[ Interview ] Alex Hillman on How a Sales Safari Can Help You Find a Business Opportunity in B2B

A few weeks back, I spoke to Alex Hillman for The Lean B2B Podcast. We talked about entrepreneurship, job creation, market selection, customer research, Sales Safaris, and finding the right business opportunity.

You can watch the full interview below, or access it on iTunes, Google Play or Spotify.

Interview Transcript

Alex Hillman – Sales Safari

Etienne Garbugli: My guest today is Alex Hillman. Alex is the co-founder of Stacking the Bricks. Alex developed, along with Amy Hoy, the Sales Safari methodology and created 30 by 500, a training program designed to teach people how to research, build, launch, and market new products. Alex is also the co-founder of Indy Hall, a co-working community in Philadelphia, and the author of the newly-released book, The Tiny MBA.

Alex, welcome to the podcast.

Alex Hillman: Thank you for having me. I’m excited to finally get a chance to chat. We’ve been emailing for a very long time. I was excited to hear from some of our students that we showed up in your book and, and now we’re here and I’m very, very excited and glad to be here.

Etienne Garbugli: Some of the students it’s even more than one!

Alex Hillman: Yeah. We had several folks, a bunch. Hey, I saw Sales Safari mentioned in here. I thought you’d want to know. And I thought that was really cool.

Etienne Garbugli: That’s awesome. That’s awesome. So, maybe first question. I saw on your website, I also saw on your Twitter. So, you have the stated goal of creating 50,000 jobs in the Philadelphia area over the next 10 years. Why that goal specifically, and how are you going about reaching that goal?

Alex Hillman: So, a few years ago, there’s a company you might have heard of called Amazon. Amazon pulled an incredible stunt where they convinced cities across America to compete against each other for the privilege to give Amazon a bunch of incentives, you know, tax breaks and things like that in order to place a new headquarters in their city.

And this, this is. It’s evil genius is what it was. And I watched, as many did, in horror as my own city entered into this competition. And I watched many months of discourse and debate and should we do it, shouldn’t we do it, whatever.

The truth is, Amazon had their minds made up from the beginning. Strategically, that only makes sense. They created this contest as a negotiating tool, again, evil genius, but a couple of really interesting things came out of the dialogue that weren’t the dialogue itself. That I thought were interesting.

One was that because of this sort of timeboxed competition, that. Organizations, individuals. There’s a bunch of players in the business ecosystem in Philadelphia that normally don’t play nice together. And sometimes they actively, you know, hate each other and undermine each other, suddenly we’re willing to play nicely together for a very specific project, with a very specific goal to talk nicely about Philadelphia and why a business would want to come to Philadelphia.

And that’s something that our city is not very good at. Philadelphia is an amazing city, but we’ve been very ineffective at positioning ourselves as a place that is good for businesses. We don’t need to get into the weeds of why that is. There’s a lot of really, really long-standing socio-political, racial, economic, like, there’s very real reasons for that. That’s for another podcast.

The other thing that I noticed was that people went bananas because Amazon promised 50,000 jobs. And I said to myself, that number doesn’t seem that big. I mean we’re a city of, you know, we’re the fifth or sixth largest city in the country, depending on exactly how it’s being measured and what year it is.

But we’re a major city. We’re a top 10 city, over a million people. 50,000 jobs is undeniably a good thing and we have our own issues with economics. And we’re the biggest poor city in America. Major, major economic disparity, especially among the racial communities, but 50,000 didn’t seem proportionate to the offer that Amazon was asking for from their cities.

So, my takeaway was well if 50,000 is a number that makes city hall and all kinds of other people do backflips, what if I said that I was going to create 50,000 jobs over the same 10-year period and Amazon said, because it wasn’t 50,000 jobs on day one, it was 50,000 jobs over 10 years. And that’s ignoring exactly what the makeup of those jobs are, who is going to get those jobs, things like that.

What would creating 50,000 jobs do for our city and how could we do it in a way that’s not Amazon because. If we think critically about this. 50,000 jobs is a good thing. One company creating 50,000 jobs is about the worst way to do it in terms of the liability that comes with it. And we already have a pretty tenuous relationship with our other biggest technology employer, which is Comcast. They do not treat our city well, and they sap us dry. So, to invite another, even more aggressive tech company seems like a disaster.

So, one company creating 50,000 jobs is a liability, but what are the other alternatives? And so, I sort of took the 30 by 500 model, which for those who are not familiar, 30 by 500 is the name of our course, but it’s actually a math equation that says that one of the ways that you could create a $180,000 a year salary, which when we created this course, that was actually a common developer salary in the Bay area. It’s now double that, whatever.

So, a way to do that is to get one job or to create $30 worth of value for 500 people on the internet every month. So, can you create a tool or product that 500 people every month get $30 worth of value. And obviously that math can go any which way, but it’s to show you that 500 people a month on the entire internet… the internet is huge. And whether we’re talking about recurring revenue through a subscription service or a one-off product, 500 customers a month is not that many and $30 a month is not that hard in terms of an effort to create that much value for a business.

So, if you approach with that math, you can easily, so long as you’re approaching things systematically achieve that number goal. And so, I approached the 50,000 jobs the same way where you can have one company, 50,000 jobs, and the other end of the spectrum, you could have 50,000 entrepreneurs. That’s not better.

We could have five 10,000-person companies, ten 5,000, and so on and so forth. And none of them are great, but somewhere in the middle I hypothesized there’s an answer. And that was where the number 10,000 came from because I started building sort of a mathematical model as well as a roadmap for what it would look like to over a 10-year period help 10,000 people become sustainably-independent, or another way I framed it is to create a job for themselves.

How do you create, how do you take the skills that you have, the knowledge you have, or that you need to get whatever may be and learn the business skills around it in order to create a job that is equal to or better than what you could get as a job, whatever that looks like in our local economy. So, the goal is to help 10,000 people first create a job for themselves, and then some percentage of those people will get to the point where they want to hire somebody.

80% of them probably won’t, 80% or more won’t. But if 20% do, and then some percentage of that 20% decides to hire two or three, and then some percentage of that decides to hire 10 or 15, and then so on and so forth.

The way I ran the math against our state’s data, we actually ended up generating over 80,000 jobs, conservatively, running this model. So, my hypothesis for economic development in 2020, where companies don’t need 10 employees to start on day one, what they really need is for one person to understand how to create a job for themselves that’s actually sustainable. It creates the opportunity for them to then become the next generation of job creators.

So, the work that Amy and I have been doing for the last decade has already headed down that path. And now I’m turning that locally and saying if people want 50,000 jobs, this is a way to actually do it. And look, if we fall short, let’s say we only create 10,000 jobs. We created 10,000 jobs. And we’re not beholden to the whims of some giant corporation that wants whatever it is they want.

And we’ve got a replicable model that any other city that participated in an Amazon’s game, I believe if they spent money on that campaign, which of course they did it cost time, therefore cost money. They owe it to their citizens to at least spend equal to whatever they spend on the Amazon campaign to try a playbook like this.

So, that’s why that number, and that’s how we intend to do it. The goal is to focus first on helping people reframe what entrepreneurship is and how to create opportunities for themselves. And then those folks are in a position to, if we help them get from the stage of surviving—I make enough money to cover my bills—to a stage of thriving and really understanding how to grow and sustain a business.

That’s our best shot at a generation of employers that is much more humane to their workers that is empathetic to the world around them. And ultimately, we’re living in a world where we’re coming to a reckoning with what happens when highly-leveraged technology companies have unchecked power.

I feel like if people start with a different measure of success, a different set of goals for success, and there are good role models and good examples and good playbooks to follow, we can help more people create businesses that are good for the world because they’re good for their neighbours first.

Etienne Garbugli: Yeah. I think I read a study the other day mentioning that 80% of all revenue from software is in California.

Alex Hillman: That’s not surprising to me. And the truth is, the internet is everywhere, so why?

Etienne Garbugli: Yeah. I think it’s a great mission. So, what roles do you see Stacking the Bricks and 30 by 500 play within your objective?

Alex Hillman: So, there’s three pillars to the objective. Pillar one is inspiring people who think that entrepreneurship is not for them to realize that it could be. Not to convince people to become entrepreneurs, but to show that there’s more than one flavor and for them to go, oh wait, there is a version of this, I don’t have to be the next Mark Zuckerberg or California Silicon Valley startup to create a technology business or any kind of like, it doesn’t need to be a technology business. Technology is just this amazing lever and tool. Indy Hall is not a technology business. My main business is not a technology business. I feel like I can say that with confidence.

Pillar two is that surviving to thriving, and I feel like that’s where Amy and I, and our experience, not just in teaching entrepreneurship, but in teaching entrepreneurs and teaching creative people, and breaking down a lot of the expectations and biases and frankly, misunderstandings about how business and sales works, or is supposed to work or needs to work.

We are prescriptive to a point, but at the end of the day, the prescriptiveness is a means to an end where the goal is really to show people there are more ways that work. And I honestly so long as no one is being hurt, don’t care which one you choose, so long as you choose, and don’t simply assume defaults.

So, we have, a decade of experience. We have curriculum that we can develop. We’re now in a position where we can make that curriculum more financially accessible. We could potentially teach people how to teach our material. So, there’s a scale. The most honest answer is I don’t know, but I do know that we have assets that have been successful in reframing entrepreneurship for people. And since that is such a big part of this mission, it makes sense that they fit together.

One of the most exciting pieces, essentially, because I think that there’s entrepreneurship belongs to everybody at every age. However, I’m really excited about the potential. I have a few friends that work in youth mentorship in particular, and thinking about the most disadvantaged youth in our city who struggle with not just life, although life’s so hard, but also opportunity because the systems are designed to shut them out.

And when you create your own job, it’s hard, but you’re also creating a new system. And so, the number of people who can shut you out suddenly starts to diminish. And if we can put those tools in the hands of young people that have the most time to do something with it, I think we can do some really exciting things.

So, there are some really, really smart folks that I feel fortunate to be friends with, who have spent time in our material and are helping do the, what’s the translation. It’s also like what’s the starting point. I can’t throw a young person into 30 by 500 without some context in its current state, but I don’t think we need that much to make it make sense to somebody who has, you know, whatever perspective they have about business and what they want to create is a hair salon or a skateboard shop, or sell their art.

There’s fundamentals that we teach that will translate. There’s fundamentals that we teach that need translation. I think that over the next few years, doing more of that… One of the things we’ve learned over the years with 30 by 500, is that in order to do that kind of work, there needs to be a tight feedback loop. That’s not the kind of thing where I get some insights and I go into my hidey hole and produce some new courses.

That’s going to be live instruction with students in person, if not online, depending on how this whole pandemic shakes out. However it happens, live instructions to guide and understand what resonates and what doesn’t, what translates and what needs translation. And then we’ll sit down and do the work to bake a scalable product, because that’s the way that we’ve created the stuff that we have up to this point.

Etienne Garbugli: I think you’re touching on a really interesting point. You were mentioning about how people kind of default, go with the default path a little bit. Which is kind of something I see a lot, especially with B2B founders where people will try and solve problems that are kind of always in the same universe while there’s still a portion of these that are not tackled at all.

So, it feels like you mentioned, like the internet, there’s so many opportunities, but people tend to focalize on more similar paths in some ways, which means that some opportunities are not being tackled and there is a…

Alex Hillman: A hundred percent. So, I actually just wrote an article that is not on our blog yet, but went out to out email list about the availability bias and how that shows up in exactly the problem you’re describing.

It’s kinds of businesses. It’s kinds of products. Somebody, a friend of mine tweeted this morning, she said, you know, what kind of tools, what kinds of products can developers make that aren’t software, eBooks, and courses, I’m having a hard time thinking of any.

And the reason for that is because the most recent things you’ve seen are software, eBooks and courses. And so, if you don’t have a system for expanding that, which is key, it’s like one of the biggest sets of lessons in 30 by 500 is how to turn real audience insights by running through a system. So, you’re not relying on your imagination. You’re relying on what’s effectively like pre-programmed remix algorithm, where you put in a problem and it’s ended. You have to do more work. It’s not an automated thing, but algorithmically, you can approach a problem and say, here’s a bunch of different variations. And some of them won’t make sense. Some of them won’t be feasible. Some of them your audience won’t want, and some of them you won’t be able to create. So, you eliminate those, what you’re left with is a bunch of options that will include things that you wouldn’t have thought of if you had a blank canvas and just your creative mind.

