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Harvard innovation lab :       Michael J Skok :           Startup Secrets :   Product to Company
 Hi
Hi    Harvard innovation lab
         #innovationlab              @mjskok                     #startupsecrets    www.mjskok.com




                           START UP
                           SECRETS
                             An insider’s guide to unfair competitive advantage




                           Turning Products into Companies
                               by Design & Architecture



                                           MICHAEL J SKOK
                                         North Bridge Venture Partners

                                          twitter: @mjskok mjskok.com
                                                                                                         1
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Welcome
     • Gregg
       Favalora, Principal, Optics for
       Hire
         – Founder Actuality Systems
         – @gfavalora


     • John McEleney, CEO Belmont
       Systems
         – Previously CEO Solidworks
         – @johnmceleney                                                                     2
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                         www.mjskok.com
            #innovationlab          @mjskok            #startupsecrets




     Startup Secrets - Series
     • Company Formation
            – Culture
            – Hiring
     • Value Proposition
     • Go-To-Market Strategy
            – Strategic (Brand, Positioning, Segmentation etc.)
            – Tactical (Driving your Marketing and Sales Funnel)
     •     Business Model
     •     Turning Products into Companies
     •     Perfect Pitch
     •     Raising Funding
                                                                                                3
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Feature, Product, Company?
     • Which do you have?
     • How will you get where you want to go?




                                                                                            4
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Feature, Product, Company?

     Messaging


     Photo Sharing


     Check-In


     Directory
                                                                                             5
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Feature -> Product is easier…

     Messaging


     Photo Sharing


     Check-In


     Directory
                                                                                             6
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     It’s just a big iPod…




                                                                                            7
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     The problem…
                  Even if we have a product
          It takes several years to build a company
                     Markets change and
                        Shift happens!

                                We have a GAP…



                                                                                            8
Harvard innovation lab :   Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab          @mjskok             #startupsecrets




     The Product - Company GAP




                                                   GAP



                                                                                             9
Inventing and almost
                      commercializing 3-D
                      displays:
                      When “tech looking for a market”
                      goes from awesome, to painful, to a
                      patent sale 12 years later

                      April 2013

                      Gregg Favalora
                      Principal, Optics for Hire

                      * Founder, Actuality Systems (1997 – 2009)
                      gregg@opticsforhire.com

Client Confidential
Client Confidential
Gregg Favalora, re: Actuality Systems

 Phase 1: $1.5M, Proof-of-concept
 1997-2001
 • 100 million pixel display
 • undocumented sole-sourced
 component (DLP)
 • only 6 people




Client Confidential
Gregg Favalora, re: Actuality Systems

 Phase 1: $1.5M, Proof-of-concept   Phase 2: $8M, Look for Market
 1997-2001                          2002 – 2006
 • 100 million pixel display        • CEO #3
 • undocumented sole-sourced        • Started selling prototypes
 component (DLP)                    • For “whole product” added an API for
 • only 6 people                    standard 3D graphics (OpenGL)
                                    • Sell products not components
                                    • Failed to identify segment with
                                    sufficient ROI for a $100k product




Client Confidential
Gregg Favalora, re: Actuality Systems

 Phase 1: $1.5M, Proof-of-concept   Phase 2: $8M, Look for Market
 1997-2001                          2002 – 2006
 • 100 million pixel display        • CEO #3
 • undocumented sole-sourced        • Started selling prototypes
 component (DLP)                    • For “whole product” added an API for
 • only 6 people                    standard 3D graphics (OpenGL)
                                    • Sell products not components
                                    • Failed to identify segment with
                                    sufficient ROI for a $100k product

                                    Phase 3: $2M, Pivot out of HW
                                    2007 – 2009
                                    • CEO #4
                                    • Good clinical studies, but no VC
                                    interest. PIVOT: become a medical
                                    software company for prostate cancer
                                    • Attend procedures in OR, understand
                                    reimbursement, hire VP Clinical, study
                                    successful competitors... * recession *

Client Confidential
Gregg Favalora, re: Actuality Systems

 Phase 1: $1.5M, Proof-of-concept           Phase 2: $8M, Look for Market
 1997-2001                                  2002 – 2006
 • 100 million pixel display                • CEO #3
 • undocumented sole-sourced                • Started selling prototypes
 component (DLP)                            • For “whole product” added an API for
 • only 6 people                            standard 3D graphics (OpenGL)
                                            • Sell products not components
                                            • Failed to identify segment with
                                            sufficient ROI for a $100k product

  Phase 4: Wind down, asset “sale”          Phase 3: $2M, Pivot out of HW
  2009                                      2007 – 2009
  • ~70 shareholders (!) approve sale to    • CEO #4 [yes, difficult business!]
  my new employer, OFH                      • Good clinical studies, but no VC
  • Patent broker, 150 prospects, sale in   interest. PIVOT: became a medical
  2010, gave some $ back to investors       software company for prostate cancer
                                            • Attend procedures in OR, understand
  INTRIGUED? Find the whole story on        reimbursement, hire VP Clinical, study
  Michael’s website – www.mjskok.com        successful competitors... * recession *

Client Confidential
Harvard innovation lab :   Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab          @mjskok             #startupsecrets




     The Product - Company GAP




                                                   GAP



                                                                                             16
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     The Product - Company GAP




                                                                       Go-To-Market
                                                                       Business Model
                                                                          Execution




                                                                                            17
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     The Product - Company GAP

       Solidworks




                                                                          Develop
                                                                           Design
                                                                          Architect




                                                                                            18
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Your product…




                                                                                            19
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     It’s all about the product right?




                                                                                            20
Harvard innovation lab :     Michael J Skok :    Startup Secrets :     Product to Company
Hi                                                                           www.mjskok.com
         #innovationlab            @mjskok             #startupsecrets




     Your expenses will flip
     • From all R&D, engineering …




                          Development

                                             STARTUP
                                                                 Sales &
                                                                 Marketing

                                                                                                  21
Harvard innovation lab :     Michael J Skok :       Startup Secrets :    Product to Company
Hi                                                                             www.mjskok.com
         #innovationlab            @mjskok                #startupsecrets




     Your expenses will flip
     • From all R&D, engineering …
       to prove market acceptance, gain
     repeatability




                          Development          Market              Sales &
                                             Acceptance            Marketing


                                                                                                    22
Harvard innovation lab :     Michael J Skok :   Startup Secrets :     Product to Company
Hi                                                                          www.mjskok.com
         #innovationlab            @mjskok            #startupsecrets




     Your expenses will flip
     • From all R&D, engineering …
       to prove market acceptance,
     • Then repeat & scale using Sales and
       Marketing



                                                                Sales &
                                                                Marketing
                                              SCALE

                          Development

                                                                                                 23
Harvard innovation lab :      Michael J Skok :   Startup Secrets :        Product to Company
Hi                                                                               www.mjskok.com
           #innovationlab            @mjskok            #startupsecrets




     Your expenses will flip – Apple…
     APPLE                            2012                2011                      2010
     R&D                             $3,381              $2,429                     $1,782
     % of net sales                       2%                2%                        3%
     SG&A                           $10,040              $7,599                     $5,517
     % of net sales                       6%                7%                        8%


                                                                     SG&A = 3x R&D

                                                                          SG&A
                                                SCALE

                            Development

                                                                                                      24
Harvard innovation lab :    Michael J Skok :      Startup Secrets :       Product to Company
Hi                                                                             www.mjskok.com
        #innovationlab           @mjskok               #startupsecrets




     Target Business Model -
     Demandware
                                2010         Q4 2010        2011           Q4 2011       Target

     Revenue                    100%           100%         100%            100%         100%

     Cost of Revenue            40%            36%          35%             28%           30%

     Gross Margin               60%            64%          65%             72%           70%

     R&D                        17%            14%          20%             15%           12%

     Sales and Marketing        30%            27%          35%             30%           25%
                                                                    Sales & Marketing = 2x
     G&A                        11%             9%          11%           11%
                                                                    Development        8%

     Operating Income
                                3%             15%          (1)%            16%           25%
     (Loss)

                                                                                                    25
Harvard innovation lab :     Michael J Skok :   Startup Secrets :     Product to Company
Hi                                                                          www.mjskok.com
         #innovationlab            @mjskok            #startupsecrets




     Your expenses will flip
     • From all R&D, engineering …
       to prove market acceptance,
     • Then repeat & scale with SG&A

                                                                 SG&A= 2-3x (!)
                                                                 Development

                                                                Sales &
                                                                Marketing
                                              SCALE

                          Development

                                                                                                 26
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     What if…

     You thought like an Architect
     and planned for this upfront?

