Dec 07, 2020 08:00:00

'Top-down sales' is essential for successful and expanding product development, and how should it be incorporated?

There are two types of organizational management methods: top-down type, in which decision-making goes down from top to bottom, and bottom-up type, in which decision-making is made from bottom to top. In recent years, technology companies and start-ups often take bottom-up innovation strategies led by 'product development', but at some point it is necessary to add 'top-down sales' to expand the company.

Yes , said Sarah Wang and David George of venture capital a16z . It explains in detail how to add top-down sales to the bottom-up development site.

The '$ 20M to $ 500M' Question: Adding Top Down Sales --Andreessen Horowitz
https://a16z.com/2020/12/03/adding-top-down-sales-bottom-up-enterprise-startup/

◆ Why do you need top-down sales?

The early growth of a successful bottom-up company was due to the development of its products on

flywheels . In other words, users who use attractive products post reviews, and the reviews become viral, and the development team expands the scale by adding new features and upgrading. However, as products expand through individual customers, one day they will hit the 'limit' of those who want to discover and use the product. If you continue to 'get users to find you', in other words, the self-service approach you did when you started your company, your growth curve may flatten and even worsen.

However, it is possible to create new customers and use cases by developing on a company scale rather than on an individual scale. It will add access control and large-scale group collaboration features that were not needed at the individual level. Many tech companies started with product development at the individual level, and at some point they changed to selling and supporting more complex and broader enterprise products. In this process, top-down sales will be required.

Peter Levine, general partner of a16z, said, 'We have a limited set of users who perfectly match the value of bottom-up products,' and GitHub sales representative Paul St. John said, 'Bottom-up. Only when the momentum of the mold and the top-down sales are combined will there be an acceleration worth the money. '

◆ When do you need top-down sales?

So when is the best time to incorporate top-down sales into a startup? It depends on the business. However, when top-down sales are added, at least two requirements must be met: 'bottom-up flywheel is working' and 'business wants top-down solution'. ..

In addition, bottom-up sales with

annual recurring revenue (ARR) of 20 to 30 million dollars (about 200 to 300 million yen) seems to be one indicator. Companies such as GitHub, Twilio , and SendGrid have begun top-down investments when ARR reaches this amount. Be aware that if the top-down deployment is too fast, it will fail to measure the value of the use case due to insufficient scale and may lose customers.

Another indicator is that customer needs begin to change. Individual-level users do not appreciate security improvements, access control, transaction reporting enhancements, etc., but they are required at the enterprise level. When such a demand is born, it is necessary to develop beyond 'products for individuals and small teams'. Developing capabilities for business customers rather than individuals can be a major turning point for product-driven companies. At this time, it should be noted that it is a time when conflicts and conflicts arise between engineers who think development first and sales-led staff.

◆ What abilities do leaders in top-down sales need?

When a bottom-up company, which had been product-led until then, suddenly incorporates top-down sales, a conflict naturally arises. This clash is rooted in bottom-up success, so top-down sales leaders need to be someone who can convince the development side that 'we need a different way than we've done so far.' There is. As a16z interacts with a number of companies, he states that top-down sales leaders need the following four capabilities:

1: Being able to make collaborative decisions
2: Ability to give analytical and technical presentations
3: Being able to build a sales team with long-term orientation
4: Have experience in sales for companies

In particular, engineering-oriented companies tend to think that sales are not a skill, but their sales and sales abilities and skills, such as forecast management, setting appropriate opportunities, continuous guidance, and team formation, are We need to be aware that it is still important.

◆ What is the reward for the sales team?
Many of the companies that a16z talked to set the compensation of sales leaders as 'basic salary 50%, commission 50%', which is an appropriate example. The above example is a typical reward system, but 'Companies want to do innovative things, but know the strengths of the classics before trying to innovate,' said Ben Horowitz of a16z. He said that it is important to have a 'prize' element in the classics when it comes to rewards. On the other hand, some companies aiming for the sales team to cooperate with each other reduce the commission ratio to 30%.

◆ What is the

GTM strategy required for a top-down transition?

You need the right sales leader, but if you don't have a sales infrastructure in place before that, leadership can fail. In order to adapt the top-down sales model to the bottom-up culture, it is necessary to fundamentally shift the entire system. What kind of system you need depends on your business, but a16z proposes the following two models.

Hybrid model:
A combination of price transparency for small self-service customers and price negotiations for enterprise products. Dropbox is this hybrid type. Initially, Dropbox was operated for companies without discounts, but he realized that there were many customers who would not buy without discounts, and he changed his direction.

Self-service model for businesses:
A model that is completely transparent and fully priced for corporate products, with no exceptions to discounts. This model is suitable for products that are less competitive and anticipate new use cases, as clear public pricing is the key to driving conversions.

One of the worst mistakes bottom-up organizations make is to neglect to retain customers until they face a major churn problem. In this regard, many good top-down sales leaders do not treat success as a result of an increase in customers, but carry out 'sales activities' and 'function construction' in parallel, and focus on customer retention at an early stage. I know that. And as the company matures, its success is expected to range from product development itself to troubleshooting to advocacy promotion within the organization to continue growing the company, resulting in broader customer success. It is also important to set the goal of.