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August 2023

Get Your Positioning Right


One of the topics that comes up a lot in startup companies is around positioning. As in, “we need to hire a marketing consultant / guru who can help position our product.”

Positioning is super important, but it’s not something that can be done after the fact. You can’t build a boat and position it as a car. It works best if you think about how you want to position your product (and your company) before you build it.

While there is some art to all of this, at a minimum you should answer the questions:

  • Who is the product for?
  • What problem does it solve?
  • What are the competing options customers have?
  • How does your product solve the problem better than any others?

There is a huge discipline in modern product management around “jobs to be done” which can help you build a good perspective. If someone buys your product, what is the job they are hiring your product to do? This works equally well for consumer products as business products.

You must focus on how your product is the best and how you want it to evolve over time. Keep in mind “best” is in the eye of beholder. It has to matter to your buyer.

For a CIO buying a SaaS product “better” might mean:

  • Fastest implementation time
  • Easiest for users so there’s less training
  • Most secure / least risk
  • Most advanced reporting
  • Integrates with the broadest range of products

When you start, you might only be better in one way. But as you build your product strategy over many releases, it’s good to continue to concentrate your strengths.

Positioning is by no means easy. But there is a template I have used many times. This came from some “bullet-proof positioning” workshops my friend and colleague Jeff Wiss ran for dozens of different companies including MySQL, Duo Security and others.

It’s based on a deceptively simple template to factually describe a product’s key attributes. Positioning written in this style is not intended to drive a tagline or creative marketing. Rather it should be used to evaluate whether your marketing is “on message” to your target audience. 

Here’s the template:

To Target Market, XYZ Product is the Frame of Reference or Category that Point of Difference because Justification.

Here’s how Fed Ex’s early positioning would be described in the template:

To deadline-oriented business people, Federal Express is the overnight package delivery service that is the most reliable because of its sophisticated package tracking system.

The key point of positioning in this way is to identify a singular vector of differentiation and the supporting proof or feature. In the above example Fed Ex could show they were the most reliable by pointing to their sophisticated package tracking system. This was the proof behind “how” they were able to be more reliable. This positioning worked for Fed Ex because their customers wanted to make sure that if they sent something via Fed Ex it got there the next day. Otherwise, they would have just sent it by regular postal service.

Of course, the positioning template is not the slogan Fed Ex used in their print and television advertising. They used a creative embodiment of the position: “When it absolutely positively has to be there overnight.” Which resonated emotionally with the buyer.

However, if you start by writing the tagline, it’s almost impossible to get to clarity. Instead you will likely end up arguing over the adjectives for hours “wordsmithing” the tagline until everything sounds the same.

Here’s a second example template that illustrates Amazon’s early positioning:

To people that like to read, is the online bookstore that is the best place to purchase books because it has the widest selection.

The creative rendition was: The world’s largest bookstore. That’s a very focused message for people who are looking for a wide range of books they might not find at their local mall store.

Finally, here’s the positioning statement that we developed for MySQL:

For web developers and DBAs, MySQL is the world’s most popular open source database because it reduces the Total Cost of Ownership by 90%.

While the template is simple, it can take many hours to work through an exercise in positioning. Jeff and I led several such workshops when MySQL was acquired by Sun Microsystems in order to help other teams throughout the company improve their positioning. In many cases it resulted in greater clarity for the team about what their appeal was in the market place.

However, in a few cases, it became apparent that positioning alone was not going to be sufficient. I remember when we met with one of the hardware server teams. We went around and around for a long time when finally I asked what I hoped would be a question to get them enthused. I asked “How will you win?” 

After a bit of hemming and hawing it was clear that no one on the team thought that they could win. Their product line had suffered from two years of delay and was far behind the competition. Commodity Intel x86 servers were destroying the traditional price/performance ratios and no one wanted to pay Sun’s premium prices for higher levels of reliability. That said, there was still an installed base who would continue to buy Sun’s servers. So we helped them focus on that. It was a grim reminder that no amount of positioning can make up for a product that is not competitive.   