                          LET’S DO IT!
                                                                                            27
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Closing the Product - Company GAP:
     Develop, Design & Architect

     • Develop foundations
          – Validated Value not just features
     • Design to fit
          – Product Go-To-Market Fit
                •   PVP – Primary Value Prop
                •   MVP – Min Viable Product
                •   MVS – Min Viable Sector
                •   MRP – Min Repeatable Product
     • Architect to attract
          – Business Model
                •   SLIPPERY Products
                •   Russian Doll Pricing and Packaging
                •   Whole Product
                •   Services
                                                                                             28
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Develop foundations

                    Validated Value not just features




                                                                                            29
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Developing value
     • Develop less
         – Focus on your CORE, partner for whole product
     • Develop faster
         – Crowd source
     • Develop cheaper
         – Offshore (carefully!)
     • Develop smarter
         – Co create…

                                                                                             30
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Startup Secret: Co-creating Value
     • Build on yourself
         – Eat your own cooking
         – Be your own customer

     • Be Open and Extensible (eg Software APIs)
         – Be Modular
         – Enable external multipliers to your value


     • Use Open Source
         – Leverage through community
         – Make the customer the product manager
                • Scratching their own itch                                                  31
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     1,000 people contributed to Drupal 7

                                                                                            32
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Value…
     • BEFORE you build even a feature, let alone a
       product
         – What problem are you solving?
         – How significant is it?




                                                                                             33
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     PRIOR to MVP
     • Check, recheck and triple check your Value
       Prop

         – If you’re not solving a valuable problem…

         – YOU’RE NOT SOLVING A VALUABLE PROBLEM
           !

         – And unsurprisingly you won’t build any value 

                                                                                             34
Harvard innovation lab :     Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                        www.mjskok.com
        #innovationlab            @mjskok             #startupsecrets




     Qualitative Validation

                            Before                          After


                                Vitamin vs. Penicillin



                         Acute Pain                  Absolute Joy
                                                    
                                                                                               35
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Agile Validation
     • Tools
         –   3D printing                 See session by Abby Fichtner
         –   Paper prototypes
         –   Web landing pages
         –   Online surveys
         –   In product A/B testing
         –   Kickstarter
         –   Prepay customers (my favorite)
         –   Funding
         –   etc
                                                                                             36
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Value Proposition…
     • See Building a Compelling Value Proposition
        http://www.mjskok.com/resources/value-proposition




                                                                                             37
Harvard innovation lab :   Michael J Skok :         Startup Secrets :        Product to Company
Hi                                                                                www.mjskok.com
        #innovationlab          @mjskok                  #startupsecrets




     Gain/Pain Validation




                                                                           Pain
                                              Inertia,
                                               RISK


                         Gain
                                                   >10

                                                                                                       38
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Start with a
     Primary Value Prop!                                 (PVP)
     • Focus on a PRIMARY value prop for a single
       audience
     • Multi faceted are harder
         – Chicken and Egg problems
         – Serving too many masters




                                                                                             39
Harvard innovation lab :       Michael J Skok :   Startup Secrets :    Product to Company
Hi                                                                          www.mjskok.com
        #innovationlab              @mjskok            #startupsecrets




     Value Prop: Recap & Intersection
                   – 3D Solution
                          • Discontinuous
                          • Defensible
                          • Disruptive
                                                                           Unique
                   – 4U Need
                          •     Unworkable
                          •     Unavoidable
                          •     Urgent                                       For targeting &
                          •     Underserved market                           Segmentation



                                                                                                 40
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Design to fit:
     Product Go-To-Market fit
                   MVP and introducting MVS, MRP




                                                                                            41
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     The Product Market Fit




                         Product                   Market


                                            Fit                                             42
Harvard innovation lab :   Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab          @mjskok             #startupsecrets




     The Product Market Fit




                           MV                      Market
                           P




                                                                                             43
Harvard innovation lab :    Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab           @mjskok            #startupsecrets




     Adding to Lean Startup thinking…
                            Minimum Viable Product (MVP)




                           MV
                           P




                                                                                             44
Harvard innovation lab :   Michael J Skok :      Startup Secrets :    Product to Company
Hi                                                                         www.mjskok.com
        #innovationlab          @mjskok               #startupsecrets




     The Product Market Fit Problem
                                                                          Market

                                                    here?

                                 here?

                                                              here?

                                    MVP
                                    ++             here?
               Fit ?
             stretch ?            here?


             MV                                                                                 45
Harvard innovation lab :      Michael J Skok :        Startup Secrets :    Product to Company
Hi                                                                              www.mjskok.com
        #innovationlab             @mjskok                 #startupsecrets




     The Product Market Fit Solution
                                                                               Market
                                           not here

                                not here



                                                            not here


                                                not here

                   Fit

                  MV
                                                                                                     46
                  P
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Adding to Lean Startup thinking…
                          Minimum Viable Product (MVP)
                         + Minimum Viable Segment (MVS)


                 Repeat?

                 MV                          MV
                 P                           S




                                                                                            47
Harvard innovation lab :   Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab          @mjskok             #startupsecrets




     Adding to Lean Startup thinking…
                          Minimum Viable Product (MVP)
                         + Minimum Viable Segment (MVS)


                 Repeat for …

                 MV                          MV    = same   NEEDS
                 P                           S




                                                                                             48
Harvard innovation lab :    Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                       www.mjskok.com
        #innovationlab           @mjskok             #startupsecrets




     Adding to Lean Startup thinking…
                         Minimum Viable Product (MVP)
                        + Minimum Viable Segment (MVS)
                      = Minimum Repeatable Product (MRP)

                           Repeatable 

                 MV         MR    MR          MV    = same   NEEDS
                 P          P     P           S




                                                                                              49
Harvard innovation lab :    Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                       www.mjskok.com
        #innovationlab           @mjskok             #startupsecrets




     Adding to Lean Startup thinking…
                         Minimum Viable Product (MVP)
                        + Minimum Viable Segment (MVS)
                      = Minimum Repeatable Product (MRP)

                           Repeatable, Referencable 

                 MV         MR    MR          MV    = same   NEEDS
                 P          P     P           S




                            Smaller target to reference
                                 lead, dominate
                                                                                              50
Harvard innovation lab :   Michael J Skok :     Startup Secrets :   Product to Company
Hi                                                                        www.mjskok.com
         #innovationlab          @mjskok              #startupsecrets




     Minimum Viable Segment…
     Segment according to the same NEEDS

     MV        MR         MR     MV       = same    NEEDS
     P         P          P      S

      Maintains MVProduct footprint
         • Same functionality needed by all customers

      People reference according to the same NEEDS
         • Customers can compare solutions

      Potential for leadership, domination
         • At least initial Beachhead
                                                                                               51
Harvard innovation lab :      Michael J Skok :    Startup Secrets :      Product to Company
Hi                                                                             www.mjskok.com
         #innovationlab              @mjskok            #startupsecrets




     Targeting, Segmentation
     + Blatant Critical need if possible:

                                 Mobile Professionals              vs. Office Worker

                                    Field Workers                  vs. White Collar

                                      Services                     vs. Sales

                                 Medical Equipment                 vs. Office Equipment

                                      Hospitals                    vs. Medical Clinics

                                     Critical Care
                                                                   vs. Diagnostics



                                                                                                    52
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     No longer just Product Market Fit
     • It’s about Product Go-To-Market Fit
         – Narrow your target
         – Segment it by need
         – Focus your product

     • Vital for
         – Positioning, Messaging, Communication
         – Packaging and Pricing
         – Channels & Distribution, Partner Alignment

     • Enables
         – Reference selling, network effects, virality
         – Overall Business alignment
                                                                                             53
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     NUMBER ONE Startup Secret
     Don’t be afraid to FOCUS!

 • Narrow as possible to start!
      – Think small targets to dominate

 • Which would you rather…
      – Expand on success?
      – Contract on failure?


 • Balance Vision vs. Execution
                                                                        #1
      – See post on mjskok.com
                                                                                             54
Harvard innovation lab :     Michael J Skok :    Startup Secrets :   Product to Company
    Hi                                                                           www.mjskok.com
                 #innovationlab          @mjskok             #startupsecrets




         Roadmap: Vision -> Execution


                 Vision                Demo           Team            ROI        Executio
                                         s                                          n

Technology
Breakthrough ?




