Intercom on Product: Accelerating your strategy after COVID-19
While the pandemic has thrown us all for a loop, it seems as if we're starting to see the light at the end of the tunnel. But as businesses recover and new opportunities arise, what exactly should your next move look like?
Not too long ago (although it honestly seems like a lifetime), we were buckling up to navigate the COVID-19 pandemic and all of the tough, unparalleled challenges it forced us to face. We had to adapt overnight, reevaluate our priorities, make some particularly rough decisions – for many of us, it’s been over a year in survival mode.
But as vaccination gears up, lockdowns ease, and people slowly get back to their lives, countries all over the world are finally looking at what could be an inflection point of economic growth. And so, now’s the time to start thinking about accelerating our business strategies and grabbing the opportunities it brings. That’s the advice of the Sequoia team in their last memo, “COVID Accelerated the Future, Now Seize It,” and for the last couple of months, that’s certainly been on the top of our minds here at Intercom.
So today, Paul Adams, our SVP of Product, and I are bringing you a special episode of Intercom on Product. Now that the worst seems to be over, what exactly should your strategy look like? Where should you invest your resources? And if you’re about to hit the gas pedal, what’s the smart way to go about it?
If you’re short on time, here are a few quick takeaways:
- You can’t balance short-term and long-term investments without considering the existing product strategy. If the product isn’t in good shape, R&D needs to prioritize getting it up to speed before focusing on the next thing.
- Beware of falling into the trap of exclusively going for easy money, snacking-type opportunities. It may take a bit of a leap of faith to invest in a differentiation strategy that won’t immediately translate into ROI, especially in a pandemic, but you can’t sacrifice innovation and sustainability for short-term revenue.
- Choosing the right investment is a balancing act of art and science. What resources do you need to put in, and at what timeframe, to get which return? Although there’s always a bit of raw intuition involved, if you’re on to something big, there will be some evidence to it.
- When it comes to making your business case, however, try not to overthink it. There’s no use in taking a few months to build an epic 40-page report on the next move when the idea is to be fast and agile.
- In times of extreme change, whether it’s a pandemic or a new round of capital, it’s easy to get carried away and change strategy to meet challenging circumstances. But if the strategy was good to begin with, keep at it.
Stepping on the gas
Des Traynor: Welcome to Intercom on Product, episode 14. I’m joined, as always, by Mr. Paul Adams. Hello Paul.
Paul Adams: Hi, Des.
Des: And today’s topic is about accelerating growth. There have been two seminal memos that have, in a sense, rocked the tech industry. One was sent last March by Sequoia, and it was explaining the damage that was coming to the industry as a result of coronavirus. And it had a lot of guidance about adapting to change, about managing your burn, all of the classic things you’d expect to do in advance of a global pandemic, and all of the things we’ve gotten quite used to.
“If you feel confident about your business post-vaccine, now is the time to carefully step on the gas”
And then, most recently, in March of this year, there was a following memo which was titled “COVID Accelerated the Future, Now Seize It.” And in it, the guidance from Sequoia, through their same CEO, was “the current moment on our road to the recovery represents a massive opportunity. And if you feel confident about your business post-vaccine, now is the time to carefully step on the gas (or step on the accelerator pedal if, of course, you’re driving an electric car).”
And in Intercom and elsewhere, we’ve been thinking about what that actually means for startups, for seed-stage companies, all the way through to mid and late-stage companies. What does it mean to just generally accelerate, and how do you control acceleration in a way that it’s not haphazard and “let’s just throw more heads at our existing plans”? Should we sink bigger? Should we plan bigger? In terms of research and development or generally the product and engineering functions, the people who produce your software, this really is a question of investability. It asks you, do you have areas where you know the work is working and you can just increase the amount you’re doing?
Do you have areas where this work you had not yet planned because you didn’t have the capacity, but at this time there’s an opportunity to invest, get the capacity and take it on, to effectively accelerate your future roadmap, versus just doing what you were currently planning, faster? And then, of course, the speculation too. There are things, bets you might take, but you definitely wouldn’t have taken in the midst of a pandemic. Paul, my question to you is simply, thoughts? No, I’m joking. In this case, my question is: what have we been up to in this regard?
How can we accelerate our current strategy?
