Be Kaler Pilgrim - Where Does Product Go Wrong in PE-Backed Firms?

But I think this is a conversation about intent more than anything else. And I think a really interesting point to make here is if the CPO is buried too far down the organization, it can suggest that business sees product as a function rather than a strategic leader. And I think that's where it's challenging. So I think, I don't think reporting lines are the whole story, but it can absolutely point to how seriously product is taken in that organization. Hello, and welcome to One Night in Product, the show where I chat to some of the brightest minds in and around products across the globe to help you see product management in a whole new light. If that sounds up your street, don't forget to dive into the back catalogue on your favorite podcast app or on YouTube, and of course, follow, share or drop me a comment or review. It all helps keep the lights on. On this episode, I'm speaking to Bea Kayla Pilgrim. Bea's a recruiter, but we won't hold that against her, and the founder of Futureheads Recruitment, who says that everyone thinks that she's a hard-nosed businesswoman, but she's a teddy bear, really, and cares just as much about people as profit. That'll never catch on. She's since started a new venture, Smithfield Search, helping founders, CEOs, and investors hire transformational tech and product leaders, and has recently worked on and published a deep dive CPO report, helping us understand what's going on out there in the real world. She's here tonight to speak about some of the findings, and hopefully leave us all with some food for thought along the way. Bea, thanks for coming, and welcome to the show. Thanks for having me. I don't hold it against me for being a recruitment consultant. We have a brand issue in our industry, don't we? But hopefully, you'll see that I also share a value in the industry. But talk to me about that, kind of almost branding problem then, because, you know, I mean, obviously, it's all fair and for a little joke when we're doing the intro and stuff, but as you say, there is some kind of, sometimes a bit of a, maybe somewhat of a bad feeling towards the recruitment industry. What do you think drives that? Like, is it kind of fair enough to some extent or with some recruiters, or is it just a kind of misrepresentation of recruitment and kind of the value and the work that they do? Well, to be honest, I think that the bar to entry to recruitment traditionally historically has been very low. So you don't have to have a qualification necessarily. Lots of people try it. You know, if you talk to recruiters, they often say I fell into recruitment. And often it can be seen as a really transactional role. I think that, you know, one of the reasons I set up Futureheads 17 years ago, actually, was really because I wanted to raise the bar of recruitment standards and show the industry that it wasn't just about the pursuit of finance. So we're a women-founded business. I wanted to be a great place to work, which we achieved. And we're a B corporation as well. So we're not all bad. You know, essentially, I've helped, I've spent the last 30 years helping businesses grow technology and creative teams. And I launched this report to look at what product leadership really looks like in investor-backed businesses. I think it's appropriate for other businesses as well, but that was the focus of it. And it was basically a way to pull together loads of conversations I've been having. And I wanted it to be something really useful, practical, and perhaps extend into something a little confronting. But that's interesting because, I mean, we'll talk about the report in a minute, but as you say, you did set up Futureheads Recruitment. You were there for a long time. I think you've now started a new venture, Smithfield Search. So, you know, on the one hand, yeah, another recruitment firm. But like, what was it then that made you start up a new thing? Before we talk about the report that you then kind of sponsored and created as part of that. But I thought that would be more valuable to the market now. And to be honest with you, like you said, I want to make friends in the investment-backed businesses and investors. And so I wanted to get something out which could share some of those language intentions with those businesses. Awesome. Good to see that the people are back in fashion, you know, I'm a big fan of people. But as you said, you then went out and spoke to a bunch of those people to produce this CPO report, which we're going to talk about now, some of the themes from within that. But before we dig into the themes, I'd be really curious. I mean, I can imagine, for example, that you've kind of produced this report for probably two reasons. One of which, because it's interesting and you kind of want to get a sense of what's going on out there. But also at the same time, I'm assuming it could also be considered pretty good lead gen for your search agency as well, because people kind of read it, know that you understand their business and so forth. So I guess, you know, unless you can give me a third reason, that kind of makes sense to me. But like, you've gone out and spoken to a bunch of people. I think you spoke to about 18 people, is that right? Yeah, 18 CPOs. Now, 18 people is a pretty small sample set in a way, but obviously, I'm sure very valuable and in-depth conversations. Were you worried a little bit around sort of selection bias, like, you know, maybe finding just a certain type of CPO or maybe that they wouldn't be representative across industries? Like how were you, or how did you try to kind of make sure that the people that you spoke to could be considered broadly representative rather than maybe a narrow slice? Yeah, I think that's, you know, really, really clear to make that point that this isn't, you know, this is about lived experiences. And I wanted to add real colour. The intention was to surface patterns and language and tensions. I actually went out to the market via some people that had worked in private equity that recommended people