Why Aren't Salespeople Running Software Companies?
bostinno.streetwise.co
bostinno.streetwise.co
Having done both sales (taken product to market leading position from scratch) and development, I am convinced it's easier to add sales leadership to take a sold product to market than to add developers and fix a badly built product that happens to have a good sales leader running the show. IMHO ymmv.
I disagree. "Lean startup" (I've only skimmed, not read) is all about teaching coders to sell. Correct me if I'm wrong, no code should be written unless there is market demand.
The challenge is not selling ONCE you have a solid product, it's going from NOTHING to something.
Chris
Second, did you skim over anything about the build-measure-learn loop? If so, let's say that you have an idea, build a first (completely fake) version, and get it in front of people. The next step would be to build something that works, right? If you're completely non-technical, how do you find people to take you to that step (and to do it elegantly enough that you can not only learn, but build on top of what you have learned)?
I just can't imagine how a wholly non-technical salesperson could go from validating there is a demand to actually fulfilling the demand without either finding a technical co-founder, becoming technical or else winning the freelance lottery.
And you sign your comments as if we can't see your bloody username?
I have read Lean Startup and guided the development of products based on it so let me tell what (some of) Lean Startup says:
1. Make the simplest possible thing that could validate your hypothesis (a well formed one) against the market.
2. Use real data and principled hypotheses backed by data to guide product iteration once you've established a market response to one of your MVPs.
The key part being here - MAKING the thing.
What the book doesn't say is, "sell ice to eskimos, hire outsourced coders, hope for the best".
I've worked at startups dictated by salespeople or their sales process, it was a goddamn mess.
That kind of mentality is exactly how we ended up with the dot-com bubble. For a couple years, everyone who wanted to got from nothing to something. Remind me what happened next?
Simply put: Software companies aren't all the same. Some sell to consumers (B2C), others to businesses (B2B), and others sell to both.
You won't find many B2C companies with sales people, due to the cost of sale outweighing the return from one customer. Oppositely you won't find many B2B companies without them, as cost of sale is built into the price (read up on high vs low involvement products if you need to know more). B2C's typically rely on marketers instead, as they can help spread a message across a broader prospect base, keeping the cost of sale down.
Sales is a set of activities a person does to compel someone else to sign a contract. So all those B2B startups probably do have sales people (eg people selling), just that they may be the founders or developers helping prospects with the hope of them converting to customers.
Finally, the reason salespeople aren't running software companies? Depends what you mean - no they may not be founders. But once a company is growing, and trying to grow faster - show me which company doesn't seek advice from their sales and/or marketers on how this should be achieved.
Agreed, all software companies are different. There is also a huge distinction between software-to-software sales (where the product design is more important) and software-to-outside-world sales. Most of our customers pay with CHECKS, yes, checks. They aren't software people so the design doesn't need to as good in the beginning.
Chris
To a certain extent, there is a lot in common in the software industry whether you're selling to the consumer market, the enterprise market or the smb market.
>> There is also a huge distinction between software-to-software sales (where the product design is more important) and software-to-outside-world sales.
I'm not 100% sure I understand, are you talking about consumer software (software-to-outside-world) and enterprise software (software-to-software sales)?
Because marketing can be different, agreed, but development of the product is not that different. Unless you're trying to talk about internal apps vs. products ?
>> Most of our customers pay with CHECKS, yes, checks. They aren't software people so the design doesn't need to as good in the beginning.
Not sure how someone pays for software matters, care to explain?
Sorry, but you don't seem to really understand software product development, neither from the sales side, the marketing side, nor the engineering side. Not from the post itself nor from your comments. But I guess you say that up front so "it's ok" ... ? ... I guess?
Many times sales people do better then engineers in a big company because they are better able to impress people and forge political alliances. Note that I also think that a sales person is closely related to a business person. If you've ever been to a large corporation, many times the engineering offices are some of the crappiest while the business offices are some of the nicest.
