Letter #6: Jim Goetz (2015)

The Templeton Compression and the Sales Ready Product

Hi there! I go by KG, and I love studying the history of business and investing. I’ll be sharing some notes from one Investor/Shareholder letter per weekday (mostly from my compilations) here.

Today’s notes are on Jim Goetz’s 2015 essay The Templeton Compression and the Sales Ready Product.

You can find this essay on Sequoia’s website here.

If you have any thoughts on what you’d like to see, let me know!

Notes

This is dedicated to Don Templeton and his family.

Don Templeton envisioned and developed the concept of a Sales Ready Product. He held early and critical roles at Peribit (acquired by Juniper), Palo Alto NetworksNimble Storage, and Clearwell (acquired by Symantec). Peers from those companies have gone on to bring Don's process to Clari and Skyhigh Networks, among other firms.

The Templeton Compression

Don believed that to engage engineers and influence their priorities, they needed to fully understand the sales process. He aligned sales, product, and engineering to create a “sales ready product” and a provocative demo that could convert prospects in the moment. Instead of showcasing lots of features, the product squarely addressed customer pain. Because the product had such incredible fit with market needs, Don’s companies could shrink the sales cycle, hence the term the Templeton Compression.

  • Every sales organization has a learning curve where

    • 1) companies invest in sales before they start generating revenue

    • 2) Breakeven Point

    • 3) Traction Point

  • A sales ready product (SRP) can shift it to the left and shorten the break-even time and generate positive returns earlier

    • While you shouldn’t neglect sales, you need to build and strengthen the foundation to climb sales rather than focusing on ramping up too quickly

A shorter sales cycle unlocked a chain of events where higher early revenue drove increased engineering headcount, robust product innovation, and, ultimately, better terms for follow on financing.

MVP vs. SRP

9-MVP Image1

A Sales Ready Product converts a prospective customer in the moment—which shortens your sales cycle, ramps your revenue, and points you towards market leadership.

  • While MVPs may launch first, they validate product-market fit through incremental iteration, whereas SRPs chart a course toward market leadership (even if more upfront R&D is required)

  • Once launched, customer transactions accelerate, sales cycles shorten, renewals come more quickly

| Elements of an SRP | | ---------- | | To transform your product into a Sales Ready Product, you need: | | Unified Engineering, Product Design and Sales teams | | First-hand customer research An inventory of customer objections | | An inventory of customer objections | | Understanding of what matters most to customers (and what you can ignore) | | A qualification list (and the right initial customers) | | A demo that uses data from the prospect and includes a light switch moment | | Standardized and unified sales training and materials |

9-MVP Image29-MVP Image3

Don would continue to research and refine what the product needed to be until he was convinced that it could achieve at least a 50% close-rate in 30 days. This meant holding back from launching early, but it ensured the product was sales-ready. It also created a "velvet rope" buzz around the products he was selling. He always wanted his products to be both bought and sold—he wanted people to actually want what he was selling.

A 50% success rate for deals that can close under 30 days seems too good to be true, but Don made it happen at company after company.

  • Forget first-mover advantage

  • Focus on product — hype will be generated as a side product

  • Build a product people actually want

Compressing the Traditional Sales Cycle

This is how he did it: Develop a Sales Ready Product with the right kind of demo and at least one very compelling use case. Qualify all leads: Don't waste time on customers who don’t fit your ideal profile. Get the right people in the room: Decision makers and key advocates Combine the demo and proof-of-concept (POC) into one meeting. Have each sales team only manage the 3-4 accounts that squarely fit the customer profile.

  • The traditional sales cycle takes ~10 steps and 180 days to close. The traditional sales team manages 10-30 accounts, and has a success rate of ~25%.

  • Don’s method shortened the sales cycle to 3 steps and 30 days to close.

How to Build a Sales Ready Product

11-SalesReadyProduct Image1

Don’s Sales Ready Product process:

Know your customer’s pain Create an inventory of customer objections Know what matters to your customers (turn on your BS detector) Establish the right beachheads and bowling pins (and alleys) Find your product super power and develop an action matrix to know what to build and what to skip 6. Build the right demo with a light switch moment Drive towards the purchase order from lighthouse customers by standardizing the sales training process and materials

1. Know Your Customer’s Pain

Don was a forward scout.

He met with prospective customers to uncover what kind of solution they needed, what they thought of a product idea in development, and what would make the potential product difficult to sell, or met with open arms.