Paul: Yeah. It’s a fascinating time, actually. There’s some kind of quote that I’ll misquote: when you’ve got scarce resources, it’s much easier to be focused. Like, scarcity of resources is a good thing. And if there’s an abundance of something, like an abundance of capital, it definitely can lead teams and companies to pick things they wouldn’t have normally picked. So we’ve been very attuned to that to make sure that we don’t, I guess in Sequoia’s words, seize the moment too quickly and have a measured approach.
Des: Or seize the wrong moment, even. Just jump on any old idea.
Paul: Yeah. And that’s the danger, that someone’s favorite idea wins because there were no other ideas that made it to the start line. There are different levers that we’ve been thinking about for accelerating our growth and the areas of investability. To start at the zoomed-out level, the different levers that you can have, any business can have, start with, of course, hiring more people and building more teams. If you’ve got a good setup, then more teams equal more product, and more product equals more marketing and more sales and all sorts of stuff like that. So you can hire more and hire faster.
You can also find people in other ways. You could acquire companies just to acquire the talent within the company. You could acquire companies because their product is strategically aligned with yours, or you could acquire a company that has a new type of product that you think is going to be useful in the future.
We’ve been focused mostly on looking at how we can grow our team and what might new teams do and what might new people do. And then, in that regard, we’ve been looking at our current strategy and asking ourselves, “How can we accelerate our current strategy?” That is, more people working on the same strategy we have today. So, for example, something that we might’ve built next year could be built this year instead. And then are there other areas of adjacency to our strategy that we would probably get to in the fullness of time, but they’re not directly in our strategy today? And yet, now might be a good time to hit the accelerator.
A matter of time horizons
Des: The goal of this conversation is really to expose ways to think about accelerating investment in your own businesses. But the interesting thing about the latter category, Paul, is it’s really a question of time horizons. It reminds me of that famous quote – I think it’s a philosopher who said it – “Societies grow great when old men plant trees whose shade they’ll never sit in.” It’s that idea of building something now such that it can pay off in year two or year three or year four, which is a hard mindset to have, especially in startups where you have this essential, eternal paranoia that your company might not exist in two or three years. It’s hard to make those longer-term bets.
“The obvious and easiest lever to pull is to get more people doing the things you’re doing”
But in general, there’s so much to get through here. Let’s just take, as a target case, a PM or a manager of PMs in a startup who’s being told, “Hey, let’s go and accelerate.” I think the “Sure thing boss, give me more headcount” is obvious. It might mean we’ve got three teams building our ticket trackers, so let’s have four teams building the ticket tracker. The obvious and easiest lever to pull, in a sense, is to get more people doing the things you’re doing. The only challenge there is your recruiting capacity, right?
You’re basically saying we’ve got 10 people building X, let’s put 20 on it, and hopefully, X will come in sooner. I realized this is the whole man-month fallacy thing. But in general, when you have a lot of parallelizable work, let’s say you’re trying to build the Android app and the iPhone app and the desktop app. Three teams can tackle that app. One team each versus one team, sequentially, for whatever it would be, three or six quarters or whatever. So I think doing more of what we’re currently doing is the obvious thing to do. What’s the payoff in doing that? It’s just ultimately our product or more of our product hits the market sooner, which means maybe we win more deals, we can charge more money, right?
Paul: Yeah. Most of people’s go-to, I think, is revenue – different ways you can accelerate your revenue. So, when people are asked, especially from a leadership team or an exec team, “Hey, we need to accelerate,” I think what they mean is accelerate business growth, which usually comes down to revenue. If you’re a SaaS company, that could be new customer acquisition, it could be an expansion or even reduce contraction, reduce churn. That’s one category.
And then there’s a whole other category which is back to the time horizon thing, the strategic investments that might not have a direct revenue implication today but will have in years to come. That’s the “plant the tree today to sit in the shade tomorrow”. And they are much harder to defend when you have short-term revenue ideas on the table too.
Looking at the future
Des: If you’re told to accelerate, at what point should you stop just dumping heads into the current strategy? Is there a sense of diminishing returns, or is there a sense of well, at some point, we need to start growing the next strategy, building the next generation of the product, and there’s no point in over-polishing where we have been? At some point, we know that we need to move towards a new whatever it might be – a new model for help desks or a new way to think about design collaboration. Is there a sense you have of at what point are we good enough on our existing strategy and it’s time to start investing in next year’s stuff?