Etienne Garbugli: That’s a great point. So, maybe connecting that to the methodology that you guys have in place. So, I personally first came across the Sales Safari technique on Indie Hackers some of the posts you guys had mentioned. I also heard it mentioned by Hiten Shah and other entrepreneurs. I think it’s a really interesting technique, both in terms of research, but also in terms of entrepreneurship, what it can bring, what it can add in terms of value.

So, could you maybe talk about the genesis of the Sales Safari and how it relates to 30 by 500? Which came first, which came after, why?

Alex Hillman: Yeah. So, I want to start by making sure that Amy is credited for inventing Sales Safari. This is a hundred percent her, her brain baby. We have collaborated on refining it, on teaching it. We teach it together. Amy has more practice and therefore is better at it.

But, to more directly answer your question. When we started teaching 30 by 500, there was a set of steps that we thought were instructive. And they basically said, go out on the internet, find your audience and read what they’re talking about.

Sounds straightforward, right? And so, people would come back and say, I didn’t see anything. Oh like really? Where did you look? Oh, browsing Hacker News or Indie Hackers, whatever forum, Reddit. Whatever it was. And we’re like, well, what threads? And they’re like, I was just kind of browsing around and I was like, well, did you go into any threads?

And they’re like, yeah some. And I’m like, and what did you see? Ah, just people, you know, talking about stuff, a lot of them were complaining and I was like, complaining? That’s the thing you’re supposed to be looking for. Why did you ignore that? And they go, I thought it was just people complaining. And I was like, no, no, no people go on the internet to complain about things because something hurts.

Think about how much something needs to hurt in order for you to go on the internet, to a room full of strangers and ask for help. And there’s a difference between complaining and asking for help, but they were assigning people asking for help as complaining. And I was like, okay, we need more explicit instructions.

And so, the first wave of what became Sales Safari was Amy kind of reverse-engineering what she did when she would go on a forum and do research. Break it down into steps. First you look at this, then you look at this, then you look at this, and we broke that down and we showed people examples of Amy looking for it.

And so, we brought that to people and they were, oh my God. I didn’t see any of that, that’s unbelievable. And we’re like, okay, cool, now you go do it. And so, they would go off into their forums. They come back and they’d say, I just don’t see anything. And we’re like, what, what did you do? And they go, well, I did what Amy did and I go show me your notes. And they go, oh, I didn’t take any notes. And I was like, then you didn’t do what Amy did because Amy was taking notes. And I realized that this group of smart, many of them college-educated professionals didn’t know how to take notes. Fascinating. I realized that that is a researcher skill. And not necessarily a technologist skill or a creative skill.

And so, the next major wave of Sales Safari development was teaching people how to take notes. And that was when we developed the sort of core quadrants roughly of Sales Safari notes which are pain, jargon, worldview, and recommendations. And there are a few others that show up from time to time.

And those are actually subsetted in a few ways, but those are… basically by giving people a pre-created note-taking sheet, we could say, when you go to a forum, pass number one, you’re looking for pain, write down all the pain you see. Then do it again, and look for jargon. This is what jargon looks like. Write that down.

I don’t know if we can make it more paint-by-number then we have at this point, but the truth is people are now, they can. Here’s the differences is it’s kind of like, I would equate it to kind of… there’s two different ways. There’s a lot of ways to learn to play an instrument, but the two most common ways are by ear and somebody teaches you kind of step by step.

You learn to play a note, and then you learn to combine those notes into chords and chord progressions and whatever it might be. And I’m not a musician, so I may be speaking out of turn there, but I think the fundamentals translate. We were trying to teach people by ear and people needed to be taught progressively.

And so, 30 by 500 as a set of techniques is now a progressive thing. And most importantly, we teach it as a practiceable skill. So, a session counts as practice. And in fact, one of the biggest shifts that we made when we redeveloped the course in about 2013 was instead of having people’s first Sales Safari attempt to be on their own audience, we would assign them an audience, something that was general enough that they could understand, even if they were not that themselves. We chose freelancers because even if you’re not a freelancer, you kind of have a sense of how a freelancer works and thinks. And you can say words like invoicing and client, and that’s not gonna sound like a foreign language.

And so instead of sending people into their own audience for the first practice, we’d send them into an audience that was familiar enough, but not their own. And that the stakes were lower and they could practice a thing from a little bit of distance, get the practice in, and then come back to their own audience to say, okay, this might actually be harder on my own audience because I have blind spots and biases and things that I take for granted that other people, them asking for help, looks like complaining to me when in fact it’s really them saying I’m stuck and the documentation sucks. That’s my favorite is people just saying like, oh, in software forums, it’s just people complaining about the documentation or people asking questions that the documentation answers.

And I always say it’s easy for you to assume they haven’t read the documentation, but have you thought about or interrogated what are the reasons that they haven’t read the documentation? One is that they’re lazy and that is entirely possible. But what are the other ones? And then you start realizing, well, maybe the documentation is poorly written. Maybe it’s confusing. Maybe it assumes knowledge that they don’t have.

And I’ll be honest with you, we have quite a few alumni who have made pretty large amounts of money based on problems found that basically equated to the docs are garbage. And I think that that’s, not that that is the way to build a business, but I think it’s a really, really clear illustration of how you can observe a problem from a different point of view and realize that people are struggling because they’re lazy sometimes, a hundred percent.

But even within that, you know, let’s assume they have any energy for it. If they weren’t lazy to start with, if the docs were good and inviting, and well-written, maybe they’d overcome some of that laziness. So, that’s sort of the evolution of Sales Safari, where it started, where it came from and how we teach it today.

Etienne Garbugli: So, you mentioned pain, so what’s the focus area? What are you looking for specifically when you’re doing a Sales Safari? Are you looking for what Jobs people are trying to get done? Are you trying to look for tasks, or you’re trying to look for problems? What are you looking for specifically?

Alex Hillman: Emotions. Typically, a wide range of negative emotions, which could be things including struggle, confusion, disagreement, debate. Pain shows up as a lot of different things.

So, that’s a tough question to answer without having concrete examples. However, I will tell you that it is hard to find environments where pain is not being surfaced. People just aren’t used to seeing it. So, maybe like the easiest example is people asking questions. Again, you have to come at it from the lens of people are asking questions for a reason.

It’s not just because they don’t know, there’s a reason behind why they don’t know. Sometimes they don’t know. Sometimes they lack the confidence that what they know is correct. Sometimes they’ve gone and done the research they found three different answers that are shades of correct. And can’t tell which one is the right one for them.

All of those are variations of pain. But I think the easiest place to start is to examine when people have questions or variations of challenges that they’re facing to note, first and foremost, how are they expressing it? What are their words?

Not what is your interpretation of their problem, how do they perceive their problem? And that’s the difference between Sales Safari and many other approaches to customer research is. This is all about gathering insights into how they see the situation, not what you can do about it. That comes later. That’s an entirely separate part of the machinery.

The very first part is you getting inside their head and understanding their point of view, their worries, their fears, their anxieties. Also, the things that they’re excited about, like what gets them wound up? What gets them enthusiastic? What gets them manic?

And then, you know, what is the crash look like? What are their habits? So, I’d say, what is pain? What are we actually having people look at? It’s two things. It’s emotions and it’s patterns. It’s not about finding one pain and locking onto that, and then finding every example of that pain. The challenge of Sales Safari sort of poses is instead of finding one pain and then trying to validate that that pain exists elsewhere, which is once you’re in that mode now you’re back to another observable bias.

Instead you observe the entire landscape and you go, what’s showing up here a bunch on its own. And then you use that pattern to then deduce okay, is there an area of focus that I maybe want to invest some time into and look for the next round of patterns.

And it is a bit of deductive reasoning that goes into it, but the idea is to collect wide swaths of information, look for emergent patterns and then refine, and then kind of repeat that. So, a combination of emotions and how those emotions show up as patterns. I was describing on another podcast a couple of days ago, that if you come from a technology world in particular, this can start to look like debugging. Cause you’re looking for patterns, right?

You’re looking for, are there, if something is not working for somebody you have to look for patterns and why it’s not working for them. You can also look for inconsistencies, right? Inconsistencies is another kind of pattern. What shows up? As an inconsistency, but with some degree of consistency.

And that starts feeling very kind of circuitous. But again, that’s why we don’t start there. The way we teach Sales Safari is really, really focused. We send you into one thread and say, I want you to come away with as many notes as you can about the problems being expressed and let’s see what you come back with.

And then there’s things that are kind of obvious on the surface, but then sometimes there’s things that are lurking underneath, and those are the things that come from asking your own questions about why that thing is on the page in the first place.

Etienne Garbugli: So, in that case, so this is a technique that works for a lot of entrepreneurs in B2C. I know it’s worked with entrepreneurs in B2B, like Brennan Dunn, for example, with RightMessage, is the evolution of his research and other entrepreneurs as well. So, for example, in a business setting where people are maybe less likely to be sharing or expressing might be more limited in terms of what they can share publicly, do you see any constraints or do you see any ways to work around that to make the Sales Safari as effective in maybe a larger business to business context?

Alex Hillman: So, actually, B2B is what we essentially force our students to do. B2B is where it actually is stronger.

B2C is tough. It’s not impossible. Obviously, people do it, but it’s tough for two reasons. The biggest one is that consumer audiences are fickle and really inconsistent, so the patterns that show up are way, way harder to read, because you’re going to find so many conflicting variations. It’s not like in B2B, you may find two conflicting variations and you can pick one to focus on. And that’s where worldview comes into place. It’s like Apple versus Android. Right?

Well, you can’t really serve both effectively. So, I’m going to focus on the Apple worldview and what that contains. B2C is you’re dealing with hundreds, maybe thousands of variations and permutations. And it’s really hard to like suss out one that you can latch onto.

The other is buying on value. Consumer audiences do buy on value. They buy on lots of things, including value, but they don’t buy in value consistently. Psychologically speaking consumers buy on far wider and stranger reasons.

Sometimes people buy on value, but a lot of times they buy based on how they want to be perceived or style or brand, and those kinds of things. Businesses do that too to a degree, but far less. Businesses and individuals who operate like businesses, which, there are professionals who don’t operate like businesses.

One of our favorite examples is restaurants and music venues are really, really difficult to sell to because they operate more like consumers in that they are fickle they tend to be very, very resistant to a new thing. They things to be the way that they were, those kinds of things.

So, what you’re looking for is people who behave like businesses or businesses. Because for them buying on value is a pretty straightforward equation. I have a problem. This problem is costing my business money. Therefore, it’s costing me money. Solving this problem will either put money back in my pocket or stop the bleeding.

And that arithmetic is happening all day, every day for every business owner and even professionals who don’t necessarily think like a business owner are still doing some variations of that calculus. Right? So, the B2B space is actually much, much easier to the point where we explicitly, we used to early, early days, we used to tell our students, you should do B2B, but you can do whatever you want.

And we had zero successes in B2C. And so, we were like, you know what? Let’s just focus on B2B. So, as 30 by 500 has evolved, we’ve kind of put on guardrails to say, look, we can’t sit on you and force you to do anything. But in terms of your best chances of success, here are constraints that we’re going to provide.

These constraints are to your benefit. And choosing B2B is one of them. So, your original question also suggested that B2B was harder to observe. And I have not seen that to be true. What I have seen to be true is people assume that because they don’t hang out online in certain ways… I was just emailing with a prospective student who is more of a C-suite type executive, mid to late forties or older and in their head, they go, well, my peers don’t hang out on Reddit and Indie Hackers. So, is this really gonna work for me?

And I pushed back and say, do people in your industry not go anywhere for advice? Do you buy books? Do you go to conferences? And conferences are weird thing in 2020, but like, do you go to professionals? Do you have professional development resources you go to and they go, of course.

And I go, then they exist. You just aren’t thinking of them that way. And so, you’re gonna have to do a little bit of work to think outside of your bubble about what are these groups maybe that I belong to, but I don’t think of them that way or that I don’t belong to because of my own maybe, I don’t feel like I need it, but just because I don’t need it. It doesn’t mean other people need it. So, it doesn’t mean other people don’t need it.

So, I have a blog post if you Google “can’t find audience Alex Hillman“, you’ll find a three-part, increasing with increasing challenge, but for increasingly challenging to find audiences ways to find them.

