In-house Product Spin-outs
Lessons for Agency Owners
Photo by Sindy Süßengut on Unsplash
This week I recorded an episode of Unicorny, a podcast aimed at marketing folk (my episode will be broadcast in the second week of January). And in the discussion, one question that the host, Dom Hawes asked was “is spinning out IP into a product something that in-house teams can do, or is it just agencies that are interested in this?”
And it got me thinking. My focus is on agencies who choose to build (primarily) a SaaS product, but what about in-house teams who want to be entrepreneurial within the company that employs them? Does that happen? Is it possible? Do they face the same challenges as agency owners looking to do the same thing?
Some examples
Of course, we can all think of big tech companies who have spun out new product ideas.
IBM created Watson initially to be able to answer questions on the TV show, Jeopardy! as a means of demonstrating AI’s natural language capabilities.
Google has launched several products either through innovation or acquisition.
LinkedIn (now part of Microsoft) acquired Lynda.com and created LinkedIn Learning.
But in many ways you would expect this: technology companies looking at other tech opportunities.
But what about companies that aren’t primarily tech companies? Are there any examples of these types of businesses who have gone onto create technology products that they were able to commercialise?
Well, actually there are several of them, too.
John Deere, the company that makes tractors and lawnmowers, span out a SaaS product for farmers called Precision Ag, to allow them to be more efficient. At $2,000/annum you too can enjoy more precise seed placement.
Caterpillar, manufacturer of construction and mining equipment created Caterpillar Connect Solutions, which uses data from technology-equipped assets to deliver solutions and insights to their users.
There are many, many more examples of non-technology businesses acquiring or investing in technology businesses and scaling them.
Financial Services company, Fidelity acquired eMoney Advisor, a wealth platform
Lloyds Bank began working with the fintech company, Thought Machine and then invested £11m in them before helping them scale to unicorn status.
Are internal teams better placed than agencies when it comes to creating products?
I think agency founders have some signifiant advantages over most other backgrounds, but I also think some of the things that might be challenging for internal teams of established (non-agency) companies are going to echo some of the ones that agencies face:
Balancing Core Work with Product Development: If it’s not your main thing, it will never be your main thing. This is as true for an agency as it is for other businesses. It seems that where products have been spun out into their own entities with their own management team they have a better chance of success.
Revenue Model Change: Switching to a recurring revenue model, which often takes longer to grow, for a business that hasn’t operated in that world can take adjustment.
Sales and Marketing Shifts: Selling a SaaS product is not the same as selling agency services. It’s probably not the same as selling tractors either. Both types of business might underestimate the need for specialised SaaS sales and marketing tactics.
But, here’s where agency founders have an edge
And it’s why I love working with agency founders who are on this journey.
Entrepreneurial DNA. You built your own company from nothing. Probably with no help financially either. Don’t underestimate how much of a small club that puts you in (compared to the wider workforce).
Hustle and Grind. Who remembers Royal Bank of Scotland’s ‘Bó’? Me neither. Bó was created as a challenger banking brand to Monzo and Revolut. But it failed to innovate and differentiate itself. It only lasted about six months. Sometimes, even having an entire bank behind you isn’t enough to beat a plucky startup.
Team in a Box. If you are trying to build a software product out of a company where they don’t build software for a living, you are going to have to hire a whole new team. Or outsource it. I know not all agencies are building technology for their clients, but if that is your bread and butter, then you are so far ahead.
You don’t need to ask permission. Often the challenge of getting anything done in an established business is getting it approved. And you can bet your life that if someone has been given the task to create some cool software product within a company that doesn’t normally do this sort of thing that it will get a load of interest and the scrutiny that comes with it. If it’s your agency you just need to fucking get on and do it. Which leads me onto….
The biggest barrier for agency owners: Procrastination
This is probably something that companies creating products from in-house teams have less of an issue with since decisions to embark upon something like a new product are made by committees, whereas agency initiatives probably come down to one or to two people deciding whether to bite the bullet. They decide when, how much and how fast. But those options also provide multiple reasons to do nothing (just yet).
The best time to start is ‘now’. I often see agency owners kicking an initiative down the road because the timing’s not right (hint: it never will be). But it’s something they really want to do. And as time has gone on and they think about it more and research it, they feel even more passionate about its potential. Yet it’s still something that they’re going to get round to in maybe six months’ time: because six months is not like putting it off forever, but it’s also not so close that you have to take decisive action this week.
So, I’m going to end by quoting a passage from Paul Graham’s fantastic essay, ‘How To Do Great Work’ which I think frames the danger of not ‘going for it now’, really well.
Since there are two senses of starting work — per day and per project — there are also two forms of procrastination. Per-project procrastination is far the more dangerous. You put off starting that ambitious project from year to year because the time isn't quite right. When you're procrastinating in units of years, you can get a lot not done.
One reason per-project procrastination is so dangerous is that it usually camouflages itself as work. You're not just sitting around doing nothing; you're working industriously on something else. So per-project procrastination doesn't set off the alarms that per-day procrastination does. You're too busy to notice it.
The way to beat it is to stop occasionally and ask yourself: Am I working on what I most want to work on? When you're young it's ok if the answer is sometimes no, but this gets increasingly dangerous as you get older.
