When building a house builders are focused on doing a good job, they’re not focused which job to do, or whether the house is built in the right place. All of that has been validated beforehand by the architect and site manager.
Taking a product to market is the same thing. There is the preparation and validation phase, before the execution phase.
The biggest mistake founders and go-to-market leaders make is:
Attempting to execute a business model, before validating which business model to execute.
It sounds obvious, but it’s a common problem.
Whether a conscious decision or not, it happens because of an unspoken assumption that product-market fit is validated. This assumption can be fatal.
The objective of a Go-To-Market team isn’t to execute an unproven business model, it’s to validate which business model to execute. They exist to validate a set of hypotheses and determine which business model to invest time and effort into.
Revenue is not the goal
Focusing on revenue is a common mistake. This is what I call an acquisition focused go-to-market. Although this sounds ridiculous,, winning customers isn’t the objective. Winning customers is a consequence of product-market fit, but product-market fit and validating the business model is the goal itself.
Winning customers is a consequence of product-market fit, but not the goal itself. The goal is to achieve product-market fit and validate the business model.
Focusing on revenue, instead of what makes revenue possible, leads to bad practices. Deals are closed at all costs. Low-fit customers sneak in the pipeline. Learnings are foregone in order to focus on closing. It’s an ugly spiral that takes everyone away from what really matters. Achieving PMF and validating which business model to execute.
In addition to this failure, focusing on revenue can create unnecessary team tensions. When leadership make the false assumption that PMF and GTMF have been validated, the only excuse for poor results must be poor execution. How can you be sure whether the plan was executed poorly, or the plan itself was the issue?
Focusing on revenue in the early stages of go-to-market doesn’t work.
There are five stages to company building
- Build the product
- Validate the market
- Validate the business model
- Scale the business model
- Achieve profitability
Focusing on revenue makes the assumption that you’ve already conquered steps one, two, and three and are now ready to scale the business model.
This can work, but only if you strike gold in having product-market fit (PMF) and go-to-market fit (GTMF) first time around, without any need for iteration. It’s extremely rare, but it can happen.
In fact, this is exactly what happened at Spendesk when we launched the UK and German markets. We had a strong product-market fit in France, our core market. When I was hired to launch the UK I picked up the phone, sent a bunch of cold emails, and started to execute a sales process. It worked! We didn’t need to validate PMF because we already had it. But we were extremely lucky. When I moved to the US last year, this was not the case.
We arrived in the US four years late. There was a lot of well funded competition, all going after the same customer. There was a strong pain-fit, but our solution wasn’t working in this new environment.
Coming to the market with a revenue focus slowed our learning. We continued trying to close the same customer far longer than we should have. Had we been focused on validated learning and laid out a set of hypotheses in the beginning, it would have been clear that we needed to change either the product (what we sell), the segment (who we sell to), or the positioning (how we sell it).
This is when I came across the Customer Development Process
laid out by Steve Blank in his book called ‘The Four Steps to an Epiphany’
. It completely changed the game for our team.