"If I Had Duck Feet" - The Importance of Picking One Identity in Your Early Days – Part 1 of 2

As you some of you may know, one of my part-time jobs over the last few years has been working closely with my children on their high school exit, college selection & entry process. As you might imagine, I have subjected my poor kids to likely too many spreadsheets, too many frameworks, and schedules that are over optimized. Regardless, it has allowed me to spend critical time with both my daughter and son which I will always relish and look back fondly on (although they might think differently). Fortunately, it also appears that both will have gotten into their super stretch schools ( you don’t make any of the shots you do not take) and are on their way to the next part of this journey called life.

I am writing this as I return from a seven day trip on the east coast and a three day trip in California visiting three excellent schools, and their own admit day program for my child. I know – seems a bit crazy but what can I say – when I run a process, I run a process. For those that have been through this rite of passage, the admit day is where colleges who have admitted your child run a unique on-campus program to recruit your child hard to pick them. What is very difficult in this process for a parent and more importantly your child (as it’s their call at this point) is how best to determine which school is the best fit for them. It has been very interesting indeed to experience first-hand the marketing program each school puts on and the depth, uniqueness, and consistency of their message or lack thereof. The schools are very different in their ability to deliver an unambiguous message on who they are, what they care about, and what type of student would thrive there. They also differ in showing vulnerability and admitting the challenges kids might face and the resources the school provides to support them. I found these differences both fascinating and surprising – they are all top-flight schools who are in theory fighting for your kid (and the enormous 4-year contract with significant ACV followed by a 20-40 year annuity,- albeit much smaller hopefully). To me, it strikes me as odd that they all wouldn’t crush this part of their jobs.

Perhaps, I will write a blog one day on my top 10 tips for working with your child on helping guide them on the right approach for them to get into the right school for them without the unnecessary stress and definitely without the need to superimpose their face on a world-class fencer or champion crew oars-person. For the best written and humorous piece on this, check out this fantastic article from the Atlantic. However, for now, this experience has inspired me to write this piece – which is really about the critical importance, in your early seed to series A days, of establishing and sticking with a core identity to ensure that you can attract the right clients and employees and develop an investable story. How do you ensure you do not underwhelm in your approach like some of the schools I have visited that don’t have a coherent, unified approach and message that calls very strongly to the people they are trying to convince to commit? Because you must to thrive and survive to see another day and another round of investment.

In thinking through the best way to provide some color (and hopefully some humor as well as life shouldn’t always be so serious), I think the fantastic children’s book “If I Had Duck Feet” by Dr. Seuss is a great business primer. It’s an excellent book to read to your kids about them coming to terms with who they are and to love their true self as opposed to trying to be too many things to too many people – i.e., just be YOU. Not to be condescending but early stage start-ups, at least in their lifecycle, are in their business infancy so thus the not so subtle comparison to children. To summarize the book, a young child wishes to have many additional special skills so that they can stand out, as shown in the example below:

The child then decides that if they had all these skills at once, they would be amazing. Not just one skill, but all the abilities all at once!

However, the reality is that people do not recognize the child and worse deem him a freak and decide to catch him and throw him into a cage at the zoo.

Then naturally, with all good Dr. Seuss books where the moral of the story becomes evidently clear, the child comes to his senses and realizes the goal is not to be a “many-which-what-who” but to just be happy being themselves:

What then is the analogy here for start-ups? It is actually a simple and straightforward one.

Young companies, around the seed funding stage, tend to have the following characteristics:

• Compelling founders and likely a strong vision and market aspiration.
• They may or may not have a true MVP of a product and likely do not have significant ARR and market traction.
• They have some business data points but minimal actual valid indicators of market fit.
• They have hopefully raised around $1-2M in cash with which they have about 18 to 24 months to find some quasi-market fit and triple their ARR (i.e., from $30-$50K MRR to $200k-$300K MRR). 

Companies who want to find market-fit successfully must avoid chasing too many markets and segments in a distracted, energy dissipating manner. In short, they must not fall into the high aspiration trap and avoid becoming a “many-which-what-who.”

