a great company, and a great category all the same time.
  • So, off you go.  Do that.  See you at the next board meeting.

I find the book a tad simplistic and pop marketing-y (in the Ries & Trout sense) and more than a tad revisionist in telling stories I know first-hand which feel rather twisted to map to the narrative.  Nevertheless, much as I’ve read a bunch of Ries & Trout books, I have read Play Bigger, twice, both because it’s a good marketing book, and because it’s de rigeur in Silicon Valley.  If you’ve not read it, you should.  You’ll be more interesting at cocktail parties.

As with any marketing book, there is no shortage of metaphors.  Geoffrey Moore  had D-Day, bowling alleys, and tornados.  These guys run the whole “something old, something new, something borrowed, and something blue” gamut with lightning strikes (old, fka blitzkreigs), pirates (new to me if not Steve Jobs), flywheels (borrowed from Jim Collins), and gravity (blue in sense of a relentless negative force as described in several cautionary tales).

While I consider Play Bigger a good book on category creation, even a modernized version of Inside the Tornado if I’m feeling generous, I must admit there’s one would-be major distinction that I just don’t get:  category creation vs. category design, the latter somehow being not just about creating and dominating a category, but “designing” it — and not just a category, but a product, category, and company simultaneously.  It strikes me as much ado about little (you need to build a company and a product to create and lead a category) and, skeptically, a seeming pretense for introducing the fashionable word, “design.”

After 30 years playing a part in creating, I mean designing, new categories — both ones that succeeded (e.g., relational database, business intelligence, cloud EPM, customer success management, data intelligence) and ones that didn’t (e.g., XML database, object database) — I firmly believe two things:

  • The best way to create a category is to go sell some software.  Early-stage startups excessively focused on category creation are trying to win the game by staring at the scoreboard.
  • The best way to be a category king is to be the most aggressive company during the growth phase of the market.  Do that by executing what I call the market leader play, the rough equivalent of Geoffrey Moore’s “just ship” during the tornado.  Second prize really is a set of steak knives.

I have some secondary beliefs on category creation as well:

  • Market forces create categories, not vendors.  Vendors are simply in the right place (or pivot to it) at the right time which gives them the opportunity to become the category king.  It’s more about exploiting opportunities than creating markets.  Much as I love GainSight, for example, I believe their key accomplishment was not creating the customer success category, but outexecuting everyone else in exploiting the opportunity created by the emergence of the VP of Customer Success role.  GainSight didn’t create the VP of Customer Success; they built the app to serve them and then aggressively dominated that market.
  • Analysts name categories, not vendors.  A lot of startups spend way too much time navel gazing about the name for their new category.  Instead of trying to sell software to solve customer problems, they sit in conference rooms wordsmithing.  Don’t do this.  Get a good-enough name to answer the question “what is it?” and then go sell some.  In the end, as a wise, old man once told me, analysts name categories, not vendors.
  • Category names don’t matter that much.  Lots of great companies were built on pretty terrible category names (e.g., ERP, HCM, EPM, BTO, NoSQL).  I have trouble even telling you what category red-hot tech companies like Hashicorp and Confluent even compete in.  Don’t obsess over the name.  Yes, a bad name can hurt you (e.g., multi-dimensional database which set off IT threat radar vs. OLAP server, which didn’t).  But it’s not really about the name.  It’s about what you sell to whom to solve which problem.  Again, think “good enough,” and then let a Gartner or IDC analyst decide the official category name later.

To hear an interesting conversation on category creation,  listen to Thomas Otter, Stephanie McReynolds, and me discuss the topic for 60 minutes.  Stephanie ran marketing at Alation, which successfully created (or should I say seized on the market-created opportunity to define and dominate) the data catalog category.  (It’s all the more interesting because that category itself is now morphing into data intelligence.)

Since we’re talking about the marketing strategy game, I want to introduce another book, less popular in Silicon Valley but one that nevertheless deserves your attention: Playing to Win.  This book was written not by Silicon Valley denizens turned consultants, but by the CEO of Proctor & Gamble and his presumably favorite strategy advisor.  It’s a very different book that comes from a very different place, but it’s right up there with Blue Ocean Strategy, Inside the Tornado, and Good Strategy, Bad Strategy on my list of top strategy books.

Why?

