Understanding customers to find product/market fit - with Jim Semick Founder @ProductPlan

Welcome everyone to another episode of the Product Bakery Podcast. I'm here today as usual with Christian and we have a lovely guest from California, Jim. Hi, Jim. Hi, Alex. Thank you for having me and thank you for having me, Christian. Before we jump into the conversation, I just quickly wanted to share that as usual, it would be great if you have any questions, feel free to drop them directly on our website. We now are launching all the episodes there with some episode minutes as well as a short recap and a comment function, which is also read by obviously like our guests. So in case you have something that you want to get off your chest, feel free to drop it there. Besides that, follow us on all our social media channels for all the latest updates. And Christian, I hand it over to you. All right. Thank you. So our today's guest is Jim Semig and he is the founder of one of the most used roadmapping tools, Product Plan. Jim, it's a pleasure having you. But before we talk about things we have planned for today, I'm actually curious about how you got started your career. Because when I look at your history, I saw you starting at Microsoft, working as an author consultant. You then changed companies and worked many years as a community manager, consultant, advisor. So I'm curious to hear how you moved into the world of product management. Yeah, it's an interesting question. And my path to product management and eventually to become a founder is a little bit crazy. I have been in product management in the product industry for software products for about 20 years. And in talking with a lot of other product managers, my path to becoming a product manager is similar, which is we got thrown into it. The path to product management isn't often a direct path for most people. They find themselves in an industry and then are asked to become a product manager because there really isn't a, up until recently, a career path for it. And my experience has been in technology for about 25 years, working as an author, a technical book author, as an instructional designer, creating coursework and classes for technology, and then eventually becoming a product manager at a software company and a couple of different software companies helping to validate and build new products, some of the earliest B2B software as a service products. And then about eight years ago, decided to take the plunge and become a founder of a software company. And so my path was a little bit convoluted. It's not a clear path to where one goes to school and then eventually winds up doing what they had intended to do. Every step along the way, I realized what I enjoyed and what I was good at and decided to pursue that further until I'm now co-founder of, as you mentioned, Product Plan, a B2B software company building product roadmap software, and I'm loving it. Great. And when it comes to the whole way of making the step from a product manager to a founder, what was the most challenging thing for you back then? As a product manager, and for those people that have worked in product before, this will resonate that as a product manager, you're often responsible. You have a lot of responsibility. You have a lot of stakeholders within an organization to please, and yet you're the master of none of them. You often don't have direct reports. You have very little true authority. And so you need to lead through communication by influencing people to your vision and your way of thinking. And so moving to become a founder is a little bit different where you are an authority and you can dictate what happens with the product and with the company. And you, of course, have a lot of people that you're hiring and trying to discover new markets and trying to figure out what that product market fit is. And so the path, I think it's a natural leap to go from product management to becoming a founder and entrepreneur. And yet the responsibilities are significantly different. And so even though product management, most product managers will tell you that it's a stressful position, but thoroughly enjoyable. I would say that it prepared me for the stresses of being a founder. I think it's actually a wonderful quote or a wonderful comment, because I think like what we've heard also in the past, like we talked about how to work with founders as a product manager. And as you say, it's a lot about also how to influence them, especially if they don't have a product background. So it sounds like you're a little bit like in this awesome position where you can combine it and lead as a former product manager and bring in this knowledge in the conversation in the company. Yeah, absolutely. And we're in a very unique position. My company sells to product managers. So our software is used by product managers for creating product roadmaps, for prioritizing what to build for their own companies in a variety of industries. And so it's very, I think, poetic that I came from product management and started a product management software company and I get to interact every day with product managers in some context and also can share my advice, my 20 years of product management experience with these product managers. Even outside the domain of product roadmaps, I can continue to share my experience. Yeah, and it's actually interesting, right? Because you are very dedicated to product management and also around the whole community. So I'm just curious to better understand if I want to make the move from a product manager to a founder coming up with a great, let's say, product management tool that I want to build, what are the best ways that you these days would choose to evaluate if there is a market for us and how I can enter it? I think that I had the benefit of my specialty being market validation. My specialty for a number of years was in evaluating opportunities and looking at for an idea, what is the potential market size? What's the potential total addressable market? And then how do you enter that market? Who you sell to, how much you charge, how you position the product, what the value proposition of the