Note, that's not always engineering, but sometimes it's hard to get product management looking beyond current sales needs, and therefore it does fall on engineering to do the strategic work.
IMO, it doesn't matter who does the strategic work, sales, product management, or engineering, as long as someone is doing it.
I could get a programming job since I have a CS degree and a few years development experience... but instead I choose to work a non-programming part-time job while coding my startup. I've been coding it for 6 months without showing anyone my demo. (it's a big project)
If I get investors this summer or not... I'm committed to "my vision" for the next 3 years. Bills aren't too hard to pay if you live minimally. (e.g. I don't own a cellphone)
"We act as though comfort and luxury were the chief requirements of life. All that we need to make us happy is something to be enthusiastic about." - Albert Einstein
(I imagine that this may be perceived as an extreme stance. To that I can only say: “It is no measure of health to be well-adjusted to a profoundly sick society.” - Jiddu Krishnamurti)
There's an interesting anti-pattern I see in business time and time again...it's the company that's run as follows:
1) Start with a successful product (regardless of how it happened to become successful) and put a top-tier MBA guy in charge
2) Slowly fire or alienate all of the engineers who had anything to do with the initially successful product (too expensive!), replace them with more sales guys and/or very cheap and incompetent "maintenance engineers" so abstract engineering vs. cost numbers can show diligent stewardship of the product
2b) Stop innovating entirely
3) Squeeze the product for cash like a vampire trying to squeeze blood from a stone
4) Eventually the product momentum runs out and the sales stop coming in
Making a new product is both hard, and expensive, it's understandable that MBA types want to try and recoup that and make a multiplier on that initial investment. They're allergic to putting huge investments back in for a round 2 of innovation.
It sometimes works (see Oracle), but usually ends up with a failed company being sold off for parts.
Chrysler is a fantastic example, the First Generation 300 (2004) started out as a very popular car, selling over 110,000 copies in it's first year. A bad merger with Daimler-Benz later, Chrysler ended up in MBA-tastic Cerberus's hands in 2007. So what did they do with their almost 4 year old flagship that was selling over 120,000 copies a year? They let it sit for 2 more years. Nothing, no new models, no minor redesigns, no real updates. In 2008 sales were half, then in 2009 almost half again. It wasn't until 2011 that a new model finally came out, and it was a shockingly modest refresh after nearly 8 years and what happened? Sales almost doubled in 2012!
My point is that it's not that hard, a new front end, some cosmetic interior changes and a fancier CD player and if doubled product sales. Why didn't they do that at any time in the preceding few years? They were simply working too hard trying to squeeze blood from stone.
At the risk of being influenced by survivorship bias, Apple under Jobs is the counter argument to this. It's an example of what happens when you ruthlessly pour resources into keeping products fresh. But somehow this lesson seems to escape so many product companies (tech or other industry).
Perhaps a better non-tech example is Coca-cola. Sure it's more or less the same product, but Coke spends extraordinary amounts of money keeping their brand fresh, slight changes in bottle shape, even slighter changes to the logo and packaging, effectively putting a new front-end on their product. It's one of the most valuable brands in the world.
But you don't need to run a business like that. Sure, you can be a blood-thirsty profits vampire. Yet still make investments into product development that will allow you to have more blood to suck in the future. I'd say its a balance between profit/innovation, which Jobs became good at.
I won't give a synopsis because it is a really short article - but here (IMO) is the key sentence and take away: "...ultimately, moving numbers around can do only so much. Over the long haul, you've got to invent or improve real products and services to grow."
The author of the article references a book written by Bob Lutz called "Car Guys vs. Bean Counters: The Battle for the Soul of American Business"[2], which contains numerous examples of how replacing executives from engineering backgrounds with executives from more traditional business backgrounds failed GM as a strategy.
[1]- http://www.time.com/time/magazine/article/0,9171,2081930,00....
[2]-http://www.amazon.com/Car-Guys-vs-Bean-Counters/product-revi...
