Defenestrating Thoughts from the Bivouac

With most of my work experience in an R&D (research and development) environment, I noticed that we’re always told that our number one priority is to build a great product with the best features and high quality. After a while, it’s easy to feel that this goal is the number one priority for not just our job function, but for the entire company. However that’s not the case.

The company is around to make money for its owners (i.e. shareholders); obviously building a great product is an important part of it, but it is just a part. I’ve talked to many engineers that started their own business and failed. A common thread is that they were able to build a really cool product, but couldn’t make money on it. That is, they could not find revenue (i.e. customers).

It seems obvious, but in this context someone has to sell the cool technology, otherwise it’s mostly useless. I have a friend that creates really cool software and tools, but does very little in the way of marketing or selling and, in my opinion, sees a tiny fraction of the money he could be making.

Now, the trend I see is more and more technology start-ups created with the goal of not making money, but with the goal of being acquired by a company like Microsoft or Google. They figure, let someone else figure out how to monetize this. This way they play to their own core competency of product development.

All this really means is that marketing and sales are really important to business. I know that every engineer hates to hear this, but really they are just as important as us engineers (if not more). A technology company just won’t survive without all of these functions.

I had been thinking through this idea for a bit, and some recent reading and work helped me crystallize it a bit more.

I’ve been lucky to be doing some focused product strategy work recently. While I can’t talk about the specifics, I was happy to do some more business analysis and learned a lot in the process. I found that it would be possible for the company to target a certain market segment and with relatively small investment in marketing and have amazing market share gain a quick time period. How’s that for a blatantly generic and optimistic prediction? :-)

It seems straight-forward from there, but I had to look at the overall opportunity cost. The resources (time, money, and people) needed to achieve the short term goals are, of course, non-zero, but the ROI (return on investment) seemed to justify going ahead.

But that level of analysis was still limited in scope. When you look at other products in the company, would the same resources on another project result in higher ROI? In this case, due to economies of scale and some barriers to entry, it turned out that putting those resources on another project would be more profitable for the company.

Turns out that this really is no different than the work I would do in the scope of a single product. You look at possible individual features and enhancements and rank them by the calculated worth (ROI, etc.) and execute on the top ones.

This recent strategy work made me realize that I was doing the same thing but instead of working with individual features as my variables, I abstracted it up to the product level and then even higher to the business function level.

Now, if we look at this practically, I can now explain a lot of decisions that technology companies have made historically that made all the R&D staff and technical analysts confused. It seems pretty obvious, but keep in mind that some of these people are the ones that always say, “If it’s cool, we should just build it.”

If a company has a product that is hands-down the industry leader and clearly differentiated and you wanted to grow market share, what would you do? Of course it varies by the situation, but given resource constraints a very valid solution would be to cut R&D in favor of sales/marketing. It sounds really weird (especially coming from an engineer), but think of it as a queen sacrifice. :-)