                                                                                                      55
Harvard innovation lab :          Michael J Skok :      Startup Secrets :       Product to Company
Hi                                                                                   www.mjskok.com
        #innovationlab                 @mjskok                #startupsecrets




     Roadmap: Vision -> Execution


         Vision                 Demo                Team              ROI            Executio
                                  s                                                     n



        Feature                 Product           Solution           Market          Company
         + usability            + partners        + customers,     + segments         + product line
                                + services           references    + beachheads       + scalability
                                + whole product   (+ product RASS) + repeatability    + profitability



                                                                                                          56
Harvard innovation lab :          Michael J Skok :      Startup Secrets :       Product to Company
Hi                                                                                   www.mjskok.com
        #innovationlab                 @mjskok                #startupsecrets




     Roadmap: Vision -> Execution
     (more likely parallel than literal)


         Vision                 Demo                Team              ROI            Executio
                                  s                                                     n



        Feature                 Product           Solution           Market          Company
         + usability            + partners        + customers,     + segments         + product line
                                + services           references    + beachheads       + scalability
                                + whole product   (+ product RASS) + repeatability    + profitability



                                                                                                          57
Harvard innovation lab :          Michael J Skok :      Startup Secrets :       Product to Company
Hi                                                                                    www.mjskok.com
         #innovationlab                 @mjskok                #startupsecrets



     Roadmap: Vision -> Execution
     Always validate from Customer viewpoint eg
     NPS


          Vision                 Demo                Team              ROI            Executio
                                   s                                                     n



         Feature                 Product           Solution           Market          Company
          + usability            + partners        + customers,     + segments         + product line
                                 + services           references    + beachheads       + scalability
                                 + whole product   (+ product RASS) + repeatability    + profitability

                                                                       Retention, Upsell
                                                                                                           58
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Closing the Product - Company GAP:
     Develop, Design & Architect

     • Develop foundations
          – Validated Value not just features
     • Design to fit
          – Product Go-To-Market Fit
                •   PVP – Primary Value Prop
                •   MVP – Min Viable Product
                •   MVS – Min Viable Sector
                •   MRP – Min Repeatable Product
     • Architect to attract
          – Business Model
                •   SLIPPERY Products
                •   Russian Doll Pricing and Packaging
                •   Whole Product
                •   Services
                                                                                             59
Harvard innovation lab :    Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab           @mjskok            #startupsecrets




     Architecting to Attract

                                SLIPPERY Products




                                                                                             60
Harvard innovation lab :   Michael J Skok :         Startup Secrets :         Product to Company
Hi                                                                                     www.mjskok.com
            #innovationlab          @mjskok                  #startupsecrets




     Gain/Pain ratio
     •      Revenue                     •    Inertia                             •    Find (See)
     •      Cost savings                •    Switching costs?                    •    Try
     •      Time                        •    Default = do nothing                •    Buy
     •      People                      •    Alternatives?                       •    Implement
     •      Competitive advantage       •    Good enough =                       •    Deploy
     •      Reputation                       good enough!                        •    Own – eg TCO
     •      Etc..                       •    RISK on a startup

                                                                               Pain
                                                  Inertia,
                                                   RISK


                             Gain
                                                       >10

                                                                                                            61
Harvard innovation lab :   Michael J Skok :         Startup Secrets :         Product to Company
Hi                                                                                     www.mjskok.com
            #innovationlab          @mjskok                  #startupsecrets




     Gain/Pain ratio
     •      Revenue                     •    Inertia                             •    Find (See)
     •      Cost savings                •    Switching costs?                    •    Try
     •      Time                        •    Default = do nothing                •    Buy
     •      People                      •    Alternatives?                       •    Implement
     •      Competitive advantage       •    Good enough =                       •    Deploy
     •      Reputation                       good enough!                        •    Own – eg TCO
     •      Etc..                       •    RISK on a startup

                                                                               Pain
                                                  Inertia,                                    Product
                                                   RISK                                       Lifecycle


                             Gain
                                                       >10

                                                                                                            62
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Get To Market – product facilitation



                                                    What if you could
                                                    literally slip into the
                                                    lead?




                                                                                             63
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                         www.mjskok.com
            #innovationlab          @mjskok            #startupsecrets




     Friction Free, SLIPPERY products
     •     Simple
     •     Low to no initial cost
     •     Installs easily
     •     Proves value quickly
     •     Plays well with others
     •     Easy to use
     •     ROI is obvious
     • Your customers can’t live without it – it’s stickY
                                                                                                64
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Simple




                                                                                            65
Harvard innovation lab :    Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab           @mjskok            #startupsecrets




     Simple
                                       Complexity

                                         Simplicity

                                FIRST PRINCIPLES

                                        Advantage

                                     Disadvantage

                                                                                             66
Harvard innovation lab :     Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                       www.mjskok.com
        #innovationlab            @mjskok            #startupsecrets




     Simple
                 Advantage = Innovation / Complexity

                                Complexity # Simplicity

                   Advantage = Innovation * Simplicity

                            Advantage # Disadvantage

              Disadvantage = Innovation * Complexity

                                                                                              67
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Even Simpler = Less is More!
     Microsoft                                     Apple




                                                                                            68
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Example
     Knowledge Management                           vs. Note Taking




                                                                                             69
Harvard innovation lab :   Michael J Skok :   Startup Secrets :     Product to Company
Hi                                                                        www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Simple
     • Simplify to your C.O.R.E. value
         – Create a whole product with partnerships, open source
           etc
                • See http://www.mjskok.com/resource/startup-secrets-game-changing-
                  business-models
        Capabilities
        Of
                                             C.O.R.E.                   Focus on it!
        Really                                Value
        Exceptional
        Value
                                                                                               70
Harvard innovation lab :   Michael J Skok :           Startup Secrets :               Product to Company
Hi                                                                                          www.mjskok.com
         #innovationlab          @mjskok                    #startupsecrets




     Low to no initial cost
     • Potential for
         – Frictionless trials
         – Lower initial CARC
         – Self identifying Freemium prospects



     • “Freeconomics”


                                                http://www.wired.com/techbiz/it/magazine/16-03/ff_free
                                                                                                                 71
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Low to no initial cost
     • Potential for
         – Frictionless trials
         – Lower initial CARC
         – Self identifying Freemium prospects

     • Free-fall, free-fail ?
         – It’s worth what people are paying for it = nothing
           = no proof of value
         – And perceived value can also be zero
         – Ultimately have to upsell

                                                                                             72
Harvard innovation lab :   Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
        #innovationlab          @mjskok             #startupsecrets




     Low to no initial cost


        – Value

        – Network

        – Monetization


                                               Design for VIRAL if possible
                                                                                             73
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Installs easily, integrates well
     • Slippery not Trip-up-ery!




                                                                                             74
Harvard innovation lab :   Michael J Skok :         Startup Secrets :          Product to Company
Hi                                                                                   www.mjskok.com
         #innovationlab          @mjskok                  #startupsecrets




     Installs easily, integrates well
     • Reducing the Pain for customers to
       try, adopt, deploy


                                                                              Pain
                                               Inertia,
                                                RISK


                          Gain
                                                    >10

                                                                                                          75
Harvard innovation lab :   Michael J Skok :   Startup Secrets :                        Product to Company
Hi                                                                                            www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Installs easily, integrates well
     • Integrates well:
         – “Embrace & Extend”
                Open & Extensible…

                                                          http://blog.programmableweb.com/2012/11/26/8000-apis-rise-of-the-enterprise/




                                                                                                                                         76
Harvard innovation lab :   Michael J Skok :   Startup Secrets :                        Product to Company
Hi                                                                                            www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Installs easily, integrates well
     • Integrates well
         – “Embrace & Extend”
                •    Open & Extensible…


     • Assume
                                                          http://blog.programmableweb.com/2012/11/26/8000-apis-rise-of-the-enterprise/




         – Change = risky, painful, time consuming & costly
                • Incumbents far and wide
                       – Applications
                       – Operating environments
                       – Business processes
                       – Human skills
                                                                                                                                         77
Harvard innovation lab :   Michael J Skok :   Startup Secrets :       Product to Company
Hi                                                                          www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Products that integrate, play well with others…

     • Encourage
       others to
       play with
       them…                                                            ®
                                                      LINK Technology
                                                             Partners




      LINK program
                                                                                                 78
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Proves value quickly
     • Consumer
         – Instant gratification




     • Enterprise,
         – Rapid payback
                • ≤3 months is great
                • >12 months is bad

                                                                                             79
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Self proving value
     • For example
         – If your product is about improving a process…


     • Provide proof as part of the product!
         –   Baseline current before the product usage
         –   Provide key metrics, visibility into progress
         –   Integrate analytics, dashboards
         –   Clearly surface reports that prove the value


                                                                                             80
Harvard innovation lab :   Michael J Skok :     Startup Secrets :   Product to Company
Hi                                                                       www.mjskok.com
        #innovationlab          @mjskok              #startupsecrets




     Package and progressively disclose
     value


                                               VS.