  • Consumer packaged goods (CPG) is the major league of marketing.   If they can differentiate rice, yogurt, or face cream, then we should be able to differentiate our significantly more complex and inherently differentiated products.  We have lots to learn from them.
  • I love the emphasis on winning.  In reality, we’re not trying to create a category.  We’re trying to win one, whether we happened to create it or not.  Strategy should inherently be about winning.  Strategy, as Roger Burgelman says, is the plan to win.  Let’s not dance around that.
  • I love the Olay story, which opens the book and alone is worth the price of the book.  Take an aging asset with the wrong product at the wrong price point in the wrong channel and, instead of just throwing it away, build something amazing from it.  I love it.  Goosebumps.
  • It’s practical and applied.  Instead of burying you in metaphors, it asks you to answer five simple questions.  No pirates, no oceans, no tornados, no thunderstorms, no gorillas, no kings, no beaches.

Those five questions:

  • What is your winning aspiration? The purpose of your enterprise, its motivating aspiration.
  • Where will you play? A playing field where you can achieve that aspiration.
  • How will you win? The way you will win on the chosen playing field.
  • What capabilities must be in place? The set and configuration of capabilities required to win in the chosen way.
  • What management systems are required? The systems and measures that enable the capabilities and support

Much as I love metaphors, I’d bury them all in the backyard in exchange for good answers to those five questions.  Strategy is not complex, but it is hard.  You need to make clear choices, which business people generally resist.  It’s far easier to fence sit, see both sides of the issue, and keep options open (which my old friend Larry used to call the MBA credo).  That’s why most strategy isn’t.

Strategy is about answering those questions in a way that is self-consistent, consistent with the goals of the parent organization (if you’re a brand or general manager in a multi-product company), and with the core capabilities of the overall organization.

In our view, Olay succeeded because it had an integrated set of five strategic choices that fit beautifully with the choices of the corporate parent. Because the choices were well integrated and reinforced category-, sector-, and company-level choices, succeeding at the Olay brand level actually helped deliver on the strategies above it.

I won’t summarize the entire book, but just cherrypick several points from it:

  • As with Burgelman, playing to win requires you to define winning for your organization in your context.  How can we make the plan to win if we don’t agree on what winning is?  (How many startups desperately need to have the “what is winning” conversation?)
  • Playing to win vs. playing to play.  Which are you doing?  A lot of people are doing the latter.
  • Do think about competition.  Silicon Valley today is overloaded with revisionist history:  “all we ever focused on was our customers” or “we always focused only on our vision, our north star.”  Ignoring competition is the luxury of retired executives on Montana ranches.  Winning definitionally means beating the competition.  You shouldn’t be obsessed with the competition, but you can’t ignore them either.
  • While they don’t quite say it, deciding where you play is arguably even more important than deciding what you sell.  Most startups spend most of their energy on what (i.e., product), not where (i.e., segment).  “Choosing where to play is also about choosing where not to play,” which for many is a far more difficult decision.
  • The story of Impress, a great technology, a product that consumers loved, but where P&G found no way to win in the market (and ultimately created a successful joint venture with Clorox instead), should be required reading for all tech marketers.  A great product isn’t enough.  You need to find a way to win the market, too.
  • The P&G baby diapers saga sounds similar to what would have happened had Oracle backed XQuery or when IBM originally backed SQL — self-imposed disruptions that allowed competitors entry to the market.  IBM accidentally created Oracle in the process.  Oracle was too smart to repeat the mistake.  Tech strategic choices often have their consumer analogs and they’re sometimes easier to analyze in that more distant light.
  • The stories of consumer research reveal a depth of desired customer understanding that we generally lack in tech.  We need to spend more time in customers’ houses, watching them shave, before we build them a razor.  Asking them about shaving is not enough.
  • I want to hug the person who described the P&G strategy process as, “corporate theater at its best.”  Too much strategy is exactly that.

Overall, it’s a well-written, well-structured book.  Almost all of it applies directly to tech, with the exception of the brand/parent-company intersection discussions which only start to become applicable when you launch your second product, usually in the $100M to $300M ARR range.  If you don’t have time for the whole book, the do’s and don’ts at the end of each chapter work as great summaries.

To wrap this up, I’d recommend both books.  When thinking about category creation, I’d try to Play Bigger.  But I’d always, always be Playing to Win.