I was talking with an entrepreneur the other day about her startup. The upshot of the conversation was that the product that her company has built truly rocks in terms of both functionality and ease of use, prospects completely validate the approach as the "right way" and definitely "the future" of the space. And no prospect has shot them down in meetings.
You can probably guess where I am heading. Towards a potentially fatal "BUT." The but in this case is that customers are not buying with any measure of predictability to the point that even forecasting opportunities is difficult.
Such is the paradox for many a startup. Great product, clear strategy, warm fuzzies in meetings, but no path to predictable sales.
In such instances, I advise entrepreneurs to distinguish between strategic and win-able deals. Strategic deals are customer wins that take advantage of the proprietary differentiators of your products, those that have a likely prospect of embracing your long term product road map, marquee customers whose embrace validates your existence, customers purchasing your products or services under terms that validate your business model and/or those that integrate your offering with other components critical to your target customer's value chain.
In a nutshell, strategic wins are those that you pictured yourself winning when you came up with the great startup idea on the back of the napkin. Put another way, strategic wins map directly to the "3.0 stage" company you envision when your products are mature, you have lots of customers and can leverage all of the niceties that industry power and influence have to offer.
In the grand scheme of things, however, if strategic deals are a reflection of your reason for being, win-able deals are the oxygen, and we all know what happens to living entities without oxygen. They die.
Hence, a good sanity check on your value proposition is to (temporarily) subordinate pursuing strategy at all costs to focusing on win-able deals when you find yourself struggling to define a path to predictable revenues.
This approach has some obvious benefits. One, it discerns whether anyone at any price will buy your product in its current form, and failing that, what form at what price people will buy. Theory and conviction are great but sometimes there is no substitute to putting the "dog bowl" out there and seeing if the "dogs will eat the dog food."
Two, such an approach can be an effective proxy to locking in on strategic customers that happen to be win-able as well. For example, at an earlier startup of mine called Rapid Logic, we had built a device management tool kit where the strategic customer was one with lots of device platforms (e.g., hubs, routers and DSL gateways) needing to be managed by various flavors of management (e.g., SNMP, Web browser and command line) and with highly configurable devices where management was a core differentiator for the vendor.
Unfortunately, those customers were not ready to buy, the approach was too much of a seed change for them, and this type of positioning forced them to treat third party management providers as a strategic partners versus as a commodity component supplier, as they were used to.
In the end, with not a lot of dollars in the bank to provide necessary oxygen, we focused on any deal that we could win at whatever price we could get it at, and found that packet switch vendors, while not strategic, were indeed win-able. This lead us to a sub-segment strategy that carried us increasingly to more strategic deals, market leadership and a $67M acquisition by Wind River (who still uses the products as the core of their device management strategy).
Three, such an approach can serve as an effective "land and expand" strategy. Land and expand is where you so simplify your value proposition for customers (who often pay less for it as a result) that it is really easy to get a win. Once through the door and integrated, your strategy provides you a path from which to upsell either within the same group or to other groups within the company.
Finally, such and approach can reconcile the "1.0/3.0 Paradox," something that I have written about previously whereby your company is borne of its 3.0 vision, but you only initially deliver a 1.0 product, and customers buy based on their perceived 1.0 needs.
Focusing on win-able deals in this instance may be another way of acknowledging that your product is not all the way to the complete product solution that your target customer needs to embrace your offering as strategic. The good news is that 1.0 is usually good enough to get to the customer's 2.0 requirements and by then, you are legacy, securing the vaunted 3.0 lifecycle positioning.
To be clear, focusing on win-able in the scenarios presented is not paradox free. It can distract your focus, it can lead you to one-offs, and customers, once trained to buy your product a certain way, are hard dogs to teach new tricks.
That said, the approach is the ultimate "show me" indicator for entrepreneurs, investors and the like, and worth considering in such instances.