My favorite example that I love is we had somebody reach out who is a private pilot. Like he flew planes for rich people and he was like, I like my job, but I want to be able to do other things that don’t require me to be in the air, will this work for me? And I said, do your peers—which could be your professional peers, people who want to get into your industry or people who hire you, that’s sort of the trifecta—do those people exist on the internet? And he said, I think so. And I go, here’s three or four things for you to go, try to go find them. And he came back and he goes, I just found a bunch of forms that I never knew existed because you gave me the way to think through what is the language and jargon and questions that I do know, map that to the things that people put into the internet.

Used this magic thing called Google and all of a sudden, these conversations that were a hundred percent blind spot to me show up and I can start participating in those conversations. I can start doing Sales Safari and learning from those conversations. So, if I can get a private pilot whose people are definitely not hanging out on Reddit or Indie Hackers, unless you’re Brennan Dunn, I suppose because he’s getting his commercial pilot’s license is that the next, but for the most part, just cause they don’t hang out in the places that you hang out doesn’t mean they don’t hang out. And that’s in itself is a really good meta lesson of the way you are is not necessarily the way that your customers are, you still have advantages and it benefits you to serve customers that you have those things in common with. But the line that we’ve, there’s been a part of 30 by 500 since the very early days when it was a bit more psychological and headspace, then practical and practice was you are not your audience.

So, if you’re making decisions based on what you do. And not what you’ve observed your audience doing. You are setting yourself up for a world of confusion, hurt, and probably failure.

Etienne Garbugli: Well, so, say in that direction. How would you decide which audiences you should be researching initially?

That person was a pilot, but would someone else target pilots right out of the gates. That’s not really a pattern people would do.

Alex Hillman: So, the reason he went after pilots. It’s cause that’s what he already does professionally. So, the constraints that we teach are so straightforward and yet people so often resist them I think in part, because they are so straightforward.

People expect there to be some kind of magical secret that I think part of this comes from the there’s a lot of talk on the internet about things like finding the perfect niche, right? There’s also a common theme among people who don’t want to create a business that’s in some way associated with the work they already do because of conflict of interest with an employer, perhaps. And that is, that’s a very real concern. However, I’ve yet to find a situation where we couldn’t work around it, where you can have a candid conversation with an employer, or you can read over your employer…

I mean, if you look at your employment contract and it says you can’t create stuff on the side, then you have to have a conversation with your boss anyway if you’re going to go down this route. Otherwise, you’re opening up massive liability. And if you can have that conversation with your boss, you can set boundaries and say, we will never go after whoever the customers of the company that I worked for is. In almost every case, that deals with almost everything that legal is going to care about, but every situation’s a little bit different.

So, the other reason that I think people avoid going after an audience that they belong to professionally is because they feel a certain way about their professional peers and it’s usually not good. And what I like to remind folks of is whoever you were surrounded by the majority of the time is not representative of your entire audience.

And you’re used to looking at them as a bunch of complainers instead of with a tool that teaches you how to observe that as pain and create opportunities to help them. And I’ll tell you what, when you become somebody who helps people, they start treating you differently. And that feedback loop looks and feels very, very different, but you can’t know that until you get into it.

So, can you serve audiences that you don’t belong to? Absolutely. It’s just a thousand times harder because you’re throwing away one of the biggest advantages that you have, which is you already understand them. Even if you’re not exactly like them, there’s jargon that you’re going to understand. You’re going to be able to see inside their heads more easily than an audience that you have nothing to do with, or that your cousin is embedded in. You can’t get inside your cousin’s head either.

So, use every advantage you’ve got is a core tenant of 30 by 500. And so, serving audiences that you belong to is key. The second step to that is audiences you belong to can go into one of three different paths. Like I mentioned before, that can include people who do what you do, your peers, it can include people who want to do what you do.

So, newbies that are a few steps behind you, or many steps behind you, depending on where you are in your own progression. It can also include people who hire you. And so, for the people who are already in the consulting game in some way, that’s an opportunity to look at this from the perspective of, okay, there’s an industry that, I may be a software developer, but I do mostly work in farming or aerospace. Sure.

And so, you can say, okay, let’s start looking at what a batch of my best clients have in common. And are there ways for me to introduce new products and services into my consulting business for customers who I already serve. Because again, I already have that built-in knowledge and I have some built-in relationships.

I have maybe some trust established in the industry. All you need is really one client who likes you to have any amount of trust in industries that appear really vast. And so, like it doesn’t take a lot. I think people imagine it takes so much more than it really does a little bit goes a really long way.

So, there’s really, I think, under-explored opportunity to look at well, here’s who my clients are. Here’s the kind of businesses that they are. There’s the people who already pay me. Whatever they pay me. There’s people who can’t quite yet afford to pay me. So, can I product or productize something for them?

Cause they already know about me. They want to hire me, but they can’t. So, there’s that option. There’s also the people who can’t afford to pay you. And now you can say, all right, in addition to that services that I do here are a few other things that you can buy. And for you, those things are much more time-cost efficient, because if you’ve got new clients coming in, it could be a package that you sell or a set of tools or kits, or like one of my favorite things where people who work with clients is what’s the stuff that you do with every client.

And what if you sold that as its own thing to new and existing clients at a premium price is totally viable so long as they see the value in paying that price. And then the key is, is like, even if you’re running a bit of that manually, or semi-manually, you’re not creating bespoke work every single time.

So, it’s extremely time efficient work, which is a really, really valuable middle ground between time-inefficient work, which is selling time for money and products, where you create something and sell it over and over and over. Sometimes it’s hard to have the time and resources to get from the one for this end of the spectrum to the other.

And so that’s why Stacking the Bricks is about incremental growth in saying, okay, maybe I can use some of my client time to create products that help me make it’s a great tool that help me serve my clients better. Now, the next client that comes along, I can sell that to them as a package. Now my time is more efficient and now I have more time to invest in a product that is entirely self-serve, and now you’ve made the progression along that path from time for money to a thing that people can buy off the shelf while you’re asleep.

So long as they’ve got a credit card they can come and grab it and do their own thing. And then those people who bought that are it’s almost becomes like paid lead generation.

If you want to keep consulting, which you don’t have to. But so many people do is you’ve got people that buy the thing and they go, that was awesome. I learned a lot, kind of bring you on for some expert time. And now you’re being paid as an expert rather than a other way I’ve started framing is the difference between hired guns. Oh sorry, hired hands and hired guns.

You’re hired hands, people just want you to do the work when you’re hired guns, they want you to come in and tell them what the right thing to do is, and then they’ll go ahead and do it. That’s some, that’s really the only consulting work I do anymore cause it’s all strategy. It’s extremely time-efficient. And it lets me be extremely high impact inside of an organization that either is missing some knowledge, is missing some outside perspective, doesn’t trust itself to take the right steps, or just doesn’t know how to put the pieces together even if they have all of the pieces available to them.

Etienne Garbugli: That’s super interesting. I think that’s in a way what Brennan was referring to when he was talking about, basically he learned from the community, the personalization he did ended up becoming a course, which ended up becoming software now, and then gradually scaling that.

Alex Hillman: So, and what what’s interesting is like Brennan has a case study, like Brennan moves along that spectrum all the time. He’ll launch a new piece of software and he’ll build in consulting opportunities that are premium consulting opportunities to hire the guy who knows the thing.

So, Brennan’s a student and a friend, we’re RightMessage customers, and yet there’s parts of the RightMessage implementation that I’m just struggling with, but I know Brennan can do it in his sleep. And so, he offered a package to have Brennan come in and do stuff for us. And I was like, where do I pay?

So, what’s cool is Brennan can do that because it’s to the advantage of his… The long-term advantage of a software company that has customers that actually use the tool they’re paying for, which is often not the case. It also becomes revenue that he can use to fund other parts of growth that are necessary. So, it’s a win, win, win. Everybody’s getting what they want out of the deal.

I’ve got the expert doing the implementation for me and then showing me how to build forward based on the foundation that he created. He’s getting upfront research opportunities to see why, why do I struggle with this?

And so that over time they can bake that into their onboarding, into their learning center and things like that. And he’s earning income that is fairly time efficient. Cause it’s something he’s doing across 10, 15, 20, however many people he’s doing it with. And that gives him that that revenue gives him the ability to invest in other parts of the day.

Etienne Garbugli: That’s interesting. So, if I flip that around, would you recommend a new entrepreneur go directly to software? Or would you recommend that they go gradually and progressively a little bit like the Stairstep approach from Rob Walling discovering what they can do to sell to value and then get to software eventually?

Alex Hillman: Software is incredible. Software is very, very hard. Even if you are good at building software, there is so much more to selling software, especially if we’re talking about subscription software, something that is extremely not obvious I’ve learned is that people don’t realize that the amount of trust that is necessary to get somebody to buy a $30 to 50 one-time purchase is much, much, much, much, much lower than to get them to put in a credit card and to give you permission to charge them 30 to $50 every month.

And what’s even crazier is it is easier to sell a $500 one-time purchase than it is to get people to put a credit card in and give you permission to charge them $30 a month or $50 a month over and over.

Even if again, it’s not a rational thing. It’s about, it’s a psychological thing. So, software again is incredible, but it is the steepest hill to climb. Even when you were working with all of the advantages. So, can it be done? Of course. Do we have students who have done it successfully? Absolutely. Do they all say it took longer than they thought it would? Yes.

So, the most common path to success is a hybrid approach where at the beginning you’re creating stuff for an audience that is fast to ship, easy to maintain, easy to support and stair-stepping your way towards bigger things. Or if you start with software, and this is where things get tricky. And this is where I do not advise this. It’s possible, but I do not advise it.

Would be to launch software and a productized service that kind of complement each other Where, I mean Convert Kit did this early, early days on where Nathan would basically sell a package where you would get 12 months of Convert Kit plus training on how to start an email list and, and get things set up on your website and all those kinds of things.

It was a good way to jumpstart it because it was revenue upfront. You were getting customers to actually use and implement the product, which is the high. Like people want this turnkey ready to go thing, but to do that effectively before, at the very beginning before you’ve got customers, it’s kind of a cold start problem.

You need customers to create good onboarding, but you can’t get customers who stick around without good onboarding. So, it’s easier to figure out how to do that with one-off products where you’re not banking on them sticking around for three, six, 12 months, whatever it is. You can also, I think people get hung up on recurring revenue, which by the way is amazing. Again, Indy Hall is a mostly recurring revenue business. Yeah. So, I dig it and I get why people go after it. But recurring revenue is just one way to look at a lifetime value equation. I can look at the 30 by 500 business, which got almost no subscription pieces to it.

And I can look at customer lifetime value. Even before somebody gets to 30 by 500, our flagship that is a significant investment. I can look at people who have over the course of months or even years bought basically everything else. And that means that a customer who buys things is and actually gets utility from them is also way more likely to buy the next thing.

So, taking a portfolio approach of small products is our number one recommendation. Because it gives you a foundation. It gives you an ever-expanding customer lifetime value, and you can use all of those resources including the trust you earn and the insights that you gain by selling things to people and watching them use it to build things that are higher leveraged like software.

Etienne Garbugli: Speaking of the next thing, you decided to write a book, a new book, specifically, the Tiny MBA rate was released, I think about a month ago. So, what made you decide to write a new book and, what can people learn out of the book?

Alex Hillman: So, I’ve tried to write a bunch of books. Writing a book is hard. You’ve done it. You know how hard it is, and it’s hard for a bunch of reasons.

The books that I’ve tried to write in the past, not exclusively for the Stacking the Bricks audience. Everything in Stacking the Bricks was either something Amy created and then we finished together and then I helped build sort of the sales and marketing systems around, or something that we’ve actively co-created.

So, things like Just Fucking Ship. She wrote that and then we kind of packaged it and sold it together. 30 by 500 was actively co-created. This is the first thing that I’ve created entirely on my own. So, I’ve been sort of jokingly saying this is the solo album so to speak, the band is not broken up by any means, we’re just trying new sounds.

And Amy and I have talked a bunch about this since the book has come out and has been successful and how excited she is to watch me be successful on my own within the business. We’ve talked about it a lot. One of the interesting dynamics of our business is for a very long time, even though we collaborated on almost everything, Amy was very much the face of the business.

She wrote most of the articles. I wrote some, and I’ve got certain kinds that are more my wheelhouse, but the vast majority of our business people’s first contact with our business was going to be Amy. Our podcast was actually the first thing that really shifted that for them to see that, oh, Alex is not just a behind the scenes guy. He’s actually a part of the business.

