a16z Podcast - Building Products for Power Users

Episode Date: June 24, 2020

As more digital natives have entered the workplace, they have brought with them the expectation that their software should both be a joy to use and allow them to be power users. That is, users who configure and control it to better serves their needs. And often, these digital natives aren't just aspiring power users, they are also prosumers, who can and will pay for a premium experience. But first generation SaaS products have often struggled to deliver the experience these users crave.For today's founders and builders, how do you get the user experience right when a product has to delight your power users, while being something a less savvy user can pick up and learn?In this episode, a16z general partner David Ulevitch and Superhuman founder Rahul Vohra discuss how to build products that can turn any user into a power user. The conversation touches on themes from David's recent talk on products that adopt developer tools, like the command palette and keyboard shortcuts, to improve usability, and Rahul's talk on how to apply game design principles to product design. They cover how to onboard users to drive virality, when to expand to a second product, and how to use pricing to position a premium product.

The content here is for informational purposes only, should not be taken as legal business tax or investment advice or be used to evaluate any investment or security and is not directed at any investors or potential investors in any A16Z fund. For more details, please see A16Z.com slash disclosures. Hi, and welcome to the A16Z podcast. I'm DOS with an episode on how to build business software for power users. As more digital natives have entered the workplace, they've brought with them the expectation that their software should allow them to configure and control it to better serve their needs. And often, these power users are also prosumers. That is, users who can and will pay for a premium experience. But for founders and builders, how do you get the user experience

right when a product has to delight these power users while being something a less savvy user can pick up and learn? In this episode, A16Z general partner David Ullovich and superhuman founder Rahul Vora, discuss how to build products that can turn any user into a power user. They cover how a command palette and keyboard shortcuts can improve UI, how to onboard users to drive virality, when to expand to a second product, and how to use pricing to position a premium product. They start, though, with where first generation SaaS has often struggled to deliver the right experience. The first voice you'll hear is David's, followed by Rahul's. As somebody who thinks of himself as a power user, I always start like SaaS tools just really

really never allowed me to climb up that learning curve to being a power user. There was a whole sort of first generation of SaaS tools that really would hallmark their benefits of it's easy to use. It's really simple. I always think back to Microsoft Excel versus Google Sheet. Excel is easy to use, but it allows you to be a power user if you want to be. I would argue that actually companies like Salesforce and Atlassian-Wigura were catering to power users. It's just that the complexity and the configurability was so strong that the company's almost lost sight of the fact that it should be enjoyable to use. I think what's changed recently is the ability to then also package it in a consumerish fashion. The challenge with tools like Salesforce and Jira, as well as really any other piece of enterprise software,

or more generally, any piece of power user software is that they often end up looking in elegance and becoming visually cluttered. You're totally right that Salesforce and Jira are very configurable, but in fact, most companies that deploy Salesforce end up hiring a third party or hiring a specialized person to other company just to administer it because it's so configurable, and I don't think anybody that ever uses Salesforce would call it a joy to use.

That lends itself to a conversation, around design. And for those that don't know, superhuman, it's often driven through two mechanisms. One is called a command palette, which is sort of like a command line that pops up wherever you are, and then through lots of keyboard shortcuts. And so what gave you the confidence to build a pro-sumer application that really encouraged or forced people through their onboard and to become power users? How did you know that was going to work? And how do you think about usability in light of that? Those who know me well know that I started a PhD in computer science, I spent a lot of time thinking about human computer interaction and this idea of ease of use and I came to the conclusion

that as a whole industry, we had played way too hard into learnability and into ease of use and that we were really doing our customers of this service. We are assuming they're not as intelligent as they actually are. And so we aggressively push in the other direction. What we worry about is, can it do all the things that you want it to do? When you're a power user, are you really, really fast? And we'll solve the problem of you becoming a power user through other techniques. I had this belief, having grown up as a developer, that keyboard shortcuts were the way to go. But I knew that people generally don't use them. Less than 2% of the entire Gmail user base have even used a keyboard shortcut once. So how do we solve the problem of teaching users?