The most important thing about positioning is to focus your efforts on what makes your product uniquely valuable to your customers. When done right, positioning acts as your North Star to provide a clear direction in which to expand your company’s capabilities for many years.

How would you describe your company’s position using the template above? If someone goes to your home page is it obvious within 10 seconds who the product is for and who it’s not for? Is it clear how it’s better than the competition? Does everyone in the company understand your positioning?

Does your positioning stand out? Let me know by posting a comment below.

What Does Your Brand Stand For?

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The early days of my career were in Product Management and I eventually became a Vice President of Marketing (later title inflated to Chief Marketing Officer.) But I never worried about things like company logos, colors and taglines.

I had and still have a strong bias that in a startup, company strategy means product strategy. Brand is important, but we must not get confused about what it means.

A brand is the promise that a company makes combined with the experience customers have.  So if you ask me if I like a brand, it depends very much on my experience with the company’s products. The Apple brand, particularly in the first few decades, stood for innovation, ease of use and creativity. Over the years, Apple invested extensively in its brand advertising to support these ideas. Their advertising, in print and on television to launch the Macintosh supported this idea. It was a computer “for the rest of us” meaning, for non-technical people trying to do creative work. 

However, my perception of the Apple brand is also grounded in my experience (and probably many people’s) with their actual products. The Mac was easier to use than the contemporary DOS-based IBM-compatible personal computers in the mid 1980s. There was an elegance to the hardware and software design that elevated the product experience, especially when compared to the very utilitarian computers from IBM, Compaq and others. Apple clearly cared about it’s product design, in a way that other companies did not. Apple products were in the same league as icons of design such as the Fender Stratocaster, Bang-Olufsen stereo equipment or Ilya coffee machine. And like those products, you paid a premium for that experience.

Later, when Apple stumbled, and its products were not very competitive, the brand suffered. Windows machines eventually got to a comparable level of ease-of-use and much higher levels of performance using commodity Intel processors. In part, this was due to a virtuous cycle from the “Wintel Duopoly” of Microsoft and Intel such that every year or two CPUs got faster, memory got cheaper and more and more applications were written for Windows. During the 1990s, Apple consistently lost market share and as they did, more and more of the innovative software was written for Windows rather than the Mac. Ultimately, Apple’s market share fell to below 5%.

It’s not clear what the Apple or Macintosh brand represented during this time. As many people did, I abandoned Apple in the late 1980s and had become a regular user of Windows machines for the next twenty years. But I can tell you that the Windows brand was strong on attributes like high-performance, good value and fun. After all, the best software, including games, were running on Windows, rather than the Mac.

When Apple fell behind, it was not because there was something wrong with their logo. It was because their products no longer had a unique and valuable position in the marketplace. Apple’s brand marketing people could have shouted from the rooftops “Our products are better…” but the market response was a clear “I don’t think so!” as people rushed to wait inline to buy their copies of Windows ’95. (Yes, that actually happened!)

Astute readers will of course know that the situation didn’t stay this way. The industry is always changing and evolving and new product innovation can surface changing billion dollar markets.

When Steve Jobs returned to Apple in 1997 with the acquisition of his failing company Next, there began a steady improvement in the company that would last for several decades. Jobs focused on fixing the Apple brand. But what he really did, was he strengthened the “promise” that Apple made in creating products that were unique and valuable to people who worked in creative fields. Sure, a Windows machine might be the standard in corporate accounting, but designers, lawyers, writers all wanted something easier to use and more fun.

Jobs cut mediocre, undifferentiated products and focused his efforts on a new and colorful computer called the iMac. It was an all-in-one design that was easy to set up and get going. Over time, Jobs expanded the appeal of the Mac to software developers, engineers, data scientists and pretty much everyone.

Jobs brought out a ground-breaking easy-to-use MP3 player in 2001. In 2006 he moved Apple to Intel CPUs. In 2007 he introduced the iPhone. And in 2010, in failing health, he introduce the iPad.