And so, when I set out to write this book, I think the key difference is I didn’t set out to write a book and maybe this is an expression of the 30 by 500 process in motion, even though I wasn’t deploying it intentionally, it’s in my soul, so I can’t help it maybe.

But, well the 30 by 500 process dictates that the format comes last. You create the thing that helps the customer figure out what that’s going to be, and then it can take, and then you figure out what forms are possible. And then you choose from among those forms, what people would want and what is in your capacity to create.

I accepted a challenge last December on Twitter to write 100 tweets that were strong opinions, perspectives, observations, pieces of advice, whatever they were about, a topic that I felt I knew a lot about. And so, the topic I chose was the long game of business, how to build a business that lasts.

So, not just business advice broadly, but like long-term thinking is very much where I believe my business wheelhouse lives. And so, I accepted that challenge and over the course of five days or so, and in sessions wrote 100 tweets. So, I’ve got Twitter as my writing constraint. Twitter was Google docs in this drafting case, which is maybe a kind of unusual way to start drafting.

But again, I didn’t know, I was writing a book. I was responding to a challenge to share something that I knew. And the advantage I had going into this is I wasn’t, I didn’t have to ask my audience, what do you struggle with because I spend all my life understanding what people struggle with. And so, off the top of my head, I can start plucking cards of oh, people always ask this question, let me write a few tweets about that.

People don’t ask about this question. And then, everything blows up in their face. What could I tell them before it blows up in their face and sort of running that gamut and once I started writing and then I’m writing within the constraints of Twitter, where I’ve got 280 characters to express a thing I realized sometimes, well, this is a bit too big. Maybe I’ll break it into its component parts. So, Twitter is forcing me unknowingly to me and Twitter, to be really granular with these pieces of advice, these perspectives, these observations, and things like that. And by writing in public, I did something that I had never done before, which is I finished.

Every book draft I had started before. I’d write an outline at best. I write some chapters and then I’d be like, no one wants to read this. This is not, this is not right. This is not, I’m not on the right path. And a lot of times it was because I wasn’t applying the lessons that we teach.

I was not following my own advice. And every teacher knows you know how that feels when you’re like if I followed my own advice, we would not be in this situation. So, finished this thread of tweets, which while I was writing I was also getting this live feedback loop. People were liking the tweets or replying to the tweets, quote-sharing them.

I wish everybody had heard this. Or where was this when I had this terrible experience. And so I’m like, alright, people are digging this now. I’ve also got the motivation to keep going. And I’ve got a little bit of ideas about like what people like and want more of what people don’t understand and what I need to go deeper on.

And so, I finish. And then it’s the holidays. So, I go not write a Twitter thread and went on vacation and came back about six weeks later. And that thread was still getting likes and retweets and comments and shares. And I was like, this is not normal. I’ve been on Twitter for a long time and I’ve had viral tweets, this is something else.

And so, I said kind of jokingly sort of quote-tweet my own thread. I said, this is still alive somehow, people are still finding it and sharing it. I wonder what it would look like to turn this into a book. And my tweets exploded all over again. Oh my God, that’s such a good idea. Those tweets were more valuable than the last five business books that I read. And I’m like, I need to take all of this with a grain of salt Twitter, but I hear you and I hear your enthusiasm and it’s all very interesting.

So, I downloaded all those tweets started reading through them. And I was like, there is something here and it’s not just what I wrote, it’s how I wrote it. And it’s not just that I wrote a book about business, or the long game of business, the constraints and the timeline and the framing. I had all, like each thing was kind of self-contained and can be used to… people latched onto it because the things were self-contained. They didn’t have to read the whole thread in order for it to be useful.

How often can you read one page of a business book, get enough context to feel like that was good and then put it into action right away. There’s a very short list of books that’s possible with. So, I went to a friend who is a designer. Who I’d worked with on a small publishing project a few months prior.

And I said, hey, I don’t know if you saw that Twitter thread from a couple of months ago, but it seems to want to be a book, but it’s not a book it’s something else. And so, we’re going to need to design it. And the book part of the Tiny MBA is the packaging. The book came last.

The problem that The Tiny MBA solved is that there are a lot of little things that people have heard before and ignored or forgotten, or they’ve only heard it in a way where they rejected it, or they didn’t know what to do with it, or, or, or, or. And this thread, one thing per page, created an opportunity for somebody to thumb through it and like a work shock test. It looks the way it needs to, like Brian Eno’s oblique strategies, it’s not going to teach you a thing so much as it’s going to make you think about a thing. It’s going to kind of mold your brain. It’s going to put your brain in a place where it’s going to do what a brain needs to do.

Or like the Zen Cones is another reference that I would have never plucked that out of thin air, but it’s been really fulfilling as someone who’s inspired by Zen Buddhism in particular, that it’s these short little parables that they don’t exist to tell you what to do, they exist to help you decide what to do.

And when I realized that that was where the book started feeling more like this is a product. There is a thing here. It’s not just a hundred ideas. Those hundred ideas serve a purpose. And that was where the foreword from Nilofer came from. That’s where my preface that encouraged people, and really to reframe this. If you’re someone who buys books, business books in particular for advice, this is different.

It’s not going to tell you how to start and run a business. It’s going to tell you how to think like somebody who starts and runs businesses, and it’s going to plant seeds of ideas that in some cases you won’t know what to do with right now, but if you come back and read this book six months further down your business journey, you’re going to see things that you read before in a new perspective, you’re gonna read advice that you read last time, and didn’t even realize that you applied.

That framing was for me the biggest gamble. Writing this was not a gamble at all, because it was a challenge. It was a fun thing to do on Twitter. The gamble was, are people going to get that framing? And is it actually going to work? And so far, the response has been yes. So, it’s a, I think we can tie this together with our conversation so far is I wrote the core to solve a bunch of problems that I know and understand intimately for my audience. And then once I had it, I had to figure out what the packaging was. And then part of the packaging was the onboarding. There’s a how to read this book section in this book, which is, I don’t think that’s normal.

But, it wasn’t in the drafts really up until about a week before we went to press. And actually, some of our books got printed without it by a technical mishap, but the installation of how to read this book was to make sure that if somebody doesn’t have the instincts to look at a page that’s got one to three sentences on it and don’t just read it and turn the page, read it and stop and go what does that mean for me? Does that conjure up any experiences in the past that I maybe want to think about or reflect on? Does it give me any insight into experiences or challenges that I’m having right now? And, if this doesn’t make sense to me yet, why might that be? Just some of the kinds of framings.

Some people are good at that instinct. Many people who have not been in business yet are. And so, the how to became sort of the onboarding, it was like passed these pages this book’s gonna look a little strange. Don’t be alarmed. We’re here to help. Here’s some tips for getting the most out of it. And that’s been really well received.

Etienne Garbugli: I think we’ve actually managed to go full circle as well. So, we explained part of the methodologies with how to make sure you ship the product forcing constraints, but also refer back to your long-term planning that we were referring to with the 50,000 jobs in Philadelphia, which is your super power as you were mentioning. Thanks a ton for taking the time to chat. Where can people go to learn more about your work and you and Amy’s work?

Alex Hillman: So, Stacking the Bricks is our home on the internet. Lots of articles, podcasts, and links to our products. You can find me on Twitter as my online watering hole of choice, @alexhillman. I’m on there a bunch. And if you’re into checking out The Tiny MBA, that is at tiny.mba available in paperback and eBook.

And we package the eBook with the paperback so you can buy it now, read the eBook right away while you’re waiting for the book to ship and be delivered. And then as soon as it arrives, you can read it a second time, which a lot of folks have been telling me how much they enjoy going through the book in that way.

So, if you do buy the book, I would, in particular, love to hear if you have favorite lessons. Each of the self-contained pages has a page number on it. So, you can tweet at me. You can email me alex@tiny.mba. Tell me what your favorite lessons were, why they were impactful? Did it remind you of something? Did it help you see something new? Whatever it is, why it was your favorite?

I’d love to hear from anybody who picks up the book and gets even one useful thing out of it, which, I mean honestly, it there’s a hundred things in here. I’ve got 100 chances to give you something useful. If you leave with nothing useful. I’m sorry. Write me as well. Cause I want to know what happened and why that might be, but if you get even one or two useful things out of it, I want to hear what those are and I hope that you’re able to get more out of it over the lifetime of you having the book.

Etienne Garbugli: So, I’m excited to do that as well. I bought your book earlier this week and I’m excited to check it out.

Alex Hillman: Well, thank you for having me and thanks everybody for listening.

More on the Sales Safari Methodology

[ Interview ] ProfitWell’s Patrick Campbell on the Pros & Cons of a Multi-Product Strategy in SaaS

A few weeks back, I spoke to Patrick Campbell for The Lean B2B Podcast. We talked about metrics, customer research, pricing, segmentation, and the pros and cons of having a multi-product strategy.

You can watch the full interview below, or access it on iTunes, Google Play or Spotify.

Interview Transcript

Patrick Campbell – Multi-Product Strategy

Etienne Garbugli: My guest today is Patrick Campbell. Patrick is the founder of ProfitWell. ProfitWell is a business intelligence platform helping more than 8,000 subscription companies reduce churn, optimize their pricing and grow their subscription business end to end.

Patrick is an economist by training. Before starting his company in 2012 he worked in data and strategy at Google and Gemvara in Boston.

Patrick, welcome to the podcast.

Patrick Campbell: Yeah. Awesome to be here. Talk about research, all kinds of fun stuff today. Excited.

Etienne Garbugli: So, ProfitWell has a really interesting story. It started out bootstraped providing services, helping businesses with their pricing strategies, but the vision was always to be a product company from what I understood. How were you going about figuring out what the product should be initially?

Patrick Campbell: Yeah. So this is one of the biggest misconceptions about our company, and it’s kind of our fault if it’s a misconception, right?

So we, we actually ended up, starting off as a pure product company. Um, so we had this piece of software that we started off with that it did, essentially pricing research. So you build these surveys and you send it out. Um, and then what we discovered is, basically people, they liked the data. And they liked the output. They didn’t want to do the work to get the output, and they didn’t want to,, how do I put it? They didn’t want to make decisions without talking to a human. So they wanted like, services and things like that on top of it. And we were like, Oh, that’s dumb. We don’t want to do that. And then it was like, well, no, we’ll pay you money. And we’re like, Oh, okay. So it was one of those things that kind of worked out in a good way.

And then, you know, when we were doing our research, we wanted a better way to get data than just surveys. And so we, we started building other products and things like that. And that’s what came about with ProfitWell Metrics. And now we have a whole suite of products out there.

Etienne Garbugli: So, at what point did you guys start thinking about adding multiple products? Like was it the, what made you think that this was the right strategy?

Patrick Campbell: So, um, yeah, that’s a good question. I think it really just came down to the math and, and just the velocity. So what I mean by that is, we realized very quickly that our TAM, our total addressable market from a logo perspective was actually quite small. There’s only, you know, depending on how you measure it, about 150,000, maybe only a hundred thousand subscription companies.

And when you cut that by SaaS, you know, mainly the B2B SaaS market, then all of a sudden you’re talking about 20 to 30,000 companies, which is not a lot from a market perspective. And so. You know, the advantage of that market is the, the revenue on all of these businesses is growing exponentially, right? It’s compounding as the world of subscriptions and recurrent revenue does, which is our market. And so we looked at it and we said, okay, well, to be a hundred million dollar company, a billion dollar company, we can’t sell $50 a month products to a lot of people, right? We have to sell like higher priced.

We needed high LTV, and the best way to get a high LTV is through good pricing and good monetization as well as, good retention, obviously. But then, you know, the way that you increase that ARPU [ Average Revenue per User ] or that ACV [ Average Contract Value ] further, the average revenue per user, or the average contract value is basically by adding more products, right?

And so it kind of created this thesis of being multi-product. And we’ve taken this on really early in our life cycle. Most companies don’t take this on until they’re $100 million company and we’re, we’re a $10 million company. So, it’s kind of fascinating.

Etienne Garbugli: But so how did the opportunities for ProfitWell Metrics, Retain and Recognize come about? How much effort did you guys put into finding the next product opportunity?

Patrick Campbell: Yeah. So, the metrics product actually. So, like I kinda said before, we were looking for a product that we could, so survey data is amazing. A lot of people misunderstand survey data. They don’t know how to clean data properly and, we’re terrible as human beings or as operators at sending surveys, but the people who are really good at it and they realize how much power is there. The issue that we were having is it’s a higher cost way to get data.

