Do You Run a Company or a Product?

23 and Out

Do you work with a company, or a product? A friend reminded me of this important question in New York last week. We were comparing notes on working with founders over the past three years and our experiences were strikingly similar.

23andMe is struggling to stay afloat. It has the DNA records of 15 million customers and permission from 80% of them to perform research. The company’s valuation peaked at US$6 billion and sales at $440 million. Five years later they are half that level and the value down to $120 million. What went wrong?

How many DNA tests do you buy? Your ancestry doesn’t change, so unless the company pivots to another product it runs out of road. 23andMe tried to offer disease predictions but struggled with credibility. Even when the FDA cleared the company’s procedures, public scepticism sounded the death knell for the business.

When a product goes viral you have two choices. The first is to look for another product, which is easier if you planned ahead. The second is to sell the business to a company that adds value by including your product in its offer. In either case, a successful product needs another for a business to scale.

Common Founder Errors

My friend worked with a founder who built a product for the investment market. Once it was ready, my friend advised him to go to market. The founder wanted to keep adding functionality to make his offer bulletproof. They ran out of money.

On relocating from New York, I worked with a company selling services to corporates. The CEO was convinced that investors would pay for similar information. The big difference is that corporate customers share proprietary information, while investors work off public data. Adding value to what is already out there is hard and puts you into conflict with the homegrown techniques of potential customers. Unfortunately, a single paying client did not prove there was a market and there was no plan B.

Another friend in New York just shut down an 18 month old research project that didn’t deliver. His company was trying to automate infrequent, big ticket transactions but with three parties involved, this proved impossible. Matching buyers and sellers is one thing, doing it with third party approval requires humans to broker the deal. Fortunately that’s what my friend excels at, so this experiment proves his worth.

Value Behind the Curtain

There are three stages to selling services. The first is a free offer with clear, but limited value. Use this to introduce paid services that develop the initial value you offer. Once people pay, you open up a far larger offer behind the curtain.

An example is a free webinar. In it you highlight client pain points, introduce yourself and the framework you use to address the pain. You must giveaway something that anyone can use to demonstrate your worth.

The webinar leads to a 3-day paid course, either online or in person. During this, you reveal your community, continuous learning and ancillary services as a subscription package. Both buyer and seller gain the biggest advantage from this follow on offer.

Never reveal the big offer during the initial promotion. The ticket size alone will put off people who will buy it after a gradual introduction to your business. Incremental selling is why you launch an MVP, rather than keep loading product with new features before the original ones have taken root.

A Company or a Product

A company is a series of products or services that build brand loyalty because they each add value to customers. Starting small with a roadmap for scale and the flexibility to pivot, is how companies grow big. Product sales peak and if you don’t know what comes next, then it’s time to cash out.

Questions to Ask and Answer

1. Do I know the next product I will sell to my clients?

2. Is this a one-time add-on or part of a suite of services?

3. How can I pivot from one time purchases to subscriptions?

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1. Schedule a call to talk to with my team about business efficiencies using AI.

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