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Browne & Mohan
          Board & CEO Advisors, Management consultants




Building Profitable and Sustainable Software
              Product Company
Browne & Mohan
                               Board & CEO Advisors, Management consultants


What common principles underlie success of              Imitate, not Innovate
software product companies such as Newgen,
Nucleus, Tally, Polaris, Srishti, Mindmill, Quest       While it is fashionable for academics to talk about
informatics, Druvaa, Infrasoft, Zoho etc?. Kim and      first-to-market, most successful product companies
Maubrogne (1997)in their analysis of high growth        are strategic imitators. They allow the first-mover
companies found that these companies focus on           to discover the key features, educate early
bettering themselves, continuously let unprofitable     customers, but ride on a me-too quickly to
customers       go,     and     shed     commodity      capitalize on the market growth. This helps in lower
resources/skills. Hagel and Brown (2005) argue that     S&M costs and improved ROCE.
growth opportunities will be monetized by
companies that deepen distinctive internal              Let ideas fly from all, but focus to design for few
capabilities, mobilize resources of other companies     Successful product companies seek ideas from
and accelerate learning. Collins (2001) in his widely   multiple sources, beta clients, product demo
acclaimed book “good to great” identifies, the          teams, end users, etc. But build the product looking
value of executive leadership, getting the right        at where the friction is highest, pain is unbearable
people, focus on what a company is good at and          and intension to pay is highest.
creating a culture of discipline, as the core
principles of great companies. On the product           Design a product for reuse and as platform
development side, Reis (2011), Brown and
                                                        Design the product for big picture, but strip down
Eisenhardt (1998) have brought out the value of
                                                        to basic version to design first and market test.
building core (Minimum viable product or MVP) to
                                                        Later modules must be used for versioning and
reduce time to market and patching modules
                                                        bundling. Build modular products and products that
against market opportunity.
                                                        could be used in cloud or on-premise environment.
In this article, Browne & Mohan consultants             Focus should be on minimizing customization, and
synthesize their learning of working and helping        reduce variety at early stage to benefit from low
software product companies grow.                        code, feature and support variety.

Operative Market selection                              Exploit Ecosystem to maximize reach

While many product companies start off as services      Successful product companies must learn to exploit
companies and later productize-their services,          the product ecosystem. Whether it is the
successful ones are those that operate in markets       technology OEM you have an ISV relationship with,
with periodic changes in regulatory requirements,       analyst relationship, or a sales partner, they are
witnessing newer investments to scaling and             good levers to reduce investments in your set-up
growth of enterprises in the industry and               (people and other paraphernalia). Align your sales
operational friction exists due to proprietary          resources to maximize the self-interest of partners.
approaches or tools. Long term sustaining software      Align with OEM account manager to acquire new
product companies also look at markets where            customers and “sales focused” no product
large MNC products exist, product acquisitions are      companies in international markets to expand.
on raise and MNC’s are unable to address non-           Partners and resellers help in market coverage,
behemoth companies in that sector.                      delivery and post-deployment support. Invest in
                                                        marketing and vendor management resources,
                                                        processes including training and certification
Browne & Mohan
                               Board & CEO Advisors, Management consultants