And so we were thinking, well, there were two things, like one, we were thinking, well, how do we get the data we need at a lower cost? And what that became was, well, what if we had access to their financial data? Or what if we created personas? And it was like, well, then we would need financial data probably top of the funnel data, engagement data. Ooh, all of a sudden it started to become, you know, really, really, really complicated, right? And then it’s like, um, okay, well, uh, how do we get that data in a better way? Well, we’re always going to have to start with financial metrics, right? So that was kind of a little bit of a thesis that we’re having. And then all of a sudden, we were helping a company that was about to IPO with their pricing, and we discovered that they were basically calculating MRR churn completely incorrectly. It was a public company that was about to be public. And so, we kind of started of putting the two together.

And we just were like, oh, well we have multiple things that are showing us like that this is something that we should go into. And that’s when we jumped into ProfitWell Metrics. And then everything else was like, very much like the flow of information and the flow of resistance, right? Which was like, oh, like, this is not good, let’s solve it. Or, hey, we’re right next to being able to solve this. Let’s do that. Or this is what our customers are screaming, you know, all types of things.

Etienne Garbugli: So, one opportunity came out of the previous and the previous, and then the previous, and then… It was a sequence of different opportunities that came out from the previous.

Patrick Campbell: Yeah, exactly.

Etienne Garbugli: Okay. And how much effort did you guys put into finding what the next opportunity or the next product opportunity should be?

Patrick Campbell: Um, so yeah, that’s a really great question. It’s really hard to quantify effort, right? If it was physics, it’d be a lot easier, right? It’s hard. Yeah, it’s hard. It’s hard to quantify just because you’re always like rationalizing why you’re doing things right, and so you’re like, well, of course. Of course, we put a lot effort into it because we just rationalize why we’re doing it, and it’s like, well, hold on a second. No, maybe we didn’t put that much work into it.

So I think for us it’s like. The effort, the flow starts with a thesis, right? And it’s like, Hey, I have this thesis. And that thesis is probably based on something that someone said or like some feedback that we got or someone we really trust, like being like, Oh, you guys should totally do this, or something like that.

And then what ends up happening is, is our CPO, our head of product and I, we then just start debating. Oh, we should do this, or we shouldn’t do this, or we shouldn’t do that. Right? And so there’s a lot of effort that actually goes there and it’s very much a qualitative, and yes, there’s some quantitative aspects that, you know, we go through, like with this of, Hey, well why would we go into that space? Well, let’s look at the size of the space. Well, this, these three articles, say the size of this space is this. Like, that makes sense. Or that handles that objection. So, there’s a lot of debate that goes on. And I think that a lot of companies, this is where they should start, but they don’t because it’s uncomfortable to debate. And we’ve created a pretty big, you know. A culture of debate and feedback.

Then what we ended up doing is let’s say we’re like, cool, we’re going to go after it. Then we write a narrative, which is basically like a memo of sorts, or we just go through like X, Y, and Z of this is the logic behind it.

And then what we end up doing is if the logic makes sense and we send it to like another group of people internally. We then go and, we then start doing market research. Now, this market research, will probably start with just qualitative interviews. Hey, how are you doing this right now? What does this look like?

Kind of like being a prosecuting attorney. Like you’re not asking them directly, do you want this, right? And I think that’s another problem is people don’t do the narrative, they don’t do the debating. And then they just go out and be like, Hey, do you want this? And then what you’re doing is you’re just, you’re just doing the path of least resistance, which is, I’m just going to build the thing that someone says.

And it’s like, yeah, but there might be one person, they might not be articulating things properly. Like you have to be that researcher to basically dig into it. And then after those conversations we’ll start to have a clear thesis on some of the details of what we’re doing. And then we’ll do some quantitative research.

Sending out some surveys to our customer base and then like, disregarding certain people’s answers if they’re, you know, Hey, we know this isn’t going to be a startup product. This is for big dogs. So, we have to like, get big dog data and things like that. And then, you know, what ends up happening is, and then there’s this iteration cycle, right?

So, we’ve decided on this big thing that we’re going to go after, and now there’s just constant iterations. And those iterations have their own research cycles. And their own debates and things like that. So like right now for our Retain product, which is a churn reduction product, we did those big debates and the big narrative like years ago at this point.

Now it’s like, hey, should we go into this part of the market or should we add this feature? And so those cycles are shorter because the overarching thesis has been thought through and now it’s just more detailed work. Even if it’s a big feature or something like that. So hopefully that’s helpful.

I mean, that’s kind of the process that we follow and it probably isn’t as linear as I’m saying. It’s probably all over the place and in some cases as is the case when you’re building something.

Etienne Garbugli: No, no. It’s great. So, is there an overarching persona or like a profile that you’re specifically targeting across these opportunities?

I there like a unifying tread behind these opportunities in terms of the targeting or the market that you guys are going after? Like you mentioned SaaS, but within SaaS?

Patrick Campbell: Yeah, so we’re subscriptions targeting. So that’s not just SaaS. So, it’s DTC or direct to consumer, which includes subscription e-commerce, subscription media, subscription nonprofits, all kinds of stuff.

And so I think that the big thing to kind of think through for us has been. Multiple products means you typically will have multiple personas, but maybe the same company you’re targeting. So, this has made it a complicated, and we admittedly have not figured out all of this from a go to market perspective or even a product perspective because you can’t just spin up four teams for four products, right?

Like, this is just not how it should work, especially when you’re, we’re a bootstrapped or a customer-funded company of about 80 folks. And we have four different products, right? So like, that’s a lot to like. Yeah, a lot of surface area. And so, you have to, you’re probably going deprioritize a product on some level and then you have to come up with some framework of targeting.

Now, from a go to market perspective, they’re all subscription companies and we tend to target companies that are doing tens of millions, if not more of revenue. But we get a lot because we have a free product, we get a ton of startups and we love them and we like them. They like us, they’re getting a ton of value.

But because of that LTV problem that I was describing, we need to go after like more upmarket companies, and then each product has different personas. So, on the Price Intelligently product that typically is targeting marketing and product folks, and normally the head of product or the head of marketing unless it’s like $100 million plus company then it might be a director of some sort.

Retain product is customer success or product. And then our Recognized product is very, very much, the CFO or the. There’s not really Chief Accounting Officers, but the lead accountant at a company. And so, it’s kind of interesting too, because we use the free product as basically a signal.

So, depending on who comes in, you know, cause it might be the founder, well, if it’s a founder at a smaller company, we’ll go at them with a certain product, right? Probably Retain, if it’s a founder at a larger company, we’ll probably be do an enterprise type deal where we try to sell them the suite.

But if it’s customer success or CFO or something like that, we’ll lead with like those different products mainly because those are the ones that they’re, they’re most interested in.

Etienne Garbugli: So, in a way, the free product helps qualify a certain set of prospects and then the behavior within the free product or the people that sign up will help you qualify what the next step should be.

Patrick Campbell: Yeah, 100%. So, basically the idea and that sounds really elegant and smooth. It’s not that elegant and smooth. So, it’s just one of those things that there needs to be a lot of, a lot of adjustments depending on how things, how things go forward. But it’s one of those things where, you know, it’s, it’s at least like, that’s, those are the, not only the constraints, but those are the, the playing field or the framework that we’re working with, which allows our team to kind of work within it.

Etienne Garbugli: So, you mentioned before, like that a lot of times businesses will start thinking about a multi-product strategy later on. You guys did it a bit earlier, so when you think is the right time to start thinking about that specifically? You guys did it earlier. There’s a specific reason for that. But when do you think for other businesses, when should they start thinking about expanding their product line?

Patrick Campbell: As late as humanly possible? No. Just because of our pain. No. I think that our, yeah, it’s a good question.

I think the model there is more around, like if you were seeing. If you were seeing like crazy traction on one product, like I think you need predictable growth for one product before you move on to the next product. And that’s the thing where you have infinite optionality. And so, what’s really, and this is the classic product advice is.

Hey, you need to say no more often than you say yes, right? And so much more like 99 “Nos” to one “Yes”, right? And I think what ends up happening is, we, we can even get a little bit too like, oh yeah, we could build that, we could build that because we have 20% of the entire subscription market using ProfitWell.

And so it’s one of those things where it’s like, well, you have 20% of any market. There’s just infinite possibilities of what you could build to monetize that market, right? And so I think for most folks, you gotta have predictable growth in one area. And then the market’s going to pull you. And I know that feels like fluffy, but the market’s going to pull you into a direction of like, hey, this is what makes sense, or this is not what makes sense.

And I think that that’s kind of the structure of how to think through things. And your measurement of the market pulling you is going to be, it’s going to be different depending on the vertical and the company.

Etienne Garbugli: So, so when you guys start looking into a new opportunity, how do you start thinking about pricing when it comes to the new products? From what I understood, the different products you have, have different value metrics and different, not business models, but different ways of charging specifically. Like how do you guys start thinking about it? How do you guys start thinking about the pricing?

Patrick Campbell: Yeah. So, our directive is, so we basically have this spectrum and this spectrum came about in just thinking through like the analytics space.

So, there’s a spectrum of data, analytics, insights, outcomes, right? So, the only reason you want data is to solve an outcome. The only reason you want analytics is to help you solve an outcome. The only reason you want insights is to help solve an outcome, right? So, everything leads to this outcome. And it could be reducing churn, improving ARPU, it could be a whole host of things, right?

And so, our thesis was, okay, anything that’s just data or analytics, we’re probably going to not charge for, right? Like that’s where we’re going to have freemium. Anything that’s insights or outcomes, we’re going to be driving towards an outcome. The only reason we have those insights is to get towards the outcome, but we’re going to try to charge based on the outcome as close as humanly possible.

And so, what’s kind of held us back from building certain products has been. Oh, there’s no effective way to charge based on an outcome. So, for example, like, we want to come up with this, there are certain retention aspects for retention products that we wanted to build and we’re probably going to build them, but we’re going to include them basically in the Retain products rather than spinning them into something else because it’s like, hey, we can’t charge in a clean way that isn’t tied towards that outcome. But if we put it into Retain, we can still charge based on that outcome. And yeah, maybe we’re not monetizing that feature as effectively as we could, but we’re monetizing the entire product.

And so, our Price Intelligently product, that’s morphing into a pure software product, or a lighter service product, you know, at some point in the next couple of years, because we now have a clean thesis on hey, this is how we could charge based on an outcome, you know, for a pricing product, right? And so that’s what really drives us. And I think that when you have some initial traction and you’re moving, this is how you should think about your pricing, or your products like, Hey, is there a way that I can charge effectively to increase my overall ACV or ARPU.

I think this is the reason why we gave away ProfitWell for free. The metrics product was one, because, metrics products are terribly difficult to monetize. They all go up market. They all start out saying, hey, we’re going to be like the democratization of this type of metric. And then it’s like, nope, we’re going to Fortune 500 because people just don’t appreciate metrics and analytics products as much as they should. And you know, we’ve tried to change that, but it just doesn’t, it doesn’t work. That’s just how people are hard-coded. And so it’s a gateway for us. And the only reason it’s a gateway is because from a unit economic perspective, as well as from a network effect perspective, not only for a network effect of the data feeding our algorithms, but also the network effect of people like referring other people to use the product. That just kind of worked out, right? And so, I think that that’s, that’s been the big thing that we’ve kind of focused on is how do we charge for products that, basically make people more money. And that’s like the central thesis.

Etienne Garbugli: So, each of your products, the products that you’re charging for have a specific outcome that, that people are buying it for.

So, like Retain for example, is churn reduction. And all of the other products. So, the way you kind of segment these products as well, is based on the actual outcomes that’s coming out of the products.

Patrick Campbell: Yeah, that’s the goal. Now, we are not in a perfect place because we have some, some pricing debt, we’ll call it.

So, ironically, our Price Intelligently product, the way that it’s set up. We don’t, we can’t charge purely based on outcome. Now we have a plan, like we have this ROI plan that people can pay for, but what ends up happening is, it gets really complicated when you’re selling to an enterprise company, right?

We’re selling to like giant, Autodesk or something like that. They need a little bit more predictability and they can’t handle the ambiguity of, the type of pricing that we would come up with. Now we’re working on basically. A new product coming down the pipe where we would be able to do that.

Now, that’s going to be some time though. So, but we have this deck where it’s like not a perfect thesis yet, but it’s something that we are, we are basically guiding ourselves towards.