Paul: It’s a very hard question to answer. I think it’s very specific to the company and the stage they’re at. If you’re missing revenue targets and there are implications for how fast you can grow next year, like how many new people you can hire, you might want to optimize for immediate revenue. Whereas if things are going well and you’re beating your targets and you can continue to invest in sustainable headcount growth next year, then I think there’s more opportunity to bet on something that will take place tomorrow. I think it really does depend on the business. Most businesses fall in the middle of those two things, probably – where they’re not experiencing crazy, wild growth, nor are they about to fold, and they’re on death’s door trying to stay alive.
Des: Yeah. Those people aren’t listening to our podcast, is my guess.
Paul: They shouldn’t be – they have better things to be doing. Also, if they were listening to it, they wouldn’t have gotten into this circumstance. This podcast is for everyone in the middle. And if you’re in the middle, the easy answer is that you need a balance of both. And the balance could be 50/50, 60/40, could even be 70/30. We’ve had 70-30 here at Intercom on both sides at different times.
“Are we good today in the short term? In which case, R&D needs to be working on the future. Or is the short term not great?”
Des: And there’s another variable I think we intuitively track. Sometimes, some of our products are closer to table stakes than others. And one challenge we have is sometimes there’s a sense that the product’s great, it just needs to be marketed a lot to extract a lot of revenue out of it. And then there are other products where it’s like, “I wouldn’t dial up the marketing just yet. We’re still making this whole thing make sense. We’re still working through what we’re hearing in terms of customer feedback, early churn signs, et cetera.”
And so, you’re trying to balance these: Is it a case that the market just needs to hear about the product and everything takes care of itself after that? In which case, from an R&D perspective, maybe it’s time to be like, “Okay, let’s start thinking about the next generation here” while marketing is firing up on-demand generation, on growing the brand and the product, et cetera. And then, there are other times where you’re like, “Nope, the product is definitely the problem here.” And we need to actually get in there and go hard on our existing strategy. There’s some interest in the time horizon here that you have to think about. Are we good today in the short term? In which case, R&D needs to be working on the future. Or is the short term not great? In which case, we need to start prioritizing that instead.
Can I ask, how do you articulate? It’s very easy to say, “If you give me an extra team, I’m going to tackle churn reasons one through five, and that will increase our gross revenue retention.” It’ll reduce our churn, potentially increase expansion. It’ll hit the bottom line. And realistically, if you give me those heads today, I could probably actually do that in a manner that would affect this calendar year. And usually, when the work is quite tactical and practical and people are quitting because you can’t merge projects, okay, let’s build a merge project feature, and that will be a team for two quarters. You can actually see that it’s quite a responsive feedback.
The other stuff you’re articulating, the more next year stuff, what’s the best way to try and explain to a business why to invest? And just again, if I was to play the role of a mock CFO here, what I’d say is, “Hey, Paul, your pitch is for me to give you 14 more heads. That’s going to cost salary times 14, whatever that might be, 3 million a year or something like that. If I’m going to add that to the burn of the company and project this forward, next year we’ll be sitting here burning a lot more cash.”
“This is absolutely art and science. It’s not cold, hard science, like maths”
How can you articulate the value of what you’re working on so that it looks like a financially prudent decision? How are you going to turn that cash into code? And how can I then turn that code back into cash? How does one tackle that discussion from a product perspective? How do you articulate the value of the future, potentially speculative work you might be doing?
Paul: It’s a fascinating area. I think there’s a whole bunch of things in here we could explore. I’ll quickly go through a few and then we can dive in deeper. One is that this is absolutely art and science. It’s not cold, hard science, like maths, “Oh, hey, thanks for the 15 heads, boss. Here’s my mathematical formula.” And so one of the ways we’ve been thinking about this is if we invest in X to get Y in timeframes Z – what is X? What are we investing in? And what is Y? What’s the return? And there’s some nice middle ground on the return where you do need to build a business case for it in that you need to have evidence.
Unless you’re knowingly taking a wild bet at something like a big wild swing, there needs to be a business case behind it and some due diligence done. But also, I’ve seen business cases for other companies and big public companies I’ve worked in prior to Intercom, and someone will go off into the woods and write a 40-page business case on why we should build the new thing or invest in the new team. And the 40-page report took as long as it would to nearly hire the team and get them to build a product. So you can overthink this.
Des: Which ironically comes at the cost of acceleration, in a sense, right? You’re being told to accelerate, and your first move is to head off into the forest and produce this epic 40-page doc that no one opens. And for bonus marks, as is the move right now, add a three-hour Loom to go with it, right?
