Our company this week is Electric AI. We spoke with Ryan Denehy, the CEO. Electric provides a suite of IT solutions, including network management and compliance guidance, through Slack integration. At time of writing, Electric has raised a $25MM Series B round and has about 250 employees. As they are the most mature company that we have spoken to for this series so far, Ryan had three battle-tested points to share on keeping your teams aligned:
1. Customer Segmentation. Prior to founding Electric, Ryan meticulously sized his actual customer market. He identified a pain point broadly felt across the sector in the lack of effective IT support for businesses. A fairly typical starting point for startups. An often overlooked next step, however, should be determining which segment of business will actually buy your product. Enterprise businesses, for example, typically have in-house IT teams and complex infrastructure, which makes it unsuitable for automated, blanket AI products. Small brick-and-mortar, on the other hand, do not have the budget to pay for such a solution. You have to find the “Goldilocks zone” in the middle if you want to know your customer and keep your team focused on the same goal.
2. Talk to Your Team. If you ask your head of product and your head of sales who your customer is, they should give you the exact same answer. If they don’t, you’ve got a problem. Ryan suggest that, as a founder, you should touch base with your team at least bi-weekly to understand how your customer target is evolving. Keeping your team in agreement on who your customer is, is key to keeping product and sales aligned.
3. Buy Low, Sell High. A bit trite, admittedly. Essentially, when developing a product road-map, a significant portion of your discussion should revolve around what is the easiest feature to implement that will develop the greatest number of customers. A feature can be extremely impactful and expand your customer base significantly, but if it takes 3 years to roll out, it’s not that useful. Likewise, if a feature can be rolled out tomorrow, but impacts almost no customers, maybe prioritize other feature development.
Incorporating external feedback from customers into development cycles can throw off the ability to keep product and sales aligned. Over its lifetime, Electric has had several difficult customer requests that disrupted product development. Ryan suggests the following four tips to better know your customer and help keep product and sales aligned:
1. Go Wide. This can be difficult when you’re struggling to acquire your first customers. Once you have built a relationship with your first few, however, you can reach out to them to understand what aspects of your platform they are using more and what they value from your service. Be clear with the questions you ask them, but utilize your existing customers as a resource. Go wide with your questions, so that you are able to capture all use cases and truly know your customer.
2. Be Analytical. When discussing customer requests in team meetings, if every sentence starts with “I think” or “I feel,” it’s over. Assertions should be backed up with customer use statistics or customer feedback. Being analytical with discussions will reduce decision-making based on preconceived notions and misconceptions. This can be difficult early, but as you develop your customer base, you can be more analytical with your decision-making. Collecting this data is critical to building a successful startup.
3. Customers Don’t Always Know What They Want. Look at how customers are using the product rather than what they ask for directly. Understand how you are providing value, and evaluate functions against the fundamental value drivers of your business. Electric, for example, had received several requests for additional functionality commands through Slack. This was implemented, but over the next few months, almost no customers actually used it. When Ryan looked into why, he found that it made the platform too complex, and increased employee on-boarding time. Fundamentally, Electric drives value by simplifying the IT process. By adding this feature, Electric had diminished its value proposition.
4. Just Say No. The best way to develop discipline is start saying no and see what happens. Whether it is a prospect or current customer, if the prospect is legitimately interested in working with you, if you say no to something they’re not going to walk away. It will lead to some productive conversations. If you’re reasonable with conversations, then you’ll be surprised with how flexible customers can be.
The consistent theme from Electric is to step back and first align your team on who your customer really is. You may think that you know your customer, but if that feeling isn’t backed up with customer data, there is a fair chance your feeling is wrong. Do the market research and look at your customer usage data if you really want to understand how your customers are using your product.
Ryan’s top tip for founders this week is: once you know your customer, identify the most important things that they expect you to do, and until you’re excellent at those things, don’t do anything else. Tactical wins can wind up becoming strategic failures. Chances are, your market is pretty big. Every board member wants big sales, but in the early days, getting the product right is more important.
If you liked “Keeping Product and Sales Aligned: Know Your Customer” and want to read more content from the Bowery Capital Team, check out other relevant posts from the Bowery Capital Blog. Also keep an eye out for the next part in our series on keeping your product and sales teams aligned.