Etienne Garbugli: Okay. Okay. So, once you have these products, how do you figure out what the value metric should be for these? It’s tied to the outcome I assume?

Patrick Campbell: For the new products?

Etienne Garbugli: Yeah. Well for the new products or the products that you add or you created in the past?

Patrick Campbell: Yeah. So that, that, that’s what we’re trying to do. So, all new products, we’re trying to get as close to outcome as possible. Now, some of them might still be in the insights like world, which isn’t necessarily, so that’s where Price Intelligently is, Hey, we’ve done this research. We have these insights, we have this data or these insights that tell you that you should do X, and that’s what’s going to help you improve that, that ARPU or that ACV, right? So, it’s basically like one degree away from that outcome or two I guess one degree to do your, I don’t know how the degree, but it’s like basically right next to that outcome.

So, we’re okay with that for now. But basically, what we’re trying to do is we’re trying to get all of our products into a world of outcomes, which, you know. Might not be possible right now, but it will be possible as we kind of advance in the future.

Etienne Garbugli: Okay. Okay. So, when you’re working on say the pricing model for Retain or another product, how do you go about creating the segmentation for your pricing strategy?

Patrick Campbell: Uh, so for us, like which axis of segmentation are you referring to? I just want to make sure I understand.

Etienne Garbugli: I think that’s part of the question. So, how do you figure out which axes of segmentation are important for a specific product versus another one?

Patrick Campbell: Got it. So, when you’re referring to segmentation, are you referring to like verticals, these types of things or like types of personas?

I just want to make sure I understand cause there’s segmentation. I can take that way. Or packaging.

Etienne Garbugli: That’s also the question. Which dimensions are you’re looking at specifically, and like, how do you. How do you figure out which dimensions matter for that specific product?

Patrick Campbell: Yeah. So, okay, I’m going to answer based on my interpretation of segmentation.

Yeah. Cause segmentation gets tough because most people what they refer to is, which aspect of the customer or the segment of the base that you have. So, for us it’s. When we’re doing research, and we’re putting together our pricing specifically for some, most of our products.

We just go back to those, those ideal customer profiles that we’ve set out and we really focus on the data and the information that’s coming from those target folks. So, for example, on the pricing side, we will weight data or we will wait information for customers that come from those companies that are doing $75 million or more in revenue per year versus those who are doing less than that, right?

Because we’re pushing ourselves to continue to go up market. Now in terms of like, the segmentation of when a deal comes in. We typically price, also along that axis on some level. So, we have a couple of different levers within our Price Intelligently pricing. One is like the size of the company, and that’s very much like pure segmentation-based where it’s like, Hey, if they’re above this threshold, the price is different than if it’s below this threshold.

And that’s basically just because the value that they’re getting, even if it’s the same level of work is very different, right? If I improve ARPU for $100 million company by 30%, and I improve a startup by 30%, that $100 million company is going to see those gains in a much, much quicker way, but also a much more dramatic way. So, that’s kinda how we weigh things there.

What’s kind of beautiful with the Retain product is the segmentation is just built into the value metric. We charge based on recovered revenue. So, you know, if you’re a large company, you have a lot of failed payments and the price is then going to be higher because it’s recovered revenue versus a smaller company where you might have a lot of failed payments, and so the effective percentage we take based on revenue, we don’t charge based on percentage. We charge based on, we have some tiers that basically backs in you based on how much we recover. But either way, like that allows us to, basically get as close to pure value as humanly possible. And yeah, we’re pretty proud of the elegance of that pricing model because it’s, it’s pure ROI.

If they don’t make any money, it’s $0. It doesn’t cost you anything. And if we make you a ton of money, we take, a good amount of money, but it’s nowhere near the amount of money we made you.

Etienne Garbugli: Hmm. So, in that sense, the segmentation that you guys have is based on… So, you have an overarching hierarchy of the market that you guys are looking at and the products, matter to different types of audiences and different types of segments that you guys have or different ideal customer profiles within, in relation to that specifically.

Patrick Campbell: Yeah. So, from that perspective, yeah, exactly. So, we have, depending on the product, we have different segments that we target, and then our pricing model shifts depending on who actually comes in, right?

So, on our inbound side, on, on the lead to demo, to our ops team, you know, they’re not BDRs [ Business Development Representatives ], we don’t have BDRs, but they’re like BDR equivalent. They are only taking certain, or they’re only going after folks outbound who are of a certain size or of a certain caliber, but they’ll take inbound from different types of groups as well.

So, it’s structured based on those segments coming in, but that’s, that’s the nature of a value metric is that it can kind of save you a little bit from having to overthink segmentation.

Etienne Garbugli: Okay. Okay. So, in that sense, that also helps you guys minimize a little bit the diffuseness of having a multi-product strategy where you guys are targeting the same profiles, but approaching them with a set of products that cater to their realities?

Patrick Campbell: Yeah, it gets tough. It just gets tough because like again, there’s a lot of surface area, but yeah, the long and short of it is we are, we are trying to make somewhat of a path of least resistance for folks coming in. And we don’t want to, obviously get it wrong when they come in just because they might not. They may not, you know, we don’t want to confuse the sales process, if that makes sense.

Etienne Garbugli: Yeah. Yeah. I think that’s actually a very good strategy. Like if you, I don’t know if you’ve read Lost and Founder by Rand Fishkin.

Patrick Campbell: Yeah.

Etienne Garbugli: Yeah. So, he talks about how the multi-product strategy that they add actually confused there because they had different personas, different targets, and the products didn’t overlap that much.

I think you guys have a structure that kind of makes it. More consistent, which is really interesting.

Patrick Campbell: Yeah. Yeah. Which works out well. Yeah. It’s interesting. I think it’s super hard, with whenever you add multiple, multiple pieces to a situation, and that’s kind of what we’ve done.

Etienne Garbugli: Well, what do you feel are the, the pros and the cons of having a multi-product strategy?

Patrick Campbell: Cons we’ve talked a lot about, so I’ll summarize them. I mean, it’s, you have a lot more surface area for limited resources, right? And there’s, there’s definitely an argument not to do it because you have, again, if you were targeting, if we were targeting different types of companies AND different types of buyers, I think it would be a very dumb decision and we’ve, maybe it’s still a dumb decision, but we’ve tried to convince ourselves it’s a smart decision because we’re going after the same companies and we have this hub and spoke model where they can come in through the hub, which is ProfitWell Metrics, or they can come in from one of the spokes, which is our different paid products.

Now, what’s super interesting is on the pro side. We get multiple bites at the apple, as they say, or maybe I’m using the metaphor incorrectly where let’s say someone, someone stalls on the Retain side of the house, right? You know, the customer success person, they’re really busy or he or she just isn’t interested for some reason.

We can go at them for the Price Intelligently product, right? And that customer success person may or may not even be involved in that process, right? And so, there’s a little bit of a swarming aspect where when one path fails, another path can be successful over time. I think that the other, the other pro is, is that.

We, and this might be just rationalization of a bad idea, but we don’t have to necessarily be as targeted with some of our marketing strategies because there’s a little bit of a pick your own adventure because people can kind of come in and see what’s going on. But the con there is that our homepage is a little generic, right?

It’s a little bit hard to understand exactly what we do from the hero, right? It’s not just like. We do this, we help with this, right? It’s like we have a suite of products that help with this nebulous thing, right? This outcome-centered products, right? And it’s like, what does that mean? Well, you have to read a little bit more to understand, right?

And so, the goal is we have to be so good at our marketing, so good at our content that people are willing to read that whole page, right? If they can read the whole page, we can get them. If they don’t read the whole page, then it’s really complicated, right? So, I think that there’s, those are some of the pros, some of the cons.

I think it’s, it’s something that we’re constantly, literally every quarter we’re like on some level debating, should we focus all on this thing right now? Should we, should we do this? And we always kind of talk our way out of it. But yeah, it’s something that’s, you know, something that’s super interesting.

Etienne Garbugli: So, how would you assess a product that would be too far off the platform that you guys have created? Like would you say, for example, a product that is for acquisition or something else like that? Is there like something that would tell you that this is, this is too far off, what we currently have.

Patrick Campbell: Yeah. I think that it really comes down to, so it’s, it’s less about the space. So, we believe that we will, we’ll have an acquisition product at some point. And it’s more about. What is it that we can do that no one else can do better, right? Or what makes us unique in doing it? So, one thing that we thought about is like, Oh, let’s build an NPS [ Net Promoter Score ] product.

Cause it’d be really useful to have NPS inside ProfitWell, so you can segment your data by NPS, but then we’re like, eh, like what are we going to do that’s anything different than every other NPS product that’s out there. And we have some ideas of how we could do this in a unique way, because you know, the Price Intelligently software is survey-based. And so there’s some things we’ve learned there, but we’re probably not going to make like a four to five X, let alone a 10 X product in that space, right? So, it’s like, eh, let’s just integrate with people and people can use whatever they’re using right now. And then, yeah, maybe we offer up a version of it because our really basic product there, but yeah, it doesn’t.

It probably doesn’t make sense for us to build that, right? So, it really kinda comes down to that uniqueness factor. Like, what can we do that someone else can’t? Well, right now with Retain, our data set allows us to basically be the best in the world at recovering failed payments because we’re sitting on more failed payment data than anyone else, right?

And data as you know, is the fuel for those algorithms. Now, that is kind of expanding now into active churn as well. We’re not going to be a Gainsight, we’re not gonna be anything like that, but we might be a product compliment to the Gainsights of the world and those types of things.

So, yeah, I think long story short, it really comes down to that thesis of how are we better than, how would we, how can we be better than anyone else who would be building this? And that’s, it’s not always obvious. And so, there’s, there’s definitely a debate that goes into that.

Etienne Garbugli: So, in a way, it’s kind of looking at what your current platform enables. Find a way where you could expand in the most, strategically sound way to be able to address, in a unique way, other outcomes?

Patrick Campbell: Yeah, 100%. I mean, we’re going, so for give you an example. So, we’re going deeper and deeper into revenue operations, which is this new newfangled term, which is basically the combination of sales, marketing, and customer success operations under one roof.

And. What we’re finding is that, you know, we’re, we thought the cleaning of data and getting accurate financial data was going to be, something that, yeah, it’s hard, but everyone was going to be able to do. Well, it turns out, we’ve been in this game now for like six years and we’re still miles ahead of our competition and other people in terms of accuracy.

And so, it’s like, okay, well if that’s the case, maybe this is a lot harder than we thought. And so, as we go deeper into revenue operations, okay, well we can create products that help with revenue operations that are, we’re uniquely qualified to solve, around accurate data and things like that.

And so, that’s kind of how we think about it. I think that there’s a world where you still have to say no to some of those ideas, but right now that’s the guiding light for a lot of the ideas that we have, because a lot of the ideas we have, it’s all of a sudden, we ask that question and then poof, that idea goes away because we’re, eh, there’s nothing that we can do that’s going to solve for this.

Etienne Garbugli: No, it’s definitely a super interesting approach. I like in a way how contrarian it is to a lot of the thinking in startups right now. How would you… Maybe last question, how would you, if you were starting over today, how would you approach figuring out what your opportunity should be?

Patrick Campbell: Say that one more time.

Etienne Garbugli: Like if you were starting all over today. You were able to start anything, any kind of business in the current, in the current space. How would you go about figuring out what your opportunity is?

Patrick Campbell: Yeah. So, from scratch.

No, it’s hard. You asked really good questions cause they’re not obvious answers. I think that. Here. Here’s what I think on approach. I feel as if most companies, they do this a little bit backwards. You know, product-market fit was a really good concept when product was really difficult to build.

Now, creating a great product is still and always will be really difficult because it’s like creating a great piece of art or a great, math theorem or like a great chemistry innovation or something like that. It’s always going to be hard to do great. But I think the barrier to entry is so low right now where all of us can just basically build a product, very quickly, right?

We can spin up a server and all those things that we take for granted of. Being able to just grab a website off of Squarespace or doing X, Y, Z. Like those things were so hard 20 years ago. It took so much effort and so much money to do those things. And I think so now product-market fit made sense because Hey, if you could build this innovation, there weren’t a lot of features and functionality out there, so you could just go find this market, right?

You have a product now I’ve got to go find the market. And I think that really, we’re in a world of market, right? And so like, Balfour, Brian Balfour, good friend of mine who’s, runs Reforge right now, and used to be former growth or leader of growth over at HubSpot. He basically started talking about like, it’s really market-product fit.