Paul: Yeah, exactly. Maybe just the Loom. Here’s my 40-minute Loom on…
Des: Just trust me, it’s really good. Michael Bay directed it.
“Building software isn’t a home run type endeavor. It’s get it out, see what works, learn, talk to customers, iterate. It’s an ongoing endeavor”
Paul: So there’s a middle ground here, for sure. I think the reason people write the 40-page docs and the 40 minute Looms is because there’s a bit of risk aversion. To some degree, if you’re been asked, “Here are 15 heads, we’re going to accelerate growth, over to you,” there’s a risk inherent in what you decide to do. Will it work? Will it not work? And, like you and I know, and I’m sure most of our listeners know, building software isn’t a home run type endeavor. It’s get it out, see what works, learn, talk to customers, iterate. It’s an ongoing endeavor, a day-by-day, week-by-week endeavor. And like a lot of the software, at Intercom at least, in terms of how we think about our principles for building software, it’s get out early, ship early, learn, iterate.
I think the same is true in this case. You need to do a bit of due diligence on the different types of products or features. If it’s your new product line, what do we have to believe? We could charge X. A number of existing customers might use it as Y. Roughly ballpark, how much would the team cost? Headcount and salaries and comp and all that kind of stuff. And some sense of what we’ll get for the investment over what timeframe. But you can overthink this thing, for sure.
Making the right bets
Des: I think there’s an interesting piece I observed at a lot of startups that I chat to, and I see it in Intercom from time to time too, the idea that any positive investment is, in some sense, a good investment. And I think that’s just fundamentally wrong. All else being equal, if you give me a million dollars and I say, “Don’t worry, I’m going to give you back $1.1 million of recurring revenue next year,” that might sound like an absolute home run. Why wouldn’t you do it?
But the reality is you don’t have an infinite stock of these things, and you definitely don’t have an infinite stock of engineers or leadership bandwidth or ability to market or sell. So if you’re going to produce something, even if you got it cheap, you’re still going to have to market the hell out of it. You’re still picking to do it rather than accelerating your current strategy or any other idea out there. And then, your sales reps are still on the call trying to sell this ticky-tacky add-on versus something substantive that would go on to become a really rich new vein of revenue.
“In software, it only gets good when someone perpetually invests in it. And big companies can’t justify perpetually investing in small features”
I think the mistake a lot of folks make is that there’s some perceptual chasm you just have to cross which is the project would be ROI positive in two years. As if that’s the only thing that you need to do. But I do think a lot of folks miss the fact of, hang on, as it is today, we might spend $10 million a year on building software. And for that, we produce 20, 30, $40 million of new revenue every year. So that’s a pretty impressive ratio.
If we start doing these 1 for 1.1 swaps, we’re damaging that ratio. And we’re actually becoming a less effective engine of R&D because we’re now producing swiftly. Yes, it’s positive, but it’s no longer performing anywhere near the same rate as it was. It’s not just enough to be like, “It costs a mill, and it’ll get us back a mill soon.” You have to have some sense of: is this genuinely a substantial opportunity for us? Or is it the type of ticky-tacky thing that ideally you wouldn’t have to build at all? Because one of the benefits of Intercom is that there is a platform element there where there are small features that will be missing in Intercom and missing in every other help desk opportunity.
And, in those cases, when we look at an opportunity of something like managing holiday time for your support employees. Yes, that’s a problem. But when we look at that opportunity, we see a pretty narrow window of opportunity. Whereas if someone says, I’m going to build a plugin for Intercom and Zendesk and Freshdesk and all the rest of the desky gang, and at the end of it all, I’ll nail this job for them, then it’s just a bigger platform opportunity there.
I guess what I’m saying is, in general, in software, it only gets good when someone perpetually invests in it. And big companies can’t justify perpetually investing in small features. In an ideal world, this is what a platform does. It lets you say there are small things that not everyone needs. And we’ll shell that out to the platform, to the community of people who build on Intercom and let them build a living out of that. And that way, our customers actually get a better offering.
