Very few businesses have been able to sell one product to a market through one channel. They’ve had to branch out — looking at expanding products or finding new markets and channels. Sadly, most of these expansion opportunities fail. But why?
Mark Roberge, Managing Director at Stage 2 Capital, discusses predictable growth strategy and how the framework can help increase the successfulness and speed of these expansions.
Why your new product launch isn’t going well
As a new company, you may start out with just one product and do fairly well. Imagine a business that sells only t-shirts. But to see that business succeed without ever expanding products, markets, or channels is incredibly rare.
The t-shirt company gets to 15 million in revenue and decides to add socks to the product line and sell to the existing customer space. They pour money into a huge team of salespeople, assuming that they’ll be able to sell the socks the same way they sell the t-shirts. The sock launch ends unsuccessfully.
According to Mark, businesses, once they get to around 15 million in revenue, will get overconfident about their ability to sell a new product. T-shirts and socks may seem like similar items to sell, but there could be many hidden differences that the business isn’t taking the time to figure out. So, instead of spending time selling the socks, the business is now wasting time backtracking — figuring out that socks sell much differently than t-shirts.
”Don’t learn value scale. In my experience learning model scaling fails a lot. Instead learn and then scale.” — Mark Roberge
Instead of a large team, Mark suggests starting with a smaller, well-chosen, cross functional team to lead the new product launch. When you’re spread thin with 40 salespeople making 40 calls, it’s hard to learn patterns. But if there’s only two salespeople, they’re going to pick up on those patterns more accurately and quicker. And, while it may feel slower at times, Mark suggests that in a two year window, a company will see better results than if they don’t use this strategy.
Understanding the framework
So, how can a company know the steps to take when launching a new product? They have to understand the framework that will act as a safety net in case they don’t realize they’re charging into selling a new product without adequate investigation.
Mark shares the framework he stumbled across through his research:
- Develop an overarching strategy: Your plan needs to encompass the new product and existing products. If the T-shirt company example above were to make their website homepage completely about socks, they may lose out on existing T-shirt sales. But if they don’t promote socks at all on the website, they’re unsuccessful with the new launch.
- Hold tension at the top: A lot of the time, when a new product is being built, it’s stuffed down the organizational structure. When that happens, it’s difficult for it to succeed. By keeping a project near the top of the structure, the CEO can use their visibility into all the tensions to make the best calls.
- Embrace inconsistency: You cannot measure the success of a new product on revenue first. Instead, measure the success on how fast you’re learning.
Once a company understands the framework that sets them up for a successful product launch, it’s time to figure out the right moment to scale the product.
The science of scale
When Mark asks a general manager or a new entrepreneur when the right time to scale is, they all respond with: When I have product market fit. Defining exactly what product market fit is, however, is a lot more varied. Most lean towards a definition that involves revenue — once they get to a certain amount of revenue from the product, they think they have product market fit.
Mark disagrees. His best solution: customer attention. If a customer uses the product and buys it again, a company can be fairly confident the product has market fit. But there’s a problem; you now have to wait approximately a year to see the outcome. To solve this, Mark recommends finding a behavior that correlates to retention.
“If we can figure out something, some behavior, some observation with our customer, that happens in their first 30 days, that correlates with retention. That’s a really powerful observation.” — Mark Roberge
But once a company is ready to scale, they have to be wary of pacing. Adding 15 reps when you only had 3 before is a setup for failure. Mark suggests watching the leading indicators and letting them function as your speedometer — telling you whether it’s time to speed up or slow down.
A key takeaway
Using this strategy will not only give you a safety net to avoid scaling without a firm understanding of your product, but a roadmap to knowing when to scale and how to set your pace for scale. Ultimately, it gives your company predictability when it comes to growth.
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