Podcast Transcript

[00:01:49] Sean Steele: G’day, and welcome back to our regular listeners and to anyone joining us for the first time. We are thrilled to have you. My guest this week is Mike Smart - Product Management legend, Founder of Managing Principle at Egress Solutions. Mike, as I understand it, you're helping, you're helping companies and also actually private equity, and perhaps VC firms to make sure that the products either within their company or within their portfolio are like hitting the mark, they're getting to market fast, they're building profitable products and it's actually adding to their competitive position. It's great to have you on the podcast today. How are you, Mike?

[00:02:23] Mike Smart: Sean, I'm doing well, and I appreciate, and I'm honoured to be here and hopefully we will have a great conversation because I understand a lot of your listeners are not technology companies, so I have the work to say how does this apply to the broader universe of businesses, and I'm happy to contribute to that in any way I can.

[00:02:43] Sean Steele: Fantastic. Well, when I heard you on the Silicon Valley Podcast, and I know Sean Flynn quite well, I was like, I have to chat to Mike because I support, you know, in Scale HQ our clients, but also our listeners, we have a lot of Founders in the 1 to 20 mill rev range. Most of them are non-technical Founders. They're running services businesses or maybe product businesses, but they're not SaaS businesses. They often don't even have any recurring revenue streams in their business models at all. But they are of course, always looking at launching new products, launching new services, trying to get them to market, trying to get them to sell, trying to get them to scale. And there's a lot of methodology. You know, I was listening to you, I was thinking these principles apply in all these businesses. It's not just a software thing, even though you might spend a fair bit of time there, because of course that's a big driver of growth. But there's lots of methodology right there. And you spent your career in product marketing and product management. And one of the things I loved in your LinkedIn bio was it said, “Product consulting that exhilarates product sales growth.” And that's the goal, right? Like, you know, number one, am I selling something that's solving a problem? And number two, is it profitable? And number three, if those first two things are happening, then I really want to scale that product up. So, I really wanted to sort of get into your mind today, maybe you could give us a quick career history just as to how you kind of ended up doing product consulting.

[00:04:05] Mike Smart: Sure. So, I think like a lot of people that start out in the product management discipline, and especially in the technology orientation of that, you'll find product managers come from all different sorts of walks of life. My first job in tech was in sales. I literally, as they say in the old days, carried a bag, so to speak. I carried a quota. I literally cold called. I called on, I was selling technology services to the CIOs of Fortune 500 companies based in Silicon Valley and the Greater Bay Area. This was before SaaS. It was before a lot of things that went on. And so, I came to this industry based on my business acumen and my desire to go out and make business happen, and to be very blunt about it, to make money. I grew and took various positions and sales executive roles. I, at one point was a VP of Sales for a mid-market technology company with salespeople on three continents. And then as someone told me once, I had a mid-life crisis somewhere in the year 12 or 15 of this, and decided I wanted to become a product manager and the reality was, it was about self-preservation. I worked for a company that had really poor product management and even worse product marketing. And as a seller, it became just absolutely painful for me to go out and engage with clients. And I started working with people back in the office when there were offices to help fix this so we could go forward. And I finally went to the CEO and said; I'm either going to change jobs and fix this outright for the organisation, or I'm probably not going to stay here. And it's not a threat, it's just a promise that I can't continue to make this stuff up and go sell it, and then hand it back to engineering and say, now make this happen. It's backwards. And while he resisted the idea, he got a lot of influence and feedback from others is that he's the right guy. And they took me in and I learned how to do this work and I fell in love with it. I absolutely found that this was the place. It's like, so what took me so long to do this? I found that I was able to touch the part of the business that made sense to me. I was able to influence the areas of the business strategically. I could talk to the technical people that were making, coming up with the decisions to decide, and I said, this is where I belong. This is a vortex of where I want to be. So, that's how I got here. And it escalated based on just the idea of … I became an expert at fixing broken product management processes.

[00:06:57] Sean Steele: You know what's interesting about that Mike, is, you know, I grew up in sales as well and so, you know, we probably had lots of similar experiences where you were having to basically go out there and sell the world. And this is probably back in the days where maybe… well, one of the things that I notice is that of a lot of, it feels like a lot of product marketing and product management come out of marketing, which is great. You know, they're typically good at understanding the customer's need, trying to build a solution that kind of makes sense. But in the absence of actually ever having had to communicate that to a customer, understand their needs live and then convert that into a sale, feels like there's a huge gap. So actually, having somebody who's come from the sales side to go, that's nice. And yes, I hear the customer said they like that or they want that, but in reality, I know in that conversation, that's not the thing that's going to get them over the line. Like the thing that's going to get them over the line is this because that's the real problem or that's the real emotive trigger or that's the real pain point for them. That's what we need to understand. I think salespeople are probably far better at that, you know, have an advantage I think because I've had to live and die by that sale. Did you find that?