“For us to consider a new substantial offering on the platform, it needs to meaningfully change the posture of that current offering. It can’t just be a small addition to it”
But just to go back to the master point, it’s not enough simply to clear some ROI high jump. It has to be a meaningful, trajectory-defining piece of work for the company. And this is why accelerating current strategy is usually a good idea. You’re basically saying, in the case of Intercom, our core product was – I’ll give you an old revenue figure just because I don’t know what the current ones are – above $150 million worth of revenue, right? And, as a result, getting better at that, both strengthening and improving it, making it even more attentive, even more expansive, that’s always going to be a good bet. And for us to consider a new line of business or a new substantial offering on the platform, it needs to meaningfully change the posture of that current offering. It can’t just be a small addition to it. Because, as I said, it’s actually going to be sucking away from the much healthier, stronger, faster-growing piece of the puzzle.
So, when it comes to articulating, “Hey, if you give me a couple of teams today, I can make something happen that will probably pay off next year and realistically probably really pay off the following year when we get all the retained revenue through and we’re starting to stack the bricks on top of each other,” you say it’s art and science, and I guess one way of saying that is there’s raw intuition based on customer feedback, tacit knowledge, knowing what’s possible technologically, knowing what’s changed technologically.
Half the battle is seeing the opportunity. And then the other half is the science piece, which is if we’re thinking about building something new for support people, how many support people do we have and how is that figure growing over the next five years? And how big is the support industry overall? And what’s the current share of wallet? And has anyone ever asked for this? And if they haven’t asked for it, have we ever tried pitching it to somebody? And do we have a customer advisory board that we could go out to and see what they think of it?
You’re trying to look for all of these inputs to inform the science side of the bet, which is: is there definitely something big here? And if you’re stretching, I think it’s usually a good warning sign that there might not be. So if you’re trying to beg, borrow and steal little bits of reasons because you can’t point to a big reason, it’s usually a sign that the product is perhaps not in a great position.
Getting more than you put in
Paul: Yeah. I think it’s not just the product – it’s the strategy. Just as an example, you said there were warning signs, and I think that’s an interesting thing to think about. As an example, we’re going through something similar right now in Intercom, where we’re looking at new areas we might invest.
And so, for example, to make this concrete for people listening, that could be we have a current area of the product that we don’t have a team working full time on. Maybe we should have a team on that. Or, “Hey, this part of the product over here does have a team working on it. Maybe we need two teams, and what would they do?” And so we went through this exercise, looking for these big areas of additional investment. We came up with 14. And there’s no way we’re going to staff 14.
Des: Of course.
Paul: We might staff anywhere between one and three. And the 14 are different types of things. Back to the earlier part of the conversation, some are long-term strategy investments, some are shorter-term gaps that we need to fill. And the reason we fairly quickly came up with 14 investable ideas, these 14 have a bit of art, but they do have science. There’s customer evidence, there’s data that says this would be a good investment in a medium to large size return.
Right now in Intercom, we have, I would say, some of the clearest strategies we’ve ever had in the history of the company. And so, like any company, we oscillate at different times between having absolute clarity in our strategy and then revisiting an issue.
“It should be fairly easy to come up with five to 10 investable ideas that feel pretty big. It’s a warning sign if you can’t”
Des: It just ages out. One strategy starts to age and you need to refresh. And we’re right at the peak of a strong refresher.
Paul: Yeah, exactly. So it’s very clear to us what we want to do over the next couple of years. It was easy for us to come up with 14 investable ideas. If anyone out there is trying to do something similar, maybe they’ve raised a recent round and they’re wondering what to do with it, it should be fairly easy to come up with five to 10 investable ideas that feel pretty big. And it’s a warning sign if you can’t. And the warning sign might be, “Hey, strategy refresh time” or something else that’s amiss. And without doing that core root cause fix, you will end up building something random.
Des: Or you’ll do one of those, as I said, tactical, practical, easy money, low impact, snacking type opportunities. I’d like to go back to your earlier piece just to help folks who are in the middle of this exercise. You said we want to invest X to get Y by Z. So X is the cost. And you want to fully bake that so that it doesn’t just include the engineers and a designer and a PM. Is there an adjacent ask in marketing? If X is big enough, are there ancillary asks that follow headcount, such as HR or recruiting or whatever? At some point, you need to add incrementally. Then there’s also X as in you want to do sales training, you need to make sure that everyone’s up to speed on the opportunity.
That’s the X. What are the types of Y’s? When you say “to get Y”, Y is obviously the money, right? You want to invest money to make money. But could you give us specifics? One you said earlier was something like more customers, or maybe more money from the same customers. Talk us through your thinking there.
Paul: Yeah, yeah. On the X there are other things, too, that we’ve bumped into here and there. The X can be things like, is our office big enough? There’s actually a whole bunch of other capital considerations and so on, on the X side.