                                                                                              81
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Package and progressively disclose value
     Example: Acquia, Drupal Gardens




                                                                                             82
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Package and progressively disclose value
     Example: Acquia, Drupal Gardens – Results...




                                                                                             83
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Easy to use and apply
     • “OOBE!”
         – Out Of the Box
           Experience
         – Delight & entrance users
         – E.G. Templates




                                                                                             84
Harvard innovation lab :   Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                       www.mjskok.com
         #innovationlab          @mjskok             #startupsecrets




     Easy to use and apply
     • Example Salesforce.com vs SIEBEL




                                                    VS.




                                                                                              85
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                       www.mjskok.com
          #innovationlab          @mjskok            #startupsecrets




     ROI is Obvious
     • Quantifiable
          – Increase revenue
          – Reduce time, resources, costs


     • Or
          – Reduce risk
          – Drives competitive advantage

     (ties to fast payback)

                                                                                              86
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     ROI is Obvious
     (Supported by Self Proving Value)

     • Example: Unidesk




                                                                                             87
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     StickY
     • Your customers can’t live without it!
     • Fulfills a real need
     • Leaves customers
       wanting more !




                                                                                             88
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                         www.mjskok.com
            #innovationlab          @mjskok            #startupsecrets




     Friction Free, SLIPPERY products
     •     Simple
     •     Low to no initial cost
     •     Installs easily
     •     Proves value quickly
     •     Plays well with others
     •     Easy to use
     •     ROI is obvious
     • Your customers can’t live without it – it’s stickY
                                                                                                89
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                         www.mjskok.com
            #innovationlab          @mjskok            #startupsecrets




     Friction Free, SLIPPERY products
     •     Simple
     •     Low to no initial cost
                                                Gain
     •     Installs easily
                                                               Pain
     •     Proves value quickly
     •     Plays well with others
                                            Think of how this improves
     •     Easy to use                       the Gain/Pain Ratio in our
                                                 Value Proposition
     •     ROI is obvious                            Workshop

     •     Your customers can’t live without it – it’s stickY
                                                                                                90
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Startup Secret…

                          Disruptive innovation
                                           Yet..
                     NON disruptive adoption


                                                                                            91
Harvard innovation lab :     Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                        www.mjskok.com
         #innovationlab            @mjskok            #startupsecrets




     Startup Secret…

                                                                          high
        Disruptive innovation                                   =         GAIN
                                 Yet..
                                                                           low
     NON disruptive adoption =
                                                                          PAIN


                                                                                               92
Harvard innovation lab :   Michael J Skok :       Startup Secrets :   Product to Company
Hi                                                                         www.mjskok.com
        #innovationlab          @mjskok                #startupsecrets




     Example - Apperian



                                                   • Increase revenue by 40% at counters
                                                   • Saved $2.5M+ in direct IT costs


                                                   • Roll out 17,000 iPads
                                                   • Deliver worldwide no IT touch required




                                                                                                93
Harvard innovation lab :   Michael J Skok :       Startup Secrets :   Product to Company
Hi                                                                         www.mjskok.com
        #innovationlab          @mjskok                #startupsecrets




     Example - Apperian



                                                   • Increase revenue by 40% at counters
                                    PAIN
                                                   • Saved $2.5M+ in direct IT costs


                                                   • Roll out 17,000 iPads
                                    GAIN
                                                   • Deliver worldwide no IT touch required




                                                                                                94
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Architecting to Attract

                  Russian Doll Packaging & Pricing




                                                                                            95
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Build a Russian Doll!
     • Multi purpose strategy
         –   Packaging
         –   Pricing
         –   Distribution
         –   And more …




                                                                                             96
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Incent




                                              Free

                                                                                            97
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Freemium …




                                       Limited
                                         Free

                                                                                            98
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     OEM Solution…




                                   Personal
                                    Limited
                                       Free

                                                                                            99
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Premium …



                                Workgroup
                                 Personal
                                   Limited
                                     Free

                                                                                            100
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Sales enabler …


                                Corporate
                                Workgroup
                                 Personal
                                   Limited
                                     Free

                                                                                            101
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Adoption …

                                Enterprise
                                Corporate
                                Workgroup
                                 Personal
                                   Limited
                                     Free

                                                                                            102
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Russian Doll Packaging enables:
     “Addiction before Adoption”

     Gives you, your partners &
     your customers:
     • Digestible starting point
     • Upsell Options
     • Channel Flexibility
                  … and more


                                                                                             103
Harvard innovation lab :   Michael J Skok :    Startup Secrets :   Product to Company
Hi                                                                       www.mjskok.com
         #innovationlab          @mjskok             #startupsecrets




     Russian Doll Packaging enables:
     “Addiction before Adoption”

     Acquia example = increasing LTV
     “Land & Expand”


                                           Upsell
                                                                LTV
                             On-           / Cross
                                                     $400
                             board         Sell      $300
                                                     $200
            Acquire                                  $100
                                                       $0



                                                                                              104
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Architecting to Attract

                                WHOLE product




                                                                                            105
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Whole Product –
     Reinventing the wheel




                                                                                            106
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Example – MP3
                 Rip...




                                                                                            107
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Whole product…
                MP3
                 +
               Player
        (Parallel port, ~ 8 songs)




                                                                                            108
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Whole product ?
             MP3
              +
           The iPod
        “1000 songs in your pocket”




                                                                                            109
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Whole product
             MP3
              +
           The iPod
        “1000 songs in your pocket”
        + Firewire
        + iTunes
        + Legal Music
        = WHOLE PRODUCT !

                                                                                            110
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     The ideal whole product
     • Is a win / win with a partner
     • Where the partner needs you
     • And can take you to market




                                                                                             111
Harvard innovation lab :   Michael J Skok :             Startup Secrets :     Product to Company
Hi                                                                                     www.mjskok.com
            #innovationlab          @mjskok                       #startupsecrets




     Strategic Partnership
     EG: “Whole Product” Strategic Partnership

     Multipliers:                                                               Levers:
     • Increase revenue                                                         • Reduce time to market
        through fuller                                  Services                • Reduced dev costs
        solution                         Multipliers   Application




                                                                  s
                                                                  Lever
     •     Increase reach                              CORE
                                                       Database
           through their sales
                                                        Storage
           force, channel etc.
     •     Credibility


                                       Integrate your CORE
                                    into their technology stack
                                                                                                            112
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     What makes a partner strategic?
     • Symbiotic multipliers & levers (win-win)
         + Product
         + Distribution
         + other


     • 1+1 > 2 in joint market leverage
         – Ousting competitors, driving share


     • Can create potential exit
                                                                                             113
Harvard innovation lab :   Michael J Skok :        Startup Secrets :   Product to Company
Hi                                                                           www.mjskok.com
         #innovationlab          @mjskok                  #startupsecrets




     An ideal ideal (win-win)
     Strategic Partner Example

       What You Get                                 What They Get

      • Complete your                               • Competitive advantage
        “WHOLE Product”                             • Increased ARPU
           - Increase Value (LCV)
                                                    • Faster Time to Market
      • Channels to reach YOUR
        target customer
           - Reduce Selling Cost
           (CARC)

      • Credibility
                                                                                                  114
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                     www.mjskok.com
        #innovationlab          @mjskok            #startupsecrets




     Architecting to Attract

                                        Services




                                                                                            115
Harvard innovation lab :   Michael J Skok :   Startup Secrets :       Product to Company
Hi                                                                           www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Services can be a lethal weapon



                                                    “One of the most controversial subjects I
                                                    hear raised between Entrepreneurs and
                                                    Investors is the use of Professional
                                                    Services in a product company. “




                                                                                                 116
Harvard innovation lab :   Michael J Skok :      Startup Secrets :     Product to Company
Hi                                                                           www.mjskok.com
         #innovationlab          @mjskok               #startupsecrets




     Startup Secret:
     Professional Services – 7 golden nuggets
                                               1.   Pre-sales facilitation

                                               2.   Post- sales implementation & support

                                               3.   Customer breadth of deployment & growth

                                               4.   Predictable revenue and contribution

                                               5.   Free Product Management

                                               6.   Best practices buildup

                                               7.   Upgrade acceptance, deployment




                                                                                                  117
Harvard innovation lab :    Michael J Skok :     Startup Secrets :   Product to Company
Hi                                                                           www.mjskok.com
          #innovationlab           @mjskok              #startupsecrets




     Startup Secret:
     Professional Services – 7 Deadly Sins
       Wrath           Customers get angry, thinking your product should work without
                       services
       Greed           You start gouging customers for extra revenue

        Sloth          You get lazy in fixing product issues in the product versus covering them up
                       with PS
       Pride           You become so proud of the revenue PS is adding to your top line, that
                       you forget to pay attention to your business model
        Lust           You Lust after acquiring more customers instead of partners. Ultimately
                       partners that can take services on for you are a much more scalable way
                       to grow your business.
        Envy           Envy between sales and services builds divided loyalty.