To do that, job one is directing their limited capital and resources at a core market and market segment with a very clear product and GTM focus. Absent that, they will simply not have an investable series A story as they will not be able to decipher their business results and explain how they will effectively deploy additional capital after their next round. However, if they do settle on an “identity” and rally their efforts squarely against it, they will be able to develop what I call “metric maturity.” They will start to understand what is working and what is not and where best to direct effort, resources, and money to fix underperformance or invest in success.

This effort, if done right, will not just maximize success for a successful A round but is likely the investable thesis for these companies subsequent B rounds of funding as well.  Running a successful start-up is obviously more complicated than what I can outline in a shortish digestible blog. Regardless, I have provided below five high-level concepts/steps for young companies to follow to help maximize their success in moving from "high hopes but uncertainty" to a company in which many will want to invest.

1.  Craft and Fine Tune Your Narrative

In a business’s infancy, story-telling is job number one. There is nothing more important than aligning everyone around a very clear and easy to understand narrative around the problem your company uniquely solves and why it matters. We used this storytelling to significant effect at salesforce.com, and many former salesforce.com employees have gone on to great things leveraging this same approach. For a great example, look at the wonderful work of Tien Tzuo at Zuora referenced here.  Here are the necessary items you must be able to answer succinctly and powerfully. Note they may not all be true yet (you are just a tiny start-up), but it is indeed the vision on which you will be 100% focused on delivering:

• How has the world changed for companies?
• To survive/thrive, what must companies now do?
• Why must they do this now rather than later?
• How does your solution best enable companies to make this shift?
• How easy is it for companies to adopt your solution?
• How many companies like X have already done this with you?

I have seen in my career hundreds of website, sales presentations, and investor decks that go on and on about market size, product features, and company logos without merely answering the questions above. I recommend that all companies answer these questions first – they form the foundational value proposition and differentiation for your company. Moreover, they also allow you to understand the genuine need for your product and the potential TAM. A compelling and clear narrative is hugely impactful and will allow your to punch way above your actual weight in the early days and successfully attract your first great ten employees and logos – especially if the message can elicit emotion. 

A great example to inspire you in building your own world-class emotionally compelling narrative can be found here, courtesy of Don Draper of Mad Men fame.

2. Do Not Try and Change Your Buyer - Yet

Many people will speak to you on the importance of value selling and power of the challenger sale. I am one of them. As you evolve as a company, as I have previously written, it is essential to position your offering within the context of what matters for your core buyer. I have also explained how you should evolve your entire sales process into a buyer-oriented process where you can effectively measure your deal progress within the context of the interest and activity that your buyer is showing. For mature companies in mature markets which face well-informed and somewhat biased buyers, you often have to become the masters of “flipping the script” and reframing the buyer's point of view to best match to your unique strengths.

However, in the seed stage – i.e., in your infancy, I strongly recommend (assuming your narrative is compelling and makes sense) that you DO NOT do this. Yes - please do come up with a relevant, compelling story for your target buyer but do not try and describe and sell it in a manner that the buyer does not naturally comprehend. If you have to do that to succeed, go back and rework things - you haven't found some natural, frictionless market fit. Some might call what I am saying heresy, but in this stage, you still don’t really understand your true market-fit and instead of trying to foist your vision of the product a buyer needs with your language that they may not grok is just a complete waste of time and effort. Instead, in your early stage, do not over think it – adapt your GTM around what your buyers expect and when the market responds well to it, do more of it.

Use language the buyer naturally understands. Use pricing that makes sense to them. Use the product delivery and support mechanism that feels natural to them. Deliver the features that matter to them rather than the visionary ones you think they need but they do not appreciate nor or willing to trade for what they consider their Maslow’s hierarchy of needs.  