[00:08:05] Mike Smart: I think there's truth to that, that salespeople have a, what I'll call a unique perspective. They're at the point of sale, no pun intended. They're literally on the front line where the transaction is going to happen. And if they are observant, if they are objective, if they are students of human behaviour, they will sense and understand and know the resistance to a purchase decision. They'll hear the objections to a purchase decision. They will hear the level of risk balance that the buyer is actually sitting in. You're the CIO of a major corporation and you're proposing, and I'm going to my background, proposing a multimillion-dollar solution, which includes hardware and software, and it's 20% of that CIO's budget. If they bet wrong, they're out of a job, right? So, in my world these were bet your job kind of decisions. And if you see that and you understand there are gaps in the holes in the solution. Then the salesperson can, has the ability and potentially the exposure to provide input to marketing upstream, product marketing, upstream and ultimately even product management. These are the things that people on the whole are reacting to that are unfavourable about our solution, and here's why. I was always the lean in on the how, meaning the solution kind of salesperson. Which meant that I had pipelines into engineering even in my best days of sales because I could extrapolate what I call requirements or gaps and bring them in. And I had a way of saying them and then articulating them in a way that were objective, that made it useful for the people who were making the planning and product decisions to use that information to help plan on building and filling. And I think there are a lot of salespeople who can do that. It's not a sales job. So, it doesn't automatically translate. And then the reality is there are some salespeople that are, will say; near term tactical in their focus, and in order to do this, to make it beneficial to the rest of the organisation, marketing, product marketing, product management and engineering, you kind of have to have a strategic thought process, which means it's not about the transaction, it's about the broader set of transactions that we're engaging with over the long haul. And a lot of salespeople have that skill, but many do not. They struggle because, well, if I don't make quota, games over, and that's valid, but it doesn't help sort of move the planning needle upstream.

[00:10:53] Sean Steele: So, I've got lots of questions for you, Mike. And so, I think, but what might be helpful is for us to put our self in the minds of the people that we're talking to, which let's assume that they could be running a recruitment business or, so it's just this selling really kind of people on a service or they do pest control or they do, you know, they're legal services firm or, like they don't have anything like they're often selling knowledge, or a process packaged up in a service that delivers an outcome. When they're thinking about, like, let's just say I'm the legal services team and I'm planning on going into a new, I don’t know, area of specialisation. Like I think it's a great idea for us to get some specialist legal services guys in, I don’t know, mergers and acquisitions because we don't really have skillset in that, we do all sorts of commercial stuff. We don't do M&A. Okay. What are the starting principles? Like what are the steps that you would get that Founder to think through before they decide whether or not that's actually a good idea or not, whether they should spend any time actually thinking about what, how do you get them to start? What are those key principles that you start them off on?

[00:11:54] Mike Smart: There is the cliche phrase, what problem are you trying to solve? And it's a perspective shift that a lot of people need to work at doing, because we're not talking about the problem you're trying to solve for your business. We're talking about the problem you're trying to solve for your customer or client's business which requires you to have a deep understanding of the world that your client lives in. What are their aspirations? What are their fears? What are the things that are stopping or blocking them from doing the business level or the business outcomes that they want to achieve? What do they see as the biggest opportunities for them in the near term, in the long term? What kind of staffing and or what kind of capabilities sit around them in the scope of their business that you could augment and add to? Or if you don't do correctly, you could constrain and kill? The other cliche term that gets used a lot. What are their jobs to be done? Whenever we add, and we're big on this in technology, but I think it has elasticity, it goes well past just providing technology and product every time somebody buys something from us, whether you are a service provider. A hardware provider, a software provider, they are trying to use your skill, your capability, your offerings to fill a hole that's in their organisation. Assuming you're selling B2B, whether it's small business or large business, they're trying to use your capability to fill a hole that translates to doing a job. And the more we understand that, the more we can articulate and understand the problem that they're dealing with. And a lot of salespeople, and I stay away from this term when I'm thinking like product, we want to talk about pains. And to me, pains and problems are related, but they're not the same. You see, I may wake up in the morning, I own a small business. I may wake up in the morning, have a pain with the fact that it's end of month and I need to close the books and I'm too busy and I don't have a keen interest because closing the books is a pain. The bigger problem is the mechanism and or the method by which it takes to close the books. Could be multiple solutions in that. So, let's go back to your legal services example. If I have a client that is into doing M&A, what is the pain? Well, the pain could be any number of things. Is the pain sourcing and finding potential candidates for M&A, is the pain the DD process or due diligence process based on selling? I mean, so there's a spectrum of things and the more I understand what the problem is.

[00:14:49] Sean Steele: Yeah. Is it the negotiating…

[00:14:51] Mike Smart: … broader, bigger problem, I can map a better service offering that meets that problem. And it also extracts and understands what that pain is. What pain are you solving? Well, typically, if somebody's going to buy something from you, you're going to have to solve more than just one pain.