And if anyone wants to start a software company and run it from a sales or marketing perspective, they're free to do so! Nothing special prevents it.
But from my perspective, the author begins to answer his own question with the 'soft skills' musing. When people without measurable skills are in charge of things, you run a much higher risk of incompetence derailing the business. And even one or two average-competence people in leadership positions can make any organization inefficient.
Also, I think his point about quality being a secondary consideration to customers should be explored more. That point is only true when there is a high cost (be it time, money, or fear) to switching products, and thats where you see the sales based companies succeed. Software is often easy to replace, in relative terms.
Then why are you giving advice on how to run software companies?
I agree it's about balance. I'm talking about ONE SPECIFIC time. That's going from $0 in revenue to $50k, without investment.
Chris
Without a talented engineering team, a product won't be able to change or adapt to customers changing needs and opinions.
Sure you can sell a product that isn't fully developed, and outsource your engineering but in all likelihood you're going to wind up with a clusterfuck of a codebase and so much technical debt that your customers aren't ever going to see anything more than the crappy first iteration of a product.
This is all just so silly. By your logic all that is important is that you have salespeople that can sell anything, including a crap product. Is that really how you want to drive a company? Salespeople would have an easier time selling a well engineered and functioning product no?
Chris Williams here, I wrote the article :) The reason that I feel I can provide advice is because I started a software company that has been profitable every step of the way, and now have ~400k in revenue in year 1.
The fact that I did not come from the software industry was A HUGE advantage, because most of the advice given is horrible.
Chris
Real question, is 400k enough for you?
It wasn't that these companies weren't profitable - some were, some weren't. They just weren't enjoyable places to work. When you have to explain or justify things that shouldn't need explaining or justifying, it really drains morale.
Let's start from the basic questions: 1. How do you know X is more difficult than Y technically. How do you trust somebody who says X or Y? Should they sell you the idea because, ya know, you are a sales person?
2. What makes a sales person? Ability to sell a product A? Is selling A different from B? Do you specialize in A? How are you different from somebody who too can sell A? Do they need a degree to do it? Can our average car sales man do it? Yes or no, please give me your reasons..
3. Can you give me good examples of sales people running any other businesses? Businesses that, ya know, don't suck.
4. Salespeople usually do well in business where the technology is mature. Ya know, not long ago, there was this "fruit" company that was brought to its knees by a "cola" sales guy. And there is a Seattle company that is getting off rails slowly.
Benioff was a programmer too. http://en.wikipedia.org/wiki/Marc_Benioff#Career
Given the position Microsoft was in 2000, when Mr.B took charge, I don't think their position could be much worse.
1. Realize that you have the most leverage going from version 0 to 1.0. We're also best suited for software products that are not being sold to other software people.
2. Find out how to get traction without the help of any software person by using free and existing and doing things offline.
3. Have very specific goals for you market tests. Also, relay on something that is more tangible then "readers" or "users". Cash is the best kind of market research. These two posts are great about how to test markets and get pre-sales. Close your Sales Funnel and Sell a Product Before It's Ready
4. Build REAL RELATIONSHIPS within your market."
I think that you are talking more about starting a company rather than running a company.
Good engineers want to avoid working at companies, where engineering department is not on the top - on example they need to explain things, which shouldn't need explanation, or their boss see them as cost centre, not a profit centre and seeks to replace them by cheaper alternative. If you don't have good engineers, innovation of your product stales and someone comes to steal your market, no matter how awesome sales people you have.
You mention that sales people are more important in reaching phase 1.0 in B2B companies, in getting these first 1000 consumers. Let's get two hypothetical examples: - Company A, which creates bad product, but sales manage to sell it to 1000 consumers. - Company B, which creates awesome product, but their are no good sales behind, so it is gaining first customers very slowly. Then over the time first customers of company B will tell their friends that product is awesome and it will eventually reach 1000 customers and keep increasing exponentially (these new customers will bring their friends and post excellent reviews online). It is run by good engineers so they will analyse and listen to their users and keep making product better. On the other hand, company A will get terrible reputation, these 1000 customers will realize shortcomings in the product and stop using it.