     Gluttony          You get hooked on a services model. This is a real risk that I’ve seen
                       from startups who get too used to the predictable services revenues.
                                                                                                 118
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Closing the Product - Company GAP:
     Develop, Design & Architect

     • Develop foundations
          – Value not just features
     • Design to fit
          – Product Go-To-Market Fit
                •   PVP – Primary Value Prop
                •   MVP – Min Viable Product
                •   MVS – Min Viable Sector
                •   MRP – Min Repeatable Product
     • Architect to attract
          – Business Model
                •   SLIPPERY Products
                •   Russian Doll Pricing and Packaging
                •   Whole Product
                •   Services
                                                                                             119
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Blueprint for success:
     Develop, Design & Architect a COMPANY

     1. Develop foundations
     2. Design to fit
     3. Architect to attract




                                                                                             120
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                         www.mjskok.com
            #innovationlab          @mjskok            #startupsecrets




     What we did we NOT cover:
     materials & cases on www.mjskok.com
     •     Product Branding
     •     How to develop a compelling Value Proposition
     •     Co-creation
     •     Distribution
     •     Product lifecycle,
     •     Supportability
            and more…
            … let us know what you feel is important
            @mjskok #innovationlab #startupsecrets

                                                                                                121
4/1/13
                                           Belmont Technology Confidential
Turning Products Into Companies
J. McEleney, CEO Belmont Technology Inc.
April 2013


                                           122
Background
• Former CEO of SolidWorks (2001-2007):
 • $600M supplier of Windows 3D CAD software
 • Acquired by Dassault Systemes




                                                4/1/13
• Former CEO of CloudSwitch (2009-2012)




                                                Belmont Technology Confidential
 • Enterprise cloud software
 • Acquired by Verizon
• CEO of Belmont Technology (2012)
 • $9 M Series A (North Bridge, Commonwealth)
 • $25 M Series B (NEA)
 • Based in Cambridge                           123
CAD is the Basis of Every Product




      Belmont Technology Confidential   4/1/13
124
Does anyone know what this is?




                                 4/1/13
          1-5-0-3




                                 Belmont Technology Confidential
                                 125
Where to sell?

             11+    1      2




                                 4/1/13
                                 Belmont Technology Confidential
   # Units   6-10




             1-5           3
                    0-3    4-6
                                 126
                     # Months
Why did we care where VARs sold?

• Under-capitalized          +$

• Need profitable, quick




                                                        4/1/13
  sales                            Making Money




                                                        Belmont Technology Confidential
• New account penetration                Losing Money
  was critical to our long
  term success
                             - $




                                                        127
“1503” = Execution Philosophy
• From 1st customer touch -> product delivery:
  • Minimize friction
  • High touch, low cost




                                                        4/1/13
• Broad, stable revenue predictability




                                                        Belmont Technology Confidential
• Upgrades became an optimization challenge
  • >500K boxes to be shipped
  • 15.9 oz vs 16 oz (different UPS pricing schedule)
• “Land and Expand” sales strategy for major accounts



                                                        128
Eco-system “CATCH-22”:




                                           4/1/13
Partners only want your customers, but…
You can’t get customers without partners




                                           Belmont Technology Confidential
                                           129
So how did we break the cycle?
    Step # 1                   Step # 2                Step # 3




                                                                          4/1/13
                                                                          Belmont Technology Confidential
 Marketing Cold            Leaders Set The          Followers Will
    Fusion                      Pace                    Follow




Credibility through #’s   Get one partner, make   The others (including
                             them successful        leaders will join)

                                                                          130
Meet your enemy:




                                              4/1/13
                                              Belmont Technology Confidential
    1. Events force action
                                              131
    2. The perfect is the enemy of the good
What you think vs. What you know




                                    4/1/13
                                    Belmont Technology Confidential
                                    132
    Important      MORE Important
Subscription: What price to charge?
 • Situation:
   • Competitors charged 18%
   • Wanted VAR’s to provide end user support




                                                                       4/1/13
   • SolidWorks always wanted to take calls->help customers get into
     production




                                                                       Belmont Technology Confidential
 • Action:
   • Start with the VAR:
       • How many customers could a support person handle?
       • How much would they cost?
       • What % margin does VAR expect?
   • How do we make sure they call VAR first?
   • Statistical Process Control
                                                                       133
 • Today this generates $300M (all of the profit of the company)
Some Other Things I have Learned:
•   It’s easy to start a company, it’s hard to build a business
•   Events force actions
•   The perfect is the enemy of the good
•




                                                                  4/1/13
    Hiring is the most important thing we do
    • It should be part of your culture
    • You are going to make mistakes, fire quickly




                                                                  Belmont Technology Confidential
• Sales people:
    • Look for the coin slot
    • Look for people who want recognition
• Your job as the CEO: create the culture
    • Hand written notes – go a lot further than you think
    • Celebrate victories, anniversaries…
    • As a leader NEVER take credit, give it to the team
        • You will get enough, don’t worry
        • If you’re doing your job, they did the work             134
• Have Fun – it’s the journey NOT just the outcome!
Harvard innovation lab :   Michael J Skok :   Startup Secrets :   Product to Company
Hi                                                                      www.mjskok.com
         #innovationlab          @mjskok            #startupsecrets




     Thank you!
     • Gregg
       Favalora, Principal, Optics for
       Hire
         – Founder Actuality Systems
         – @gfavalora


     • John McEleney, CEO Belmont
       Systems
         – Previously CEO Solidworks
         – @johnmceleney                                                                     135
Harvard innovation lab :       Michael J Skok :           Startup Secrets :   Product to Company
 Hi
Hi    Harvard innovation lab
         #innovationlab              @mjskok                     #startupsecrets    www.mjskok.com




                                     Thank you !

                           START UP
                           SECRETS
                             An insider’s guide to unfair competitive advantage




                           Turning Products into Companies
                               by Design & Architecture



                                           MICHAEL J SKOK
                                         North Bridge Venture Partners

                                          twitter: @mjskok mjskok.com
                                                                                                         136
Tweet your takeaways from
   tonight’s workshop!

   @innovationlab

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Turning Products into Companies