As an example, I was working with a company who was selling to a simple SMB buyer. They were struggling in this segment versus a woefully inadequate competitor. When I dug in, I discovered that they kept trying to charge 2x the price with the justification that their solution was far more powerful and complete. However, that approach for this buyer, who was not sophisticated and wanted a simple tool just to get started, was just "stupid is as stupid does" in retrospect.

3.  Pick Your Product Identity and Potential Paths

If you read any of my blogs before, you will know that I am a huge fan of conceptual frameworks. In my mind, understanding how best to frame the logic around the decisions you may or may not make is what allows companies to succeed in a sea of uncertainty. I have also found frameworks as a great way to gain alignment in a meeting around what companies are seeing, how best to understand them, and how best to make logical trade-offs in regards to potential paths of actions.

A framework I use almost every time I meet with seed stage (and often series A) companies is what I call the Product Identity framework. In that, I ask companies what is their initial product identity and have them focus on just one to start. Why? Because that identity helps guide how best to deploy their limited capital across their product and go to market strategy. In mind, I have them pick - are you a Utility or an Application or a Platform? I tell them that at some point they can be more than just one, but for their initial foray, they must settle on one. Consider below my definitions of these three product identities:

• Utility: The product is a utility that people clearly and quickly understand what it does and why they might use it when they see and experience the product. This product is usually bought rather than sold and the value it offers to an individual user may be more than sufficient for that company's product to be purchased and gain some traction. These products tend to crush when there is a natural virality loop - i.e., when one user shares the product with another user, the product's value to the individual is greatly enhanced. To surpass 10M in ARR, successful utility product companies sell tons of their SKUs at lower individual sales prices. Think - Dropbox.
• Application: This product is more sophisticated than a utility product and tends to need some explanation as to why someone would buy it. You generally have to insert humans at some part of the evaluation and buying process, usually to explain better what the product does, why the buyer should use it, and how its better than what the buyer is using or is considering as alternatives. The value of an application leans more towards the benefit it provides to a group of individuals, whether that be a small team, a department, or an entire company. For that 10M ARR target, success application companies sell less quantity at higher prices than their utility oriented peers. Think - Marketo.
• Platform: By platform, I mean that the product is more complicated than a single application and far more so than a utility-based product. These tend to come in two different flavors: 1) A multi-application product suite for use across a broader subset of a company's users (think - SAP) or 2) An infrastructure like offering that customer leverages to either create applications or add value to their existing applications (think - Snowflake or Mulesoft). These offerings take a while for a customer to evaluate and will require more resources in the selling process as the eventual business outcome for the buyer is less well-defined out of the gate. As such, we usually see companies in this space selling a smaller number of much larger deals, albeit with longer sales cycles.

Now - of course, there are no hard and fast lines between one identity and the other - i.e., there is a continuum. I also appreciate that there are plenty of examples where it is hard to put a company into a single box. I can hear people saying right now - is Segment a utility or a platform? Isn't AWS a platform utility? Isn't Salesforce both an application and a platform product? Sure, but I would argue that in a company's early days, centering yourself around one of the definitions above as your starting place will be hugely helpful for clarity across all that you do - as I will explain later.

Also, remember the identity you choose does not prevent you from adding more identities as you progress - I just have never seen a company be successful in having more than one core identity when they start. As the AT&T advertisement on TV says - "Stay in your lane bro."

Over time you can pick your path. I regularly see companies start as a pure utility who then evolve to a higher value application, especially as they move up-market and add GTM resources. Similarly, legions of application companies roll out simpler utility versions of their product over time to capture more effectively the SMB market place. The most valuable companies are those that can unearth a platform & ecosystem from their application.

For history - salesforce.com started as a simple monthly utility, moved into the application business, and finally became a multi-cloud and developer platform.

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That's all for now. In part two of this piece, I will go into detail on the two remaining key principles - which are:

• Map Your Go To Market Plays to your Identity
• Use Operational Metrics to Hone Performance & Subsegment Successfully

With these remaining topics understood, you will able to effectively map your core narrative and product identity to a particular set of actions and analyses across product, marketing, sales and support that should maximize your start-up's success.