Commercial Strategy Resource List
v1.1 - July 2024
This annotated list contains articles and books that I frequently refer to or recommend to startup leaders.
Please use the comments to recommend additional/alternative resources. I might not include all of them, but I will make sure to credit you if I do!
🔽 🔽 🔽
Jump to topic:
Revenue Model and Metrics
Early Sales / “Traction”
Scaling Sales
Pricing
Strategy: Decision-making
Strategy Frameworks
Communicating Strategy (via Metrics)
Culture
Product Management
🔽 🔽 🔽
Revenue Models: What kind of revenue do you want?
Not all revenue is good revenue.
Revenue should never be confused with profit. Surprisingly often, it is.
The best revenue compounds on itself, creating positive reinforcement loops (e.g. second order effects, a community of experts and evangelists etc.). The worst revenue is revenue that costs increasingly more to obtain than it will ever bring in. (If that isn’t obvious, then I have a magically bottomless bag of money I would like sell you…)
Harder to discern is revenue that pulls the company’s attention in a direction that might be a dead end or too-niche market… but might also open up new, profitable, revenue streams.
I will write more on this. In the meantime check out:
Bill Gurley - All Revenue Is Not Created Equal - A classic; overview of the financial and strategic drivers besides revenue that impact valuation
Shaun Verma - B2B SaaS Top-Line Metrics: Getting More Out of Revenue Measurements - Straightforward definitions of key B2B SaaS metrics such as ARR, ACV, LTV, churn… etc.
On the topic of revenue metrics, Battery Ventures Software 2021 - Slide 14 of this deck is probably one of my favorite slides of all time. The authors absolutely skewer each of seven different longstanding SaaS metrics — ones that have long been held as reliable indicators of success (in, ahem, very one size fits all fashion) — and instead proclaim “this monolith is breaking apart piece by piece due to two of the most impactful drivers of new value creation today: machine learning and product-led growth.”
What Battery has called a movement to a “multi-playbook era” is part of what inspired me to title this blog “one size fits none.”
Early Sales (a/k/a “Traction” )
The concept of “traction” sometimes befuddles early stage founders. The work of building traction is typically entirely separate from the work of building a good product.
Good products do not sell themselves; even “product led” growth requires product changes that are explicitly made in the furtherance of traction.
It takes a lot of work to “get traction.” This involves developing demand for your solution, finding and attracting the people who you believe will get value from it, and some level of ongoing interaction or engagement of those people with your solution and company.
Essay by Paul Graham - Do things that don’t scale - The Classic. If you haven’t read this and think Stripe and Airbnb took off on their own just because they were obvious products at the right time, think again. And then read this right away before your do anything else.
Startup School | How to Get Your First Customers - Video overview of the (counterintuitive for many!) truth that good products never sell themselves. It takes work to find, connect with people and get them to change their behavior. In the process, YOU will also change your product and your company to match what the customer needs.
Founders must learn Sales. There won’t ever be a better salesperson that you. This is one of the reasons that companies often fail when they try to import best practices blindly. Sure there are basics of sales but the exact way you do it for your company needs to be build for your solution’s unique characteristics. A great resource for founders learning sales for the first time is Pete Kazanjy, Founding Sales, https://www.holloway.com/b/founding-sales
For inspiration on how different companies got to traction there are some quotes from founders here from a wide swath of industries. How do you get early traction for your startup?
Finally here’s a decent book Traction: How Any Startup Can Achieve Explosive Customer Growth, by Gabriel Weinberg by the founder of DuckDuckGo
Scaling Sales
Sales gets a bad rap. Possibly deservedly, since it’s often not done well.
Good sales people solve problems for their customers. Good sales processes can solve problems for a whole industry of people.
When done well, the sales process should reach a lot of potential customers quickly — weeding out the ones that are not a fit, without badgering them. It then focuses the sales team’s efforts on creating a great experience for those who have the problems that your company can really solve.
As soon as a company starts to scale, a good sales process serves another vital purpose: a good forecast, which is a critical financial planning tool.
After all you need to be able to manage your expense so that you can achieve profitability eventually right? The headlines might be full of money losing tech startups but they are in the smally minority of businesses in the world. Most companies need a profit and don’t have the luxury to wait decades for it. There’s a helpful calculator here: Startup Growth Calculator (by Trevor Blackwell).
But I’m getting ahead of myself. Before you can really begin counting your money, you first you need to be able to manage sales with some level of predictability. Here are some of my favorite resources on that topic:
Steve Schiffman - Getting to “Closed” - Good overview of what pipeline “stages” are, why they are valuable, and how to implement them. (Note: Don’t be thrown off by the title. This is not actually about closing deals, but the process of “getting” there.)