product is, and then deeply understanding the customer acquisition model and sales model. So I had that luxury through my prior companies. And my experience, just to give you a little more background, was that I wrote the product specifications for some of the earliest SaaS products, including GoToMyPC and GoToMeeting. And that experience of trying to understand if we have an idea and if we bring it to market, will it actually sell, I think has set the stage for later successes, both at other companies and for my own company. And so I think that the product managers, if they want to take that leap from becoming a product manager to a founder, that getting some experience in new product development, in understanding at the very early stage, how you potentially position a product and for what market segment you position it for, I think that experience is invaluable. I think that if a product manager is working for a very large company and they are responsible for a very small slice of a product, I think that they, and they eventually want to become an entrepreneur, they may not be getting the full breadth of experience that they would need for being a founder. That it actually might serve them better to work for a smaller company and to be a product manager with more responsibility over the overall product. And so I think that the smaller a company, the broader your product management experience needs to be, and that will translate into better experience for becoming a founder. And then the final thing I want to mention along these lines from taking the leap is that I think product managers already have a variety of experience that is useful, but the number one thing that they need to bring into becoming a founder is being able to manage risk and being able to understand that they will never have all of the answers, that there will never be a perfect time for starting their own business. And so they need to be able to have some risk tolerance to be able to take the leap into becoming a founder. And that's something that I hesitated about for years, even though I really wanted to start my own company. I eventually had to get to a point of feeling that if I don't do it now, I don't know if I'll ever do it. And so being able to just say, you know what, I'm going to do it. And regardless of the outcome, I'm going to make this successful. I think that I had that sort of, not quite, it wasn't quite desperation, but it was a sense of, a sense of, I have to do it now. But did you already have the idea when you took that decision? No, no. In fact, I had a number of ideas and I had left, was leaving my prior company with the full support of the founding team and was actually talking with one of the founders about some of these ideas that I had. And they were very supportive in helping me transition away from that company and giving me the space to evaluate other ideas. And I had a list of five or six potential ideas, none of which are the idea that we executed on. And so I was talking with other influential people in my community, in the tech community and people that I really respected as far as entrepreneurial background. And eventually went to lunch with my co-founder when I was asking him for his advice. And we just started talking about doing something together. And then the idea that we eventually wound up with product roadmap software was not on the initial list. And it was through talking with product managers, colleagues, people that I've worked with previously, just trying to figure out what their challenges are, what their problems are. And they began to tell us consistently that product roadmaps were a pain point. And so we started to listen to that and started digging a little bit deeper into that problem. And then I started proposing product roadmap software for them. And that's how this idea came about. And so we actually, my co-founder and I started with our why. We started with a conversation about why we wanted to start a company. And we talked about what kind of company we wanted to start and what the culture of the company was and how big we wanted it to be and whether or not we wanted funding. So we had agreement at the very early stage about some of these more theoretical foundational issues. And then we found the idea. And so I think that's one of the, I think one of the reasons why the company is successful today is that my co-founder and I, Greg, we haven't had an understanding at the very beginning about what we wanted to achieve. And then the actual product for achieving that was secondary to those core underlying principles. But this also goes back to what we've discussed a couple of times already in our podcast, because to me, it's clear that you from day one on not only had the conversation, you also had clear agreements and you make clear decision on where you want to be. And that helped you to better move into this direction by founding then the software or the product that you decided on later. Absolutely. I'll give you one example. We decided very early on that we did not want to take venture capital. We decided that we didn't want outside capital and outside investors. And that was a very conscious decision that we made because we had both been part of venture funded companies. And we saw the trade-offs that founders make when they take outside capital. And so we decided very early on that we would self-fund the business with our own capital. And we decided deliberately very early on that we would not have an IPO. We decided that we never wanted to become one of the tech unicorns. And I think that sort of agreement up front sets the stage for success later on. Yeah, agreed. And I think this reminds me, I once had a conversation with a founder here in Berlin and he's also investing in companies. And we were talking exactly about what is a company that you would invest in. And the one thing that he said is also the idea is never as important as the founder team. Because with the right founder team, you can rock pretty much any idea and you will make it fly. And I think your example shows this perfectly. You had a team, you had an agreement and then you started working and you found the right