[00:15:08] Sean Steele: And is it also…

[00:15:09] Mike Smart: If I have a headache, I can take a pain pill like an ibuprofen, or I might decide to go to a chiropractor depending on the intensity of the pain and what the reason for the headache is.

[00:15:23] Sean Steele: And so, how do you think about, if a customer might have a pain, or multiple pains, but I think sometimes people can fall under the trap of thinking that you make the assumption that they actually want you to solve that. And that they're willing to pay for it. You know, like just because they have a problem or a pain doesn't mean they A) Want you to solve it. B) Think you are capable of solving it, or C) Actually are willing to spend money to solve it because we have lots of pains, but it doesn't mean we're going to spend money on everything.

[00:15:55] Mike Smart: Exactly, Sean. So, my catchphrase is, once you understand the problem, there's a heuristic to go through, which is, is it urgent to your point, is it pervasive? Now in the world of product and specifically technology, we don't like solving pains for or building solutions for one client. This is about repeatability and scale. And I think that applies to most services companies as well. Is it urgent? Is it pervasive? And then are they willing to pay to, to solve it? And that is a series of high-level questions which you need to answer. And there are questions within those questions to extract that from not just one client, hopefully there are more than one client you can test this with. Before you ever conceive of a service offering before you ever hire resources to deliver that service offering, those things need to be understood.

[00:16:54] Sean Steele: Mike, what are some of the questions you, it sounds like you've probably got quite a list and it's quite structured, but what are some of the questions that they might ask to get past that? Hey, is that something that you would, you know, that they might go super top level and go; Hey, would…

[00:17:06] Mike Smart: Sean, you're going to laugh at this because you're going to sound a lot like sales qualifying questions. Okay, so if you walk into somebody and you sell M&A services, you'll ask; oh, I understand you're head of M&A services offering Mr. Customer. Yes, I am. And so, what are you finding are the most important things for you to get organised around to deliver the kind of M&A capability to your internal customers, external customers, whatever it is, and they're going to say, well, it's hard to find people that can do the work, or it's whatever it is. And you're going to ask a series of qualifying questions. Different intent though. I ask these questions as a product person differently with different desires than I ask it as a salesperson. My goal in asking a salesperson is I want to qualify them. Are they in the funnel or out? I ask these questions on a product side just to hear what it is they're struggling with. And if they tell me, for instance, the biggest problem with doing M&A is staffing really good people and keeping them on board to help do the due diligence, because the due diligence process is never long lead time, it always just pops up. People have to be ready and available. They have to know how to do due diligence. We can't train them on a job. It's an exposure that creates a risk for us. Okay, so what are you saying to me, Mr. Customer, is that part of the challenge is keeping staff ready and available on a short notice that know how to run a discipline due diligence process and are comfortable working together? That's exactly right. Urgency. So, what happens if you show up to a proper, a potential acquisition without that team in place? I have to run the process or I have to manage it myself, or we may have to pass on a process. it's not only important to solve the problem, but there's an urgency that the next time a deal shows up, you better have a team in place. Isn't that correct? Ding. Urgency. If I get 10 customers to say that to me. I have probably a good belief that there is a service offering that may be worth doing. And I can go through that heuristic to ask about pervasiveness. That's get 10, right? So instead of 1, it's 10. And then the last one is…

[00:19:35] Sean Steele: When you say pervasiveness, Mike, sorry. Do you mean that they're likely to have that issue on an ongoing basis, or they're likely to have it multiple times? Explain to what…

[00:18:47] Mike Smart: My worldview is two things. If you're talking about service companies, I would want to check or validate pervasiveness on two fronts. Ongoing issue. To your point. So how often does this come up? 'Last year we did seven M&A projects.’ Okay. That's pretty good. And then how many other clients like them are similarly situated, whether the answer is four M&A projects, or 24. Now I've got a two-axis pervasiveness, right? These things come up frequently and it's spread across a segment of the market that represents an opportunity for me as a company owner or a Founder, to build a service capability that can be applied to them. Okay. Now I have two things that I'm working with and that may be good enough for a service that may be good enough to start thinking about what that service looks like. The last one, which is willingness to pay. The last time you showed up and you didn't have this capability, can you characterise what the downside or upside opportunity was that you may or may not have been able to cover? ‘Oh, we missed an opportunity to buy a 4 million business that would've done X, Y, and Z.’ Or ‘we missed an opportunity to collect fees that could have generated $400,000.’ Whatever those things are, now you have the vital three, right? Urgent. This is a real pain, pervasive. It happens not just one time, but many times across the spectrum, our two-dimensional spectrum. And then three, I know from some extent that there's a real dollar cost and or opportunity cost if they don't do this.

[00:21:30] Sean Steele: Yeah.

[00:21:32] Mike Smart: If I was in sales mode, I'd be check, I know I'm ready to go close the deal, right? I'm going to present an offer, I'm going to present a capability. I'm going to close the deal. In the product creation or service creation world, I now have enough information to start formulating what that service looks like.

