Product-Market-Sales Fit with AppDynamics CEO Jyoti Bansal

Quick notes from an Andreesen Horowitz podcast with Jyoti Bansal (@jyotibansalsf), Peter Levine, Satish Talluri (@satishtalluri), and Sonal Chokshi (@smc90).

One of the toughest challenges for founders — and especially technical founders who are used to focusing so much on product features over sales — is striking “product-market fit”. The concept can be defined many ways, but the simple definition shared in this episode is: it’s when you understand the business value of your product.

And that comes down to users, which is where the concept of “product-market-sales fit” comes in, observes Jyoti Bansal, founding CEO of AppDynamics (which was acquired by Cisco for $3.7B the night before it was to IPO). Bansal shares this and other key milestones and frameworks for company building in conversation with a16z general partner Peter Levine; enterprise deal team partner Satish Talluri (who was a director of product and growth operations there); and Sonal Chokshi.

The importance of sales motion

  • sales / product fit is key for scaling
  • GTM model important, be deliberate not random
  • “Sandwich strategy” devs and execs
  • Services – around 15% of rev. Focus on large enterprise as a driver of renewals not as profit center
  • Product/services blend should drive product adoption

How does Sales motion affect roadmap priorities?

3 buckets

  1. Revenue Now (current business)
  2. Internal improvements around adoption
  3. Revenue Later (new products, strategy)

App dynamics used a 66/33 framework to prioritize, 66 on current business, 33 on future business for engineering resource allocations.

New product launches

  • Changing product and sales motion at the same time is extremely disruptive.
  • Sales learning curve needs to be considered when launching new products. Need to start over especially if it’s a new market.
  • Lesson learned – when app dynamics built second product, sales failed at it. Problem is that you sell differently a new product or a mature/MQ caliber product.
  • Reorganized as a “startup in a startup” structure. There’s a sales incentive problem too since new product is way harder to sell and sales won’t sell it to make their numbers.
  • This is really expensive to do. How to manage? First 25 customers phase, then 25-100, then 100+. For phase 1, deployed PM as primary seller like a founder. Use top PM, Architect, Sales Engineering team to get early wins and build blueprint ~ 8 months. Then do internal sales to show sales that this product makes more money.
  • Sometimes companies launch too many products. Important to stay focused, don’t let things get mainstream until you are ready.
  • Don’t give your sales force too many immature products to sell before it distracts them from focus.

Pricing and packaging

  • Pricing – what is the business value?
  • Can your sales people describe it simply? “Half a sentence pricing” is the right level of complexity.
  • Pricing should be measurable – “how many do I need to buy” or “how many am I using” both presale and post sale
  • Keep it simple, don’t get creative with pricing
  • Enterprises need certainty and fixed budget, not variable.
  • Sales led pricing process based on ” how much is this going to save”
  • Leave a business case in the sales process, aka Business Value Assessment.
  • Play back business case to internal champion
  • If your product is superior, then don’t go down in price. Don’t be afraid to charge higher than competition, but you have to be clear about articulating value.