idea. But I think to add a question to this, because for example, if I think of myself, I personally always struggle with this. It's like jumping into the cold water and saying, okay, I'm trying it now. So I'm a little bit curious to also hear from you how it felt to, let's say, leave your job behind and live with the uncertainty of saying, okay, I want to found something. I want to not take like other's money. It's like we invest time, money and so on to build it ourselves. How did it feel? Yeah, the feeling is both liberating and exhilarating as well as scary. I have two children, I have twin boys. They're now about to graduate high school and then go on to college. But when you have a family and a mortgage, the stakes are higher. One piece of advice that I would give is to start sooner. I think one, as they go through their career, there's an expectation for a higher salary because you have higher living costs, you might have children. And then that makes the stakes higher. I had many sleepless nights in the beginning. However, I think what it did is it lit the fire under me to make this successful no matter what. And so I made good decisions. I was very strategic about how I went about it. Both Greg and I knew that we didn't have a lot of capital in order to test a lot of different ideas. And we certainly didn't have the capital to start coding a product before we knew with reasonable certainty that it would actually be successful in the market. And so that's why we did a lot of the research, a lot of the market validation. Before we started coding, we had 30 in-depth interviews with potential customers. And those interviews were so influential to helping us assess whether the product would be successful, whether people would actually buy it, what the features were, what the minimum viable product features were. And so I think the fact that I was moving from a place of comfort where I was in a company, I was enjoying my job. This had nothing to do with me being dissatisfied. It was about me wanting to take the next challenge in life. And it was a place of comfort where I was receiving a salary. I had respect and a comfortable life. And then moving into something that is very unknown, where all the statistics show that there's a higher chance of failing than succeeding. And so that made it so that I was very strategic about how we went about starting this company. Because I knew that we, in a sense, if we failed, then I didn't want to have to take another, to go to another job. I just knew I had to make this successful. Absolutely. Do you think that founders who start a company with others' capital approach it differently? I think there's a possibility of that. And I do believe that there are entrepreneurs who would, whether they're using their own capital or someone else's capital, that they would start the company with the same intensity, with the same ambition that they would in both cases. However, I think that founders who take other people's money, they run the risk of trying things without doing significant research and really thinking through strategically if that's the right thing to do. For example, one of my first positions as a product manager was, I was working for a company, this is about 20 years ago, and the company had taken, I think, 28 million in outside funding. And they spent 10 million of that building a product. And they spent so long building the product, making it perfect. And they eventually set the product to go live and hardly anyone bought the product. And within months, that product was shut down. So they spent $10 million launching something that wasn't successful. And I think that had the team been using their own money, I suspect they would have gone about it differently. Partially because they couldn't have taken the chance of spending $10 million. They wouldn't have been able to spend $10 million. They may have been able to spend 100,000 US dollars. And if they had spent 100,000 US dollars to experiment, and to test the market, and to start small, then they may have discovered very early on that the idea wasn't viable. There's a different mindset with founders that take outside money. They're able to take bigger risks, which in some cases, turn out to be very successful, wildly successful. But there's also a chance that they're taking risks with money that will be flushed down the drain. It almost sounds like not having massive fundings forces you actually in a good approach of testing and learning fast to have a good fit. Absolutely. You said at the beginning, there was a lot of uncertainty, and you were working in a very strategic way. Could you explain what your strategic steps were to reduce the uncertainty? Absolutely. So I'm a big fan of, as I said, market validation. And this is a relatively simple concept of interviewing potential customers and discovering their pain and deeply understanding their pain. And doing this even before you have a solid product concept. So really understanding a day in the life of a potential customer. So for us, it was beginning to interview product managers and understanding what they do in a day. And we interviewed product managers from a lot of different market segments, from different vertical industries, and from different company sizes. And just to understand, if you're a product manager for a company of 1,000 people, what are your expectations? How are you evaluated at the end of a year? And really understanding their day was important to us. So we started to do that. And then when we got to the point of hearing repeatable patterns of pain, we said, okay, now we think we understand what you need. And product managers were telling us that product roadmaps were a pain for them. So we really understood, how are you developing product roadmaps? Who do you present them to? How often do you change your product roadmap? What's the information that goes into your product roadmap? And then after we did several of those interviews, we then started pitching them a potential product roadmap software solution. And we did that using Keynote. So we, both Greg and I were not developers and we're not designers. We went in and we created some, I