And funnily enough, I realized the answer had been staring me in the face for my entire career as a programmer. It's this idea of a command palette. Every text editor for programmers from VI through EMAX through VIM to things like TextMAT and Sublime more recently and every big IDE has a command palette. We're able to add arbitrary amounts of functionality without ever making it more cluttered because we found an entirely new way to interact and to operate the software. You simply hit one master keyboard shortcut, and superhuman it happens to be Command K, and then you just type in the thing you're looking for. At that point, you can hit Enter and it will do it, but not only that, it will also teach you the keyboard shortcut for next time.

So you start up this mastery curve. Well, I had actually an interesting reminder of exactly what you're talking about during this quarantine. I decided that since I was stuck at home, I was going to go buy an Xbox. And when I have been a gamer at other parts of my life, it's always been on a PC where I've used a keyboard and a mouse. And so for the first time, I had this controller. And all I could think about was like, man, this is terrible compared to gaming on a PC where you have so many buttons at your fingertips. and you can drive shortcuts and remap your keys the way you want. And I actually found that the Xbox controller was nowhere near as fun

as playing a game using a keyboard and a mouse. So in game design, we have this notion of a lean back or a lean forward experience. And TV is a lean back experience. Now, with console gaming, it really does depend on the game. You're probably not going to play Call of Duty leaning back. But you might play Animal Crossing that way. And so as a product designer, I think that there's just a set of questions you have to answer. Are you building a lean back versus a lean forward experience?

How do you want people to feel? What is the primary thing you're optimizing for? Is it the feeling of power? Well, then you're going to want to let customers remap their keys and run things their own way. You take a very consumer-like view to how you present essentially an enterprise software product. So how do you think about the lines between consumer and enterprise software. And does it relate to that learning curve of letting something be powerful, but also be a joy to use? In practice, we've ended up with a very interesting hybrid of both enterprise

and consumer. Around 60% of our subscriptions are enterprise. They are expensed or paid for directly by companies. But the other 40% is what you might call consumer. They are paid for directly by end users, albeit for their work email. All of our customers come to us as prosumers, but not all of them come to us as power users. Historically, many power users simply have not been able to pay. That's why they became power users in the first place, because often they were writing their own software. And many prosumers don't necessarily have the time to become power users, but if you can get them there, they then represent a very powerful market. And we see a big part of our responsibility when they buy our software to help them become the power user that

they aspire to be. So we put a lot of effort into helping folks level up. And believe it or not, we get many customers who come to us who have never used a keyboard shortcut in their life. And this is one of the main reasons why we onboard users. For each new user, we do a 30-minute one-to-one video call, we teach faster workflows, powerful shortcuts, and using innovations like the command palette, we teach you how to teach yourself so you can quickly become a power user. Do you think that the way that you're doing your onboarding would be another reason why you couldn't have gone down for the mass adoption consumer route? The constraints around whether or not you can on board fundamentally come down to unit economics, you can do it so long as your churn and

retention are good enough. There is an argument to be made that if something has more of a consumer price point, it becomes economically untenable. But in practice, it really does depend on your churn. Let's say you had a $10 per month price point. If you could show me that your churn was zero or perhaps even negative, then by all means I would say, yes, you should onboard. Zooming out all the way. The question is, are you making net promotion? or are you making net detractors? And I don't like to leave this to chance. Personally, I would rather invest every dollar we have

in helping every single customer become a net promoter because that is the flywheel behind any company that has reached massive scale. And this was a lesson that I learned relatively early in my career. So when I sold reportive to LinkedIn, I had the very fortunate privilege of working for Elliot Schmukler, who was our head of growth, and took the company from 25 million members to 250 million members.

And in our first one-on-one, I sat down and I said, hey, Elliot, please teach me everything that you know about virality. And he said, well, lesson number one is that there isn't such a thing as true virality. No feature or product has ever really had a viral loop of greater than one for any meaningful period of time. Even at LinkedIn, the address book imports has had a viral factor of 0.4. And even at Facebook, the most viral company of all time, they were not able to sustain 0.7 for more than about seven months. At the end of the day, it always comes down to word

of mouth organic spread. It comes down to brand. It comes down to building a products that people love. I wrote a blog post last year about this idea of product user fit. You've talked about how do you satisfy that high expectation customer. One of the things I've noticed over the last 18 months or so, as I spent some time with seed stage companies that are building a product that they want to be widely available, is that when they look at their numbers, the averages are terrible. So if they look at retention, it looks terrible. If they look at number of minutes per day in the application, it's terrible. But then if they focus on the users who are using the application every single day,

