Picks and shovels: infrastructure for the win

With IPOs being announced almost weekly, we get a lot of insight into how Lyft, Pinterest, Uber, etc. are spending their money. And one element they all have in common: a huge infrastructure bill.

Lyft’s S-1 mentions their agreement with AWS to spend an aggregate of at least $300 million between January 2019 and December 2021. In other words: AWS gets $0.14 on every Lyft ride. And another winner when you order a Lyft? Stripe, taking a few cents ever ride for processing your payment.

Pinterest has roughly the same agreement: the commitment to buy at least $750 million of cloud services from AWS between May 2017 and July 2023.

And when Snapchat did their IPO, everyone was flabbergasted with their $2 billion five year contract with Google (next to their $1 billion deal with AWS).

Cloud providers and payment processors, but also marketing platforms, data & analytics vendors, customer support tools, they all provide the more or less critical infrastructure for every growth company. And especially the first category did something amazing: they positioned themselves to be part of every transaction. And by being part of every transaction, you grow with your customer, and you more or less have equity in all your customers.

Amazon, Google, Stripe: they don’t need their venture arm per se: their product is creating a more significant upside than a few percents on a cap table will.

It’s no longer 1848, but it is still lucrative sell shovels in California’s Gold Rush. Or in 2019 terms: to provide the critical infrastructure every new company and app will need. Infrastructure FTW!

The moment is now for enterprise software startups

We’re in a great moment in time for enterprise software startups. Talk to anyone working in a larger company, and you know that they have many stories on the crappy software that they are using. And for that crappy software, they pay a lot of money.

The moment is now for new enterprise software startups to challenge that. Most markets cope with ever low and declining net promoter scores and are just ripe for better alternatives that make the expensive cheap and benefit from new tech and better access to more data to make existing processes 10x faster. And in other cases: make processes digital for the first time.

New players will ride the trend of consumerization of enterprise software. Winning players understand that the person using enterprise software is also that: a person. A person that has access to great software as an individual and will no longer accept less in their work life.

The software development circle of doom

Building and scaling a product development and engineering organization is not an easy task. Most founders of startups and high growth companies indicate that “there is something wrong with the engineering team.” But is there? In a lot of cases, when you start to pay closer attention, you notice different problems. There is not something wrong with a team or the people in the organization. But you see that there is a lack of trust, people don’t communicate, and there is the (perception) of no progress.

Before you know it, you end up in a vicious circle. You end up in the software development circle of doom.

software development circle of doom

The software development circle of doom has three distinct parts that feed each other, and it’s hard to break out of this vicious circle:

No progress
In most cases, the circle of doom starts with progress, or more precise: the lack thereof. Or in some cases, there is too much progress, so there “should be something wrong.”

Mistrust
Because there is no progress, the level of trust degrades, “they say they will release tomorrow, but they’re always late anyway.” “Yeah sure there is a new version, but it’s full with bugs.” “Our competitors already have this feature.” “Why should this take multiple weeks/months to build? It such a simple thing.”

Lack of communication
And with no trust, people stop communicating. There is no longer a feedback loop; different visions and multiple truths become a reality. There is no transparency in status or outcome anymore. People start to hide mistakes; wins are not shared wins and are not celebrated. Resulting in less progress or progress in the wrong direction, and the circle of doom continues.

How to break out of the software development circle of doom

Get to a shared vision.
It’s critical that everyone in the organization understands the vision, knows what the end goal is and what the real jobs to be done for the customer are and why we focus on the first three items on our list and not on the other things on our to-do list. That is the job of the product manager (more on that in Product Management: what people don’t tell you). Here it’s critical that there is a proper balance and understanding on what the level of desired quality is: regular downtime that interrupts customers? Unacceptable. Relying on a manual release process since implementing CI/CD takes a few weeks: we can live with this in the short term but will address it later. A good product manager also educates the organization on why it takes time to create this new feature: it’s not a one-off for one customer but a module that will be reused by all customers. It needs to handle a certain amount of load; it needs to support and be tested on multiple underlying platforms; it needs to be ready for customers in different countries/locales as well, etc.

Value transparency.
Bring transparency to the software development process. Have clear how time is spent (new features vs. bugs vs. tech debt vs. process). Have a good feedback loop where the development team can work directly with customers to get instant feedback. Bring insights in cost and results; maybe you can drop an underused platform if it saves you three days in your release process? Challenge if a feature is really for everyone or perhaps just an overpromise for one customer. And on the other hand: communicate delays, critical issues, and problems early, directly, and with a clear post-mortem and plan of action to gain trust and show you’re on top of it. Work on making clear what is being delivered per release, and link this to actual customers and use cases. Have clear which people work on what, and be open to getting feedback on the prioritization. But also educate on your predicament: “You want more off A? That is possible if I cancel B.” Show progress by having a hit list of bugs you are squashing each week, demonstrate progress in real user performance, etc. Work with numbers, not with anecdotes: “we released ABCD for customer X” is more powerful than “people are working the evening to get the release out.”

