Productize the 3D's for efficient growth
An overwhelmingly successful company has "productized" 3 motions:
- Development - Market requirement inputs go through an engineering motion to create predictable outputs (a product)
- Discovery - Market pain inputs go through a GTM motion to create predictable outputs (customers).
- Distribution - Market demand inputs are put through a fulfillment motion to create predictable activations (users)
Promises are made during the development phase, marketed during discovery, and fulfilled during distribution. It is uncommon for a company to excel in all three stages, and rarer to maintain it. Companies like Apple and Amazon have achieved great success by excelling and scaling these three stages effectively, but other industries that do not face intense competition may succeed by delivering mediocre performance in one or two motions. Early companies and investors often focus heavily on development, while established companies shift their competitive edge away from development by simply acquiring successful products. These companies can shift focus to discovery and distribution. Battles are won in development, wars are won in discovery and distribution.
The Three Phases of MVP Horizons
MVP Horizon #1 is focused on Product: Can we build something customers love? Without a giant war chest, this often means delivering a functional product that falls far short of founder vision. While (in software) we learn a lot about all 3 motions, in Horizon One 95% of the effort is focused on building a product that works.
MVP Horizon #2 is focused on Discovery: Can we locate and speak to potential customers at scale? Macro factors, like COVID, are huge disrupters, but equally so are innovation leaps such as automated dialers (sales) and ChatGPT (content).
MVP Horizon #3 is focused on Distribution: Can we efficiently fulfill the promises we made? This process is often broken for many years (sometimes forever). In fact, in the FP&A tool space, more than 70% of implementations fail, and even “agile” products take 2 months to install. This low bar is a blessing and curse: prospective customers are very wary of sales tactics, but if you become “known” for delivering on your promises your brand is unbreakable (“nobody got fired buying IBM”).
Maximizing Product-Led Growth Strategy
Outstanding companies have a product-led growth (PLG) approach that links and layers development, discovery, and distribution. A great example is Calendly, where non-customers use the product to schedule meetings with active customers, thereby facilitating discovery through the very act of using the product. Distribution is partially completed by the time the meeting starts, as the prospective users' email and information is already part of the current users' network - the only thing missing is a credit card.
Microsoft serves as a remarkable illustration of how distribution can overshadow development at a large scale. The company employs a distinctive approach to product development, reminiscent of the strategy utilized in yacht racing. Instead of choosing the optimal route, they imitate their followers. Essentially, by mimicking the path of their competitors, Microsoft manages to maintain a competitive edge and emerge victorious, even if the chosen route may be slower than alternative options. While this approach may not perfectly translate to the business world, Microsoft is often recognized as excelling in being the second best at everything they undertake.
Microsoft Teams vs. Slack?
This strategy was demonstrated in the competition between Slack, the superior product, and Teams, the leader in enterprise communication tools. Due to Microsoft's dominance in the enterprise market, they were able to launch a product that was not as good as Slack, but still overtook it in terms of daily active users almost immediately. (Note: there's a lot more to this story, including an antitrust lawsuit, but let's not miss the forest for the trees.)
Microsoft is repeating this approach by integrating OpenAI into Azure, Office and Bing. The outcome of this move is yet to be seen, but it has the potential to eliminate many AI companies that are currently vying for market share.
Many companies either become a platform or fade away as a point solution. Therefore, it's important to focus on the distribution of your product once you have a foothold in the market. Understanding and measuring your leading indicators in the go-to-market motion are paramount. Leading indicators of traction are:
- Share of search
- Lead growth
- Pipeline growth
- Conversion rates for early stage pipeline
- Win rate for late stage pipeline
- Cost per click
- Website effectiveness
- Social performance
- Product usage
- Customer satisfaction
- Payback period
In summary, successful companies excel in productizing the three critical motions: development, discovery, and distribution. They strategically integrate these phases to maximize growth and market dominance. Understanding leading indicators in the go-to-market motion is crucial for sustained success. By adopting a holistic approach to productization, companies can secure efficient and scalable growth in the competitive business landscape.