those users are using it constantly, they're spending hours a day in it. And so they've started to try to figure out, how do you focus on what's making those users really happy? I see this all the time in founders, they'll come to me lamenting, hey, my month-to-month churn rate is north of 7%. Surely we are screwed. And I'm like, wait, hold it, hold on. Let's segment these users out. First of all, let's discard all users who didn't activate

because we need to separate activation problems from ongoing value proposition problems. And then next, let's segment out users who have different personas, different job titles, those who are paying personally, versus those who are expensing it. Because if you've built something even half interesting, there will be a set of users who find it compelling. And the whole purpose of the product market fit engine

is to identify that segment and then to systematically expand it over time. When users love a product, you're constantly getting suggestions and requests for features or changes or what would make it better. How do you balance those priorities for new, users while you're still trying to serve that core base of power users. In my experience, startups tend towards one of two extremes. Some teams, especially those which are driven by vision,

tend to constantly double down on what users love. Whereas some teams, especially those which are driven by data, tend to systematically address user issues. And in practice, you need to keep vision and data in very careful balance. Now, doubling down on vision is truly an art. This is where we get to exercise the so-called product instinct. And this is all about talking to your users and figuring out the most impactful ways to give people more of the feelings that they crave.

Now, addressing user issues is much more straightforward. And for that, we use a very simple cost-impact analysis. And we then pick the projects which are both low-cost as well as high-impact. but there must be things that are hard and take a long time. How do you deal with things that are high-cost, high-impact? Those things tend to be important as well, right? So the answer is yes. I have a metaphor that I wrote down the other day that I'm looking for.

Did you use a command palette to find it? I used commande to open a document, so actually, yes. Okay. So what do we do about the big things that are high impact? But we get asked this question a lot by customers who write in and they say, hey, why haven't you built my pet feature that, incidentally, would take us a year or two to build? And so I think of our team capacity as a glass jar. Large projects are big rocks.

Medium and small projects are pebbles of various sizes. The most efficient way to fill the jar is a combination of big rocks and small pebbles. First add in the big rocks, and then the pebbles can fit in and around them to fill the jar. If you were to add the pebbles first, fewer big rocks would fit in. But if you added big rocks only, there would be unused space. So it's sort of classic Silicon Valley tradition at when a new engineer joins a team, they should ship on their first day or two. And that's a really good opportunity to work on a small pebble to fix a bug to get something out into production.

Every quarter we also identify one massive rock. and a few medium-sized stones and a large number of small pebbles. And we know roughly what order we're going to do them, but what the small pebbles give us the opportunity to do is to be flexible with the plan in the face of unknown unknowns. Let's say we run into an API issue, or there's a scaling problem that throws a wrench in our otherwise beautifully designed plan. Well, then we can move the small pebbles.

around and still ship with high cadence despite the changes. So how do you know when your product is mature and you can sustain the sort of innovation on the core product while it's still expanding into a new product or a new surface area? When do you make that decision? How do you think about those things? It's not, is the product mature? It's, is the company ready? I think it's a fairly common mistake for founders to see that a product is working

well, and then they move on to starting the next one. But they often forget just how hard it was to get to product market fit in the first place. Now imagine searching for products market fit again, whilst maintaining products market fit on the first product, presumably in the face of competition, and on top of that, balancing resources and attention between the two. For us, it was absolutely the right strategy at the start to sell to prosumers, the right thin edge of a wedge to Paraparys C. Dixon. And as for whether you lower the bar to appeal to customers, the question I would ask is this, do you have to? Because it comes with significant cost, attention, time, money, brand. Another way of asking the same question as this, can you be a billion dollar company

without lowering the bar? Let's assume that at the point where a billion dollar company, our evaluation is 10 times our run rate, and so our ARR is $100 million. That would then imply we have 300,000 subscribers at $30 a month. So we ask ourselves, do we think we can reach hundreds of thousands of prosumers? And our answer is, absolutely, yes, we can. So if something is working, I now believe that it is almost always better to double down and do more of that thing than to spin up something new. when every single team is fully staffed, when you have an excess of resources and personnel,

when, to quote Mark Andreessen, with his famous description of products market fit, your checking accounts is overflowing with money because you're just making so much cash. That's the right time to take on the focus risk and to start an adjacent product. When I think sort of the iconic products of our time, most of all those companies then try to it created adjacent products. And in fact, the two things exactly that you don't want to have happen to happen. First is the second products generally did not take off the way they had hoped. And oftentimes, the first product sort of stagnated.

