Module Description:
Ubiquity Extended Team member Veronica Pinchin, a fractional Chief Product Officer, product advisor, and PM coach, shares 5 key lessons for startups (David) to compete against larger incumbents (Goliath)
Full Transcript:
- Welcome everyone to our Ubiquity University session on five David versus Goliath Product Lessons that allow startups to win with Veronica Pinchin. Veronica is a fractional chief product officer, and product advisor and a proud member of our Ubiquity extended team. Ubiquity Ventures is a seed stage venture capital firm investing in software beyond the screen. That means we back pre-seed and seed stage entrepreneurs. They're using smart hardware and machine learning to solve real world physical problems far away from a typical computer screen. With that, let's dive into today's lessons. Veronica, I'll ask you to take it over.
Thanks Sunil and welcome to David's five lessons. So as Sunil mentioned, I'm Veronica. I currently work as a fractional chief product officer, product advisor, and PM coach, mostly to seed through growth stage startups. At the moment, I'm the interim CPO of Kueski which is a Mexican buy now pay later FinTech unicorn. And before this I spent about a decade in product leadership at Wealth Simple, Sidewalk Labs, Google, and Mixpanel. But today I'm here to tell you a story about David and Goliath. So in this story, Goliath, a heavily armed, Philistine giant challenged anyone to come out and fight him. For 40 days, no one would respond to his challenge until small David armed only with a stone and slingshot responded to the challenge and ended up hitting him in the forehead with the stone and defeating him. So in this story, you are David, you're the small startup with limited resources and Goliath, here is your competition, and these are the companies that have an established customer base, brand, healthy revenue and scaled processes that can make it look very difficult to take them on. So really what we're talking about in this talk today is the stone. These are the tools in your toolkit that you can leverage as a small disruptor in an established market, ways that you can leverage things like your small scale, your agility, and even your anonymity to compete with some of those large incumbent competitors. So with that, we will dive right in with the first lesson, which is to be faster. This is probably the most obvious and widely known, widely accepted truth of being a startup or a disruptor. In theory, you know, you're smaller, you're supposed to be faster. However, this is the one that I see startups most frequently get wrong, and there's a couple reasons why. Because this is such a difficult one to get right, I'm gonna spend the longest on this lesson because I think it's such an important key competitive differentiator to nail. And then we'll speed up through lessons two through five. So with no further ado, I present to you the four Cs of startup slowness. And so these are really the four reasons and the four patterns I've seen in teams and companies that fail to make speed a competitive differentiator. They are collaboration, customers, quality and confidence. So starting with collaboration, collaboration is great in theory, but in my experience, dangerous in practice. As a startup, you want to collaborate, you want your team really aligned on the vision and all rowing in the same direction. However, in reality, collaboration can often mean that you have more decision makers in the room and more opinions to consider, which can be a real hindrance to moving quickly. In teams that really nail speed as a competitive differentiator, they often have one single-threaded owner that operates a little bit like a dictator and has ultimate decision making authority. Their team is accountable to nobody but them, and they're able to make very swift threaded decisions. So X out collaboration. Next, customers. So in theory, customers are supposed to be the core of all great product management. And while in many cases this is true, when you are a small team trying to move quickly to build something in a new market, listening to customers can actually be a bit of a trap. So when you're building the first version of something, often the most effective way is rather than doing dozens and dozens of customer interviews, having one person who deeply understands the problem space and has a clear distinctive vision for what needs to be built in that space, and then runs to get that thing built and live in the world. This can mean that you actually aren't listening to customers very much in the very early stages of building that MVP until you have something live in the world that you can then start getting their feedback on. Next, quality. In a lot of cases, we are all over achievers, and we all love to build something that is a perfectly optimized, streamlined, delightful customer experience or flow or a perfectly optimized backend. However, sometimes building a perfect product can really be the enemy of speed. This is really a muscle that you have to start building where you're actually comfortable putting things out into the world that maybe you're not completely proud of, or that you know are a little bit broken in some ways. This can mean launching painted door tests that lead your customers to an actual dead end and a flow just to test if an idea is good, or it can mean building a backend