[00:21:51] Sean Steele: Love that. And do you think that, what do you think… Yeah, I'm making the assumption and I'd be really interested in your perspective that, you know, people are generally motivated by pain or pleasure. They're trying to avoid pain or they'll move towards pleasure. But that as humans and with these beautiful reptilian brains, we move much more quickly and we are much more likely to spend money to move away from pain, than to move towards things that we know could be good for us, you know, might be kind of upside. How do you experience that in the world? Like, will people invest in products just as much for some sort of utopian or toward focus goal, or they'd be much quicker to sell something that's costing them money and creating …

[00:21:34] Mike Smart: I'm going to give you the quick and somewhat tongue-in-cheek answer. I heard it from someone else and we all are dealing with this macro environment, it's certainly got a lot of uncertainty in it for most of us. And this person said, “In this environment, I'd rather be selling pain relievers than vitamins.” And we said it in a group setting, we all smile and we all laugh because I think in a sentence that establishes just what you said. And it extends to some other things that we live in a world where the reward for relieving pain is much higher than reward for setting up and building out long-term health. That's just kind of how we're wired.

[00:23:22] Sean Steele: Yep.

[00:23:23] Mike Smart: And when uncertainty is around us, that balance shifts even higher to pain relief versus building out long-term health.

[00:23:33] Sean Steele: A great example of that. You know, I've grown up in the education industry and that's always been a great industry to be in, in a terrible macro environment. Because what happens when there's a bad macro environment and people are losing jobs, they're feeling pain, they retrain, they rapidly upskill, they move towards certification. They're like, I could be out of a job. I need to protect myself. There's downside pain that I can see coming. They throw themselves at education to skill up and then be able to transition and protect themselves. But if everything's going really well, career is going really good, how much will they invest in their professional development to let…

[00:24:04] Mike Smart: A raise and a promotion. What do I care about training for? I'm doing everything right.

[00:24:10] Sean Steele: That's right. We are all, I'm glad that my thinking is consistent with yours on that one.

[00:24:18] Mike Smart: No, I think that's absolutely correct.

[00:24:20] Sean Steele: Okay. That's been, and I really appreciate the kind of live example that's so much easier for me to get my head around, I'm sure for our audience. So, let's assume we've ticked off our three boxes. We're like, okay, we have discovered a need with our clients that is urgent. It's pervasive, and we think they've got the willingness to pay. In terms of, are there any principles that you guide people to think about how to build, they don't want to go all in and go; okay, well, I've discovered a problem. Now let's go and hire five people. Let's build a whole team. Let's get the service happening. Let's build a new website and landing pages. And it's like; okay. That microcosm of going, okay, we've got an idea here. It's past the three gates. How do you get them to think about the sort of MVP, the testing, the keeping the cost limited, but getting to the next stage that builds confidence that you can then invest further? How do you get them to think about that stage two?

[00:25:12] Mike Smart: So, now you're using the terminology for my world. We're talking about agility principles, lean principles, things that appropriately balance doing what I'll call innovation on a budget. Not everybody is Apple and there is nobody that's going to ever be like Steve Jobs again. So, none of us are that brilliant or that smart that we can conceive of things. And even his process involved feedback from customers and feedback from the market, and it was incremental by nature. So, we don't ever have to build something completely at the start of an idea. In fact, the best practices in the sciences, that's a prescription for failure. Or as my high school basketball coach use to say; “That is not a high percentage shot. You can take that shot from 27 feet away, Michael. But it's only going to go in 2 out of 10 times. Or you can take a shot closer and you'll be shooting with more success and you won't be on the bench. You'll be playing in the game.” And so that's sort of the backdrop that I put in this is we want sometimes get in a hurry and it becomes our own detriment. We try and move too quickly before we really understand the problem. I deal with this a lot with engineers because they are very quick to understand a problem, most of them are very smart and they start coding. In my world, they start coding things that can't be uncoded once they start. And it's sort of like making up your mind. You're going to do something before you really have clarity about it. The mind says this is correct, and we're going to continue on this course, even if it turns out to be inaccurate, right? We'll just keep moving forward. So, in order to do that, I would advise anyone, keep it simple. And keep the investment of energy and effort down, even if it's frustrating. So, go back to the service example of building out this M&A service offering you described. There are a number of ways you could do this to test whether or not this was correct. If you had some friendlies clients or customers that talk to you, you trust them, they trust you, they've bought from you in the past. You can sit in front of them and assuming they have this problem or at least some variation of it, you could say, take a one pager service description and provide it to them, not a marketing slick, something that has definitive descriptive understanding that they could go; ‘Wow, this is pretty impressive. Can you do that?’ And offer it to them and then say, what do you think? And then quiz them. And in some cases, even play devil's advocate with them about the viability of this offering, what would they see as the risk of it, their likelihood of adopting it, the ideal time in which they would buy a service like this. If they were buying a service like this, how long would it take them to make a decision? If they were looking a service like this, would they go out to the market and test competitors to see if somebody else had the offering? If they tell you that, find out who those competitors are and then go validate what you're proposing as an offering against the competitive offering. And this happens before we ever lined up any anybody's. This is a one-person thing. Any person can do this and line this up, or talking about time on a Word document, or time on a Google Sheets or whatever, to basically build this thing out and test it and use it as sort of the staging ground. And once you do that, let's go back to pervasive, do the same process. Actually, I was involved as a early stage Founder in a company, that we've since sold. But we did this and it was partly because I had a group of really smart technical people that wanted to go build a prototype, and I forced, literally forced the team to do a dumb down version of a mock-up. And in fact, we had somebody who was a great UX designer create the mock-ups and it was 15 sort of screen looking things and I said, turn it to black and white. And they were horrified. ‘Why you doing this? Why?’ I said Because they don't want the customer to get fixated on the UX. I want the customer to stay fixated on their problem. And if I turn this to black and white mentally, what it forces that person to do is look at this from a distance, because suddenly it's not real.

