Product Organizations : Why they Win

In Venture Capital, it is well know that the CEOs of companies typically come from three backgrounds. They are R&D people. Or they are product people. Or they are sales people. Very rarely they are just people from admin, finance, processes, or human resources.
If the CEOs are from these three backgrounds and the CEOs drive the DNA of a company, that leads to very different three types of companies.
The R&D organization. The product organization. And the sales organization. In all three cases, the one thing defines the core and competency of the business and everything else is built around it.

Sales Organization

Due to humans liking people who are just like them, a sales organization will focus a lot on hiring good sales people all throughout the organization. Sales people who can sell themselves to the CEO for being good at sales. Engineers who can sell their talent and work. Managers who sell their story and successes well. Sales organizations are not companis that are focused on fundamentals. That would be more of an R&D organization. They are more about making a good impression everywhere. They can be come empty and political. But as a benefit, they typically are laser focused on how to get to a sale fast. Getting to results fast.
In the ideal case, the sales organization takes its time to get to a sellable product. But once it does, it enjoys speed, growth, execution. It will always have operational risk, product risk, customer acquisition and retention risk. But it will always be active and moving.
Technically, it might not matter the the sales-driven CEO what he is selling. He might be more likely to pivot if it seems reasonable. He will be less committed to anything particular. Decisions may change fast and be reversed. Direction of the company might be oscilating or even jumpy.
Since the start-up CEO coming from sales still wants to run a business, he will choose a product or R&D person as co-founder. Most likely, the sales CEO will overlook product management as  a key function and will see only a need for R&D to deliver on the market signals he sees in his sales talks. The customer gets what he is willing to pay for. The intrinsic value offered in the product that creates sticky customers and happy customers is not important for the sales CEO. If the customer says he wants a big fat butter bread. He gets a big fat butter bread. 
This might sound like a laser focus on what the market demands. This also fails to acknowledge that buyers are not always able to make good decisions. In a competitive environment, the word of mouth, the industry penetration and stickness will be won by the company that builds the better overall product that solves the customer problem better. This is a risk for the sales founder.

R&D Organization

An R&D organization basically is founded by your typical R&D prodigy that wants to deliver a technically perfect solution to the customer. You want the fastest CPU ever on the planet and you want it to be small and not overheat? The CTO-CEO delivers. But then . . . 
The CTO CEO wants a sales guy to get his product sold. But because he does not know which market to address and how to uncover the market, he gets just one random sales guy that oversold himself believing in the product. And then two people who do not know how to measure market demand, user pain and so forth are trying to place a technical product which might not be in demand at all into a market a sales co-founder knows but might not be the best from an overall go to market perspective.
CTO-CEOs are typically also not interested in product managers. Because nobody who achieved true greatness wants to be told by someone else how to build and refine the product. They want results on the sales side. And they end up making the wrong decision.
The sales CEO and the technical CEO hence are likely to choose the wrong business partner for the wrong reasons and they will remain dominating their partners in almost all cases – that is just waht CEOs do – and hence the organizations will have it difficult.
The technical CEO will, similar to the sales CEO, hire people similar to him. This will have an impact on the culture. It will be more scientific. More rational. More data-driven. More engineered. More accurate. But that means slower decision making, slower sales cycles, slower changes in direction of the company and hence stickyness.
This doesn’t really mix too well when hiring for non-technical roles and hiring people with DNAs that are complementary. Slow decision making and overal academic and cold thinking crashes with high EQ, fast-pace, impulsive and quick witted actions of more salesy individuals. This creates political situations and opportunism that a technical CEO will possibly frown upon which may lead to losing the battle to top performing givers that are just too much. And it will create stickness for low performing takers that just adjust to the reqirements of the technical CEO and will take what they can out of the organization.

Product Organization

A product CEO is the best of all options. A product CEO doesn’t know how to implement the product. And he doesn’t know how to sell the product. He needs both. And without respecting both, he doesn’t have a business.
But by being there to combine the strength of both sides to understand how to deliver technically grounded superior value to marketable and sellable customers that have a known and researched problem makes these kind of founders the rockstars. And product organizations all the rave.
They also are more likely to time activities well. You do not build the product too soon before you know anything about a potential audience and user pain. But you start building to test the hypothesis early on. At the same time, you do not need to sell just yet.´At least not using a high velocity and high cost sales team. It is enough to get to the demo phase and get a MVP in front of customers and get a wow. Doing this long enough gets the product CEO into different segments and possibly he finds the early adopters and evangelists that give him traction and first validation of the product. All before spending too much money.
Just by this approach the path to maturity fits the concept of venture fnding quite well. Seed money leads to an MVP. The MVP leads to signals that give Series A valuations that make sense. And so forth.
Because the product CEO does not really need other product people too much, because that creates too much turmoil, he will focus on hiring complementary skills and hire them at the right time.
Creating a far more balanced culture.


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