How to Predict What’s Around The Corner in The Fast-Paced, Ever-Changing, Tech Industry

About six years ago, Michael Lagoni, a recent guest on the Predictable Revenue podcast, left his job as an analyst at Amazon to start his own company. He had nothing but $300 seed money and a vision of the amazing enterprise software products he and his team were going to build. But, ever the pragmatist, Michael knew it would take several years to bring those products to market. So, in the short term, he had to come up with something else that would bring the company revenue.

Knowing that Stackline would eventually provide large consumer brands with software that could activate data, automate execution, and optimize e-commerce marketing performance, he decided what he could offer in the meantime was a service to the same effect.

He picked up the phone, called some mid-sized consumer brands, and offered to crunch the numbers for them manually until the product was ready for market. They had a handful of takers, like Purell and Cliff Bar, and they were off. While the company wouldn’t scale and commercialize until they launched the product a few years later, Michael and his co-founders were bringing in the profit they needed from their service, and building their cutting-edge technology in the background.

There are a few factors to which Michael attribute’s Stackline’s early success. First, they picked the right industry at the right time. Six years ago, they placed a bet on eCommerce. At that point, a relatively small market, but they had a hunch it would grow exponentially and transform both retail and marketing.

Second, Michael was fortunate enough to attract a brilliant team of talented people. Now totaling at 85 employees in both Seattle and Minneapolis, bringing on an early team of people with a passion for eCommerce and delivering innovative technology and services to this industry, was instrumental in the company’s initial success.

PLEASING EARLY CLIENTS

Michael maintains that it can be very tempting to pursue many ideas on many topics when you’re building a product – potentially to the detriment of its intended purpose. This is true for a number of reasons. You’re trying to listen to your customers and their feedback, and you want to make them happy.

At the same time, the industry in which you’re building your product is growing and changing very rapidly, and that means new opportunities are emerging almost daily. These factors compound, and if you allow yourself to be pulled in all those different directions you’ll end up bolting on feature after feature to your Frankenstein product.

To avoid this, Michael and his team decided very early on that they wanted to keep things simple. They knew taking this approach would benefit them, their product, and their customers in the long term. It was more important to them to build a product that had a strong vision, and was beautiful and easy to use, than to cater to all the micro-feedback and influences they encountered along the way.

They devised a list of criteria to evaluate ideas and help them stay on the straight and narrow:

1) How big is the opportunity?

If they’re going to build a new product or feature, Michael and his team need to be sure it’s worth their while. They gauge the value of the opportunity by how many of their 2k clients are asking for the same thing. If most of them are, they’re onto something. If only a few are, it’s probably an edge case and not something they should spend too much time on.

2) What is the value to our clients?

If they build this product or feature, will it create some sort of sustainable competitive advantage or value for their clients? Most requests Michael and co. get are just small usability changes that don’t generally create net new value, so those are easy to walk away from.

3) Is the product/feature unique?

This criterion is more internally focused. The team at Stackline are excited about building products that are one of a kind. If they have an idea, and they look out into the marketplace and see that other companies are already working on solving this problem, and doing it well enough, then it’s easy for them to say no.

4) Will this be hard to build?

If so, it’s almost always a yes! Michael asserts that, although it may be painful in the short term, being the one company that solves a really difficult problem is a huge win. Some of Stackline’s most important features took them years to invent.

Following these criteria, Michael and the team filter out about 99% of ideas.

HOW TO BE RIGHT

Knowing you’re right in building a new product is both art and science. The science comes when you listen to your clients, watch how they operate their business, see what new tactics and strategies they’re forming, and how you can align with them. Once a potential opportunity has been identified, it enters Stackline’s assembly line.

First, it must make it past the qualification criteria. Then, Stackline has several of their consultants build a small, quick prototype to bring to their clients. Their consultants work with consumer brands in real time, asking for their feedback and iterating as they go.

Questions like “do you like this?”, “will this create value?”, “will this give you a competitive advantage?”, and “what are the economics of this type of decision?” allow the consultants to keep their finger on the pulse of the solution their clients are looking for. Finally, they take the prototype and productize it.

Looking for external indicators on what type of product to build is an art. Often, Michael and his team will look at other industries for inspiration. For example, they’ve been working on a product recently that will be one of a kind in the eCommerce industry. While no one is solving this particular problem in their industry, big companies are solving similar problems in other industries.

“TECH-TONIC” TRENDS

Another element Stackline watches for closely are major shifts in the foundations of their industry. They look to major players in their space, like Amazon, Instacart and Walmart, to see how they’re evolving, what secular trends are emerging, how they’re operating in their marketplaces today, and what micro-changes are happening right now that could be big movements 2 years from now.

They look for the same answers in the consumer brands they cater to. Having the ability to predict the future, in many ways, is vital in building a successful software company, because you have to be out ahead of the market with your product by at least 2 years.

The biggest tech-tonic trends Michael sees in his space are as follows:

1) The rise of eCommerce

When Michael started Stackline, eCommerce was only 4-5% of retail, but most recently it was identified as 27% and is continuing to expand rapidly. Consumer brands are shifting their resources towards it at a growing pace. And from the consumer brands’ perspective, the number of platforms companies have to manage is also multiplying.

Several years ago, the only platform brands focused on was Amazon, but today the number of platforms they’re juggling is somewhere north of 15. This is an idea that Michael and his team are keeping a close eye on, as they make sure their products can scale and replicate across all the new platforms as they emerge.

2) The rise of self-service marketing programs

Each of the many eCommerce platforms is now launching its own ad platform that delivers self-service marketing tools to consumer brands – yet another thing they have to juggle. With the rising number of online retailers and marketing platforms, the volume of work for Stackline’s clients is compounding, so it’s essential that their technology can handle it all.

HOW TO INVENT A HIT PRODUCT

For those of you looking to build your own hit product, Michael advises you pick your industry first. You want to spot a space that is small right now, but that you can confidently say will get much larger in the years to come. Large, mature industries are full of incumbents that already have deep relationships with your target market, and, as Michael puts it, that can be hard to disintermediate.

Next, you want to ensure that your product or service creates real value for your end-user, and that that value is quantifiable – either as economic gain or a competitive advantage.

CONCLUSION

There are times to add new features to your product, times to pivot to a different use case, and times to straight up throw it all out the window and invent something completely new.

If you’re not anticipating every little change in your market, then you’re already behind. Michael Lagoni and Stackline are a shining example of a tech company that has nailed it at every turn – starting off as a profitable services company, entering the emerging eCommerce space when it was just whispers of the institution it is now, and maintaining their position as a provider of cutting edge technology that adapts to industry trends and clients’ needs.

While you’ve still got to do the grunt-work yourself, following Michael’s guidance on how to filter ideas, how to grow your company, and what trends to look out for should certainly give you a leg up.

 

EDITOR’S NOTE: 

Another blog post on creating a product in an emerging industry: The Framework For Creating a Product – And a Brand-New Category

More on product: The key to getting your first 10 customers isn’t sales – it’s product

And product-market fit: 8 Growth Secrets I Learned from Reading Every Interview with Alex Schultz, VP of Growth at Facebook

Re-establishing growth: when to scale, and how fast?

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