  • 1. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi Hi Harvard innovation lab #innovationlab @mjskok #startupsecrets www.mjskok.com START UP SECRETS An insider’s guide to unfair competitive advantage Turning Products into Companies by Design & Architecture MICHAEL J SKOK North Bridge Venture Partners twitter: @mjskok mjskok.com 1
  • 2. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Welcome • Gregg Favalora, Principal, Optics for Hire – Founder Actuality Systems – @gfavalora • John McEleney, CEO Belmont Systems – Previously CEO Solidworks – @johnmceleney 2
  • 3. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secrets - Series • Company Formation – Culture – Hiring • Value Proposition • Go-To-Market Strategy – Strategic (Brand, Positioning, Segmentation etc.) – Tactical (Driving your Marketing and Sales Funnel) • Business Model • Turning Products into Companies • Perfect Pitch • Raising Funding 3
  • 4. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Feature, Product, Company? • Which do you have? • How will you get where you want to go? 4
  • 5. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Feature, Product, Company? Messaging Photo Sharing Check-In Directory 5
  • 6. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Feature -> Product is easier… Messaging Photo Sharing Check-In Directory 6
  • 7. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets It’s just a big iPod… 7
  • 8. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The problem… Even if we have a product It takes several years to build a company Markets change and Shift happens! We have a GAP… 8
  • 9. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The Product - Company GAP GAP 9
  • 10. Inventing and almost commercializing 3-D displays: When “tech looking for a market” goes from awesome, to painful, to a patent sale 12 years later April 2013 Gregg Favalora Principal, Optics for Hire * Founder, Actuality Systems (1997 – 2009) gregg@opticsforhire.com Client Confidential
  • 12. Gregg Favalora, re: Actuality Systems Phase 1: $1.5M, Proof-of-concept 1997-2001 • 100 million pixel display • undocumented sole-sourced component (DLP) • only 6 people Client Confidential
  • 13. Gregg Favalora, re: Actuality Systems Phase 1: $1.5M, Proof-of-concept Phase 2: $8M, Look for Market 1997-2001 2002 – 2006 • 100 million pixel display • CEO #3 • undocumented sole-sourced • Started selling prototypes component (DLP) • For “whole product” added an API for • only 6 people standard 3D graphics (OpenGL) • Sell products not components • Failed to identify segment with sufficient ROI for a $100k product Client Confidential
  • 14. Gregg Favalora, re: Actuality Systems Phase 1: $1.5M, Proof-of-concept Phase 2: $8M, Look for Market 1997-2001 2002 – 2006 • 100 million pixel display • CEO #3 • undocumented sole-sourced • Started selling prototypes component (DLP) • For “whole product” added an API for • only 6 people standard 3D graphics (OpenGL) • Sell products not components • Failed to identify segment with sufficient ROI for a $100k product Phase 3: $2M, Pivot out of HW 2007 – 2009 • CEO #4 • Good clinical studies, but no VC interest. PIVOT: become a medical software company for prostate cancer • Attend procedures in OR, understand reimbursement, hire VP Clinical, study successful competitors... * recession * Client Confidential
  • 15. Gregg Favalora, re: Actuality Systems Phase 1: $1.5M, Proof-of-concept Phase 2: $8M, Look for Market 1997-2001 2002 – 2006 • 100 million pixel display • CEO #3 • undocumented sole-sourced • Started selling prototypes component (DLP) • For “whole product” added an API for • only 6 people standard 3D graphics (OpenGL) • Sell products not components • Failed to identify segment with sufficient ROI for a $100k product Phase 4: Wind down, asset “sale” Phase 3: $2M, Pivot out of HW 2009 2007 – 2009 • ~70 shareholders (!) approve sale to • CEO #4 [yes, difficult business!] my new employer, OFH • Good clinical studies, but no VC • Patent broker, 150 prospects, sale in interest. PIVOT: became a medical 2010, gave some $ back to investors software company for prostate cancer • Attend procedures in OR, understand INTRIGUED? Find the whole story on reimbursement, hire VP Clinical, study Michael’s website – www.mjskok.com successful competitors... * recession * Client Confidential
  • 16. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The Product - Company GAP GAP 16
  • 17. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The Product - Company GAP Go-To-Market Business Model Execution 17
  • 18. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The Product - Company GAP Solidworks Develop Design Architect 18
  • 19. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Your product… 19
  • 20. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets It’s all about the product right? 20
  • 21. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Your expenses will flip • From all R&D, engineering … Development STARTUP Sales & Marketing 21
  • 22. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Your expenses will flip • From all R&D, engineering … to prove market acceptance, gain repeatability Development Market Sales & Acceptance Marketing 22
  • 23. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Your expenses will flip • From all R&D, engineering … to prove market acceptance, • Then repeat & scale using Sales and Marketing Sales & Marketing SCALE Development 23
  • 24. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Your expenses will flip – Apple… APPLE 2012 2011 2010 R&D $3,381 $2,429 $1,782 % of net sales 2% 2% 3% SG&A $10,040 $7,599 $5,517 % of net sales 6% 7% 8% SG&A = 3x R&D SG&A SCALE Development 24
  • 25. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Target Business Model - Demandware 2010 Q4 2010 2011 Q4 2011 Target Revenue 100% 100% 100% 100% 100% Cost of Revenue 40% 36% 35% 28% 30% Gross Margin 60% 64% 65% 72% 70% R&D 17% 14% 20% 15% 12% Sales and Marketing 30% 27% 35% 30% 25% Sales & Marketing = 2x G&A 11% 9% 11% 11% Development 8% Operating Income 3% 15% (1)% 16% 25% (Loss) 25
  • 26. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Your expenses will flip • From all R&D, engineering … to prove market acceptance, • Then repeat & scale with SG&A SG&A= 2-3x (!) Development Sales & Marketing SCALE Development 26
  • 27. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets What if… You thought like an Architect and planned for this upfront? LET’S DO IT! 27
  • 28. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Closing the Product - Company GAP: Develop, Design & Architect • Develop foundations – Validated Value not just features • Design to fit – Product Go-To-Market Fit • PVP – Primary Value Prop • MVP – Min Viable Product • MVS – Min Viable Sector • MRP – Min Repeatable Product • Architect to attract – Business Model • SLIPPERY Products • Russian Doll Pricing and Packaging • Whole Product • Services 28
  • 29. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Develop foundations Validated Value not just features 29
  • 30. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Developing value • Develop less – Focus on your CORE, partner for whole product • Develop faster – Crowd source • Develop cheaper – Offshore (carefully!) • Develop smarter – Co create… 30
  • 31. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Co-creating Value • Build on yourself – Eat your own cooking – Be your own customer • Be Open and Extensible (eg Software APIs) – Be Modular – Enable external multipliers to your value • Use Open Source – Leverage through community – Make the customer the product manager • Scratching their own itch 31
  • 32. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets 1,000 people contributed to Drupal 7 32
  • 33. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Value… • BEFORE you build even a feature, let alone a product – What problem are you solving? – How significant is it? 33
  • 34. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets PRIOR to MVP • Check, recheck and triple check your Value Prop – If you’re not solving a valuable problem… – YOU’RE NOT SOLVING A VALUABLE PROBLEM ! – And unsurprisingly you won’t build any value  34
  • 35. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Qualitative Validation Before After Vitamin vs. Penicillin Acute Pain Absolute Joy   35
  • 36. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Agile Validation • Tools – 3D printing See session by Abby Fichtner – Paper prototypes – Web landing pages – Online surveys – In product A/B testing – Kickstarter – Prepay customers (my favorite) – Funding – etc 36
  • 37. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Value Proposition… • See Building a Compelling Value Proposition http://www.mjskok.com/resources/value-proposition 37
  • 38. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Gain/Pain Validation Pain Inertia, RISK Gain >10 38
  • 39. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Start with a Primary Value Prop! (PVP) • Focus on a PRIMARY value prop for a single audience • Multi faceted are harder – Chicken and Egg problems – Serving too many masters 39
  • 40. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Value Prop: Recap & Intersection – 3D Solution • Discontinuous • Defensible • Disruptive Unique – 4U Need • Unworkable • Unavoidable • Urgent For targeting & • Underserved market Segmentation 40
  • 41. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Design to fit: Product Go-To-Market fit MVP and introducting MVS, MRP 41
  • 42. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The Product Market Fit Product Market Fit 42
  • 43. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The Product Market Fit MV Market P 43
  • 44. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Adding to Lean Startup thinking… Minimum Viable Product (MVP) MV P 44
  • 45. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The Product Market Fit Problem Market here? here? here? MVP ++ here? Fit ? stretch ? here? MV 45
  • 46. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The Product Market Fit Solution Market not here not here not here not here Fit MV 46 P
  • 47. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Adding to Lean Startup thinking… Minimum Viable Product (MVP) + Minimum Viable Segment (MVS) Repeat? MV MV P S 47
  • 48. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Adding to Lean Startup thinking… Minimum Viable Product (MVP) + Minimum Viable Segment (MVS) Repeat for … MV MV = same NEEDS P S 48
  • 49. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Adding to Lean Startup thinking… Minimum Viable Product (MVP) + Minimum Viable Segment (MVS) = Minimum Repeatable Product (MRP) Repeatable  MV MR MR MV = same NEEDS P P P S 49
  • 50. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Adding to Lean Startup thinking… Minimum Viable Product (MVP) + Minimum Viable Segment (MVS) = Minimum Repeatable Product (MRP) Repeatable, Referencable  MV MR MR MV = same NEEDS P P P S Smaller target to reference lead, dominate 50
  • 51. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Minimum Viable Segment… Segment according to the same NEEDS MV MR MR MV = same NEEDS P P P S  Maintains MVProduct footprint • Same functionality needed by all customers  People reference according to the same NEEDS • Customers can compare solutions  Potential for leadership, domination • At least initial Beachhead 51
  • 52. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Targeting, Segmentation + Blatant Critical need if possible: Mobile Professionals vs. Office Worker Field Workers vs. White Collar Services vs. Sales Medical Equipment vs. Office Equipment Hospitals vs. Medical Clinics Critical Care vs. Diagnostics 52
  • 53. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets No longer just Product Market Fit • It’s about Product Go-To-Market Fit – Narrow your target – Segment it by need – Focus your product • Vital for – Positioning, Messaging, Communication – Packaging and Pricing – Channels & Distribution, Partner Alignment • Enables – Reference selling, network effects, virality – Overall Business alignment 53
  • 54. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets NUMBER ONE Startup Secret Don’t be afraid to FOCUS! • Narrow as possible to start! – Think small targets to dominate • Which would you rather… – Expand on success? – Contract on failure? • Balance Vision vs. Execution #1 – See post on mjskok.com 54
  • 55. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Roadmap: Vision -> Execution Vision Demo Team ROI Executio s n Technology Breakthrough ? 55
  • 56. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Roadmap: Vision -> Execution Vision Demo Team ROI Executio s n Feature Product Solution Market Company + usability + partners + customers, + segments + product line + services references + beachheads + scalability + whole product (+ product RASS) + repeatability + profitability 56
  • 57. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Roadmap: Vision -> Execution (more likely parallel than literal) Vision Demo Team ROI Executio s n Feature Product Solution Market Company + usability + partners + customers, + segments + product line + services references + beachheads + scalability + whole product (+ product RASS) + repeatability + profitability 57
  • 58. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Roadmap: Vision -> Execution Always validate from Customer viewpoint eg NPS Vision Demo Team ROI Executio s n Feature Product Solution Market Company + usability + partners + customers, + segments + product line + services references + beachheads + scalability + whole product (+ product RASS) + repeatability + profitability Retention, Upsell 58
  • 59. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Closing the Product - Company GAP: Develop, Design & Architect • Develop foundations – Validated Value not just features • Design to fit – Product Go-To-Market Fit • PVP – Primary Value Prop • MVP – Min Viable Product • MVS – Min Viable Sector • MRP – Min Repeatable Product • Architect to attract – Business Model • SLIPPERY Products • Russian Doll Pricing and Packaging • Whole Product • Services 59
  • 60. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Architecting to Attract SLIPPERY Products 60
  • 61. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Gain/Pain ratio • Revenue • Inertia • Find (See) • Cost savings • Switching costs? • Try • Time • Default = do nothing • Buy • People • Alternatives? • Implement • Competitive advantage • Good enough = • Deploy • Reputation good enough! • Own – eg TCO • Etc.. • RISK on a startup Pain Inertia, RISK Gain >10 61
  • 62. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Gain/Pain ratio • Revenue • Inertia • Find (See) • Cost savings • Switching costs? • Try • Time • Default = do nothing • Buy • People • Alternatives? • Implement • Competitive advantage • Good enough = • Deploy • Reputation good enough! • Own – eg TCO • Etc.. • RISK on a startup Pain Inertia, Product RISK Lifecycle Gain >10 62
  • 63. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Get To Market – product facilitation What if you could literally slip into the lead? 63
  • 64. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Friction Free, SLIPPERY products • Simple • Low to no initial cost • Installs easily • Proves value quickly • Plays well with others • Easy to use • ROI is obvious • Your customers can’t live without it – it’s stickY 64
  • 65. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Simple 65
  • 66. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Simple Complexity Simplicity FIRST PRINCIPLES Advantage Disadvantage 66