What is the market you’re going to go into. And then, gleaning from that market, what makes the most sense to build for that market, right? And I think that what you need to do in terms of approach, if we were starting over, I would, I would think about the market and then there’s a bunch of questions, right?

Well, if the market’s so astronomically big, there’s probably people in it already. So, what makes you different? If the market’s small, but growing, what’s the thing that can make you unique now, but also helps you ride the wave of the market? And just really going deep on what that market is and then kind of thinking through like what you build.

And so. I really like what DC, David Cancel did at Drift where you know, the first year and a half, two years, they built like four or five different products, to chase different markets and it was all in the name of research and then they said, Oh, this is the space we’re in. We’re going into this space. And then they went all in, right?

And so it’s less of, I think right now, I guess to put it in more practical terms, there’s too many people going, Oh cool, I can create this cool thing. And then they go all in on this cool thing they just created. Not enough people who are like, Hey, let me research this cool market, and then based on that, I’m going to go all in on it.

And it’s just because research isn’t as sexy as pushing code. The problem is, is that research helps you understand what code you should push, and enough, not enough people realize that.

Etienne Garbugli: But in that case key, would you define that market?

Patrick Campbell: Which one?

Etienne Garbugli: Well, yeah, maybe Drift is an example. Cause a market could be like, for example, pharmaceuticals or it could be a segment within, within that market. Like how, would you, would you start with a market…

Patrick Campbell: That’s a whole podcast, right? So, I think that. Now, how do you define that market?

I mean, that’s, that’s where you have to go into research mode, right? And again, it’s going to start with an inkling of an idea, right? Or it might start with like, I mean, I know some people who build their companies based on, you know, what are the top 10 largest markets? Or what are the top 10 growing markets, right?

You know, so the, the classic Amazon. Hey, like retail’s interesting, but this internet thing, like it wasn’t an eCommerce play, it was an internet play. He’s like, Oh, the internet is going nuts, there’s going to be a, an eCommerce person or a commerce retail person who wins in that market, right? So, you’re looking at trends, but you’re also looking at, those inklings that you might have and then kind of like sanding down.

And then it comes down to a combination of, all kinds of stuff, right? Like, you. You know, there’s some folks, and I think I’m one of them. I don’t, I can fall in love with any market, right? I can fall in love with every single market that’s out there. I could be making… shower curtains, right? Know all, everything about shower curtains. I could tell you everything and everything about it.

But then I think that there’s, there’s a ton of people who are more, they’re more, I need to love it. I need to like it, right? And that’s a constraint. And that doesn’t mean you can’t find a big market, you just might have to find a, find a little bit of a more unique play on it, if that makes sense.

Etienne Garbugli: That’s really interesting. Thanks for taking the time, Patrick. Where can people go to learn more about your work and your company?

Patrick Campbell: Uh, yeah. So, I’m just profitwell.com is, you know, we write a ton of content and do a bunch of other fun stuff.

And then, I’m just Patrick Campbell on LinkedIn, so find me there. That’s where I publish a lot of fun stuff. But if you ever have any other questions, feel free to email me at patrick@profitwell.com. Sometimes it takes a little bit for me to get back to you, but I always will get back to you.

Etienne Garbugli: Amazing. Thank you very much.

Patrick Campbell: Yeah, absolutely, man.

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[ Interview ] Lean UX Co-Author Jeff Gothelf on How Product Teams Should Do Product Discovery in 2020

A few weeks back, I spoke to Lean UX co-author Jeff Gothelf for The Lean B2B Podcast. We talked about UX, product management, innovation, experiment design, and the importance of doing effective product discovery.

You can watch the full interview below, or access it on iTunes, Google Play or Spotify.

Interview Transcript

Jeff Gothelf – Product Discovery

Etienne Garbugli: My guest today is Jeff Gothelf. Jeff is the co-author of the books Lean UX: Design Great Products with Agile Teams and Sense & Respond. He’s also the author of Lean vs Agile vs Design Thinking. Along with Josh Seiden, Jeff co-founded Sense & Respond Press, a publishing house focused on bringing innovation, digital transformation, product management, and design books to market.

Jeff is also a coach, speaker, and consultant helping organizations build better products. Jeff, welcome to the podcast.

Jeff Gothelf: Thanks so much for having me on, Etienne.

Etienne Garbugli: Maybe as a first question, so when you’re working with product teams, and when you speak with product teams, do you feel that, teams are generally sufficiently user or customer-driven?

Jeff Gothelf: Um, I think that most organizations pay a lot of lip service to being customer centric and, and customer driven. I think a significantly smaller percentage of those organizations actually work that way. That’s not to say that the product managers, the designers, the engineers, the QA folks on those teams are not customer centric or don’t want to be.

I just have seen that many organizations say they are or say they aspire to be, but don’t actually. The majority of them don’t put the effort into actually be that way, despite, despite having really smart customer-centric designers, product managers and engineers on staff.

Etienne Garbugli: Well. So, in that case, what do you feel are the biggest challenges, or the biggest hurdles that these teams or these people within organizations face in attempting to be more user or customer-driven?

Jeff Gothelf: I mean there, there are lots, not the least of which is there’s, especially in successful companies, even high-growth companies, they don’t have to be old companies, but companies that have found product-market fit and that are scaling quickly, there’s a belief that we know what’s best for the customer, right?

Look, we’re big. We’re successful. We’ve been around a hundred years or 20 years, or you know, where we, we’re a hundred-million-dollar company. We’re a $500 million company. We know what customers want. I don’t need to talk to them. I don’t need to ask them. Um, because look, look at what we’ve done on our own without that so far.

So, there’s, there’s a lot of that. Um, the other thing is that being customer centric means that your measure of success changes significantly. It changes from outputs to outcomes. Now that’s an easy thing to say. So, I’m going to unpack it for just a second. Outputs are the things that we make, the features, the products, the services, the apps, the devices, those types of things.

Um, most organizations manage to output for a variety of legacy reasons, but really, most of all, because it is a binary measure. You’ve shipped the product or you did not ship the product. And because it’s binary, it’s easy to measure and because it’s easy to measure, it’s easy to manage and easy to incentivize and reward.

If you’re truly being customer centric, you should be managing to outcomes. Outcomes are the customer behaviors that we see once we give our customers the product, the service, the app, the system, whatever it is. And if their behavior doesn’t change in a way that makes them more successful and then ultimately us more successful, then we have to update that system.

And so, the measure of success changes dramatically from a feature-centric one. We built a thing. To a customer-centric one when you manage to outcomes, which is we positively impacted the lives of our customers. And we know that because now they’re doing things differently that benefit them more and that benefit us more.

Uh, and so that’s, that’s, that’s really the biggest, the biggest obstacle to being customer centric.

Etienne Garbugli: And so, working with a lot of organizations or interacting with a lot of organizations, like how do you see that trend evolving?

Jeff Gothelf: Again, I see a lot of really smart people in the trenches, in the individual contributor roles, in the team manager roles, in the discipline leadership roles, the design leader, the product leader, that type of thing.

But I rarely see that conversation elevated to a leadership or an executive level outside of customer satisfaction or Net Promoter Score. Which again is, uh, not, uh, we should absolutely be worried about the satisfaction of our customers, but they’re using that one metric as a sole measure of that is incredibly risky and not terribly valuable.

Um, and so that’s the trend is. I think you’d be hard pressed, so I think you’d be hard pressed to find a designer who doesn’t believe they are customer centric. I mean, sure, there’s going to be some, some genius designers out there who believe they know best, but for the most part, I think the overwhelming majority of interaction designers, UX designers, those kinds of folks are customer centric by default as part of the profession.

I think product managers, modern product managers, people who subscribe to kind of the modern process of software development and delivery and understanding the market (product discovery). I think many of those folks believe they are and are customer centric. So, you’ll be hard pressed to, to find somebody who says, no, I’m not, I’m not customer centric.

There are, they exist. There are some sort of inward-facing product owners or product managers who don’t really believe in customer centricity. I think there’s probably more of those than there are UX designers. Um, and so I think the trends there are positive at the individual contributor level.

I think even engineers really get it. I mean, there’s still, again, I think, you know, there’s probably more engineers than product managers, than designers who don’t really care about the customer that much. But nevertheless, I think modern software developers really do understand that customer centricity is key.

So, I think those trends are headed in the right direction. I think at the C-suite and the leadership level, there is a belief in maintaining competitiveness, maintaining competitive advantage. And they see organizations like Apple, Netflix, Facebook, Google, Amazon, really sort of dominating not only their own spaces, but expanding fairly broadly into other domains. And they want to be like them. And unfortunately, the only real takeaways they get from those organizations is faster time to market, right?

How can we get more stuff to market more quickly? And I think where they fail to see, and this is not true across the board for those big five tech organizations, but what they fail to take away is how customer centric Amazon is. Netflix is.

How focused on the user experience they are. Um, sadly, Facebook is too to their own ends. They’re not really focused on optimizing the customer’s experience with more of their bottom line. But, um, and I think that that is, uh, that’s something that’s missing.

So, they’ll focus on things like agile, for example. Right? Agile is what makes these companies successful. We need agile. And they see it as a, as a recipe for delivering more software more quickly, which again, is managing the outputs, not managing the outcomes.

Etienne Garbugli: All right. So, going in that direction, so say I just got hired by an organization, how would you recommend I go about diagnosing the product organization?

So, how we work and what’s the current situation in terms of how things get delivered? Are we output, are we outcome? Is it, is it working in terms of agile? Is it working as an organization? And then maybe how would you recommend someone within an organization to shift that mindset towards more of a learning, more of an, uh, an output discussion?

Jeff Gothelf: I think how you have that conversation will vary by where in the organization you got hired, right? So what level in the organization. But the conversation you’re trying to have, generally speaking, is the same. It’s a conversation that asks the question, why? Why are we working on this? Right?

What customer is it for? Um, what benefit does it bring to the customer? If the customer is successful, how does that translate into business success for us? How does that fit into the broader product portfolio that we’re building into the strategic plans for the organization for the next year or two years, or whatever it is?

That’s the conversation you want to have. Now, again, asking why is increasingly risky to your career, the lower in the organization you are typically speaking in larger organizations, right? And so, we want to build the conversation to ask why in a way that doesn’t limit your career in that organization.

But that’s the conversation you’re trying to have. So, I think that, you know, at the individual contributor level, it’s about asking, what are the assumptions that went into making the decision to build X, right? Or to design it in this particular way? Who’s the target audience? Right?

When’s the last time we talked to anybody from that target audience? Can I go talk to somebody from that target audience? Right? And then to, as you start to collect more customer feedback, more quantitative data, and as you bring that back into the team. Really seeing how the team, the product manager, the business lead, the business line leader, the executives, the stakeholders, react to that data because that data is never going to be 100% reflective in a positive way of everything that you’re doing, right?

There’s always going to be some contradiction. Hey, we’re making it blue. Everyone says they like red and, whatever. Right? So, how people react to that becomes really interesting, right? It’s a good indicator of the culture of an organization if they’re like, oh yeah, yeah, that’s what the customers say, but we know better. Right?

Or that kind of builds up a better understanding of our, of our customer. Let’s explore and see why that is, and maybe through the next iterations, we can make some improvements, right? It’s two very different conversations.

Etienne Garbugli: So, I saw, I think last week or a couple of weeks back, you released the hypothesis canvas, which I really like.

So, when you’re working on a project, when you’re working as part of a team, so how do you pick which questions to address and how do you figure out what the most important things to learn are?

Jeff Gothelf: Yeah. So, um. The Hypothesis Prioritization Canvas is a tool that I use with every team that I work with to help them determine where to focus their customer discovery work.

There is sadly, not enough time in every sprint to do all the discovery work that we want, and frankly, we don’t need to be doing product discovery on everything. Right there, there. And that’s the purpose of the canvas. The canvas is to say, here are all the things that we’re looking at for the next iteration, two iterations, quarter, whatever it is, whatever the timeframe is.

Where should we focus our learning activities? Our discovery work, our research, our, uh, customer conversations? And, the matrix in that canvas is based on risk of the idea, risk of the hypothesis, low to high, and the perceived value or the perceived impact that we believe that this hypothesis will have on the customer, on the business, etc., again, from low to high.

