Why startups need to focus more on the Product and less on services.

Pitfalls of Service-Led vs Product-Focused startups

I have been on both sides of the spectrum and it has worked well for companies like Infosys, TCS which take on large service agreements with organizations and provide consulting services or develop software. I am sure you all know the differences between the product vs service company. Just to recap:

Product-based companies are driven by an idea to help different customers and are always improving the product.

Service-based company provides software products and services to anyone who asks for it for a price.

Initial phases of the product

Obviously, when a company is in startup mode, you’ll want to do anything to sign on your first client and do accommodate all their requests. It might be a custom request for a new feature or tweaking the existing functionality for their use. Saying yes to customer requests is an exciting phase of building a business. Identifying the problem area, target market and going after the clients, doing anything to sign them on.

But how long should you keep doing what the clients ask for? what if they are one-off requests? What if a feature doesn't really address the larger market need? What happens when you have signed on 10 clients and then each one of them is demanding various customizations? At what point should you shift gears and focus on the product?

In my past experience at a “startup”, 6 years later they still didn’t know where they stood. After the first few weeks at the company, it was a messy situation where they were trying to be both a product and a service company. What happened next?

1. Losing focus on the product vision

• It was not clear who had the final say in what feature gets on to the roadmap, even though the product team had spent months researching the market and understanding the customer problems.
• There was no clear alignment across the cross-functional departments, sales was over-selling and depending on the customer services team to build them the shiny feature they promised the prospect client.
• Not focusing on the market needs, left the product in the dust , the competitors were sprinting.

2. Developers were distracted

• Developers on the product side were half-heartedly working on the features that were prioritized by the Product Managers. They were starting to question if that's what they should be even doing because they have not heard direct feedback from clients. Clients seemed to be more engaged with the customer services team.
• As much as Product Managers tried to align with the Engineering team and the clients on the roadmap priorities, there were always requests that came up and the services team was accommodating it or asking the developers to stop what they were working on and take on this “urgent” request.
• Due to constant change in direction that did not align with the company vision which caused key lead engineers and product managers to lose hope and quit the company.

3. Resourcing issues

• We had 2 separate development teams, one for customer services and one for product development. It was becoming harder to justify the costs to the investors and we were burning through the funding.
• Deciding to downsize the services team, opened the flood gates towards the product teams, and roadmap going out the door.

4. Conflicting priorities

• Product Managers, customer service managers, and sales were butting heads to decide what should be developed. Constant sync up meetings to decide why the product roadmap doesn't really address 1–2 clients' needs and how they were pressured.
• Sometimes the CEO asking the team to prioritize entire new feature because a prospect would sign us over the competitor.

5. Business model

• It is not easy for a startup to sustain two different business models. At some point during the growth phase, the leadership has to make a call on based on the long term plans to avoid shooting in the dark and hoping to achieve the revenue targets each quarter.

As your company matures, you should realize that you can’t satisfy all customers. It is no surprise that you can not be both a product-focused company and service-led one if you want to create a market leader product. Companies that have clearly defined their mission and product goals have succeeded in creating a great product.

• Identify a few core clients, support their interests, and listen to their feedback, be their partner help them grown and they will support you in return to solidify the product offering. Generate an extensive list of potential target customers, understand the problems they are facing.
• Focus on growing the product to gain a competitive edge over other players in the market. Always have a long term plan which you can pivot on easily if the market needs change. Startups need to diversify and strengthen their product portfolio for the market needs not for 1 client.
• In the process you may lose some prospects or existing clients, that's okay! Having the long term target always in your vision helps, once the product is a market leader clients will come knocking in. The voice of the customer needs to be heard throughout your business.
• Ensure the product delights the customer in every way, they will definitely return and stay with the company for a long time!

Would love to hear feedback if the article has helped. Connect with me LinkedIn if you want to chat further.