Demo real progress.
Have a recurring session where the teams demo real progress. Not a sprint demo where nobody shows and only a terminal or code is visible, no. Real use cases of software that is released. Have the complete management team attend and focus. This demo day is the monthly day where you can make sure the team focuses on the right things; you can understand why the velocity is what it is, and focus on real outcomes and not on anecdotes.

Product Management: what people don’t tell you

Being responsible for “product” as a Product Owner, Product Manager, or Product Whatever, is glorified. Job adverts describe product management as being the ‘mini-CEO’ or ‘startup founder in a corporate,’ but that is far from true and far from reality. The truth is, being in product management is not an easy or glamorous job. Below what most people don’t tell you about product management (a recap of this Twitter thread by @jmj, Good Product Manager/Bad Product Manager, and my own thoughts):

1. You have to say no a lot

Your number 1 job in product management is to say “no” a lot. You have to say no to distracting ideas and say no to keep your product on track for success. A lot of times, people will be frustrated with you because you are saying “no.” It’s up to you to communicate your vision in a way that makes the “no” understandable and acceptable, and you have to communicate why X is more important than Y right now, but don’t expect people to listen.

2. You’re accountable

Being in products means that when things break, you’re accountable. You cannot blame “the process,” “the technical writer,” “the QA,” “the salesperson” or “the team.” It’s your product, get ready to bite the bullet. A good product person takes full responsibility and measures themselves regarding the success of the product — no excuses.

3. You’re not the idea person

You are not the idea person; it’s your job to create good feedback loops and communicate why specific ideas are prioritized over others. Designing new products is a very, very small part of what you’ll do. Good product people crisply define the target, the “what” and “why” (as opposed to the how).

4. Being an influencer makes or breaks you

Since you do not have many direct reports, or in most cases: none at all, your ability to influence will make or break you. And being the boss wouldn’t fix it anyway. Remember: sometimes it is more important to convince your team than it is to satisfy your customer on the vision, the what and the why.

5. You have to be the expert

You have to be the expert, on everything. Good product people know the market, the product, the total product suite, the roadmap, and the competition extremely well. You focus your roadmap and your team on customers and their real problems; not on symptoms or anecdotes. You anticipate flaws and build practical solutions instead of putting out fires all day.

6. Explain continously

Cristal clear communication, from presenting on stage and pitching to customers, to writing opinion pieces, is essential. You have to explain continuously: how the product works, what our future vision is, why are some things the way they are, why some bugs are at the bottom of the priority list, why competitors appear better but aren’t, why customers don’t always know best, why you keep saying no, etc. etc. Good product people create explicit materials as FAQs, functional overviews, how-to’s, white papers, documentation, and blogs to guide customers and the rest of the organization. You take a written stance on important issues, instead of just voicing your opinion verbally as a complaint or problem “that is out of your scope.”

And those points are exactly why being in products is such a great job to have. It makes our work challenging and different every day. There is no need for a “leader” to tell you what to do, or a manager to request “more challenging work.” YOU are the one in control.

Joining henQ

New year, new job: after nine fantastic years at Backbase, I’ve decided it is time for a change. I’ve joined henQ, the Amsterdam based venture capital firm with a focus on B2B software startups. As Partner at henQ, I will focus on finding the next winner in fintech, SaaS, enterprise software, and beyond, and I will be working with our portfolio companies on growing marketing, product, and tech.

As VP Product Management and before that, Global Head of Marketing, I’ve had the honor to be a part of growing Backbase by 10x or more in every measure. And I’m planning to do more than the same at henQ.

From my very first meeting at Backbase, I knew this was going to be an extraordinary journey. Back in 2010, I joined a team of 50 people selling an AJAX library and building a new portal product. Since then, we found focus, defined our vision, and executed on that vision, bringing Backbase to where it is today – the number one player in digital banking, and one of the most exciting tech companies in The Netherlands, if not Europe.

I am very proud of all that we have achieved at Backbase and most proud of the R&D and Products team I leave behind who will be making Backbase better and better every day.

And now I shift my focus to investing and henQ, I’m excited about getting the chance to work with more founders and more amazing teams rocking the b2b software world.