think, fairly ugly prototypes, just to be able to show them like, this is the idea that we're considering, and this is roughly what it would look like. And I'm not proud of those designs. And eventually, after we had interviewed a number of people and made several iterations, then we hired a designer who could then develop something that was higher fidelity. And of course, looked so much better, but it was an iterative process. And as I mentioned, by the time we started coding, we had interviewed 30 product managers. We also had launched a landing page to test the acquisition model. And this is before we had a product. Yeah. And this is something that I've done previously for other companies. And it is wonderful because it requires that you refine your product idea into one page. And then what we did was bought Google AdWords and LinkedIn ads, and we drove traffic to that page with a potential- A lean startup way. It's very lean startup, but unlike lean startup, we actually had no code. And so it was a landing page that I created in about two hours and began to drive traffic to it. And then we started collecting email addresses for a free preview of this product. And those people that put their email address in, we reached out to them and we said, we'd really love your advice. As we develop this product, we'd love to hear the features that you expect to have. And this served multiple purposes. One, it was proven that people were on Google searching for the problem, searching for a solution to the problem that we were going to solve. So we started to make early judgments about and guesses about the acquisition model and about the acquisition cost, which is of course very important for a software as a service company. It also then validated that our value proposition was the right value proposition. And then it also gave us a pool of more people to speak with. So that by the time that we launched the product, we had spoken with 70 product managers in all walks of life. And many of those became our first customers and are still customers today. That model gave us our early beta testers. It gave us more market validation. It helped prove out our acquisition model and it also validated our value proposition. That was our process and I would advocate that for any software company. Awesome. I really love the approach and I'm generally a big fan of these landing pages, especially as I think you did it eight years ago. I think nowadays it's much easier to build these early and dirty landing pages because there are multiple tools out there that you can like simply use to drag and drop them together. Absolutely. These days, they're not dirty anymore, Alex. Actually, I have to say, recently for a client, we developed three different value propositions and made a landing page for it. And literally like in three days, we made three completely different landing pages to showcase a little bit the value propositions and get a first feeling of what could more work. And I think it was just like great because it's such a quick test and it's much better than a lot of different ways where you ask people, would you buy it? Because you also get a real signup, right? Or a real email address because people want a free tour and it's like super valuable. Absolutely. An email address is a valuable commodity. And so people don't give up, especially their corporate business email addresses. They don't give those away freely. And so I think that in itself is great validation. I believe that the email address is even in 2021 by far the most valuable marketing resource that you can have or the most valuable asset as a company to get from someone. I really like the way you approach it because it's a mix of lean startup, growth hacking. But at the end of the day, to me, it sounds all so streamlined and straightforward. This is actually how you should do it, I would say. But I would also like to hear what were the challenges we were facing back then? Well, in the beginning, both my co-founder and I, we spent several hours a week in the business, but we weren't completely full-time. So our validation moved fairly slowly. But the biggest challenge, once we decided that it was... I remember the day when we said, okay, we are onto something. And we're starting to hear really positive reactions from our interviews where people were saying things like, when can I get this? I would love to be a customer. Those sorts of validating points. And we said, okay, now, because neither of us are developers, now we need to find a developer. Where do we go? Who do we get? We don't want to spend very much money. We can't afford to go out and buy, get a developer from an expensive agency. And so we had to be very creative in the beginning about how we went about starting the company. I read a book called, I think it's called Splitting the Pie or Sharing the Pie. And it's about compensating your earliest people who help you with a combination of equity and cash. We were very creative about how we paid our first developer. And at that point, we did do a combination of equity and cash. And that worked out really well. It was a win-win. But in the beginning, the lack of resources, the lack of capital made it so that we moved a lot slower than we would have had we taken outside capital in the beginning. Had we gotten seed funding in the beginning, which was a viable option for us. And then later after a few months or a year or later after we had truly found product market fit, taking venture capital, which was also an option for us. These were decisions that were very difficult because while we knew that we didn't want the challenges of having outside investors, it also significantly slowed down our progress. And so that was a trade-off. And I think that was the number one challenge for us in the beginning. I see. What would you say, what was your main reason to not go for a seed money or venture capital money? Well, I think there were two reasons, two primary reasons. One is that both Greg and I are more mature. So I'm in my, we're both in our fifties and we are both very independent people. And we had both been part of companies that had outside investors. And when you