Des: This has gone on in London for us right now. I mean, not that our listeners care, but this is an actual active concern for us.
Paul: Yeah. Do we have enough desks? On the Y side – so, we’re a subscription company, like many of our listeners, I’m sure. And there are other types of models out there that will probably translate fairly easily. There are different types of revenue for us, right? We can, on the Y side, we can track new business, new customers that would never have considered us before and now we have a new thing, and therefore, they’re interested. So that’s one dimension of Y. Those customers like a bit higher prices. So if we’re selling apples and oranges, now we’ve pears and they might buy a pear along with the apple and orange when they come in the door.
“What you’re looking for is small additions to the product that results in disproportionately large impacts to the product market”
Des: And just to be super precise, when we say attract new customers, what we mean is we’re not talking about building a whole new product, like a project management doc. We’re just talking about we don’t have great penetration in, I don’t know, let’s say healthcare or airlines or whatever. All right – let’s build stuff to make us really good for them. That’d be just one random way if we could attract new customers with software. So same product, but for new customers, right?
Paul: Yeah. A good example. To make this concrete again, HIPAA compliance is a recent example for Intercom, where we shift a solution around HIPAA, and now healthcare companies who couldn’t consider us before, can. Exactly. So generating new business, new customers who just weren’t able to sign up before.
Des: And the ratio or my preferred ratio for success – and I know I keep intervening here, but there’s just so much to this – but what you’re looking for is small additions to the product that results in disproportionately large impacts to the product market. So it’s like HIPAA wasn’t a huge piece of work relative to the huge industry it opened for us. And that’s the sort of opportunities you want to be looking for here.
Paul: Yeah. Yeah. And both of those things are a scale. On both sides of that ratio, there’s a scale. You could decide that you’re going to set a team off for a year today because on the other side of that year is an even bigger opportunity than the HIPAA one was.
Des: Yes, yes, yes, absolutely.
Are you sacrificing the decade for the quarter?
Paul: So, other types of things here. On the revenue side, if you’re a subscription company like us, repeat customers matter, or people continuing to pay you matter. And so, some of the other ways in which you can get, on the Y side, the return on the investment are things like expanding what your customers spend…
Des: Some more money from the same customers?
Paul: More money from the same customers, exactly. Reducing churn, so customers don’t quit. Increasing satisfaction, which could be a leading indicator for churn down the road.
Des: Yeah. But possibly word of mouth and virality as well. If people love your product, it helps.
Paul: Yeah, absolutely. So one side of this is all of those business metrics. And the other side of this are things like some of the stuff you mentioned earlier, strategic bets you might want to make, extending differentiation – on the podcast a while ago, we spoke about differentiation and table-stakes features, and getting that balance right’s really important too. The general gist of that is you need to be both differentiated to be attractive to buy in the first place.
But then, customers have come to expect these industry standards, table stakes feature for any given category. And typically, a startup’s journey is one where they’re highly differentiated and don’t have all the table stakes. This is very normal because if you are not highly differentiated as a startup, there’s no reason to choose you in the first place.
“When you have a choice between differentiation or drive shorter-term revenue, it takes guts to pick the former, to invest in the strategic”
Des: Yeah, exactly.
Paul: Rebalancing that can matter, and rebalancing can work both ways. You may start off being highly differentiated, and then, over time, you need to fill in the industry-standard features. And then the competition catches up. The bigger companies start to copy what you do and you need to invest in differentiation again. So that’s another whole strategic bet, medium-term, long-term differentiation.
Des: I’ve heard that referred to as the gingerbread man-type product strategy, in a sense. And there’s some truth to it. People will catch up with you if you don’t run faster than them. And we’ve seen this. Our messenger periodically gets ripped off, and we have to put more distance between us and the pixel copies. And it’s just a continuous race of a sort. And, if we were to ever be like, “No, no, we think the messenger is good enough,” then commodities become table stakes, and then it’s really, really hard to break out again. So that’s why you’ll always see us invest in the messenger.
“If that’s all you do, if you literally just consistently make short-term decisions, you’ll have no long-term plan”
Paul: Yeah, exactly. And this is the trap I think a lot of people fall into, which is, when you have a choice between extending or differentiation, or drive shorter-term revenue, it takes guts to pick the former, to invest in the strategic. But if you don’t, it’s very short-term. If you don’t, you risk being obsolete in the medium term.