that's totally separate and hacked together. Even if you know you're taking on technical debt, you're gonna have to go back and build later. Being able to strategically sacrifice quality for speed is a key muscle to build in fast teams that can take on large incumbents. And last but not least, confidence. This is one that I see early stage startup teams fall prey to the most, but it can happen kind of in any size company. As someone in charge of a product, whether you're the CEO or the PM, it can feel like you've told a certain story to investors that you wanna stick to in order to keep their confidence in your company and your product, and even in your personal abilities. However, if you stick to that to closely, it can mean that you're actually not making important pivots or redirects that will actually get you to the right long-term solution. You're sacrificing the right long-term outcome in order to keep the confidence, which is really false confidence of your investors, or your customers in the short term. So I'm gonna walk through two examples. One where we got it right at Wealthsimple and one where we got it wrong. So an example of getting it right was when we built Wealthsimple Trade. So Wealthsimple had a robo-advising product and a small team within Wealthsimple saw an opportunity to bring some of the same principles that we had built, Wealthsimple managed investing to a direct investing platform called Wealthsimple Trade. The way that this was built was we had a small, really stealth tiger team that worked pretty much independently of the broader R&D team, and in fact, most of the company didn't even know that this project was happening, or this product was being worked on until it was pretty much ready to launch. We built it as a totally separate app, built on a separate technical infrastructure. In fact, it had a separate app in the app store, which you can imagine was a huge amount of technical debt we did end up having to tackle later when we reunified the apps, but we really built it as an independent product that was a two-way door and we were ruthless about scope. The initial version of Wealthsimple Trade, you could only trade in Canadian dollars that had limited market types and order types that you could submit and a limited number of symbols that you could trade. But by being ruthless about Scope and having that independent Tiger team, we were able to build the MVP within a matter of months with a really small team. An example of a time at Wealthsimple where we didn't get this as right was with USD accounts. This was if you fast forward a few years into Wealthsimple Trade's life, at this point we had a large customer base and there was a huge amount of sort of pressure and feedback from customers to build this feature and we really let that bleed into our process. We also really tried to build the perfect technical solution that was integrated in our app because there was so much excitement, and we were anticipating so much scale for this product and there were just too many cooks in the kitchen at every step. And so this combination of factors meant that we were moving way too slowly. We ended up having to do a hard reset on the product several months in and identify all of these reasons we were moving slowly and find a new way of working that enabled us to get back on track and launch something quickly. That actually ended up helping catalyze a whole new product playbook at Wealthsimple that helped us move faster with all of our new projects because we realized all the ways we got it wrong initially here. And with that, I'll move on to lesson number two, which is not reinventing the wheel. So in many cases, plagiarism can be considered a bad word, and I think most PMs don't like to copy. They ride themselves on their ability to use first principles and robust discovery first, you know, user research to build something really shockingly beautiful and innovative. However, I think in the large majority of new product development, this can be a trap. If you're building something new, please, please, please start by looking at every other company you could find at home, abroad, different geographies that has built some version of that thing, study it and learn what works well and what doesn't, and copy the things that work well. You can copy at the individual feature level, or all the way up to a product, or even an entire company. And so I'm gonna give an example of this at the company level. When I was working at Mixpanel, we were the household name and product analytics, at least for small and medium companies. And we were starting to move up into enterprise. We had a strong first mover advantage, a large customer base and healthy revenue. And then came along this deck called Amplitude. When they launched, Amplitude offered pretty much the exact same thing that Mixpanel did. In fact, their reports even looked the same. If you look at this slide, I challenge you to identify which of these are Mixpanel and which are Amplitude. However, Amplitude was able to build with the hindsight of knowing exactly what the product should look like. And so they optimized both the user experience, as well as the backend infrastructure with perfect visibility of what the end product should work like. That meant that they were able to basically get to the same product with a much smaller team, much faster and had a smaller cost