Mark Roberge - The Sales Acceleration Formula - Full of practical tips on how to hire and train sales people. A key insight here is to hire sales people who are good learners (not necessarily subject matter experts) and who are extremely systematic and organized. (Note2: I mime “ugh” every time I see that fake formula on the cover. I don’t know what it is about sales books and these misleading titles and covers...)
Holloway Founding Sales - Screening, Interviewing, and Closing a New Hire - Very good overview of hiring — and compensating! — your first sales reps
Mark Roberge guide to revenue growth (video) - Measuring sales performance is trickier than it first appears. Generally, in the early part of the company you don’t actually want to hire commissioned sales reps. You are still working on product-market fit and you want to have a cofounder doing sales. When you hire reps they are usually expecting a commission as much as equal to their salary. This can create a lot of perverse incentives. At the least, you have to compensate only on new new recurring revenue, and in the best case you are compensating reps based on some “leading indicator of retention” that helps ensure the customer is a good customer that is going to stick around.
Selling to larger organizations:
Challenger Selling was one of my earlier “aha” moments in sales. This is a model best used for selling higher-price point products into firms with multiple stakeholders. It was developed by the Corporate Executive Board and now part of Gartner. Probably the best resource on this is Brent Adamson’s The Challenger Customer. The key insight here is to find and work with internal “mobilizers” at your customer organization who will help you navigate their internal politics organizational dynamics, and who will “champion” the use of your product to solve a real problem.
More recently, the same Gartner team has popularized what they call “sense making” — which is essentually an educational approach to sales. Because buyers are overloaded with information online, the seller who takes an educational, sense-making approach is more likely to be seen as helpful. Which makes the buyer more likely to buy from them if they are a fit (and the seller more likely to find out early on if the buyer isn’t a fit).
What about @#!!%^ pricing?
Pricing is often a headache. It needs attention and care at the beginning, and even more attention as the company grows. Everyone has an opinion, and usually every department in the company thinks they are the one entitled to set the pricing. (Everyone buys things, ergo everyone has experience with pricing I guess?)
Pricing is a Founder-level decision, and it really can’t be delegated until you’re pretty large. It is also usually inseparable from product. There is no way to establish an optimal pricing model or level unless you understand the value your customer gets from the product, in intimate detail. And that’s usually something only the founders fully “get.” I’ll be writing on this, and in the meantime here are some places to start:
For relatively early stage companies just in need of ideas on pricing models, this may help: Alex Estner - Powerful SaaS Pricing Strategy: How to price your SaaS product
I rather like Price Intelligently’s guide The Anatomy of SaaS Pricing Strategy (reg required to download) but it might be a bit dated now.
More up to date is Kyle Poyar - OpenView Partners' Usage Based Pricing Playbook. Sometime around 2019-2020, the tide turned towards usage-based pricing models, especially among new SaaS entrants. Most incumbents still used feature-tiered and per-seat pricing, and honestly I can’t say their growth looks super threatened yet. Nonetheless, usage based pricing has lessons to teach us all. In fact in February 2023, OpenView updated its report with the headline “hybrid models are winning.” In this context, hybrid refers to having some fixed base price tiers and some variable component. Companies like HubSpot have been doing hybrid models since before it was cool (e.g. pay for a package of features and then pay more for usage blocks, in their case, marketing contacts and email sends)
Madhavan Ramanujam's Monetizing Innovation is a wonderful new-ish overview to the topic of pricing. One of his key points is that pricing is inseparable from product because its inseparable from the value creation your product provides. Great podcast summary of the book is available here: Invest Like the Best Madhavan Ramanujam - How to Price Products
Strategy: Decision-making
The simplest ways to start making better decisions are to commit to being data-driven and to being aware of one’s own biases (harder than it sounds, for many of us). Some works worth reading are:
Annie Duke, Thinking in Bets - Well-written and engaging stories of a professional poker player, but with good practical guidance especially on how to remove bias by calling attention to it.
In the real world, when you aren’t playing poker or something with defined rules, you may wonder how to collect data in ways that allow for better relative comparison of different options. A good example of this is described in A Structured Approach to Strategic Decisions - MIT Sloan Management Review.
Performing a Project Premortem by Gary Klein details a simple approach to de-risking major decisions by asking team members to spend time thinking about a hypothetical future in which it has failed. It is useful to uncover unspoken worries that may impair ability to execute. This can be combined with other future-thinking techniques such as imagining the future press release and working backwards, as detailed in Working Backwards: Insights, Stories, and Secrets from Inside Amazon, written by a couple of long-time Amazon executives.
