– By Waseem Daher, CEO of Pilot
Disney had a strategy from at least 1957 (the year the image above is dated) and it clearly wasn’t fixated solely on its iconic mouse. The same applies for any business — after you’ve had some success with your product, you start to wonder: Should you double down on making it better, or should you expand into something else? Maybe your customers have begun to clamor for a New Product X, and you can’t decide if it’s a good thing to be able to sell more to customers and improve net expansion and retention or whether building and selling a New Product X would be a distraction because it diverts engineering, sales and marketing efforts.
There is no slam-dunk single answer, but here are a few thoughts on the topic to help you find the solution that’s right for your company:
In the early days of Pilot, we were laser-focused on doing accounting, and nothing else. Our customers kept asking us to do tax preparation, but we refused. I wanted to focus on accounting because it was a product our customers loved (and a service that we did, and still do, better than anyone else out there), and I always thought that it’s better to solve one problem really well than multiple problems poorly. (The Unix philosophy as applied to company-building.)
However, what we got wrong was that we didn’t understand the problem our customers were asking us to solve. It wasn’t “I need accounting.” It was “I don’t want my investors to be mad at me, and they’re insisting that I file my taxes and regularly show them our books.” Because we didn’t provide a solution to this, they ended up buying this from a different provider who did.
In other words, accounting alone wasn’t solving our customers’ actual problem, and we needed to expand by adding tax preparation to our set of offerings. This experience led me to three important principles for thinking about how to expand beyond your core offering:
It’s about them, not you
Every additional product you add has to solve real, big problems your customer is facing. If it’s a nice-to-have, it just won’t cut it. A dangerous trap awaits you here: if you’re solving problem #10 for someone, you’re in trouble. Sure, you’ll get good feedback from your customers—“Yes, this is a problem that I have!”—but you’ll be sad and frustrated when no one buys your product because they’re never going to get around to solving problem #10. (If I get through priorities #1 and #2 on a given day, I’m feeling really great about myself. I don’t think I’ve ever gotten to priority #5.)
Fortunately, there’s a cheat code: If you solve one of your own hair-on-fire problems and there are lots of people like you in the world, you’ll be in good shape. (This is actually how the idea for Pilot came about: we wanted to solve a problem we struggled with at our previous companies.)
Importantly, if you’re introducing a new offering, it has to be because your customer wants it, not because you think it’s a smart business decision to have a thing you can cross-sell.
Pilot didn’t add tax prep because it increased our revenue—we did it because our customers demanded it. Even if our tax offering generated no incremental revenue, because it was what our customers wanted, it’d still be worth doing. In particular, it makes the experience better, and causes our customers to sing our praises to their friends because we were solving a pain point that they had—which is incredibly valuable.
Ideally, there are benefits for you too, but you do it because it makes your customers happy. It’s crucial to have this customer-centric lens as you decide what to build. If you’re building a product that doesn’t have customer pull, you’ll be in the unenviable position of either having to force it into market (not fun) or having built a product that no one wants (also not fun).
It fits your story
If you’re going to start doing a new thing, it needs to fit your company story. How do you want your customers to describe you? Is this new product consistent with that description?
At Pilot, our overarching goal has always been “Be your trusted partner that runs your back office, so you can focus on running your business.” Accounting is a big, painful part of the back office, and really the basis for other back office functions like taxes, budgeting, and more, which is why we started there. But taxes fit that same narrative, which made it a natural next product to add to our core offering. By contrast, “We do your accounting but also pick up your dry-cleaning” is probably a bridge too far.
Related questions you should ask yourself are: Why do you have the right to win for this capability? Why should you solve this problem rather than letting someone else solve it? And why should your customers want to buy it from you rather than someone else?
We already did the accounting, which means that we could do the tax preparation more accurately and reliably than a third party provider that didn’t. From the customer’s perspective, there’s real value in getting all of this taken care of under one roof—vs. having to cobble together a collection of different providers. (Our customers were regularly asking us “Which tax preparer should I use?” which was also good validation here.)
When the time is right
Finally, the best time to expand your core offering is when you need to. An advisor once encouraged me to obey the guiding principle of “Do the fewest number of things you can do that still cause you to hit your goals.”
In your personal life, the bar that governs whether or not you should do something is “Is it a good idea or a bad idea? If it’s a good idea, you should do it!”
With your startup, though, this approach is problematic. There are lots of things that are good ideas: things your customers would definitely want, initiatives that would certainly add more revenue to the business, campaigns that would undoubtedly have high ROI—and in fact, you’re probably going to eventually do all of these things.
But the question is not “what will you do eventually”— the question is “what can you afford to do now?” The reason that trying to do it all now is problematic is that, realistically, you’re going to do too much—and you’re not going to do any of it particularly well. And when you don’t do it well, your customers notice and are disappointed. And your customers being unhappy (or even, your customers just not being delighted) weighs heavily on your brand and slows your growth.
So it really is the case that you should do the smallest number of things you have to do to achieve your goals. If you can hit your goals while deferring it until next year, you should. Take a lesson from Disney!