that would be suitable. So everybody that was interviewed had experience of working in private equity. Actually, most people exclusively. But I was really keen to counter that also with people that could compare their experience maybe to VC or other worlds like founder-led businesses. And I wanted, I wanted it to be real. So I could have done a more statistical study. You're absolutely right. And gone much, much broader. But I wasn't trying to produce something. It's sort of a perfect academic study. I was trying to create conversations. It's a directional report. So it's very much about deep conversations. And the reason why nobody's named is because then they could speak much more candidly to me. So far, I think it has, you know, it's had an effect on the marketplace and people have, I've had lots of people say that you really nailed it or actually I haven't been able to put that into words. So that's been really helpful. So yeah, I thought that would be more, I thought that would be more valuable to the market now. And to be honest with you, like you said, I want to make friends in the investment-backed businesses and investors. And so I wanted to get something out which could share some of those language intentions with those businesses. That makes a lot of sense. Obviously, you know, having sort of in-detail kind of depth conversations with people, trying to work out, you know, were there any kind of commonalities and stuff. And like you say, there's so many different ways to do research that, you know, there's no one right way. And like just, again, starting the conversation. Were there any, I know we're going to go through the takeaways in a minute, but were there any kind of big areas of contention or did you feel that most people gave a kind of fairly consistent and similar story? I don't think there was similar, but I think it was, they were really interesting people. Every CPO I spoke to was very interesting. You know, AI was a big thing, but there were definitely some rich themes. And I know we're going to talk about those a bit later. But I think your question about bias is a really, is a really fair one. You know, in the end, I, I looked at people that came recommended that had done the job for a good amount of time. And I wanted to illuminate the issues, right? So if they were interesting and they were happy to share issues, then, then that was going to be a really interesting report and create some conversation amongst the community that I'm sharing it in. Absolutely. Well, let's talk about, you just mentioned some of the takeaways and I know you very helpfully broke them down at the beginning of the report. So I could go and catch up with that. But I think that the, the key takeaways are actually, you know, pretty interesting kind of framing for some of the questions that we should ask around them. So the first one that you put in the report, first key takeaway was to quote, product is a commercial function, but PE houses still classify it as IT and delivery. And across these conversations, that misread came up as the strongest predictor of mandate failure, which, which sounds terrifying. But you also said that that was maybe something that you saw across all of the CPOs that you spoke to, this idea that, well, in many of these organizations, a CPO might even report not to the CEO, but maybe to a CMO or CTO, like kind of downstream. They're not necessarily at the right table or always at the right table to start to have the conversations at the right time. And it kind of ended The points about when you should even get a CPO, because in some cases, maybe it's not even 100% clear that they need one, but maybe they think they should have one just because the competitor has one, or something like that. I don't know, like maybe that's oversimplified, but you kind of talked about a few different triggers that might be a good time to consider getting a CPO or some sort of top-level product leader. I wonder if you could talk a little bit about those triggers and the kind of the dangers of not actually having a purpose behind it. Yeah. I mean, product is pretty new in the world of tech. Still quite a new role. And I think, you know, the CPO role, the product role is quite trendy, and businesses don't always come to you with exact, an exact idea of what they need. They have an idea of what they need quite often. They meet three people, they like one, and they go, can you find more people like that for us? Because actually, we realised that we need some more of that. So often you're working with the business throughout that process to help them refine what they're really looking for as they go along. Quite often it might be, you know, their first product, really serious product type, particularly if they've been taken over by an investment firm. So what I would say is the role has to be shaped around the actual challenge. Not, you know, nobody's gonna, I don't think people are gonna make a hire because it's trendy, but I do think you've really got to ask the right questions and you've got to go through a process to help them really understand where a product leader can help them. So yeah, so you're talking to a port about these three triggers, like transformation triggers, like it's time to transform post-product market fit, pre-scale, sort of kind of got to that point where they've they've started to sort of show some traction, but now they've got to scale it. And also then also when stagnation is product-routed, like where they've got a product, but it's kind of stale and they're struggling to make progress, I guess. But then that kind of the fourth one that you talk about, which is when there's no real problem to solve at all. And that's the point where I think you say, like a CPO without a genuine product problem to solve is an expensive overhead and a source of organisational friction. How often does that happen in your experience? Well, I've never seen it happen, and I've never met a product person who has taken a job to, and actually that's probably one of the biggest reasons they leave an opportunity, because they're