Jobs re-ignited the Apple brand helping to make it one of the most valuable companies in the world. But it was not a marketing exercise, it was not about the logo, the tagline, the colors. It was about delivering products that customers could not live without.

So when you think about your company’s brand, what is the promise you are making to customers? How can you improve your products and services to better deliver on that promise? There are lots of ways to differentiate your product in the market, but your logo isn’t going to make a difference.

The Cost of Poor Performers

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It’s always tough to deal with poor performers. No one likes to manage laggards or to admit to a hiring mistake. When companies are growing at a fast rate (50% year over year or higher), managers will often focus more on recruiting new people than in managing the team they have.

So what happens?

Inevitably, as a company hires beyond its network (of known good people) there will be some number of bad hires. Maybe they bluffed their way through the interview process, or no one checked references.  Sixty or ninety days out, when someone asks the manager how new guy Fred is performing the answer is “the jury’s out.” 

This is nonsense.

If you can’t tell what impact a new employee has had in their first couple of months, it means there isn’t any and in all likelihood there won’t be much improvement down the line. Because if you hired someone who was good at their job (or ideally excellent) you would already be seeing the results immediately.

So now you have the pain of managing someone out. Put together a performance improvement plan, give them a second chance, if it makes sense and get them up or out.

Actually, it’s worse than that.

In any organization that’s growing quickly, once you get beyond about 30-50 people it’s likely there are some people who are not quite getting the job done. Everyone deserves the benefit of the doubt and feedback on how they can improve. This is especially important in an early stage company where much of the culture is implicit and not necessarily documented or understood by newcomers.

In most cases, poor performers are doing their best to just survive and put up a good front. If managers are busy, they may assume their new hires are getting things done and not even notice any problems.

But the new employee's colleagues, with whom they spend more time, are much more aware of who is getting the job done and who isn’t. They might be inclined to help a new employee come up to speed, but they have their own work to worry about. If left too long, the top performers will wonder why no one is taking action with the poor performers.

Few people like to grouse about a peer’s shortcomings. But they all see it. If you’re in an office, they will see it and hear it. In a distributed environment, it will be harder to notice, but sharp observers and hard workers will wonder why Fred is taking so long to do something that they could have handled in a few hours.

If you’ve worked with great people in a high-performance culture, your tolerance for mediocre performers, bureaucrats and talkers starts to fall. And once the number of poor performers gets to a certain level, the best people will leave. If management can’t  tell the difference between good and bad performers, why would they stay? And when you lose top performers, you lose the creativity and drive that is essential in building a great company.

You need to give clear feedback to employees when they are meeting objectives and when they are not. You can’t wait until the end of the quarter or worse, until the annual review process. Set clear expectations: here’s what you need to deliver in order to continue working here. Follow up in writing. Help them improve. But remember, as a manager, you are the coach. You have a stopwatch, you set the goal, but they must run the mile.

I have a very high expectation of employees. I want everyone to be excellent in their job, whether they are a product manager, a programmer, a sales person or an administrative assistant. So the two questions I ask are:

  • Are they excellent?
  • If not, can they become excellent?

If they can’t become excellent, I would rather cut them loose and invest in someone else with higher potential. In all the years I have helped managers with these decisions, no one has ever come back and said “I wish I’d given them more time.” Usually, it’s the opposite. They wish they’d moved faster so it was less of a drag on them and the team. The good news is, when you do make a change, everyone’s productivity goes up. And when you let someone go, treat them with respect and help them leave with their head held high. 

How do you evaluate the performance of people in your company? How often do you give feedback about what is expected and when? What happens when someone doesn’t get the job done? Do you give them a second chance? A third? A fourth? Do you wait until the end of the quarter to give feedback? Why?