  • In the months leading up to a product release, meet with prospective customers to see what their biggest pain points are and what they actually need/want

11-SalesReadyProduct Image2

Following each scouting session, he shared his findings with the entire organization. This wasn’t a quick email; it was 2-3 typed pages of customer feedback with detailed texture on what was working and what was broken in the team's current ideas for a product.

  • Sounds pretty familiar…

2. Create an Inventory of Objections

The Inventory of Objections for Peribit was enormous. Imagine trying to solve all of the problems listed above—you'd never get your beta out the door. Don knew you didn't have to solve every objection, but you did have to uncover the few objections that really mattered.

  • Create an inventory of objections and identify what really matters

11-SalesReadyProduct Image3

3. Know What Matters

Here's where you turn on your BS detector—not every objection is valid. Don was more proud of the features he kept out of a product than the ones he helped put in.

  • Sounds familiar…

Don wrote every objection down, but he didn't try to solve them all. In the long list of objections that Peribit's prospects expressed, the only ones that passed Don's BS-detector were the following:

  1. No granular application visibility

  2. No redundancy or failover circuitry

  3. Data path is for proven products—i.e. no inline feed for a demo

  • Cut through all the noise and identify the signals

4. Establish the Right Beachheads and Bowling Pins (and Alleys)

11-SalesReadyProduct Image5

Source: Geoffrey Moore's Crossing the Chasm

Critical to the SRP process is to know your target customer. When you have specific qualifications for your beachhead customers, you won't waste your time chasing worthless leads.

  • Identify your target customer — not by who they are but by what they do: Peribit initially thought the qualification was job title (CFO), but realized it was ACTUALLY whether the person had a Cisco password

Don pushed the team to do something difficult: ignore non-strategic opportunities. Make sure everything fits your qualification criteria. If it doesn’t, move on.

  • Don’t waste time

5. Product Superpower and Action Matrix

Think of this graph as a way to spend your "development calories" on different types of features. Don wanted a mix of "good enough" features with at least one leading use case that the customer would absolutely love.

  • Find your product superpower and draft an action matrix to know what to build and what to skip

  • Filter what matters

11-SalesReadyProduct Image7

Example: Clari

11-SalesReadyProduct Image8

Notice how the list filters itself from left to right to end up with the one thing that matters in the demo: a light switch moment.

6. Build the Right Demo

The right Demo makes all the difference.

11-SalesReadyProduct Image9

A Sales Ready Product demo has near instantaneous setup. It doesn't use dummy data—it uses a customer’s real data. It instantly converts a prospect through a light switch moment. It sets the stage for a P.O. and future renewals by arming your prospect (who's now your newly converted advocate) with everything she or he needs to rally additional corp and exec approval—including a bespoke value prop that can be shared across the C-Suite.

  • Help your customers. Help them convince their bosses. Make it easy for them to adopt you. Help them help you.

The importance of real data can't be overstated. When prospects see their actual data processed in the moment, they go from being vaguely interested in the theoretical possibilities of your product to being instantly alert and focused on the value you provide.

Using the prospect's actual data has an additional benefit—it greatly increases the quality of feedback you receive. 

  • Show, don’t tell — your demo must show instant value at a glance

Light Switch Moment Design a moment that flips a switch in the mind of the prospect that converts them into an advocate and customer.

  • When a prospect sees something compelling that makes them go: “I NEED this product”

7. Driving Towards Lighthouse Customers

Standardize and certify your sales team, process and materials.

Once Don and the sales team had developed the demo, the next step was to make it easy for anyone to sell the product.

Don and his team created a library of documents—proof of concept reports, sales presentations, product documents, and sales process presentations—that any rep could use.

Rather than depend on reps to put together their own material and take time away from selling, Peribit provided all of this information in a ready-to-use format. 

His teams certified every sales rep at every stage. Training was organized and standardized; every sales rep went through the same process and had access to the same materials. As a result, Peribit put a unified expression of the value prop out in the market.

  • Make it easy to sell — Apple was great at this

|Build a Sales Enablement System| | ---------- | | One way to organize, manage and unify your sales materials is to is to use a cloud-publishing solution for sales enablement, like Inkling.com (which is how we made the document you're reading right now). If something changes, you simply republish like you would a website. No more out of date decks!|

Don’s Influence

11-SalesReadyProduct Image16

Wrap-up

If you’ve got any thoughts, questions, or feedback, please drop me a line - I would love to chat! You can find me on twitter at @kgao1412 or my email at kevin@12mv2.com.

All compilations here.