Business & Strategy
How the Sales organization in a large company slows innovation
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16 Nov 2018
Startup founders are often asked by investors, customers, and employees "what happens if [some big giant company] gets into your business?" The standard answers are along the lines of, "it won’t be their focus and will be ours," or "what if they don’t?"
But there’s another reason. One of the very things that makes a giant company formidable is the thing that makes it hard for them to innovate. The giant sales force and distribution channels they use to take a product to market can get in the way of product innovation.
If you have a new innovative product inside a large established company, it can be much harder to reach product market fit than it would be for the same product in a startup. An established company with a large sales force is accustomed to selling. They build a product and take it to their buyers. The buyers buy.
A product that’s in search of a market fit doesn’t yet know who their buyers are. They don’t know what company would buy, why they buy, or who inside the company are the buyers and the users. They don’t know what business problems they’re solving at the companies, and who has those problems. They don’t know how the customer wants to pay and how much they want to pay. The search for product-market fit is, in part, experimentation to find the answers to these questions.
This is fundamentally incompatible with the sales force at a large product company. This sales force wants a stream of qualified inbound leads. They want to be able to walk in and say this is what the product does and the business problem it solves and we know this because there are other customers that bought to solve the same problem. They want a product that has all the maturity of the company’s other products and plays well with related products the company or their partners make.
These sales forces are designed for acquisitions at scale. They’re not designed for experimentation. But you don’t get the chance to experiment because this is the only sales force you have. You can’t build a small sales organization, and you can’t tell your existing one they aren’t allowed to sell this new shiny thing. The result is that a large enterprise sales force won’t sell the product or won’t sell it effectively. They’re going to just keep selling the things that they always sold because the easiest way to maintain their commission is to keep doing what they’ve been doing. Taking risks with their customers on this new thing that might not even work right is a recipe for lost sales.
When a company talks about disrupting itself and bringing a new, cheaper product to market before a startup does, one of the reasons this can fail is that the sales organization is resistant to the new product. Their paycheck depends on them selling a certain dollar value, and if you bring a product that’s much cheaper, they will resist selling it, even if it’s 5x as good, and even if they’re losing customers to a startup in their space. The natural tendency is to work in a way that maximizes their commission. You can overcome this with a compensation plan design, but it’s hard to get right and often won’t work.
The other problem here is that to find market fit, the creators of the product must be close to the customer. They need to do the selling, so they can learn why the customer likes or dislikes the product. Unless they’re working through the early product with the customer, they don’t truly understand what they’re selling. This is why it’s always good for a startup’s founder to be the primary seller until the company scales.
In a large company with a sales organization, this isn’t possible. The product creators don’t talk to customers, the salespeople do. The founding engineers and product managers might be brought in to help close the sale, but they’re almost never involved in the early stages of the customer discussion. This leaves a large number of discussions where the product founders never know that a sale was even in progress because the sales team disqualified the customer or the customer had needs that the product didn’t meet.
If your product is a close adjacent to something the company already makes, then this might not be an issue. The same customers are buying for the same reasons, or a new market is buying for the same reasons, your existing sales engine can keep working. This leads to companies having substantially all their new product work taking the form of incremental improvements on an existing product line. It’s why they build adjacent products that they know will be of interest to their existing customers. It’s why they rarely define new product categories.