There's products that all of us have used where now maybe five plus years later, they're finally going back to the core product and just incrementally making it better. What they're doing is expanding the surface area of that core product, as opposed to trying to build these adjacent products that really are not based on the same core use cases an audience of that initial product? I think when you can do this also depends on the structure of the business. Do you have a moat? Are there network effects?

Now, for most SaaS companies, there are network effects, but they're relatively weak by comparison to a Facebook or more classically an eBay or a Skype. And so inherently, SaaS companies just have to spend more time on building features and staying competitive. Arguably, if you're building, let's say, a classic social network or a company with that kind of network effect,

once you're up and operating and at scale, you do have a little bit more latitude to go and try something else because there's inherently more defense built into the products in the ecosystem that you have created. And for founders who are interested and sort of thinking about this a little bit more. Heaton Shah was a really good article

when the acquisition of Trello was announced. But he posed the question, well, why did they sell even at half a billion? Why didn't they keep on growing? And he posited that it was because the thing that they had popularized, the drag-and-drop canband board, had simply become a feature of things like GitHub and Asana and Jira. And so it was no longer competitive.

and that what they failed to do was to constantly build and focus on their core products. Now that you said you're committed to doubling down on the core product and adding features that make it better and better, that I think opens up the discussion of, what about packaging? What about pricing? Is pricing something that should be optimized? If you're just reinvesting in your core product and adding features, does everybody get those features?

It is impossible to truly separate pricing from packaging from, from positioning. We'd go to a cocktail party back when we used to have those, and I would look and I'd listen to people talking. And by the way, this is a great way to learn how to market your product. They would invariably say two things. Number one, superhuman is super crazy fast. And number two, superhuman is $30 a month.

The second thing that they would say was the price of the product. So in our case, the price is literally part of both package and positioning. And when founders ask me, how do I figure out what my pricing should be? My answer is always, you should first figure out your positioning. So we started with this article by Ariel Jackson, who, for folks who don't know her, she actually happened to be the first product marketing manager on Gmail. And she wrote this article called positioning your startup is vital. Here's how to nail it.

She advises using a formula, and it's a little bit of a mad-libs game. for a target customer who has a need or an opportunity, your product is in a product category that provides some key benefits, and unlike competitors, your product has these differentiators. Now, folks will notice that was a very tight definition, and you can then use that to figure out your pricing. Now, in the book Monetizing Innovation, the author Mudavon advocates for developing pricing alongside product in a way that supports the positioning that you've just come up with.

Now, he covers a lot of way to do this, and we used one of the easiest methods, which is the Van Wessendorp Price Sensitivity Meter. In late 2015, we asked 100 of our earliest users these questions. number one, at what price would you consider superhuman to be so expensive that you just wouldn't buy it? Number two, at what price would you consider superhuman to be priced so low that you would feel the quality wouldn't be very good and that would be concerning? Number three, at what price would you consider superhuman to be starting to get expensive so that it is not out of the question, but you would have to give some thoughts of buying it and you still would. And number four,

at what price would you consider superhuman to be a bargain, a great buy for the money? Now, most Silicon Valley companies orient around question number four, the bargain question. And that's because most tend to be selling into a new market or a new buyer in an existing market. But for us, it made sense to adopt that premium position. And the price point that most directly supports the premium position comes out of the third question. When does it feel expensive, but you'd still buy it anyway? And for us, the median answer to that third question was $30 a month. And that's how we picked our price. And once you've picked the price, it's always a good idea to do a quick gut check on market

size. Can you grow into a billion dollar valuation? So this has been an awesome discussion. We started at this really exciting place and really understanding the difference between power users and prosumers and how do we turn prosumers into power users and then how to make sure users are engaged in our net promoters and ultimately how you think about pricing and packaging. So thank you, Rahul. It's excellent that you spend your time talking about these things for other founders out there. Well, thank you so much for having me.