Startups are constantly asking themselves: should we focus on the quality of our product or the strength of the sales and distribution strategy?
Award-winning Vancouver-based angel investor Boris Wertz tackles this question in a new blog post.
"On one end of the spectrum, many start-ups think that great products sell themselves, while the other camp argues that it’s the channel and monetization that define a company’s success," writes Wertz. "The simple answer to the question is you need both. To be successful, a stand-alone company needs a top-notch product and a clever distribution/sales strategy. However, there are a few nuances to add to the discussion."
Here's Wertz's breakdown:
1. Startups are generally more successful when the founders are product-driven. "It’s typically much easier to add sales expertise to a product-driven organization than it is to add product focus to a sales-driven start-up," says Wertz (Full disclosure: Boris Wertz is an investor in Techvibes.). "Sales is more of an execution game, meaning a start-up can hire senior executives to shape and refine the sales and distribution strategy. On the other hand, a great product requires great leadership with the right product instincts. Those intangibles are usually much harder to add."
2. Sales-driven companies can turn into service organizations. "Sales-driven companies are often focused on maximizing short-term return on investment and this mindset can shape product decisions," the Canadian investor explains. "The natural consequence is that sales-driven companies can evolve into service companies as they are stating to build every feature that clients are asking for instead of following a long-term product vision."
3. The consumerization of IT is putting more emphasis on product. "Historically, software and products were sold to a company’s purchasing agent and CTO," notes Wertz. "The sales cycle hinged on the ability of the vendor’s sales team to make the right contacts and manage the sales process and relationships from start to finish. Today, it’s a different story. The CTO and other management no longer serve as gatekeepers for which products are used in the organization."
Wertz says that products are now introduced directly to end users and that this trend has a double impact:
- small startups that don’t have a large sales force can now sell their products in the enterprise;
- and the enhanced role of the end user in buying decisions makes the product experience all the more important. Good products that are easy to use take hold in this environment.
While the sales cycle may be changing, startups still need to focus on their sales and distribution strategy, according to him. "Products, no matter how great, usually don’t make money on their own. As a result, product-driven companies need to focus on distribution in order to succeed in the long-term," he concludes.