[00:29:40] Sean Steele: Yep.

[00:29:41] Mike Smart: Now the UX was so good that we actually still had people asking, is this real? Can you actually do this yet? And that was flattering to us. The answer is no. But we were able to engage in a level of conversation that went way beneath, aren't those pictures and that isn't that we didn't care whether they thought the UX was cool or this or that. We were trying to understand the depth of the problem and what pains they were dealing with and empathise with their pains, so because that would feed our requirements or stories that would feed our marketing messaging big time. And then it allows us to convey and head of a deeper understanding of; Hey, this is really important. We do need to help these people solve this M&A problem because when they miss an opportunity to due diligence, they're basically potentially putting their company at risk in the future. If we can empathize with a client like that, we can probably build a really great solution for them.

[00:31:43] Sean Steele: Yeah, I think that it's such a great way of building some confidence in the product. And what I like about that strategy, and I've done this a lot in B2B businesses and worked with a lot of clients on this, is like if you've gone through that process, you've ticked those three boxes and you're now trying to do this testing, like find 5 or 10 people who will give you, and I guarantee you, if you go like cold to people and say, and who are credible in their industry, let's just say, you know, like it's a B2B industry, look for the VP or the chief of something or whatever, like they will give you 15 to 30 minutes and say, I am trying to bring something to market that solves a problem for people just like you. And all I want is your feedback. I just want to show it to you and I want you to tell me what's good about it, what's wrong about it. Like, just help me make it better for people like you. You'll be amazed at how many people will give you that time, and through that process, you build a relationship, they build trust with you. And the question at the end of it is; if I was able to actually, you know, deal with all the things that you talked about and then bring this to market, would you want to be one of the people that's a beta tester or a pilot, or gets a discount or work with us to make it even better? You'd be amazed at how many of those people will take that product.

[00:32:53] Mike Smart: From a salesperson perspective, it's nirvana, right? It's the softest form of a Coke. A salesperson can't do this, but a product person or plumber with a product lens on can do this. I'm not here to sell you. In fact, I can't sell you this today even if I wanted to, if you wanted to buy it. There's no mechanism. I'm trying to validate some ideas. There are three levels of human nature that make us want to help somebody do that. The one is just, most of us are nice and have empathy toward people trying to solve problems. The second one hits closer to home. To your point, if this person is committed to their space and their industry, they are flattered that you think enough of them to ask for their opinion. They're not going to say no. Right? And then the third thing is that's their ego. ‘Wow. They're working on something really cool.’ So, when this comes real, I can say I put my thumbprint on that.

[00:33:50] Sean Steele: Yeah.

[00:33:51] Mike Smart: And it's just feeding right into that cycle. And lastly, to reinforce and amplify what you said, you can always go back to them and get them to give you the second, third, fourth opinion about this as you go through. And by the time you're finished, if you do what they're suggesting, they're probably going to use it. They are probably going to be one of your earliest customers. I mean, it's a beautiful way to build out things and try things without over investing.

[00:34:19] Sean Steele: I love it. You've just given us some great steps and some great principles for us to get all the way to essentially like a kind of pilot group of customers to just kind and test the idea to get a bit more confidence in and a bit of veracity. Okay, well actually maybe I can actually put some money behind this and I'd still want to contain that and keep it, you know, because maybe I've misread some of those cues or I got a bit too excited or whatever. Well, in that process, what do you see the biggest mistakes are that people get wrong in this process? Like what are the, you know, they might be going, oh yeah, I followed all of my steps and I got to the end, and then I was like, okay, I'm coming back to you with the thing and they still didn't buy it. And you're like, okay. What are the common things in that chain that you see people slightly misunderstand or they kind of take the wrong orientation. What are the things that you see people get wrong?