take on outside investors, you spend a lot of your time making sure that those investors are happy. You spend a lot of your time creating information for the board, a lot of information creating investor packets, a lot of time actually getting the venture funding in the first place. And then there's a certain amount of autonomy that you lose when you take outside investors. So you're no longer completely in control of the purpose of the company, the vision for the company, the culture of the company. And so outside investors influence that. And Greg and I did not want that. The second reason is that when you take on outside investors, you are then tied to their outcome. So if in the beginning, if we said we need this company to be worth $10 million or $20 million or whatever the number was, that was incomplete. We were in complete control of that. And yet, if you take outside investors, you're now tied to their outcome and their outcome may be $50 million or a hundred million dollars or a billion dollars. And that dictates our future. That dictates how we are in the business in the future, the kind of company that we build. And we didn't want that sort of restriction. Looking back on it, there are absolutely trade-offs. We would have moved faster had we taken outside funding, but we also would have been tied to a different outcome, I think, than we have today. We would have been smaller shareholders of a bigger pie. I fully agree with you because I'm also a very big fan of doing it by my own and bootstrapping it rather than getting money from the outside. Because I always feel like, as you said, it's the outcomes and also other people dictating what we have to achieve, no matter what it is, is something that I'm not fine with. So absolutely fair point. I'm very curious to hear all your thoughts on this, Jim, because I had this conversation with Christian already a couple of times where I was usually always on the side of should we really bootstrap something? Wouldn't it be easier if you know, okay, I have some money there that I can spend and that I can immediately start fast with some developers, but I totally get your point. And I think even when it comes to the example that you made with your first hire, I think if you bring in a developer and they have some equity and it's not only a very high cash salary, they also have a different commitment. And it ties a little bit to the culture that you created or that you wanted to create of moving in that direction and building the right thing and making the right decisions. And I think like even with the employees, it then affects a little bit on how they work and what the end result would be. I completely agree. I feel strongly that the reason that we started a company is because we have a purpose and we have a mission and we're passionate about it. And the employees that we hire, I want them to have the same level of passion and commitment because I don't want to create a company where people show up and simply have a job. It's so much more fun when we're working as a team, when we all have this objective and when we all share in the success. And so all of our employees do get equity in the company, which I think is an important piece. But more importantly, we're all sharing in the same vision of doing something fun and big. Sharing of the equity in the beginning with the developer, that was a significant part of his compensation in the beginning. And I think that absolutely influenced the quality of the work and the passion that he put into it. And it's even a bigger confirmation also for your idea, because it's not that you only have to convince customers, but you managed to convince a developer to probably get much less cash than he would get somewhere else for equity in the long run. And I think that also shows that you managed to convince him about the idea and he believed that it will be successful, otherwise he would never have started. So it's another proof for how good the idea was. Absolutely. So Jim, to wrap up the conversation, you have so much experience with product managers over the last 20 years. What would be one or two key things you would like to share with product managers who are either right now working on their own startup or people who are evaluating or working on a product idea? I believe that the number one thing they can do in either context, whether they're validating a new feature for a product that they're working on, or they're validating an idea for a potential startup that they might want to start, is to really engage with potential customers. And that engagement can be in person, it can be over the phone, and then to have a curiosity about their customers' lives. And what that does is that opens up opportunities. When you have a conversation and you're engaging with someone and you're asking open-ended questions out of curiosity, and then asking the follow-up question of why did you say that or explain that to me, you are opening yourself up to learn something completely new that you didn't know. And you will discover new ways of solving problems, you'll discover innovative solutions, and you'll also have a higher chance of developing something that's successful, whether it's a feature or a brand new startup. I think that customer engagement that you do is so critical. And this is one of the first areas that I see entrepreneurs, they give it a cursory, they put a limited amount of effort into it. And they'll do a handful of interviews, they think they hear positive affirmation, they think they hear because the customer says, that's a great idea, that they think that's validation. And so I would encourage them to go deeper and to really ask some really deep introspective questions of the customers, and then to almost challenge the customers. When the customer says, that's a great idea, ask them why they think that. And I think that whether you're a product manager or product manager wanting to become an entrepreneur, I think that advice right there will increase the level of success. Amazing. Jim, thank you very much for sharing that with us. You're welcome, Christian. Have a great day. And thank you very much. Bye, Jim. Bye-bye.