The Peril of Growth At All Costs

Fire 6
I’ve had good luck working with many Venture Capital (VC) firms over several decades. For the right kind of high-growth business, they can be very helpful in providing not just the investment capital, but also opening doors to hiring executives, providing strategic guidance and financial counsel when needed. I have worked many times with Benchmark Capital, CRV, Index Ventures, Kleiner-Perkins, Matrix Partners, PointNine Capital, Redpoint Ventures and Scale Ventures. These are among the top firms out there and they have a long track record of working well with founders, CEOs and executives. There are many firms beyond this list that are equally good.

But when I speak to founders about raising venture capital I remind them in very clear terms: Venture investors do not care about them, their product, their team or their customers. In the end, VCs care about getting a return on their investment. And more often than not, the top firms are looking for home-run returns of 10x or better on their investment.

The entire thesis of venture capital is based on making dozens of investments wherein there are a couple of outsized 10x - 100x returns, a couple of smoking craters where the company shuts down or is sold cheap, and then a large number in the middle that get to some kind of a decent outcome over the long haul. VCs are in the home run business, and if your business is not growing at or close to 100% year over year and on it’s way to $100 million in revenue in a few years, it isn’t interesting to them.

There are plenty of great businesses that are simply not a fit for the high-growth model that VCs prefer. So before you go down the path of attempting to raise money from venture investors, you must be honest about your ambitions and your business’s potential in the market. How big a business can you build? How big is the market?

Much like novelist and screenwriter William Goldman said of Hollywood in the 1980s: “Nobody knows anything… Not one person in the entire motion picture field knows for a certainty what's going to work. Every time out it's a guess and, if you're lucky, an educated one.”

Venture capitalists look at hundreds of deals and invest in only a handful each year. They turn down perfectly good businesses for a variety of reasons: lack of time, conflict of interest with an existing investment, beyond their area of expertise, too capital intensive, unproven founders, unproven business model etc.

If you decide to pursue venture capital remember that this is a long-term relationship. They are buying a portion of your company for an eventual payoff that could take five to ten years. They will be your partner, advisor, mentor and owner during that time. As with a marriage, it pays to get to know them before you get hitched. If you are uneasy about the venture partner you are working with, if they rub you the wrong way, if your views on fundamental topics differ widely, think twice before you take their money.

There’s a danger in venture capital which is worth remembering. Like William Goldman’s “Nobody knows anything” comment about Hollywood, much of venture capital is about making bets where the outcome is clearly not knowable. Even the most successful VCs are wrong at least as often as they are right. There is a grave danger when investors (or founders) believe that VCs are infallible.

In late 2020 for about a year we were coming off a surge in ecommerce growth due in part to Covid, public tech stocks and private company valuations soared. It looked like the whole world would go full-on digital / remote / everything online all-the-time for the rest of eternity. Valuations for SaaS companies reached and then exceeded historic highs. Companies with ten or twenty million in revenues were valued at a billion dollars. And soon it was more than that.

If you were selling into that frothy over-valued market, good for you. There’s nothing wrong with being lucky. There were three companies where I was an advisor or board member that sold for very nice prices during that period. The founders and executives of theses companies had built something valuable and were pleased to be taken out at more than generous prices.

The side-effect of an over-valued market, is that the investors encourage a dangerous game of “growth at all costs.” This idea of “blitzscaling” has paid off for companies like Airbnb, Facebook, Google, Linkedin, Uber and the like. The idea is to grow so rapidly that you leave any potential competitor in the dust.

Unfortunately, most companies are not like Airbnb, Facebook or Google. Focusing on growth above all else means that business fundamentals (like product market fit, efficiency and profitability) get short shrift. If a manager is busy hiring the next ten programmers how much time is he or she spending on managing the last batch of hires? Growing a business at 100% or more year-over-year is stressful and often chaotic. It’s easy to get caught up in the rush of non-stop expansion and taking on new initiatives that you can overlook the need to find repeatable, efficient go-to-market patterns.

And even worse, the Silicon Valley fundraising process encourages founders to think of themselves as being in that rare 1% of companies destined for hyper-growth success, despite statistical evidence to the contrary. I recall several meetings with top silicon valley VC partners when I was at Zendesk and Duo Security where they told us “we were one of a handful of companies that mattered.” It’s hard not to let that all that flattery go to your head. After all, what founder or executive doesn’t think of themselves and their company as special?