basis, which meant that they could undercut us on price. And it soon became evident that they could also move faster at launching new features because they had this robust, flexible platform that they built out. So not only could they undercut us on costs, they actually started to out develop us on new feature innovation as we struggled to fix some of the legacy infrastructure and migrate to a new backend that was flexible enough to support the future. An example of a time where I was on the right side of the copycat strategy was at Wealthsimple when we launched Options Trading. When we started building this out, we started by learning from the best and looked for the most streamlined options trading flows that existed globally. We took inspiration from companies like Robinhood, and looked at what worked well and used that as our baseline for our options trading experience and then asked how to make it even better. So these are examples of doing this at the product level, like at Wealthsimple or even the company level like at Mixpanel, but I'll know you can also do this at the feature level. If you wanna add filters to a list, guaranteed someone's designed a great approach to that. Exploring a set of places on a map definitely solved. All of these things, you should start by looking at other companies, or products that do this well and go from there. Next, doing things that don't scale. This is a lesson that I really encourage big companies, and teams to remember as well, but I think it can have a especially powerful and potent impact in smaller companies. Really a key way to gain traction, especially in a market with established players is to focus on building a strong loyal customer community in a niche market. And a great way to do that and to maximize learning in early stages of a product is to do things that shock and delight your customers, even if they don't scale. And so the strategy here is really to create a deeply engaged and passionate core user base who will act as advocates, provide feedback and refer friends. So by building a loyal customer base, you generate word of mouth marketing and advocacy that really money can't buy. One example of this really well was at Wealthsimple, in the early days, our CEO Mike Katchen would personally text every new customer, thanking them for trusting us with their money and making his personal line available if they had feedback, concerns or ideas. This is definitely not scalable as Wealthsimple now reaches millions of customers. But in the early days, it created a magical experience for new customers that created a deeply loyal initial customer base that's willing to actually forgive a lot of, you know, downtime, missteps, challenges that the startup encounters over time. Another example of this is Airbnb who use things that don't scale in a slightly different ways that add a lot of value. Airbnb has a... Is famous for their 11-Star Framework and the idea here is to think through what an 11 star experience would look like for your customers. That is an absolutely optimal experience. So for Airbnb, they talk about landing in an airport, being greeted by cheering crowds, a limo whisks you off to your Airbnb where you're greeted by a celebrity who offers you a totally once in a lifetime experience. You can imagine that this experience definitely doesn't scale, but by thinking about what that extreme is and working backwards, as Brian Chesky says in this quote, you can start to think about what the kind of key pieces of a truly exceptional customer experience are. You can then work backwards which... Each of those items that really create magic and figure out if there is an iteration of them that actually can be built into the product in a way that scales, that captures some of that delight and magic, and build a truly unique customer experience. And number four, looking for market blind spots. So what I found is that smaller companies and startups can thrive, and also helpfully fly under the radar of incumbents who might see them as a threat by targeting underserved markets. These are blind spots that really big companies don't necessarily care to even look at because the market size isn't big enough. For example, Google's famous for talking about how they don't get outta bed for a problem that's smaller than $10 billion. That actually leaves a huge amount of market space available for startups to go after 'cause $10 billion can actually be a pretty healthy business. And so two examples that I like here are from Airbnb, and from Wealthsimple. So when Airbnb started, they wanted to serve customers that were really looking for a more local experience that was embedded or the city, or neighborhood they were visiting. That's what differentiated them from faceless options like hotels, or even lower cost options like hostels. That market seemed weird and small, people that were willing to stay in somebody else's home. And so other incumbents like hotels really didn't take them seriously for a very long time. And in fact, it was too late. They really landed and expanded serving that one customer niche really well. And over time we're able to expand into other markets as their offering got more sophisticated, to the point today where they actually are now going after cost conscious business travelers and really starting to eat a lot of the share that hotels have. Another example of this is Wealthsimple, where