realised better results. Use every platform provided    winning reference customers is a must, not all
by technology OEM to brand and reach out to             clients must be treated as referential.
market.
                                                        Right pricing, adopt versioning
Academic institutes and interns are a good
                                                        Use versioning or hosted vs on-premise or CPU vs
platform to explore open innovations. Ideas for
new products, GUI modifications, market research,       instance prices appropriate to the product
pricing and competitive intelligence and in fact        environment. Create sufficient variants to allow
product development can all be areas where              customers to do self-selection and a feeling of
qualified resources can be employed to your             control.
company’s gain.                                         Limited budget, Impactful Marketing
Keep sales structure lean and mean                      You do not have to splurge a lot to be noticed. In
Successful product companies need sales teams           fact, many a business papers have paucity of good
where the client opening meetings may happen            stories to tell on innovation, India based product or
through marketing events or resources on street,        E-governance product. Invest in couple of resources
closures can only happen if they have sales team        to engage actively with media and also create
that can inform and influence at senior levels of       appropriate noise on social media.
organizations. Named account strategy will work if      Many successful product companies has HR talking
the client organizations can be identified a priori,    about the culture, what is unique and so on. Brand
they are far and few and the sales team has the         all aspects of the company. See in what way your
ability to penetrate those accounts at all levels.      unique induction program can become a business
Invest in sales operations                              case study or women employees returning from
                                                        maternity or other long breaks can immerse into
Successful product companies invest in sales            the organization becomes an impactful article.
operations units, often led by a visibility into last
mile was high and the sales teams were mean and         Hire for attitude, perseverance and initiative
lean.                                                   Successful software product companies do not
                                                        need hire noble prize winners, but committed
Credible and Consultative Pre-sales
                                                        people who would embrace common ambition of
To be a successful product company, invest in pre-      the firm. They come with openness and curiosity to
sales who enjoy problem solving and consulting.         learn, improvise activities within their control and
Use various platforms to positions them as solution     innovate over time.
providers, thinkers, etc. Arm them with couple of
certifications, it helps to open many a closed minds    While academic degrees and honours may matter
                                                        initially, what matters is positivism and attitude.
in many parts of world.
                                                        Choose employees who are keen to dirty their
Profitable license sales                                hands, shoulder a bit of other roles and open to
                                                        unlearn.      Incentivize employees to attempt,
Many companies do not have the mix of license,          appreciate failures and set them for win.
support and deployment worked out in detail and
with sales pressures may accept clients where the
license fee has been abnormally discounted. While
Browne & Mohan
                              Board & CEO Advisors, Management consultants


Rein in service cannibalizing product                 Hagel, J and Brown, J.S. The only sustainable Edge:
                                                      why business strategy depends on productive
Service revenues that come with product               friction and dynamic specialization., HBS Press,
installations can be very tempting and wean away
                                                      Boston, 2005.
the focus away from the product if strongly not
reined. Many successful companies find themselves     Johnson, R. and Soenen, L. Indicators of Successful
in service cannibalization over time and lose their   Companies, European Management Journal, 2003,
long term sustainability. Limit your services play    21(3), 364-369.
and consciously promote partners to support roll
                                                      Kim, W.C and Mauborgne, R. Value innovation: the
out and de-risk yourself.
                                                      strategic logic of high growth, Harvard Business
Risk Management                                       Review, 1997, Jan-Feb, 75(1), 1012-112

Product companies that grew and sustained             Kopitov, R and Faingloz, L. Ways of transforming
momentum measured the risk and impact of their        aims into results at Successful companies,
actions, though mostly subjective.          Senior    Technological and Economic Development of
management insisted on developing an approach         Economy, 2008, 14(3), 312-327.
to estimate risks, their impact, however
rudimentary      across   organizations.   Explicit   Kotter, J.P, Leading Change, HBS Press, Boston,
identification and evaluation of risks helped the     2008.
companies question their assumptions and prepare      Leonard, D. Wellsprings of Knowledge: Building and
for back up plans.                                    Sustaining the Sources of Innovation, HBS Press,
De-risk, invest in R&D                                Boston, 1995.

Product companies must de-risk from technologies,     Morgan, M. Levitt, R.E and W. Malek, Executing
products, markets and customer segments. Look         Strategy: How to break it down and get it done,
out for related product usage areas where the         HBS Press, Boston, 2007.
product could fit, refurbish the features             Schnaars, S.P. Managing Imitation Strategies, Free
appropriate to a specific industry and monetize       Press, New York, 1994.
extension of the product knowledge across
different customer segments.

Bibliography
                                                         Browne & Mohan insight are general in nature and are
Brown, S.L. and Eisenhardt, K.M. Competing on
                                                         not refereed papers. Open Universities and other
Edge: Strategy as Structured Chaos, HBS Press,           academic institutions may use the content but with prior
Boston, 1998.                                            approval of Browne & Mohan.