  • 67. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Simple Advantage = Innovation / Complexity Complexity # Simplicity Advantage = Innovation * Simplicity Advantage # Disadvantage Disadvantage = Innovation * Complexity 67
  • 68. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Even Simpler = Less is More! Microsoft Apple 68
  • 69. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Example Knowledge Management vs. Note Taking 69
  • 70. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Simple • Simplify to your C.O.R.E. value – Create a whole product with partnerships, open source etc • See http://www.mjskok.com/resource/startup-secrets-game-changing- business-models Capabilities Of C.O.R.E. Focus on it! Really Value Exceptional Value 70
  • 71. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Low to no initial cost • Potential for – Frictionless trials – Lower initial CARC – Self identifying Freemium prospects • “Freeconomics” http://www.wired.com/techbiz/it/magazine/16-03/ff_free 71
  • 72. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Low to no initial cost • Potential for – Frictionless trials – Lower initial CARC – Self identifying Freemium prospects • Free-fall, free-fail ? – It’s worth what people are paying for it = nothing = no proof of value – And perceived value can also be zero – Ultimately have to upsell 72
  • 73. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Low to no initial cost – Value – Network – Monetization Design for VIRAL if possible 73
  • 74. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Installs easily, integrates well • Slippery not Trip-up-ery! 74
  • 75. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Installs easily, integrates well • Reducing the Pain for customers to try, adopt, deploy Pain Inertia, RISK Gain >10 75
  • 76. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Installs easily, integrates well • Integrates well: – “Embrace & Extend” Open & Extensible… http://blog.programmableweb.com/2012/11/26/8000-apis-rise-of-the-enterprise/ 76
  • 77. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Installs easily, integrates well • Integrates well – “Embrace & Extend” • Open & Extensible… • Assume http://blog.programmableweb.com/2012/11/26/8000-apis-rise-of-the-enterprise/ – Change = risky, painful, time consuming & costly • Incumbents far and wide – Applications – Operating environments – Business processes – Human skills 77
  • 78. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Products that integrate, play well with others… • Encourage others to play with them… ® LINK Technology Partners LINK program 78
  • 79. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Proves value quickly • Consumer – Instant gratification • Enterprise, – Rapid payback • ≤3 months is great • >12 months is bad 79
  • 80. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Self proving value • For example – If your product is about improving a process… • Provide proof as part of the product! – Baseline current before the product usage – Provide key metrics, visibility into progress – Integrate analytics, dashboards – Clearly surface reports that prove the value 80
  • 81. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Package and progressively disclose value VS. 81
  • 82. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Package and progressively disclose value Example: Acquia, Drupal Gardens 82
  • 83. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Package and progressively disclose value Example: Acquia, Drupal Gardens – Results... 83
  • 84. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Easy to use and apply • “OOBE!” – Out Of the Box Experience – Delight & entrance users – E.G. Templates 84
  • 85. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Easy to use and apply • Example Salesforce.com vs SIEBEL VS. 85
  • 86. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets ROI is Obvious • Quantifiable – Increase revenue – Reduce time, resources, costs • Or – Reduce risk – Drives competitive advantage (ties to fast payback) 86
  • 87. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets ROI is Obvious (Supported by Self Proving Value) • Example: Unidesk 87
  • 88. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets StickY • Your customers can’t live without it! • Fulfills a real need • Leaves customers wanting more ! 88
  • 89. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Friction Free, SLIPPERY products • Simple • Low to no initial cost • Installs easily • Proves value quickly • Plays well with others • Easy to use • ROI is obvious • Your customers can’t live without it – it’s stickY 89
  • 90. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Friction Free, SLIPPERY products • Simple • Low to no initial cost Gain • Installs easily Pain • Proves value quickly • Plays well with others Think of how this improves • Easy to use the Gain/Pain Ratio in our Value Proposition • ROI is obvious Workshop • Your customers can’t live without it – it’s stickY 90
  • 91. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret… Disruptive innovation Yet.. NON disruptive adoption 91
  • 92. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret… high Disruptive innovation = GAIN Yet.. low NON disruptive adoption = PAIN 92
  • 93. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Example - Apperian • Increase revenue by 40% at counters • Saved $2.5M+ in direct IT costs • Roll out 17,000 iPads • Deliver worldwide no IT touch required 93
  • 94. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Example - Apperian • Increase revenue by 40% at counters PAIN • Saved $2.5M+ in direct IT costs • Roll out 17,000 iPads GAIN • Deliver worldwide no IT touch required 94
  • 95. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Architecting to Attract Russian Doll Packaging & Pricing 95
  • 96. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Build a Russian Doll! • Multi purpose strategy – Packaging – Pricing – Distribution – And more … 96
  • 97. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Incent Free 97
  • 98. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Freemium … Limited Free 98
  • 99. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets OEM Solution… Personal Limited Free 99
  • 100. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Premium … Workgroup Personal Limited Free 100
  • 101. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Sales enabler … Corporate Workgroup Personal Limited Free 101
  • 102. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Adoption … Enterprise Corporate Workgroup Personal Limited Free 102
  • 103. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Russian Doll Packaging enables: “Addiction before Adoption” Gives you, your partners & your customers: • Digestible starting point • Upsell Options • Channel Flexibility … and more 103
  • 104. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Russian Doll Packaging enables: “Addiction before Adoption” Acquia example = increasing LTV “Land & Expand” Upsell LTV On- / Cross $400 board Sell $300 $200 Acquire $100 $0 104
  • 105. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Architecting to Attract WHOLE product 105
  • 106. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Whole Product – Reinventing the wheel 106
  • 107. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Example – MP3 Rip... 107
  • 108. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Whole product… MP3 + Player (Parallel port, ~ 8 songs) 108
  • 109. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Whole product ? MP3 + The iPod “1000 songs in your pocket” 109
  • 110. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Whole product MP3 + The iPod “1000 songs in your pocket” + Firewire + iTunes + Legal Music = WHOLE PRODUCT ! 110
  • 111. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets The ideal whole product • Is a win / win with a partner • Where the partner needs you • And can take you to market 111
  • 112. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Strategic Partnership EG: “Whole Product” Strategic Partnership Multipliers: Levers: • Increase revenue • Reduce time to market through fuller Services • Reduced dev costs solution Multipliers Application s Lever • Increase reach CORE Database through their sales Storage force, channel etc. • Credibility Integrate your CORE into their technology stack 112
  • 113. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets What makes a partner strategic? • Symbiotic multipliers & levers (win-win) + Product + Distribution + other • 1+1 > 2 in joint market leverage – Ousting competitors, driving share • Can create potential exit 113
  • 114. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets An ideal ideal (win-win) Strategic Partner Example What You Get What They Get • Complete your • Competitive advantage “WHOLE Product” • Increased ARPU - Increase Value (LCV) • Faster Time to Market • Channels to reach YOUR target customer - Reduce Selling Cost (CARC) • Credibility 114
  • 115. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Architecting to Attract Services 115
  • 116. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Services can be a lethal weapon “One of the most controversial subjects I hear raised between Entrepreneurs and Investors is the use of Professional Services in a product company. “ 116
  • 117. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Professional Services – 7 golden nuggets 1. Pre-sales facilitation 2. Post- sales implementation & support 3. Customer breadth of deployment & growth 4. Predictable revenue and contribution 5. Free Product Management 6. Best practices buildup 7. Upgrade acceptance, deployment 117
  • 118. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Startup Secret: Professional Services – 7 Deadly Sins Wrath Customers get angry, thinking your product should work without services Greed You start gouging customers for extra revenue Sloth You get lazy in fixing product issues in the product versus covering them up with PS Pride You become so proud of the revenue PS is adding to your top line, that you forget to pay attention to your business model Lust You Lust after acquiring more customers instead of partners. Ultimately partners that can take services on for you are a much more scalable way to grow your business. Envy Envy between sales and services builds divided loyalty. Gluttony You get hooked on a services model. This is a real risk that I’ve seen from startups who get too used to the predictable services revenues. 118
  • 119. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Closing the Product - Company GAP: Develop, Design & Architect • Develop foundations – Value not just features • Design to fit – Product Go-To-Market Fit • PVP – Primary Value Prop • MVP – Min Viable Product • MVS – Min Viable Sector • MRP – Min Repeatable Product • Architect to attract – Business Model • SLIPPERY Products • Russian Doll Pricing and Packaging • Whole Product • Services 119
  • 120. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Blueprint for success: Develop, Design & Architect a COMPANY 1. Develop foundations 2. Design to fit 3. Architect to attract 120
  • 121. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets What we did we NOT cover: materials & cases on www.mjskok.com • Product Branding • How to develop a compelling Value Proposition • Co-creation • Distribution • Product lifecycle, • Supportability and more… … let us know what you feel is important @mjskok #innovationlab #startupsecrets 121
  • 122. 4/1/13 Belmont Technology Confidential Turning Products Into Companies J. McEleney, CEO Belmont Technology Inc. April 2013 122
  • 123. Background • Former CEO of SolidWorks (2001-2007): • $600M supplier of Windows 3D CAD software • Acquired by Dassault Systemes 4/1/13 • Former CEO of CloudSwitch (2009-2012) Belmont Technology Confidential • Enterprise cloud software • Acquired by Verizon • CEO of Belmont Technology (2012) • $9 M Series A (North Bridge, Commonwealth) • $25 M Series B (NEA) • Based in Cambridge 123
  • 124. CAD is the Basis of Every Product Belmont Technology Confidential 4/1/13 124
  • 125. Does anyone know what this is? 4/1/13 1-5-0-3 Belmont Technology Confidential 125
  • 126. Where to sell? 11+ 1 2 4/1/13 Belmont Technology Confidential # Units 6-10 1-5 3 0-3 4-6 126 # Months
  • 127. Why did we care where VARs sold? • Under-capitalized +$ • Need profitable, quick 4/1/13 sales Making Money Belmont Technology Confidential • New account penetration Losing Money was critical to our long term success - $ 127
  • 128. “1503” = Execution Philosophy • From 1st customer touch -> product delivery: • Minimize friction • High touch, low cost 4/1/13 • Broad, stable revenue predictability Belmont Technology Confidential • Upgrades became an optimization challenge • >500K boxes to be shipped • 15.9 oz vs 16 oz (different UPS pricing schedule) • “Land and Expand” sales strategy for major accounts 128
  • 129. Eco-system “CATCH-22”: 4/1/13 Partners only want your customers, but… You can’t get customers without partners Belmont Technology Confidential 129
  • 130. So how did we break the cycle? Step # 1 Step # 2 Step # 3 4/1/13 Belmont Technology Confidential Marketing Cold Leaders Set The Followers Will Fusion Pace Follow Credibility through #’s Get one partner, make The others (including them successful leaders will join) 130
  • 131. Meet your enemy: 4/1/13 Belmont Technology Confidential 1. Events force action 131 2. The perfect is the enemy of the good
  • 132. What you think vs. What you know 4/1/13 Belmont Technology Confidential 132 Important MORE Important
  • 133. Subscription: What price to charge? • Situation: • Competitors charged 18% • Wanted VAR’s to provide end user support 4/1/13 • SolidWorks always wanted to take calls->help customers get into production Belmont Technology Confidential • Action: • Start with the VAR: • How many customers could a support person handle? • How much would they cost? • What % margin does VAR expect? • How do we make sure they call VAR first? • Statistical Process Control 133 • Today this generates $300M (all of the profit of the company)
  • 134. Some Other Things I have Learned: • It’s easy to start a company, it’s hard to build a business • Events force actions • The perfect is the enemy of the good • 4/1/13 Hiring is the most important thing we do • It should be part of your culture • You are going to make mistakes, fire quickly Belmont Technology Confidential • Sales people: • Look for the coin slot • Look for people who want recognition • Your job as the CEO: create the culture • Hand written notes – go a lot further than you think • Celebrate victories, anniversaries… • As a leader NEVER take credit, give it to the team • You will get enough, don’t worry • If you’re doing your job, they did the work 134 • Have Fun – it’s the journey NOT just the outcome!
  • 135. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi www.mjskok.com #innovationlab @mjskok #startupsecrets Thank you! • Gregg Favalora, Principal, Optics for Hire – Founder Actuality Systems – @gfavalora • John McEleney, CEO Belmont Systems – Previously CEO Solidworks – @johnmceleney 135
  • 136. Harvard innovation lab : Michael J Skok : Startup Secrets : Product to Company Hi Hi Harvard innovation lab #innovationlab @mjskok #startupsecrets www.mjskok.com Thank you ! START UP SECRETS An insider’s guide to unfair competitive advantage Turning Products into Companies by Design & Architecture MICHAEL J SKOK North Bridge Venture Partners twitter: @mjskok mjskok.com 136
  • 137. Tweet your takeaways from tonight’s workshop! @innovationlab