Not surprisingly, during the boom times founders and executives ramped up their hiring, increased their marketing budgets and tried to spend their way to high growth to justify the sky-high valuations. In good times, investors are fond of “pouring gasoline on the fire” which I’m pretty sure you are never supposed to do in real life.

So when the public tech stock market swooned in mid 2022, there was a reckoning to be had. Newly minted public companies were trading 40-75% off their peak. Some companies got ahead of the issue and did layoffs. Even the Blitzscale companies like Facebook, Google and Twitter did massive layoffs impacting thousands of employees. ("Thanks for working so hard, sorry we screwed up!")

Unfortunately, many companies moved too slowly or cut too little to make a fundamental difference in their trajectory. If you’re going to do a layoff, make it count by cutting at least 15% and eliminate under-performing areas of the business. Don’t try to keep doing everything you did before with fewer people.

Many of the companies that raised money at peak valuations will have a hard time adjusting to the new reality. Valuations that were once at historic highs are now at record lows in 2023. Venture investment has fallen off a cliff, and if your company can’t get to breakeven / cash-flow positive in the next twelve months, your survival is at risk.  It’s not easy, but you’ve got to reorient the entire culture of the company that has been built on “do more, hire more, spend more” to get a level of efficiency that enables your company to continue without raising additional capital. 

Companies can easily find themselves in a no-man’s land where they don’t have enough runway to get to profitability and no-longer have the high growth rate to make them attractive to new investors. If you’re lucky you might get an inside round from your current investors. Or maybe down round, at a lower valuation. (There are worse things, believe me.) My suspicion is that as we get to the end of 2023 and into 2024 there won’t be any rounds for some of these companies.

When that happens, you’ve got to figure out how to land the plane. That might mean selling to a larger competitor, a strategic partner or to Private Equity. Any of those outcomes can be preferable to going out of business or becoming a zombie company with stagnant growth. However, few companies want to acquire a money losing operation. So you still need to figure out how to get to healthy margins, even if it’s inside a larger company.

This is where you can put your VC investors to use in helping ensure that you not only have the right product for the market, but you have a well-thought-out pitch and introductions to potential buyers to help ensure a long-term strategic fit. 

Are you concerned about your company's burn rate? Let me know what questions you have by adding a comment below. 

Finding Product-Market Fit 

The toughest thing about building a startup is to be honest with yourself about product-market fit. Product-market fit is a fancy way of saying “Does anyone care about the thing you’ve built?”

The mistake most founders make, is they spend months or even years building something before they determine whether it matters to customers. For a hobby project that scratches your itch, that’s fine. However, if your goal is to build a sustainable business, remember, the answer is always outside, in the marketplace.

When I first joined Duo Security, they were doing just over $5 million in annual recurring revenue (ARR.) The product had some traction, particularly with some small and medium-sized companies where the founders knew some of the cyber security leaders. They’d spent the last year on a project code-named Barn Owl which unfortunately didn’t land. Chester, the director of Engineering was discouraged. “I don’t want people working on stuff that doesn’t matter.”

As I talked to one of the investors, Matt Cohler from Benchmark, it was clear that the company had lost a year working on a collection of features that customers didn't need. Compounding that, the head of sales changed the pricing and packaging just 24 hours before launch. No one was happy with the outcome, which I suppose is one of the reasons the founders Dug and Jon brought me into the company.

When I met with the product marketing and product management team that reported to me, one of the first questions I asked was “How many customer visits did you do last quarter?” The answer was none.

No wonder the product hadn’t landed. I immediately set an objective for the team that they had to each do 6 or more customer visits per quarter. “Go make friends with the sales team,” I said. “They’ll be happy to bring you into customer meetings.”