Collins, J. Good to Great: why some companies
make the Leap… and others Don’t, Harper Business         © Browne & Mohan 2013. All rights reserved Printed in
Press, New York, 2001.                                   India


Garud,R. Kumaraswamy, A and R.N. Langlois,
Managing in the Modern Age, Blackwell, Oxford,
2003.

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Building a Profitable, Sustainable Product Company

  • 1. Browne & Mohan Board & CEO Advisors, Management consultants Building Profitable and Sustainable Software Product Company
  • 2. Browne & Mohan Board & CEO Advisors, Management consultants What common principles underlie success of Imitate, not Innovate software product companies such as Newgen, Nucleus, Tally, Polaris, Srishti, Mindmill, Quest While it is fashionable for academics to talk about informatics, Druvaa, Infrasoft, Zoho etc?. Kim and first-to-market, most successful product companies Maubrogne (1997)in their analysis of high growth are strategic imitators. They allow the first-mover companies found that these companies focus on to discover the key features, educate early bettering themselves, continuously let unprofitable customers, but ride on a me-too quickly to customers go, and shed commodity capitalize on the market growth. This helps in lower resources/skills. Hagel and Brown (2005) argue that S&M costs and improved ROCE. growth opportunities will be monetized by companies that deepen distinctive internal Let ideas fly from all, but focus to design for few capabilities, mobilize resources of other companies Successful product companies seek ideas from and accelerate learning. Collins (2001) in his widely multiple sources, beta clients, product demo acclaimed book “good to great” identifies, the teams, end users, etc. But build the product looking value of executive leadership, getting the right at where the friction is highest, pain is unbearable people, focus on what a company is good at and and intension to pay is highest. creating a culture of discipline, as the core principles of great companies. On the product Design a product for reuse and as platform development side, Reis (2011), Brown and Design the product for big picture, but strip down Eisenhardt (1998) have brought out the value of to basic version to design first and market test. building core (Minimum viable product or MVP) to Later modules must be used for versioning and reduce time to market and patching modules bundling. Build modular products and products that against market opportunity. could be used in cloud or on-premise environment. In this article, Browne & Mohan consultants Focus should be on minimizing customization, and synthesize their learning of working and helping reduce variety at early stage to benefit from low software product companies grow. code, feature and support variety. Operative Market selection Exploit Ecosystem to maximize reach While many product companies start off as services Successful product companies must learn to exploit companies and later productize-their services, the product ecosystem. Whether it is the successful ones are those that operate in markets technology OEM you have an ISV relationship with, with periodic changes in regulatory requirements, analyst relationship, or a sales partner, they are witnessing newer investments to scaling and good levers to reduce investments in your set-up growth of enterprises in the industry and (people and other paraphernalia). Align your sales operational friction exists due to proprietary resources to maximize the self-interest of partners. approaches or tools. Long term sustaining software Align with OEM account manager to acquire new product companies also look at markets where customers and “sales focused” no product large MNC products exist, product acquisitions are companies in international markets to expand. on raise and MNC’s are unable to address non- Partners and resellers help in market coverage, behemoth companies in that sector. delivery and post-deployment support. Invest in marketing and vendor management resources, processes including training and certification
  • 3. Browne & Mohan Board & CEO Advisors, Management consultants realised better results. Use every platform provided winning reference customers is a must, not all by technology OEM to brand and reach out to clients must be treated as referential. market. Right pricing, adopt versioning Academic institutes and interns are a good Use versioning or hosted vs on-premise or CPU vs platform to explore open innovations. Ideas for new products, GUI modifications, market research, instance prices appropriate to the product pricing and competitive intelligence and in fact environment. Create sufficient variants to allow product development can all be areas where customers to do self-selection and a feeling of qualified resources can be employed to your control. company’s gain. Limited budget, Impactful Marketing Keep sales structure lean and mean You do not have to splurge a lot to be