Your growth stage company has achieved an initial product-market fit and has raised money to scale. The demands of scaling multiple functions to support future growth (and perhaps board recommendations) are pushing you towards hiring a Chief Product Officer (CPO). But what are the most critical factors for targeting the right type of CPO for the stage and business goals of your company? (If you are unsure if it is the right time to hire your first CPO read the first article of this series When To Hire A CPO For Your Startup.)
Every startup has unique and evolving needs and there are not many “do it all” unicorn Chief Product Officers out there in the job market. The right CPO can bring immense business and strategic value to your company, but only if you find a strong ‘fit’ for your specific needs. Culture fit is clearly important, but what about the hard skills and relevant experience? This answer lies in effectively understanding your company strengths, stage and outcomes. The search should be viewed as a way to not only add experience in product, but also an opportunity to broaden the coverage of key executive skills. Here are a few factors to include in assessing the unique needs of your company and how it impacts the CPO profile you should be targeting to hire.
Figure 1. Sample process and framework for CPO hiring
What’s the DNA of your company?
Startups most often take on the DNA of the Founder/CEO. This means highly technical CEOs most often create a technology led company. CEOs with strong sales backgrounds create a Sales-led company. CEOs with “think big” intuition and charisma create a Visionary-led company. CEOs with strong product and customer experience backgrounds create Product-led companies. Being technology, sales, visionary, or product led fundamentally impacts the company’s strategy, what gets prioritized and budgeted, how teams are organized into an org structure, AND the type of CPO you need.
- A Visionary-Led CEO/Company can be successful especially when creating entirely new markets – think Apple and Steve Jobs or Brian Chesky and Airbnb. But the problem is when the visionary leaves, these companies often lose their strategic rudder and struggle to develop new organic revenue growth. A CPO who has experience not only building a product strategy but also a culture and operating model that empowers a broader set of employees to be more customer obsessed and innovative could be very impactful.
- A Sales-Led CEO/Company has invested in building a strong sales team and culture but potentially at the cost of investing in a simple and scalable product with little customer support required. Sales-led companies may have a history of customer/Commercial led roadmaps that lead to products with significant technical debt, single use functions, or worse…customizations. These sales-led products can become bloated which adds to maintenance costs and make it increasingly hard for sales teams to package and position effectively. One could argue that the product-market fit is not really achieved if the sales team is selling off the roadmap. In this case, a CPO with experience working closely with Sales on packaging and support of solution selling. They need the ability to ‘Sell’ the benefits of product/tech scale to Sales and other functional leaders and what that journey looks like for their functions.
- A Technology-Led CEO/Company knows software is critical to rapid scaling and success. They may struggle with letting their technology lead the way at the cost of an effective product strategy that connects the business, market, AND technology together. Finding a CPO with a strong background in product strategy and consumer research (figuring out what should be built not could be built) could be a great fit.
- A Product-Led CEO/Company has the desire to optimize for business outcomes and put their product at the center of their organization. A CPO who has experience operating in a product-led company will know how to connect and communicate business-level outcomes and KPIs to product-level outcomes and KPIs. They will be able to quickly build mechanisms that empower product teams to continuously generate quantitative and qualitative product insights to drive business outcomes faster. And, most importantly they will know how to closely collaborate with the sales and marketing teams to redesign the product to pull sales forward in ways that reduce customer acquisition cost and maximize trial-to-customer conversions; and the customer success team to create an effective customer onboarding experience within the product itself.
What stage is your company?
It is so important to know where the company is on the growth curve. Funding rounds provide some guidance, but Series A, which has been a proxy for product-market fit, seems to be happening earlier in the growth cycle as eager investors try to get a jump on opportunities.
Broadly speaking, earlier stages should be focused on product, performance and start understanding unit economics (Gross Margin). Later stages will be focused on product and business optimization in preparation for strategic outcomes. The CPO will need to be able to assess the business growth drivers and determine when to pull the levers to focus on Gross Margin, Automation, Optimization and Profitability.
- Early Stage Growth typically includes an expansion in focus from solely product-market fit to growth and scale. Prioritization now goes beyond innovation, break / fix and commercial. Churn mitigation, COGS considerations, and tech debt will likely start to appear on the roadmap. This means more people, which means more complexity, which means some process. The CPO will need to be able to get into details while establishing the right strategy and process for predictability. They should also readily understand the financial impacts of their decisions and be able to articulate the plan in those terms to the C-Suite and Board.
- Middle Stage Growth typically includes growth from beyond the core product. New segments, verticals and/or geographies will be evaluated. Pricing and packaging is increasingly important to maximize the value of investments. The options will grow beyond development and increasingly include partnerships and acquisitions. Gross Margin / COGS impacts will need to be identified and considered depending on the growth trajectory. The CPO will also now be able to attract leadership talent for their teams to be able to execute. As the complexity of strategic options and discussions increases, the communication skills to put options and decisions into terms friendly for stakeholders must be present to be effective.
- Later Stage Growth frequently comes with increased focus on when the strategic outcomes. The company’s scale, growth rate, and profitability will inform whether the company is acquired, is bought and rolled up, or IPOs. All of these outcomes can be beneficial and having a CPO that understands how the strategy relates to each is critical to success. That strategy will look increasingly at M&A, partnerships, and optimization of Gross Margin and profits. Additional products bring new complexity and may require more work on the organization to effectively manage at scale. It also requires a CPO that understands communication in the context of the strategic outcomes and can effectively tell the story to external stakeholders.
What are your strategic outcomes?
For early and mid-stage growth companies, fund-raising is a common strategic outcome because growth rates are usually higher, multiples are higher and access to capital is key to scale. As companies mature, maintaining growth becomes more difficult. The growth rate of their addressable market can become a barrier. Earlier stage competitors can take away smaller opportunities that used to drive growth. Moving into enterprise introduces longer sales cycles and competition with larger incumbents. If growth is maintained or accelerated, then an IPO becomes an option. If the growth rate slows, then mergers, acquisitions, and/or roll-ups become more likely outcomes.
All of the options can be successful results. Having the right CPO is frequently a critical success factor in achieving them.
In order to generate a quality list of applicable candidates, define and outline your needs and outcomes in the job description and make them a focus of the interview process.
It’s important to not think too far out. Everybody wants to IPO but there is a lot of ground to cover. Pick outcomes that are achievable in the next 18-24 months and hire against those. Your company is unlikely to get to the visionary outcome if they do not hit the most immediate ones on the strategic plan.
The CPO and CEO jobs can overlap in earlier stages so if the roles, expectations and personality types aren’t aligned, things can break down quickly. As the CEO you need to think about the personality traits, not just the experience, of the CPO.
Finally, no candidate will be perfect. It’s important to know the candidate’s strengths and gaps. Make sure to give some thought to how to cover those gaps with complementary roles/functions. Leaving those gaps uncovered will pull focus from their strengths which you just went through prioritizing in the hiring process.