Des: Yeah. I often refer to that as you sacrificed a decade to hit the quarter. I think that’s the real risk there. Last year, I bet a lot of companies were making decisions like that just because of times of conservation and fear. You just generally tend to make safer, more sure thing moves. And you could always have more evidence of “We lost seven deals because we don’t have such and such a feature.” It sounds like if you build such and such a feature, you get those seven deals back or the next seven that look like them. And that, in a short-term perspective, is the right thing to do. But if that’s all you do, if you literally just consistently make short-term decisions, you’ll have no long-term plan.
Keep calm and carry on
Paul: I think it’s going to cut both ways, by the way. In times of scarcity and in times of lots of capital floating around, a little bit like you have a today, in these two extreme environments, the hardest path, honestly, it’s just stay the course. Stay the course. This is our strategy. And yes, things are changing, whether the economy is contracting or there’s a pandemic. It’s very hard. Obviously, there are business cuts that need to happen, but beyond that, it’s very hard sometimes to stay the course when things around you are rapidly changing.
And same is true right now. It’s easier for us to not stay the course because you have what I call the shiny new ball syndrome. It’s like, hey, we have a great strategy. Nothing’s really changed to make us revisit our strategy again, and we just revisited it, and we think it’s really good. But there’s money and shiny new balls and new things to do and excitement, and people’s attention can drift. So staying the course, I think, is actually the hardest thing to do on both sides.
“At any time of extreme change, be it pandemic, be it extreme economic recovery or an entry of a new competitor, it makes you question things that maybe you shouldn’t question”
Des: It reminds me of, I think it’s a Warren Buffett or Charlie Munger quote, “never interrupt compound interest”. When something’s working, sometimes the best thing you can do is literally let it be. And the other thing it reminds me of is what people always say about competitors. Every single one of our listeners has had a problem where competitors show up overnight and they look exactly like you. I remember a friend said to me when we were going through our version of this – the competitors don’t kill you. What hurts you most is the things that they make you do to yourself.
I think that’s the real risk. At any time of extreme change, be it pandemic, be it extreme economic recovery or an entry of a new competitor, it makes you question things that maybe you shouldn’t actually question. Or at least you should at least be open to the idea that we are actually right the first time.
Des: Moving towards wrap-up here. The things that are on my mind for PM’s out there trying to accelerate as per Sequoia, I think one piece is don’t get sloppy just because there’s a lot of headcount floating around. It’s very easy to think, “Right, we should do everything now because the coffers are open. Let’s start pulling in heads.” And every idea you ever had that you put on the shelf because they were a bit boring, they’re all good ideas now. Well, no, they’re not. They’re probably on the shelf for a reason.
And as part of your business case, you should definitely make sure that you have a good sense of the hurdle you need to clear. Simply paying for itself, I think, is a really unambitious goal for a lot of investments. So I’d advise people to have a really strong business case that isn’t just around making their money back. Making our money back is the sort of thinking that makes sense during a pandemic, but it’s not the sort of thinking that makes sense after it.
“If your strategy was good a month ago, and now you just suddenly raised a big round, or suddenly there’s a lot of capital to work with, stay the course”
And then lastly, I’d maybe just call out X, Y, Z. We’ll invest X. So what is the X? X is how much investment you need from a product perspective. But everything else, like, do we need a bigger office? Do we need more recruiting? Do we need more marketing, sales, et cetera? That’s the X. To get Y, we talked about all different types of Y’s, which is everything from the logo, growth, more revenue from the same customers, less churn, more satisfaction, more strategic differentiation, risk mitigation, all that. And then Z is this idea of time horizons. What’s good for the quarter isn’t necessarily good for the decade, and you should get your timeframes right for where you’re investing. And that’s X, Y, Z. Paul, but I’ll see what do you want to add to my summary?
Paul: Yeah. I’d add one more thing, which is to root your decisions in your strategy. Don’t get distracted. Stay the course. If your strategy was good a month ago, and now you just suddenly raised a big round, or suddenly there’s a lot of capital to work with, stay the course. Don’t radically start changing things just because of the buoyant times we might live in and the economic recovery and so on. I think that’s really, really important and very, very easy for people to lose sight of.
Des: I totally agree. Okay, let’s leave it there. This has been Intercom on Product, episode 14. Thank you, Paul, and take care, everyone. Bye-bye.