Wealthsimple saw in the Canadian market, there was actually a large swath of folks that were underserved by the Canadian banks. A lot of the Canadian banks really don't offer you personalized great service until you have three, four, even $5 million. And so there was this segment of the population that had... You know, they had money to invest, say at least a hundred thousand dollars, but they didn't yet qualify for the really great products and services offered by the big banks. Wealthsimple saw this opportunity to really offer differentiated access to products like alternative investments, venture, private credit, as well as the high quality service that the big banks offer to their more affluent customers. And by kind of landing there, and developing a toehold in that market, Wealthsimple was able to really make a name for themselves. And last but not least, dismantle existing cost structures and business models. So this quote is from Batman, and what it says "That you merely adopted the dark, I was born in it and molded to it." And I like this quote because it really alludes to the fact that when your large competitors were founded, many of the disruptive technologies that exist today didn't exist today, which means that leveraging these innovations isn't foundational to the bones of who they are. Said differently, they're really adopting the dark. They're learning to operate in a world where things like gen AI, cloud computing, blockchain, outsourcing. Now, a lot of these things didn't exist, and even things like mobile phones sometimes didn't exist when some of these companies were founded. And so if you can build a company where leveraging these technologies is really core to your cost structures, core to your product development, you can actually start moving and iterating much more quickly and building things that are just not possible for these companies to build. I will note that this can require some bravery. And so I'm going to end with this example from Wealthsimple when we launched USD accounts, which I mentioned previously. So in Canada, just for some context, really at this... When we were launching USD accounts, pretty much all of the big banks in Canada and to this day made a huge amount of their money on transactional revenue and foreign exchange fees. You know, charging very high FX fees, trading between Canadian and USD generally for people that wanted to buy USD stocks. And at this time when we launched this Wealthsimple was actually making the vast majority of our revenue in USD trading fees. We only offered Canadian accounts. And so anytime you treated a U.S. stock, you had to pay the FX fee. However, we knew that our customers were really asking for USD accounts, and we also saw a future where similar to the U.S. there was commission free low cost trading for everyone in Canada. And we knew that if we weren't able to disrupt ourselves, eventually someone else would come up and come out, and disrupt us. And so we decided to take the leap and launch USD accounts, really putting our major revenue stream at risk. So what we were able to do is, as we were building out USD accounts, we also looked at other ways that we could fundamentally innovate on our cost structure and revenue model in order to build a much more diversified revenue stream, and sustainable business. So while we were building out USD accounts, we were also already working on launching new alternate investment options like private credit and venture, that would be a new revenue source for us. Building things like stock lending, better cash management of uninvested cash, and launching new products like options to provide additional revenue streams. So we actually were able to fundamentally innovate on our revenue model and cost structure in a way that a company like a big bank in Canada never could. Because as a publicly traded company, you don't have the option to put what is 90% of your revenue at risk. Shareholders would simply not allow it. So as a startup, you can take these big scary bets, and really make some bold moves that a larger incumbent could never feasibly take on. And so with that, just as a quick recap, the five lessons here are to be faster. Remember the four Cs of startup slowness and don't fall into any of those traps. Second, don't reinvent the wheel. Copy, copy, copy what works well, it's nothing to be ashamed of. Third, do things that don't scale, and try to create true magic for your customers. And then walk it back to something that will eventually scale. Fourth, look for market blind spots and go after the markets that are underserved by the large incumbents. And finally, reinvent cost structures and business models to create fundamentally new products and businesses. And with that, thanks for your time.
Cool, thanks Veronica. That was fantastic and full of lots of counterintuitive stuff, which is always juicy. This has been our Ubiquity University session on five David versus Goliath product lessons that allow startups to win. My name's Sunil Nagaraj. I'd love to hear from you at Sunil@Ubiquiti.VC or if you have a software be on the screen idea, you can set up a meeting at Pitch.Ubiquiti.VC and Veronica, I'm sure many of our portfolio companies will be reaching out to you for ongoing help as a Ubiquiti extended team member. Thank you again for doing that and for doing today's session. So with that, we'll wrap up.