noticed. In Successful product companies need sales teams fact, many a business papers have paucity of good where the client opening meetings may happen stories to tell on innovation, India based product or through marketing events or resources on street, E-governance product. Invest in couple of resources closures can only happen if they have sales team to engage actively with media and also create that can inform and influence at senior levels of appropriate noise on social media. organizations. Named account strategy will work if Many successful product companies has HR talking the client organizations can be identified a priori, about the culture, what is unique and so on. Brand they are far and few and the sales team has the all aspects of the company. See in what way your ability to penetrate those accounts at all levels. unique induction program can become a business Invest in sales operations case study or women employees returning from maternity or other long breaks can immerse into Successful product companies invest in sales the organization becomes an impactful article. operations units, often led by a visibility into last mile was high and the sales teams were mean and Hire for attitude, perseverance and initiative lean. Successful software product companies do not need hire noble prize winners, but committed Credible and Consultative Pre-sales people who would embrace common ambition of To be a successful product company, invest in pre- the firm. They come with openness and curiosity to sales who enjoy problem solving and consulting. learn, improvise activities within their control and Use various platforms to positions them as solution innovate over time. providers, thinkers, etc. Arm them with couple of certifications, it helps to open many a closed minds While academic degrees and honours may matter initially, what matters is positivism and attitude. in many parts of world. Choose employees who are keen to dirty their Profitable license sales hands, shoulder a bit of other roles and open to unlearn. Incentivize employees to attempt, Many companies do not have the mix of license, appreciate failures and set them for win. support and deployment worked out in detail and with sales pressures may accept clients where the license fee has been abnormally discounted. While
  • 4. Browne & Mohan Board & CEO Advisors, Management consultants Rein in service cannibalizing product Hagel, J and Brown, J.S. The only sustainable Edge: why business strategy depends on productive Service revenues that come with product friction and dynamic specialization., HBS Press, installations can be very tempting and wean away Boston, 2005. the focus away from the product if strongly not reined. Many successful companies find themselves Johnson, R. and Soenen, L. Indicators of Successful in service cannibalization over time and lose their Companies, European Management Journal, 2003, long term sustainability. Limit your services play 21(3), 364-369. and consciously promote partners to support roll Kim, W.C and Mauborgne, R. Value innovation: the out and de-risk yourself. strategic logic of high growth, Harvard Business Risk Management Review, 1997, Jan-Feb, 75(1), 1012-112 Product companies that grew and sustained Kopitov, R and Faingloz, L. Ways of transforming momentum measured the risk and impact of their aims into results at Successful companies, actions, though mostly subjective. Senior Technological and Economic Development of management insisted on developing an approach Economy, 2008, 14(3), 312-327. to estimate risks, their impact, however rudimentary across organizations. Explicit Kotter, J.P, Leading Change, HBS Press, Boston, identification and evaluation of risks helped the 2008. companies question their assumptions and prepare Leonard, D. Wellsprings of Knowledge: Building and for back up plans. Sustaining the Sources of Innovation, HBS Press, De-risk, invest in R&D Boston, 1995. Product companies must de-risk from technologies, Morgan, M. Levitt, R.E and W. Malek, Executing products, markets and customer segments. Look Strategy: How to break it down and get it done, out for related product usage areas where the HBS Press, Boston, 2007. product could fit, refurbish the features Schnaars, S.P. Managing Imitation Strategies, Free appropriate to a specific industry and monetize Press, New York, 1994. extension of the product knowledge across different customer segments. Bibliography Browne & Mohan insight are general in nature and are Brown, S.L. and Eisenhardt, K.M. Competing on not refereed papers. Open Universities and other Edge: Strategy as Structured Chaos, HBS Press, academic institutions may use the content but with prior Boston, 1998. approval of Browne & Mohan. Collins, J. Good to Great: why some companies make the Leap… and others Don’t, Harper Business © Browne & Mohan 2013. All rights reserved Printed in Press, New York, 2001. India Garud,R. Kumaraswamy, A and R.N. Langlois, Managing in the Modern Age, Blackwell, Oxford, 2003.