Editor's Notes

  1. Intelligent line art onlyText in box resizable
  2. Messaging goes with twitterEtc.Left side as text, right side as logos
  3. Messaging goes with twitterEtc.Left side as text, right side as logos
  4. Designed it inReduced frictionLower CARCAccelerate adoption to extend LCVEnabled self service Reducing costs
  5. Beware of:Single outliers customers like Fidelity in Finserv in B2BOr in Consumer, of assuming you know the consumer – are you really representative?List resources such as- usertesting.com
  6. 5th U - Unique
  7. Product shrinks
  8. Product shrinks
  9. a set of actual or potential customers for a given set of products or services who have a common set of needs or wants, and who reference each other when making a buying decision.Moore, Geoffrey A. (2009-03-17). Crossing the Chasm
  10. Alwaysvalidat from customer viewpoint- NPS
  11. Alwaysvalidat from customer viewpoint- NPS
  12. By Chris Anderson 02.25.08
  13. By Chris Anderson 02.25.08
  14. “NPG!”
  15. Fast path to value
  16. Wheel in a build. Spare tire. Warranty.
  17. http://www.theregister.co.uk/2008/03/10/ft_first_mp3_player/Saehan's MPMan F10: held up to eight songs
  18. http://www.theregister.co.uk/2008/03/10/ft_first_mp3_player/Saehan's MPMan F10: held up to eight songs
  19. http://www.theregister.co.uk/2008/03/10/ft_first_mp3_player/Saehan's MPMan F10: held up to eight songs
  20. http://www.theregister.co.uk/2008/03/10/ft_first_mp3_player/Saehan's MPMan F10: held up to eight songs
  21. But it has to be win/winOEM, relies on upsell
  22. Could you find a larger strategic partner who needed you to complete their “whole product” AND that had channels to reach your target customers AND that multiplied your Go-To-Market value and effectiveness?