like, you know what, we got the business to a place, got the product to a place where it was all the levers were heading in the right direction. I was doing all the right stuff and it was time for me to move on. Never met a product leader who kind of wants to babysit, if you like. Yeah, I was gonna say, but sometimes they're hired to do that, though. They're hired almost, it feels like sometimes they're hired to babysit because no one quite knows, because, you know, product itself, as you say, relatively new, certainly in certain sectors, maybe they don't have a strong understanding of what a product leader is even supposed to come in and do. I guess you can educate them on that, but yeah, it's more to exactly to your point as well, this idea that, well, maybe that's when they then, you know, just the product leader churns, right? Because they realise that there's not actually anything for them to do. Yeah. You know, we're at the sharp end of tech, so most businesses that we, I would say all businesses that we are working with, you know, they have an idea of where commercially they want to be and technically where they want to be. So we don't have many clients coming to us going, we think we need a product person. It's like they've done some research and actually this is the problem we're trying to solve. We might help them on that journey, but usually they've got a fairly strong idea of that already. And what are some of the kind of top, let's say, traits of a PE firm ready CPO? Like we talk about, obviously, a lot of the, you know, these books behind me and all the stuff we're talking about, which kind of seems to come from Silicon Valley and the kind of the VC world of product management, big tech world of product management. And there's a lot of debate in, in and around product circles around, you know, the, what product leaders need to do to be successful in maybe a more traditional industry or where product is maybe less of a mature function. Maybe if they're working in, in again, as I say, sort of a, sort of a product service company or, or some other PE sort of backed situation where maybe there's a five-year exit plan and there's some very specific sort of value creation plan stuff going on that they need to hit. And there's maybe not so much appetite to start trying to do this kind of, you know, go big or go home sort of 100X the company. I mean, I'm sure they'll take the 100X, but that's not, yeah, they, they don't want the bunch of companies to fail, right? They, they want all of the companies to, to give a good return and to, to give kind of stable growth. So when you're talking about then these kind of PE ready CPOs, like what, what do you see being good characteristics for those CPOs? One of my favourite things that people who have worked in PE say is, one of the reasons I like working in PE is because it's very binary. Everybody around the value creation table has the same goal. So there's absolute clarity. I think they want clarity, pace and commercial impact, right? No PE business wants to own a business passively. They're creating value, which means they're, they're helping portfolio companies make the right decisions, build the right capability and unlock better performance over time. So I think, you know, that's the thing to be really, really clear about, you know, it's not somebody with a lifestyle business or somebody trying to create a good culture. The PE firm are there for a really clear reason to create value. Fair enough. But you talk about three, this is another key finding, three failure modes that can kind of kill, as, as you put it in the report, they can kill exits and the, you know, kind of basically make it more difficult to almost create that value or to, you know, to basically be successful in, in that role. And you also say that none of these reliably surface in standard financial diligence, which is done as, as part of the deal process. And the three that you call out are the feature factory, the land of lost toys, and the tech debt hangover. You say that they're all preventable, but again, that financial diligence doesn't really catch them. Now that sounds like a problem, right? Because when organisations or when investors are doing due diligence on organisations, you'd like to think that they want to tease these out in advance so that they could actually then potentially either pass on the company if there's some sort of systemic problems or make sure that their kind of, their expectations are correct, right? So how do you see these failure modes kind of, you know, failing? Well, I must say that, remember that the CPO report is, you know, driven by CPOs who have worked in private equity businesses. So those three failure modes, let's just go through what they are. So the feature factory is where product is busy shipping. They're not really creating commercial value. So they're kind of doing a process. They're going through the product lifecycle, but they're not really seeing the upside. The land of lost toys where, you know, the product has too many half-finished ideas, abandoned initiatives, priorities. And then the tech debt hangover where the business is really slowed by accumulated technical debt and a lack of team foundations. All of which are very relevant for businesses right now. And I thought actually lots of people have said to me, that's been their favourite bit of the report because it's really resonated with them. And so I think it's, it's important to say, like, not all PE businesses don't know this, you know, are doing this, but there has been definitely some shared experiences where people haven't been on, on top of this. And I think there've been lots of different reasons, you know, the tech hangover one is the easiest one to explain because, you know, we're in such a, you know, kind of fast moving technology environment at the moment. The land of lost toys is often where a client or a salesperson has come in and they want a button or a feature added and they get added, but they're not always prioritised and finished and tracked properly. And then the feature factory is where