It’s perceived value because we’re assuming that this will have big impact, right? We, uh, our educated guest tells us that, but we don’t really know. And then risk is contextual to the hypothesis or the idea itself. So, it might be technical risk, it might be design risk, might be brand risk or market risk. The hypotheses that end up being high risk, but also high potential value or high perceived value.

Those are the ones where we should spend our product discovery work on. That’s where we should, if we, if we’ve got, you know, those precious few hours, every sprint that we can build experiments, talk to customers, do research, you know, prototyping, whatever, whatever the activity is. Um, focus on the hypotheses that are high perceived value and high risk.

Because if you get those wrong, you stand to do a lot of damage. But if you get those right. You stand to have a good impact on the customer and on the organization. So that’s, that’s what the canvas is for, is to really help you kind of think through your ideas and where to focus your product discovery efforts.

As far as determining, uh, risky assumptions and that type of thing. The really interesting thing is there’s two key questions that I teach every team that I work with. Um, and the questions are boxes seven and eight in the Lean UX canvas, the first canvas that we did a couple of years ago.

What’s the most important thing that we need to learn first and what’s the least amount of work we need to do to learn that? Now, the focus of your question was box seven, which is what’s the most important thing we need to learn first? And that’s the question that I ask every team at the beginning of a new iteration, right?

What is, you know, uh, the, what is, it’s a conversation about risk and it’s a conversation about the risks that will derail the thing that we’re currently working on. Now, the interesting thing is, is that in a truly cross-functional setting, product managers, designers, engineers, sitting together, you will get at least as many answers to that question as there are disciplines in the room, right?

The designers will talk about some designer challenges, some customer challenges. The product managers will talk about, you know, product-market fit or scalability or business model or business rules or whatever it is, right? The engineers will talk about feasibility, scalability, performance, security, and all of those are valid concerns.
They’re all valid risks to the success of the project. The question is, what do you need to learn right now? What’s the most important thing you need to learn right now? The thing that if we get it wrong today, tomorrow, in this sprint breaks the whole initiative or breaks the whole hypothesis. And that is an interesting conversation to have with your team.

At the beginning of an initiative that’s going to be related to value, the value of the idea. Will people look for it? Will they find it? Will they try it? Will they sign up for it? That type of thing. Do they understand what it is? Right? Um, if you’re in kind of a more mature version of the product, we’re going to move away from value into feasibility, scalability, security, performance. Business viability, those types of things.

Um, and so really thinking about the, where in the lifecycle of your initiative, uh, where in the lifecycle of your idea is helps you to understand the biggest risks, but always at the earlier stages, focus on value. Because if nobody wants it, nobody will find it. Nobody will look for it. Nobody will try it. Uh, it doesn’t matter if you can build it.

Etienne Garbugli: But so, if we talk about that specifically, like one of the things I love about the Sense & Response framework is that agility, but not focused on how you ship, it’s more of that corporate agility where you know when to adapt and change course and, and change your direction.

So, in that case, when do you know, like what are the. So, for example, the trigger points that tell you that it’s no longer about the value. Now we should be learning about that next other thing afterwards. Maybe feasibility or whatever it is. Like how do you know when to transition between say one, a learning goal versus another learning goal?

Jeff Gothelf: It’s a great question. Look, I mean, the interesting thing about all this stuff is that we are inspired by science. We’re inspired by scientific method. You hear us talk about assumptions and hypotheses and experiments, right? Collecting data and all that stuff, and we do all of that stuff and we are inspired by scientific method, but we’re not doing science. Right.

In science, there are more or less absolute truths, right? We fed the bacteria X and they mutated into a monster. That happened or it didn’t happen, right? Uh, in our world, the answers are rarely black or white. They’re usually in, in some shade of gray in between. And so. How you decide when to kind of move on to the next set of assumptions, the next set of risks to say, Hey, you know what that was good data, so we’re going to continue, we’re going to persevere with this hypothesis versus pivoting or killing the idea.

There is, there’s a level of evidence that you want to use, but at some point, you’re going to need to augment that with some level of gut feeling or really confidence, right?

It’s confidence that that is, is the true test. So, my, my friend and colleague Jeff Patton talks about this concept of confidence in terms of bets, right? So, you, you ran an experiment, you learn something and you say, okay, great. Um, what are you willing to bet me. That that this is a good idea that we should keep working on, right?

Are you willing to bet me your lunch? Right? Most teams will say, yeah, are you willing to bet me a week’s vacation? Right? Maybe are you willing to bet me your retirement savings, right? Uh, your house? Are you willing to bet me your left arm? Like, you know, and so and so if you’re, when you, you know, when you collect the data, you know, qualitative and quantitative and you still can’t get to a, you know, it’s going to be in that gray area and you still can’t get to that really kind of definitive, yes, we should move forward. No, we should not. Um, that’s a good conversation to have.

What are we willing to bet that this is still a good idea? And that really gives you a sense, if people are saying, look, I’m not willing to bet you lunch that we should keep moving. That’s a good indication that. We got to change course, right?

If, and if people are saying, I’m willing to bet you my left arm, that this is a good idea. And that’s kind of the collective sentiment, that’s a good indication that the team’s got enough data to move forward. And that’s, that’s, that’s the non-scientific part of this, right? That’s the shades of gray part of this.

Etienne Garbugli: Well, so in that direction, so in one of your talk, you’re talking about, uh, say for example, the team is focused on improving the conversion rate. So, you hit 15%. Maybe you can get to 20%, but the effort between 15% and 20%, will that’d be worth your time?

Obviously, if you were able to always make the right decisions and always be, be changing, uh, to the next assumption at the right time, there would be a lot of value there cause you would probably be growing faster. Are there telltale signs that tell you, so we’ve, we’ve probably milked that objective enough for now, let’s try and, and, and address the next thing?

Jeff Gothelf: Yeah. It’s interesting, right? So, there’s theory of the local maxima is always an interesting one, right? We keep putting, we keep putting effort into this, and, um, we we’re not seeing the kind of returns on it. Um, again, this is, uh. There’s no, I mean, as far as I know, there’s no formula that says that you have now tried squeezing more out of this five times, and that’s enough, right?

There might be a formula. I just, I’m not aware of one. Um. And so, it’s really a thing of like, Hey, we ran this experiment and we couldn’t get this to move forward. Hey, we tried this week. We really got up, you know, we’ve got a 1% lift out of this. We did this, we got a 0.2% lift out of this.

Okay, we’ve been at this for a month, we can’t seem to budge off of a 15% conversion rate, 16% conversion rate. That’s a good conversation to come back to your stakeholders, your clients, whoever it is, and say, look, we spent a month trying to move this. We got to 15 pretty quickly. Getting beyond 15 has proven a challenge.

There are some big things we could try and kind of pick up and move over, but we don’t believe that we, you know, the, the, the return is worth the investment here at this point. So, I think that that, um, again, is one of those sort of gut feelings. Um, but it’s tough. It’s tough because remember, we all love our ideas and letting them go is difficult.

Etienne Garbugli: All right. So, within this like, so what’s the role of experimentation and what’s the role of maybe more in depth research on product when you’re doing product discovery? So how do you see them best working together?

Jeff Gothelf: Well, I mean this, this is how we learn, right? Experimentation and product discovery is how we learn.

Now, experiments, for me, it’s an umbrella term for anything that we do to build learning into our product. Discovering delivery process. Right? So, it can be anything from a customer interview to a paper prototype, to a live data prototype, to beta testing, price testing, A/B tests. All these things are, are experiments.

They’re learning activities to help us determine if we should continue investing in a particular direction. Um, and so to me, they are a crucial part of “the work”. In other words, these are not disposable elements of product development, modern product development that we can not do when we’re tight on time. Right?

The, the work, sadly, it’s primarily perceived the software engineering in most organizations, but in reality, “the work”, capital T capital W, right, is, uh, is software engineering, design, right? Product discovery, research, product management. Uh, uh, you know, all of these things are part of “the work”.

And I think that that’s, to me, if, if I feel successful when an organization understands that. They understand that the work can’t be done without, uh, uh, without all of those components. And so that’s to me is it’s a crucial role. It’s as crucial of a role as software engineering because, and people say, well, that’s not true because the software engineering is the actual making of the thing.

And while I agree with that, right, if you make the wrong thing or an unusable thing, then who cares? Right? And so, informing what work needs to get done is equally as important as, as expertly crafting the experience, both in a design and a development way.

Etienne Garbugli: So, in that case, if you, uh, if you use experiments as an umbrella term like that, so do you always recommend setting exit criteria, for example, you’re doing interviews or you’re doing other product discovery activities that are more, um, customer development or user research. Would you always say that there needs to be an exit criteria to these activities as well?

Jeff Gothelf: Define what you mean exit criteria.

Etienne Garbugli: More like you have an experiment, you’re running a test, so like you would have an evaluation criteria. If this passes, if we reach this certain threshold, would you do the same thing with interviews as well or with other activities like that?

Jeff Gothelf: Yeah. I mean, yes, you need to go in with a sense of what success looks like and what failure looks like. Right? So, um, there needs to be some kind of a threshold with the team that says, we’re going to talk to 10 people today. If less than three of them tell us that there’s any value in this thing, then we’ve got to go refigure, we’ve got to figure this out.

Now look, you may end up with like two and a half, right? Which is again, where this kind of like two people said they hated it, and one person said, you know, I don’t love it. I’m not sure I’d use like, you know, you don’t get that, that perfectly clear answer.

Um, and that’s where the challenges begin with all of this is, is because if you don’t get the, those very clear responses, you don’t get that very clear, you know, black or white, yes, it’s a pass or it’s a fail, but you absolutely need to go in with some kind of success threshold. That, as a team, kind of back to our conversation about bets and confidence gives you enough confidence to move forward. Right?

So, for example, let’s say you’re doing a feature fake. Right where there’s a link, kind of a button to nowhere, right? So, it looks like a feature on your site, but when you click it, you get nothing, or a 404 page or a coming soon message, right? Um, and 10,000 people come through that workflow on a daily basis, right?

As a team, how many people are going to have to click on that to give you the confidence to move forward? Right? And there’s, you know, you start off with a ridiculous. You can get teams to, to conclude, you can say, look, two people out of 10,000 and they’d be like, no way. Right? 9,000 out of 10,000 no way.

Okay, so it’s between two and 9,000 right? You kind of start to narrow that down. Is it a thousand is it 500 is it 2,500 right? That becomes the kind of conversation that you want to have and be very clear that if we hit this, we feel confident enough to move forward. That’s it.

Etienne Garbugli: So, it’s about increasing the level of confidence you have to move forward to the next step?

Jeff Gothelf: Yeah. Because I told you like, this is not, it’s not science. I mean, you will, every now and again you’ll get lucky, right. And nine out of 10 people will find the thing, tell you they love it, pay you for it. Right. Awesome. Right? But, uh. Well, I’ll give you a real life example. I was working with a team that was building a new subscription-based business for an organization that never had subscription-based businesses before.

So, they didn’t have, they didn’t even have a sense of what success looks like for subscription, but they knew how much money they needed to make and how much they’re going to charge for this service, what they thought they were going to charge for the service, and so they knew how much money they needed to make in order to build this into a viable business.

And so, they did some quick, you know, scaling or some spreadsheets for scaling this up and scaling this down. And they got a sense that about 75% retention rate month over month was what they needed, right? And so they ran this experiment with this new subscription model. A a. Idea, and as long as people converted at or around 75% continuously on a month to month to month basis for three months, that was a good indication that they were delivering value.

So, for them, that number was 75% and it may not be the number for your organization, but that’s what they needed to hit to be able to make a business case for further investment in this idea.

Etienne Garbugli: That’s super interesting. I don’t want to take too much of your time, but thanks for taking the time, Jeff.

It’s really appreciated. Where can people go to learn more about your work?

Jeff Gothelf: Absolutely. It’s my pleasure to be here. Um, so, uh, so I’m super easy to find. That’s by design. If you go to jeffgothelf.com, you’ll find everything there. My blog, What I do, how I do it, links to upcoming events.

I’ve got lots of in-person and online classes available as well as links to Sense & Respond Press. And so that’s a great place to go. Jeffgothelf.com, start there.

Etienne Garbugli: I’ll make sure to share the hypothesis canvas, and as well the revised Lean UX Canvas that you guys have.

Jeff Gothelf: Perfect.

Etienne Garbugli: Thank you very much. That’s really appreciated.

Jeff Gothelf: Thank you, Etienne. That was great.

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