[00:35:11] Mike Smart: I had somebody say this to me yesterday. Similar context, different industry space. They misinterpret what the customer or potential customer or user is saying by virtue of the fact that they've already concluded that they want this outcome. What do I mean by that? If I sit with you, Sean, and I don't know, let's say I'm trying to sell you a life insurance policy, something that you absolutely wake up in the morning thinking about buying, right? And I take you through a process of offering you various types of life insurance. And on the premise that I'd said some question like, ‘Sean, don't you want to provide for your family if something happens to you?’ And of course, you're going to say, ‘Well, of course I do.’ And if I take that clue and conclude that you want to buy life insurance from me. So, if I say, go back to our example of legal services in M&A space, well, what's happened the last time you didn't show up with a proper due diligence team? We lost an opportunity for $4 million. There's the answer. We were already there. Without fully understanding 1) How did you deal with that? In other words, they solved that problem probably without your service, because your service doesn't exist. So, you need to explore. Well, what happened when you got there and you did that? Oh, we had to hire a lawyer. She came in at $700 an hour. It was a big mess. We saved the deal, but we spent more money than we need to. Now, if you took the first answer, they lost $4 million as the rush. The justification for this, you walked out with less than half the story. The story was they had to scramble and figure out something at the last minute. It adds beef to my service offering, right? More depth and more justification, my service offering. But if I don't ask the right question, I don't even get there. And so, a lot of people get impatient and they work off of service level information, and they stop asking the question, ‘tell me’ or making a statement ‘Tell me more.’ Or asking a question, what were the consequences of this? Or what were the impacts? So, it's patience is the biggest thing. The other thing… go ahead.

[00:37:40] Sean Steele: I was going to say, it sounds like, the person is kind of walking in with a confirmation bias, right? They're like; well, I know people need this, and so what I'm listening, what you've just told yourself is that I'm going to be listening for every cue that makes me go, this is a great idea. As opposed to listening to the cues where it's like, maybe it's not a great idea. Like if you can't do it yourself. And look, I am the first one to put my hand up and go in a process like this because I'm very strong on optimism and I think everything's going to work. And that's just my nature. I know I actually need somebody else in the room who's looking for all the problems, who's going; yeah, hang on a second, but why didn't you solve that yourself? And who else would you have gone to? And what was it really such a big issue. Doesn't sound like that big an issue. Like you've got to be testing for that. And if you can't do that yourself, maybe take a second person with you.

[00:38:27] Mike Smart: And so there is a rule of thumb and why we often say salespeople probably are not the right people to do this because as a salesperson, we kind of live in a confirmation biased world because we are always optimistic about the outcome. So, clearly and product people are also like this as well. Taking a next somebody else to sort of, somebody speaks and asks questions. Somebody sits quietly, listens, watch body language, writes notes. Those kinds of things are really critical. And in today's world, when we've done this, we record sessions. Most people are willing to be recorded in a video context. And we go back and we listen and we listen. What did they say? Yeah, he said that, but did you see his body language? Maybe nothing. Maybe the room was cold, maybe a lot. And it gives us a way to go back and confirm. I like to say that you have to be sort of devil's advocate or a contrarian in this process because you're looking for the things that you missed, the things that you don't ask or the things that'll trip you up later.

[00:39:37] Sean Steele: That's all right. And you know, if you are generally optimistic in nature and you're going into this process, think about that. If you are finding it hard to get your head around, I'm like, oh, that's just not my nature. Maybe I miss those things. Think about it as an awesome way to get your objection list developed because some of those objections are going to be like deal stoppers.

[00:39:57] Mike Smart: That's a good thought. That's a very good thought.

[00:39:59] Sean Steele: But think about, it's like, no, no, I'm going to have to sell this in the future, so I need to know what all…

[00:40:02] Mike Smart: I need to know what are your objections to this? Why wouldn't you buy this? What would you be concerned about? What obstacles would you have to overcome to engage a service? And you'll hear those things that will keep you honest about the process you're in.

[00:40:17] Sean Steele: And the risk is assuming that just because it comes up, that you can overcome it and maybe you can't. Maybe it's a terrible idea. Like, you know, you don't want to waste your time or your money on it.

[00:40:26] Mike Smart: But wouldn't we like to know that we're in mock-up stage as opposed to having five people around expecting to get paid every two weeks?

[00:40:41] Sean Steele: Let’s find that out right now. And that is hard in, you know, if you're in an entrepreneurship kind of model, like I found that, you know, you think about the worst job, really, the worst jobs are executive leadership roles because they are the meat and the sandwich between like a CEO and a board or a Founder who's like just 500 miles an hour, heaps of demands. And then you've got all these needs underneath you in the organisation and you're like, this meat and the sandwich with all this pressure to deliver. And so some of these things sometimes can go a bit by the wayside because you're like, well, I've got, I don't have time for all of that. Like, let's just do it. Let's just take the risk. And you could end up with a lot of egg on your face.