I used an approach I call “active listening” with customers. It involved creating a simple 1 page set of eight to ten questions. The goal was not to tell them about all the cool new features we were working on, but instead to understand the problems they faced. To listen, without bias, to what they said was important and what was not. If we immediately went into showing slides or a demo of what we were working on, we would get a reaction and we would fail to uncover the customer’s true situation. And what customer was really going to be honest in giving their feedback to our plans? It was like showing baby pictures. No one wants to tell you that you have an ugly baby.

The questions focused on the basics:

  • What is your role in the company?
  • What went well in your last security project? What didn’t go well?
  • What surprises did you face? What took longer than expected?
  • What systems must be secured? What systems are less important?   
  • What happens when you roll out new security capabilities?
  • What’s a burden that you face that you wish you could automate?

And so on.

These are not hard questions. The goal was to get customers to open up and speak to us as they might to a colleague, or someone in a similar position over a drink. It was important that the customer spoke about their situation, not what they thought was happening at other companies or in the industry.

The goal in this process is to uncover pain. It is not to validate what you have built. In fact, it’s best if you do this exercise before you build anything. You must approach it with “beginner’s eyes” as if you know nothing about the customer and their space. Don’t make assumptions about what is difficult or painful in their world. Approach it like you are a journalist with no pre-conceived notions and no ego about being right or wrong.

Many of the customers were intrigued by this approach and sometimes they’d still want to get a briefing on what we were up to. But I made the team promise not to disclose anything. So we told the customers we would get back to them. For those who had interest, it probably increased their curiosity.

The reason this approach is so important is that when we whiteboard technical solutions in an office or over zoom, it’s easy to get caught up in the excitement of the pitch. We’re hoping the customer stops us in our tracks, says we’re geniuses, begs to get early access and calls the CFO to immediately approve budget. But that’s our dream. The only person whose view matters is the customer. What they care about is if we are solving a problem that has their attention. 

Many times, I’ve asked customers whether some important idea we’d uncovered was actually a problem for them and sometimes the answer was “yeah, not really.”  Often, they could ignore the problem, or perhaps it was a fifteen minute chore once a week. Or in some cases, they had a suboptimal solution, a manual process that worked well enough and they didn’t see much point in improving it. You might think you have a better solution, but if it’s not a problem the customer cares about, you are pushing rope, my friend.

What you want to identify are the problems where the customer gets emotionally worked up about the lack of a solution, where they lean into it, talk about the hours or weeks of effort, the drudgery, the pain. When you tap into a problem that really bothers them, you will know it. This is the difference between a “must have” and a “nice to have.” Believe me, in a tough market, you want to be selling a “must have” solution to a pressing problem.

If you are so lucky as to uncover a significant unsolved problem that is painful for a company, take note of it. Ask what would be different for the company if this was fixed. Ask who else has the problem. Find out how much it costs this person, their department, the company in lost productivity. And then… resist the urge to tell them how you’re going to fix it.

After you’ve done eight or ten such customer meetings asking the same questions, you may start to see certain patterns that emerge. I like to write notes directly onto the paper with the questions and then spread them out on my desk and take a step back. What problems are the most common? Are they shared by certain individuals or types of organizations?

You don’t need 100% consistency across all prospects to have a pain worth solving if it is representative of a type of person or business. If you’re seeing something occur in 25% of customers you spoke to that may be enough as long as you can figure out what causes someone to be in the group that has the pain. Is it related to their industry? Size of the company? The type of project they are undertaking? Tease out the common elements and then ask yourself how you can reach more people like that.

Steve Jobs quite famously said: “A lot of times, people don't know what they want until you show it to them.” I think this has resulted in an awful lot of companies going to great lengths to create products that no one wants. A better rule of thumb is to consider that customers, especially business customers, are far more expert about knowing the problems they face than any outsider could ever be.

Your job as a founder or leader is to tap into those problems, validate that what you’re building solves their problem and then, only then, show it to them. Believe me, if you really understand their problem, they are going to want to hear from you.

Have you found product-market fit in your company? What told you you were on the right track? Post a comment below.