Fact that you created successful company being a sales person doesn't mean that it is better to have companies run by sales people. One example doesn't make it for general rule. Do you know a company run by engineers executing the same idea to do the comparison?
You cite the fact that majority of companies fail because of lack of users instead of lack of ability to create a product. It doesn't mean that their failure wasn't caused by bad product - they could created something that worked, but wasn't good enough. This fact doesn't mean that they would succeed if they would have rock-star sales people on the board. Some ideas are just not fit for market and even placing hundreds of sales people doing the calls won't help.
My buddy just let me know that this post was picked up ~6 month late.
I'm looking forward to addressing everyone's comments.
The reason I'm qualified to talk about this is because I started a software company and have grown it to ~$400k in revenue and profitable in 18 months. Why? Largely, not listening to "startup" advice, and SELLING. It's key that this is a B2B company not selling to other software people (B2C and software-to-software sales are much different than B2B and software-to-outside-world sales)
Again, I'm my intent is not to insult the software industry, just say the most of the advice seems incomplete from my perspective.
Chris
In fact, many of the larger software companies seem to be driven primarily by sales (including, increasingly, Google).
At the smaller companies (incl. startups), it absolutely makes sense for engineering to be of primary importance. At this level, being able to constantly adjust to customers' desires is essential, and an engineering emphasis helps with that.
This also flies in the fact of the supposed arrogance of engineers. If anything, I think sales people are the more arrogant ones: they think customers just need to be sold on a product, while engineers understand iterating on feedback is key to growth.
If you need to hire a sales person, and the candidate sells himself, you're in pretty good shape. He's obviously got some of the skills - he may not be the best, but he'll be worth hiring.
If you're a non-technical person looking to hire technical people, you're fighting an uphill battle. First, technical people are currently in higher demand. Its hard to find them in the first place. Next, you have very little ability to evaluate their skills. Finally, the range of abilities in technical people is larger than in most other fields, which amplifies the problem of not being able to evaluate candidates' skills.
The answer I believe is: because this all used to be much harder, and you had to rely on your engineers to pull you through some tough moments. I'm afraid this is becoming less true over time. The pendulum is swinging back from technical implementation, back through design, and the power is returning to sales and marketing, IMO.
HOWEVER, people who can engineer marketing outcomes... those guys will keep the power.
TLDR; Hie thee thither to up-market positions ye men of valor!
Chris
Engineers can typically simply stay on-par with changing technology and in-effect be moving up market. What is changing fortunes right now is that innovation has stalled in software, and everyone is simultaneously catching up to the early innovators.
Once the market shifts to another platform/technology/methodology, we'll be kicking your ass again... by default. :).
That said, I'd love to have a gutsy sales guy in my corner as a mentor. Drop me a PM.
> !00% Agree.
Disagree 100%. No matter the "pendulum" there are different motivations from sales to marketing to engineering and there is no one answer. Anyone who says "sales is the answer" is either in a very specialized software market or is selling snake oil. Any good sales person knows this. Even average sales people know this. Bad salespeople apparently don't.
http://blogmaverick.com/2008/03/09/my-rules-for-startups/
Edit: I shouldn't have pulled that card. Apologies. I'm not helping matters. There's already way too much vitrol going on in this thread.
But the problem is that "sales as strategy" as posed by the OP is most likely short-sighted due to "sales person motivations" , i.e. sales this quarter that affect my bottom line. These types of sales tend to drive one customer's needs versus the customer base. Not always, but that's where product management and engineering can provide a valuable perspective.
And all of that depends on your targets. If 400K is big money for you, go for it. But 400k is probably only big in the context of one or two people.
Bullshit. Budget and schedule overruns are endemic to the software industry. There are plenty of companies that fail because they can't deliver on the technology they promised.