[00:41:08] Mike Smart: So, yeah, and I say that's a function of the executive in that role, not having a good. Well thought out process have a, what I'll call a, the equivalent of what we used to call in sales of farming algorithm that says, farming algorithm in sales, and this applies too; how many prospects does it take to get a close. I can take the same principle. How many ideas do I have to investigate and vet to get a really great one? The ratio of selling prospects to close may be 10 to 1, 20 to 1. The ratio of great good ideas, or just call them ideas to great ideas, might be a thousand to one. So, I have to go through 1000 ideas to get to one that's great. That's going to make me a hero, save my job or get me promoted. Then I better start building on this principle and start building up this pipeline of ideas.

[00:42:04] Sean Steele: Yep. You have some courage, right? To hold everybody back and go, I know that you guys all think this is a great idea, but I do not know yet, and so you're going to give me some time to build some confidence.

[00:42:12] Mike Smart: Well, and I would say it's even keep it simpler than that. It is, encourage the team to come up with great ideas. If you're an executive, you have a team and resources come up with good ideas. I'm call them great ideas, come up with good ideas, and let's go out and kill the bad ones. That's first. Except the fact that just because it's your idea doesn't mean it's going to work. It could be a good idea, but not a good idea for our company or our situation. That's another one. So, we kill and squash all of these that don't fit, and the handful are left. The 5 or 10 have been carved out and pulled out of the many. Those are the ones to go do the investigative work that we talked about. Validate, urgent, pervasive, willing to pay. Do an investigation and a deep dive with 5 clients or 10 clients. And by the way, best science says if you do five interviews of that type, you're going to find out and confirm, you know what? This thing has legs or it doesn't. And if you do 10, you're going to see some normalised distribution. You can go to a 100 if you need to, but at 10 you're going to see some normal distribution. The example I gave you earlier about the product where we were early seeding, we built this out. At 15, we knew we had something. We did 15 interviews. We had two or three people say, ‘I don't get it. Why would you do this?’ And we had two or three people say, I'm ready to buy right now. And we knew that both of those answers were incorrect. And so, we resolved ourselves to solve the problem around the ones that were in the middle, some sceptical, some optimistic, and that gave us the best shaping for how to build out what we wanted to pay and what we wanted to invest in and Bill. And I think, the formula is that you don't have to do a hundred interviews. You can do as little as 10, I'd probably say err on the side of caution and do 15 to 20 and you'll end up with some number that looks right, but that's only for the best ideas that you've come up with.

[00:44:09] Sean Steele: Yeah. That's so interesting because yeah if you think about that, if you were to listen, the smaller that number, if there's going to be 20% that are going to go, ‘yep, this is amazing, let's just do it. I'll buy right now.’ And if…

[00:44:19] Mike Smart: You do not want to build off of what they say.

[00:44:20] Sean Steele: Yeah. And you've taken the one that said that, and you're like, okay, let's double down on this thing.

[00:44:25] Mike Smart: Let’s run with it. It's done. Let's get the people on board. Yeah. That's why I say if you get to 15 or 20, you'll see this distribution. By the way, we kept doing this interviewing. We ended up with 50 and the distribution never changed after 15. Statistically, it stayed relatively the same. We still had, after we built it and showed the people, I don't understand what this is for.

[00:44:50] Sean Steele: Well, don't forget when you listen to what Mike just said, if you think about your building of your marketing and your sales process, the objections are going to be in that middle group, right? Like they're the ones who are not automatically convinced. They're not so pessimistic. They're like, this is a terrible idea. But they're the ones you actually have to work through it, and they're the…

[00:45:04] Mike Smart: Those are your normalised buyers. Those are the ones that are going to be conservative. They're going to raise the most, to your point, raise the objections. Those are the ones that will be challenged to part with the money because they'll be looking for proof points and it's sort of, you know, the classic crossing the chasm, the main street buyer is what you're looking at. If you think about that bell curve and the adoption curve, those are the ones. If you answer 80% of their concerns, you have nothing to worry about. You have solved for the biggest portion of your available market.

[00:45:34] Sean Steele: My last question for you, because I've probably got about 40,000 other questions I could ask you, but I know how much bandwidth people have to listen to a podcast. So how do you think, like, you know, we've got AI in the background rapidly changing, and like, two things were coming to my mind, like, how does that rapid evolution impact people who manage product in an organisation or, you know, what are the implications for AI as a society and should we be applying like product management principles to trying to deal with that problem? Because, you know, we've got some big ethical issues kind of coming up. How do you think about this sort of role of AI when it comes to product management?