For more resources, try Shane Parrish’s The Knowledge Project podcast, which has many episodes focusing on decision-making from different authors
Strategy: Frameworks
At a certain level of complexity, good decision-making benefits from a more robust set of processes and tools. At this point, we start to call these decision-making tools “strategic frameworks.”
There are dozens if not hundreds of strategy frameworks with splashy names like Blue Ocean, Paranoid Company, Maslow’s Hierarchy, Three Horizons.
I suppose this proliferation exists partially because there are advisors and consultants who promote themselves by promoting their one model, their one “best practice” way to answer all strategic questions.
I am skeptical that there could be a one-size strategic framework that fits all or most situations. I prefer to reflect and choose a framework to use for inspiration on the right occasion. Nonetheless, here are some of the frameworks that I find useful and come back to frequently (often with modification).
Broadly speaking there are three types:
Those that emphasize external factors. Many strategic frameworks (e.g. Porter’s Five Forces) emphasize market forces. These are of course very important.
Those that emphasize internal capabilities. Unless your company is just getting started, I often turn to a resource-based strategy, which actually emphasizes internal factors first. This grounds the company in the realism of what you have already learned to do well. (For more background on the value of a resource-based strategy there’s a good article here.) Why resource-based? Because most startups overestimate their ability to deliver. Not by a little but by a lot! Sorry to say, as you grow it usually gets harder to do more things, not easier — for reasons I will write about in the future. Maybe you can try to go in multiple directions at once if you are a “unicorn” i.e. one of the lucky firms with nearly endless pools of VC money and infinite ability to hire quickly anyone you want. Otherwise, inertia commands that your strategy be grounded in what you are already able to do well. For this reason, I tend to keep coming back to tools like VRIO.
A fair criticism of a resource-based approach might be that it does not seem very customer-focused. For this reason, I would pair it with a good external strategy exercise which must involve doing customer interviews and market research. The real insight comes from seeing where the two meet. This is where many companies uncover their strategic advantage.There are of course all-in-one models that balance internal and external factors. SWOT, for example tries to synthesize internal and external forces into just four categories (Strengths, Weaknesses, Opportunities, Threats). I find it to be simplistic. Good for a first draft of thinking, SWOT often won’t take you all the way to a conclusion on its own.
Communicating Strategy (via Metrics)
Finally there is a whole realm of strategic frameworks that work well for clarifying and communicating a strategy, as opposed to developing the strategy in the first place.
An example of this might be the Balanced Scorecard, or the framework described in Are you sure you have a strategy? by Donald C. Hambrick and James W. Fredrickson. I like and have used both but ultimately they feel a little bit big company to me and not that suited for a startup.
So, for communicating a strategy in smaller companies I tend towards simpler approaches, emphasizing metrics:
Can You Say What Your Strategy Is? by David J. Collis and Michael G. Rukstad. This approach puts strategy right next to the company mission, vision, values and goals. If your team doesn’t what the strategy actually is there’s little chance of staying focused on it.
North Star Framework - literally re-focuses everyone on one metric as the most important. I am reminded of the Steven Covey quote: “The main thing is to keep the main thing the main thing.”
Culture and Performance
Cliché alert!
“Culture eats strategy for breakfast” - Peter Drucker
Well, maybe it was Peter Drucker. I suppose you can debate whether you need a good culture first or a good strategy first. I’ve heard real arguments from real co-founders that culture can be poor as long as people work hard and are committed to the cause. I think that is a different definition of culture. If culture is “poor” then how did people get so committed to the cause?
It is clear to me is that some kinds of company cultures are a mismatch for some types of strategy. It’s not exactly about whether the company is nice or not. There are some unpleasant cultures that still manage to deliver. Many people may not want to work at such a company for long but there are notable examples of companies (Tesla?) that believe they can use long hours as a tool to retain only the most devoted and talented team members. It is a harsh component to their strategy, and I’m skeptical that it’s the only or best way to retain talent. There is plenty of evidence that people do not perform their best under sustained stress.
Culture and scaling
Company culture might be the single most important thing to consider when making the leap from product-market fit to repeatable sales. This is usually the point when the Founder-CEO is outright terrified at the idea of letting some …. salesperson … do the product demonstrations without handholding.
