Contributed by Greg Rublev
One day while working as a director of product in a growing company in the sales and marketing software space, I walked into the CFO’s office all excited: “I have a great idea!” I exclaimed. He was always eager to listen and encouraged me to elaborate. In all, we had a 15 minute chat about launching a new product in the Eloqua app marketplace.
Then he asked the dreaded question: “Have you put together a business plan?”
After saying “no, but I’ll work on it,” I left, frustrated that he was making me jump through hoops even though in my mind it was so obvious that we need to launch this app.
Fast forward six months, and we finally kicked off the work on this project and it ended up being a significant success. However, it took way too long to get started and was one of the most frustrating experiences in my career. Looking back on it now, I would do a few things differently.
Geoffrey Moore in his book Escape Velocity talks about three fundamentally different kinds of product management:
- new products that have not achieved product-market fit
- existing products that have product-market fit and are being improved to grow market share
- existing products that are being modified to reduce the cost of operating them
Throughout my career I have had the experience of working on all three of these. I most enjoyed the first category – creating new products and seeing them achieve product market fit with frequent iteration. One of the biggest challenges of working on these types of projects within an established company with existing products is: getting off the ground.
A typical CFO will ask you:
- Have put together a business plan?
- How much money will this product make?
- How much will it cost?
- Why aren’t the competitors doing this?
Although these questions are fundamentally not important when dealing with category one products, as I will explain later, you can’t fault your CFO for doing his job in the context of the existing business, and those questions are absolutely the right ones for him to ask. The trick is answering them quickly and successfully so that you can get moving — and learning.
Here are the three key things to getting your CFO to approve the work on a new product:
1. Sell with Data: the Catch-22 that Isn’t
When I researched the space we were going after, I looked at our customer base to see who already uses Eloqua, and found that over 30% do. That one piece of insight made it clear that this product would be highly relevant for our existing customers, not to mention become an important selling point for new ones. However, what would have been even more compelling is if I had called 10 of these customers, and asked them a few questions about their use of our product today and how it would be impacted with the Eloqua app.
Having just a few of them sign on as beta users for the hypothetical new app would have been indisputable proof that there is demand in the market for this new product. These 10 calls could have been done in a few days!
When a CFO asks you for a business plan, that typically means that you didn’t do a good job of selling your idea. You might say “I am not a good sales person”, but wait: you don’t need to be. All you need is to collect the smallest bit of data that sells the story for you.
You may say: “How can I spend resources to collect data, if the project hasn’t been approved yet?” It seems like a catch-22, but it is not. The data you need may only take a day or two to collect, and as product manager who is excited about a new product you better be able to put in some extra time to get it.
2. Business Plan, Shmisnessplan
Once the CFO is sold on your idea, he typically still wants a business plan. The bad news is that with most new ventures, any plan that you put together will be a work of fiction and will become obsolete the minute you finish writing it. The good news is that virtually nobody reads the business plan once they know you’ve put it together.
As I started the work on the business plan, I spent days agonizing over minute details of the marketing strategy and business model. I was trying to reduce uncertainty with market research and create a plan that I could truly defend. However, when I presented the plan, I still didn’t have any concrete data indicating demand, and each round of review was met with continuing skepticism.
If I had obtained the data from step 1, the process would have been much easier. I could have simply used that data to describe and justify the target market and value proposition. Then, I could have made some assumptions about marketing channels, business model and growth, operations, team and describe the three closest competitors. There was no need to predict the future – I just needed to describe one version of it and then move on.
All of that could have been done in a few hours with no agony!
3. Data Gets Runway
Once phase one of your project is green lit, that’s when the fun begins! Your goal is to set up a process of testing your assumptions, starting with the riskiest assumption. There are many approaches to doing this, but you should always break up the process into phases, with progressively more resources used in each phase as your understanding of the market opportunity improves.
When the project finally moved forward, our first phase included a full build-out of the product, which took months to complete. It would have been wiser to continue to vet the product idea with potential customers, so that we could further validate the demand and determine the key initial features required for launch. Getting that data would have allowed us to get even more resources to put on the project and bring it to market much faster.
Furthermore, it’s likely that we would have learned several key limitations of our initial product road map, and would have adjusted the plan which would have resulted in a more successful launch.
The key steps above apply to startups just as much as to established companies. But, it is no small feat to do them well without someone experienced on the team. I have practiced this approach at my previous startup and at my current company, CompleteCase, and it is definitely both an art and a science. To be successful, you will need to be very disciplined about the process, experiment with structure and decision making with data. Ultimately, there is an art to choosing the right experiments and deciding whether to pivot from your idea or persevere with additional tests.
Greg Rublev is a seasoned entrepreneur known for his innovative work with web-based products and SEO. During his early days in software consulting, Greg had developed the patent-pending technology platform that CompleteCase.com, a pioneer in online divorce, currently runs on. Over the next 14 years he launched web based products and online marketing campaigns at 6 venture-backed companies, and started two companies of his own. He joined CompleteCase.com again in 2013 as Chief Operating Officer to manage its rapid core product line growth and its aggressive expansion into new markets. Greg is an avid crossfitter and a runner. He is also a 3-time high school foosball champion, amateur salsa dancer and a pretty good snowboarder. Visit Greg’s blog at www.flowyourventure.com.