[00:46:11] Mike Smart: So, you probably know Sean, at the space that I'm in, AI is part of almost everybody's sentences all day, every day, all day long, right? The tech industry is now obsessed and absorbed in AI. Are we in a hype cycle? Probably. Is it real? Yes. So, I heard some really interesting thoughts and that the people who are sitting in any job anywhere who are looking at AI, sort of, and if you think about the hype cycle, it follows sort of the grief cycle, right? The first stage is denial. ‘This is not real.’ If somebody's sitting in a job as a legal analyst, and they think AI is not real in terms of their job, they're in denial, because AI is going to hit them. If somebody is a product manager in a B2B software company and think that AI doesn't have an impact on their job, they are in denial. Now whether or not AI, these “sentient beings” are going to take over your job or my job, it's TBD. What will happen guaranteed sooner rather than later is that people who jump in and embrace the tools that are out there, they're using AI, will take over our jobs. So, somebody who's a consultant like me that's using pick the plugins and the plethora of tools out there that are based in AI to start delivering services to a client, will look a lot better and a lot more capable and a lot smarter than me doing their work than I will. So, my comment is, don't be in denial. Being in embracement, go learn what this is. And that's for everybody. That's not just one sector of the economy. That's not just one class of jobs. That's all jobs. The biggest threat coming to all of us is that if we don't understand this and we don't get comfortable with it, and we don't have an embrace strategy for it, we will be pushed out, but it'll be by people that are willing to do just what I described; embrace it and dive into it and learn.

[00:48:26] Sean Steele: And if you're a Founder with a business model that you are pretty sure is kind of on the chopping block for what of a better word? Like, you know, you're really concerned about the disruption of generative AI to your fundamental product or service, then I can guarantee your people are thinking about it as well. So, you need to engage everybody in your business and get everybody on the case and go; how do we use this?

[00:48:45] Mike Smart: Somebody would've to be under a rock today not to be thinking about AI. Right? 

[00:48:52] Sean Steele: 100%. But you don't have to solve it on your own, right?

[00:48:53] Mike Smart: So, if you are Founder and you're a business owner, the greatest thing you could do for your specific business and most importantly for your employees, who, if you're a service business, they are your business, is truly embraces this, structure training program for them, encourage them to go out and get trained on their own, set up seminars or work seminars or webinars or whatever vehicles you have around you, and bring in people and the people in AI, are loving talking about this. They haven't had this much attention in 20 years. So, I've had people on my podcast to talk about AI, and they're loving it because for the first time in a long time, they're at the vortex of something that's massively changing. So, you can touch these people. They're willing to talk to you. You don't have to pay big bucks for them. And there are lots of tools out there. And so, I'd say structure methods by which your teams can come up to speed and understand this. If nothing else, they will become intelligent consumers of it, which makes your business value proposition stronger and you will eliminate the fear of what's looming around them. Am I going to lose my job to some machine? And you can take that fear out. And then after that, if they get comfortable with the tool sets that are out there, you're going to find them coming up with their own creative ways to improve the productivity of their work. And you don't have to supervise that. They'll be saying, “Hey boss, I just jumped in a Chat GPT 4.0 and this newsletter that took me three days to do now takes me three hours. Well, that's a big uplift for your business.

[00:50:26] Sean Steele: A hundred percent. I'm with you. Mike, thank you so much. If people wanted to get in touch with you, ask you questions about product management, like where would you direct people to if they wanted to follow along?

[00:50:37] Mike Smart: Probably LinkedIn is the best place. I have a company website. It's www.egresssolutions.net. Certainly, approach there. But LinkedIn is probably the place that I'll be probably most responsive.

[00:50:53] Sean Steele: Beautiful.

[00:50:55] Mike Smart: Michael Smart in LinkedIn.

[00:50:57] Sean Steele: Michael Smart. They will find you. And folks, you'll be able to find, the link to Mike's LinkedIn in the show notes. Folks, actually, I really hope you enjoyed today's show. That was a great conversation. And if you did not take anything practically from that, then you were not listening. So, go back and listen to it about another a hundred times. If you are thinking about investing like. If you are one of the culprits out there that takes huge bets on ideas that are half baked, and it actually just wastes a, a gigantic amount of time of your money and your team's resources, stop doing it. Go back and listen to this a few times. Take notes, and just think about how you can build your confidence slowly by testing in the right way and getting the right sort of MVPs. If you want to actually think more deeply about what new or modified products and services could actually help accelerate your growth trajectory? You should be joining me at the ScaleUps Roadmap Program that we're kicking off in August. Because one of the things that we do is we really step back and think deeply about a couple of the big bets that we're going to make in our business to catapult us towards our goals. And that could be a new product or service, or it might be a business model change, or it could be a whole number of things. And in that program, we're developing your three-year growth strategy, we're optimising your business model for scalability and for big evaluations and we're building a really simple and clear execution plan and you get this great group of Founders around you to build some relationships with. But if you are keen to learn more about that, go to www.scalehq.com.au, click on courses, register your interest, and you'll find out all you need to know about it. Mike, thank you so much. I truly enjoyed that conversation with you today. And I'm definitely going to have to get you back on the podcast because I have such a list of questions that we didn't get anywhere near, but yeah, really value your expertise and your wisdom. Thanks for sharing with our audience.

[00:52:36] Mike Smart: Sean, it was a pleasure to be here. Thank you for asking me. I had a great time. Thank you very much.

[00:52:40] Sean Steele: My pleasure. Speak soon. Thanks, Mike.