Developing a culture is a big part of the founder learning to let go. This is the point where trust must be developed. Mistakes must be forgiven (within reason). No stage of a company’s life stresses culture more than this point (with the exception, perhaps obviously, of later stage acquisitions and mergers when you’re trying to literally merge cultures together)
It’s really hard to give away your lego castle and watch someone else build 5 bad things before they finally build something better than what you had in the first place. Such is the challenge of moving from small to scale.
At the same time, if there’s one thing that can whack a company culture on its ass, it’s the first sales rep trying to twist the company to get a sale that the company maybe was never designed to deliver. The only way to ward against this is to have a clear strategy and communicate the vision well.
On to the readings…
Basics:
On the importance of well being: How wellbeing improves performance — An interview with Annastiina Hintsa
On the importance of psychological safety: Psychological safety and the critical role of leadership development
Compare with: Top 10 ways to ensure your best people will quit
On hiring and firing:
The Hard Thing about Hard Things - Ben Horowitz. Chapters 4 and 5 are recommended, particularly “The Right Way to Lay People Off” “Why Startups Should Train Their People” and “Why It’s Hard to Bring Big Company Execs into Little Companies”
More complex tools and observations:
Winning Teams, Winning Cultures - Larry Senn
The Cadence - by David Sacks - Technically about operations, but operations are largely rituals, and rituals are one of the building blocks of culture.
Evolution and Revolution as Organizations Grow - by Larry Greiner
Product Management
In a tech company, engineers are a scarce resource (I think this will remain true for the foreseeable future, even with more and more code-writing AI).
Prioritization is critical. The opportunity cost of spending engineer time on building the wrong thing can be huge. I know from my own experience that you can get this wrong a lot. But I also know that companies that frequently get it right have a much greater chance of pulling ahead of the pack.
In the early days, a simple model is best. One pretty simple approach is a Balanced Product Scorecard. Determine a small set of key countervailing objectives you have and then develop a spreadsheet that ranks product initiatives by these. You won’t always pick the one at the top, but it will help to facilitate discussion amongst team members.
Another simple model is the Kano Model. Folding Burritos has by far the most comprehensive explainer. Even if you don’t use this as your primary decision-making tool, it’s useful (and possibly eye-opening) to map proposed initiatives onto the Kano 2x2 to answer questions like: Is the initiative relieving a pain or producing a gain? Is this feature going to deliver more satisfaction if you build it out fully, or is a quick thing going to be enough? etc.
One key insight: some features are “toilet paper.” No one celebrates if you build them, might be mildly annoyed if it’s not soft… but boy will they be unhappy if there is no toilet paper at all…
One of the fundamental tenets of all product management and UX design is jobs-to-be-done (JTBD). The concept of JTBD can arguably be traced to the late Clayton M. Christensen’s book The Innovator’s Solution (2003). But for a short primer, I really like the article he wrote together with Scott Cook, and Taddy Hall “Marketing Malpractice: The Cause and the Cure.” (2005)
The key anecdote in this article is about McDonalds investigating a surprising number of people who bought milkshakes in the morning. If you haven’t heard this story before, can you guess what is the milkshake’s JTBD? You might be surprised!
Christensen’s former colleague Tony Ulwick takes credit for inventing Jobs-to-be-done, and continues to apply it via his consulting firm Strategyn. Recently he re-launched his thinking in the appropriately titled Jobs to be Done: From Theory to Practice (free e-book available). Personally, I prefer his book “What customers want” (2005) and especially chapter 3 (“Identifying Opportunities”) where he literally gives you a useful formula for uncovering customers’ most important unmet needs.
Dan Olsen’s The Lean Product Playbook (2015) is a relatively more recent overview of product management, informed by lean startup principles. It focuses squarely on MVP (minimum viable product) development and validation, and it benefits from being one of the most approachable reads. And I give it extra points for favorably citing Tony Ulwick’s “secret formula.“
As the product team grows, it becomes more useful to turn to team development itself. Some great recent writing on this:
Marty Cagan - Inspired: How To Create Tech Products Customers Love - A great book for companies that have reached the size at which they need to build an actual product management team. I think it’s mis-named. The title implies that somehow you get great products from divine-like inspiration, but in fact, it details how to build an organization that learns how to build great products by talking to customers.
Understanding Self-organizing Teams in Agile Software Development - Nils Brede Moe, Torgeir Dingsøyr, Tore Dyb
Many thanks to: Andrew Kanapatski (Li) (who pointed me to some of these resources when we worked together at Kira), Anne McNulty (Li Tw), and others who provided feedback and suggestions!
Please feel free to use the comments to recommend additional/alternative resources. I might not include all of them, but I will make sure to credit you if I do!