Keeping the focus after launching an MVP to the market is difficult. According to many authors and based on real experience, keeping the focus on tracking the results of an MVP and improving them based on the feedback is very relevant for the success of a start up. However, the revenue results are not always attached to a standard product only and they are sometimes related to the financial needs to survive or to extend the runway of a company. Therefore, some projects that are not directly related to the portfolio execution of products may make sense only to secure such revenue and keep growing as a company. This will unavoidably delay the planned roadmap, even if new resources are acquired to compensate, given that there is an inertia to change and also to onboard new organizations members. As a rule of thumb, 10 engineers cannot do in a month what a single engineer can do in 10 months. A lot of the success of a company is related to those two very general actions: ability (agility) to hire and onboard new team members.
Custom projects are good for the financials as discussed above, they also bring customers on board buying exactly what they need and granting with the projects a long-term relationship. This closer relationship also helps members of the organization to become more confident in the solutions provided and to understand and empathize with customers much better. However, the negative aspect of this type of projects is that customers are not concerned about the time and money the supplier spends to do so and tend to be very demanding. Therefore, the company that has already very limited resources compromises a lot of them for a single customer instead of having those efforts spread into multiple ones in the shape of a standard product.
Saying no to key customers for a solution that makes a lot of sense to the strategy and creates lots of exposure may not be the most sensitive decision to make either.
Defining Clear Criteria for Project Acceptance
First of all, timing is very relevant. If no other customers are knocking on the door of the start up, taking up those custom projects is a much easier decision, even if it could mean that the MVP is not ready yet and needs major re-work.
Common sense would dictate to having a management meeting every time there is a project to quote or accept, and take different opinions into account before proceeding with the custom project. This process would take a long time, and the commercial team/salesforce needs to remain very active and dynamic, as the whole organization. Therefore, the suggestion here is to elaborate a scorecard considering diverse aspects of a project, and unambiguously assign a score to each project, which can deliver a clear outcome if a project is worth taking on or not.
Building a Practical and Actionable Scorecard
The many aspects which need to be considered, together with the complexity of the situations that are related to financials, make the process a bit more painful than just simply deciding internal methodologies for other aspects, like the budget for the Christmas party.
The scope of this article is not to include a recommendation that will be valid for all markets, company sizes and situations; however a few main characteristics can be mentioned to accelerate the definition and elaboration of such scorecard.
Revenue: The main aspect of an opportunity that is commercially driven is the revenue. Not only the immediate revenue that can be obtained from the customer at the current project stage (like non-recurring costs and some prototypes) but also the potential revenue if that project succeeds in the long term. Setting certain aspects related to the topic above are relevant.
The Customer: The next aspect is what kind of customer is it all about? If the customer is not part of a relevant pool of customers that would be strategically important, it is easier to say no.
Resources to be Demanded: Next to the opportunity size and commercial attractiveness is how much of the resources the project will need to be executed properly, i.e. how much technical risk is associated with the project. If a lot of technical risk relates to a small-sized opportunity of a non-strategic customer, the decision will be also easier (No).
Strategical Alignment: Last but not least it is about the strategical decision if the project is aligned with the overall interests of the company in terms of long-term strategy: “in 10 years from now, are we going to regret having done this project?” is the main question to answer. “When in doubt, say no” is a good rule and philosophy, however an even better philosophy is “When in doubt, say yes but….” and establish the conditions that are attractive for the company to say yes and feel good about it.
Overcoming the Challenges of Scorecard Adoption:
The sales team will always push for custom designs. The reason is that they are always trying to connect to a deeper level with the customer, and they know that custom designs become very quickly cash cows for them. If sales teams are cashing a commission of the projects they bring, they are going to push for custom designs. However, especially in small companies, doing many custom projects is very difficult, and it can produce a lot of stress on engineering teams, who are trying to keep up with the demands on standard products to be launched to the market to collect feedback and improve. A good way to avoid frustration in engineering departments for excessively difficult goals and also the frustration and jealousy of sales teams for allowing only some custom projects to the best scorecards, is having collective goals, that are paying a bonus to all the members of the organization for achieved projects. In sales, individual goals are not only a good thing, but kind of mandatory. Therefore, in the sales department, the collective goals should represent less than half of their bonus system. However, for other teams in the organization goals can and should be mostly collective.