you're doing lots and lots of work, but not tracking it properly. And you know that I think now we're in a position where we're getting to do this really much quicker than we have been able to do it before. So I think there is a bit of gambling and you know, trying stuff, but having, making sure that you try stuff, track it, move away from it if it's not working or, you know, back it properly if it is. And I think, you know, we're seeing lots more of that in the product role in general. So you've got to try stuff, but you also have to keep a handle on what you're trying and what's working and, you know, the data, the data sort of tells you quite quickly whether or not it's a successful initiative or not. But do you think though, about that point about due diligence, and again, you mentioned, of course, that a lot of that due diligence is, is The team are there to build the stuff, which then the sales team and, of course, the CSM team can sell or renew. And to some extent, some product teams don't even really have a strong understanding of what happens after their product gets out the door. Like, that's just a sales problem. That's just a CS problem. I agree with what you're saying around this idea of, well, everyone should have a stake in, you know, revenue effectively, because, of course, they should. Sales teams naturally have that because, of course, they're getting very specifically paid and bonused and quoted off of that. And obviously, in many organisations, maybe you'll have CS teams that have that kind of arrangement as well. Whereas, obviously, product teams traditionally, you know, they consider revenue a lagging indicator. There's other metrics that they'll try and track beforehand. Maybe they do, maybe they don't connect the two together. I guess the ultimate question, though, is, I mean, you kind of half answered it, but this idea of, well, okay, product needs to be interested. Sales need to be interested. CS. But who should own NRR? Like, you said that someone needs to be on it. And, yeah, if there is no danger that, like, if three different teams all have a stake in it, that they can kind of just sort of hand the hot potato backwards and forwards. How do you see, like, NRR ownership? Well, that's a really tough question. I mean, I still maintain I don't think product can own it alone. But one of the CPOs I spoke to, who was really passionate about this, he said the first thing he does when he takes the CPO role is, before he gets into the product roadmap, he tries to do some training and make sure that everybody has a standard around him of that financial fluency. What does a successful business look like? What does our business look like when it's in success? And so I think they should be a really key driver of and perhaps own some responsibility around it. But that's where the alignment is really, really important. Like, products can't do it on its own if sales is not aligned with that and if people around them are not financially fluent and don't understand, like, you can only get the whole business to travel in the direction if they all know what they're travelling towards. So, you know, I don't know if it can be owned by one person in my experience from the people that I've spoken to. But definitely lots of people should be interested in it. But yeah. Did you have a view on that? Well, from my perspective, it's like that kind of the one neck to ring, right? Like someone has to own it. I would say, depending, so for example, if you're in a product, like a product-led growth, kind of the product's kind of selling itself almost, like I think it makes a lot of sense for product to very specifically own net revenue retention and, you know, upsells and such because they're doing all effectively themselves through the product. If there is a sales team and a CS team that are the primary touch points for obviously getting the working in the first place, as well as obviously then kind of keeping the big accounts happy and making sure they renew and upsell, it kind of feels like they're like, if you make product responsible for NRR in that situation, if you have a bad sales team or a bad CS team, then that could mean that the product team could be great and doing loads of good work, but that the other teams aren't, you know, seeing it through. On the other hand, you sit there and say, well, you know, we're all in the same boat, so therefore we should all care about that together. But, you know, fundamentally, different people are doing different parts of the work. I definitely think a thousand percent that even in that latter situation, that product teams and sales teams and product teams and CS teams should be working incredibly closely together. And one of the failure modes I see when I walk into organizations often is that they just ain't talking. The product team aren't talking to the sales team. The product team aren't talking to the CS team. And or they are, but they're only talking to them when there's some emergency or last minute thing or a big feature request. They're not having or they don't have this kind of ongoing conversation and touch points to make sure that, you know, ultimately if there are things coming up, if there are things that need to be done, that they, you know, have a chance of doing them or they can prioritize them. So, yeah, I still think that in a very sales-driven, like, whoever's driving the sales, whoever's driving the renewals, like, whoever's actually specifically responsible for that should probably be on the hook for NRR, but they need to be working incredibly closely with the teams that enable them, for example, like the product team. But if it's a product-led growth. Pardon me speaking. I was going to say that personally speaking, if I was going to be made responsible for the net retained revenue of a business, I would also want to be responsible for reporting lines and to make sure we have the right people to deliver that. Yeah, so get sales to report to product. Let's do it. That'll go down well. Yeah. Couldn't possibly go wrong. But no, I often say that product teams and sales teams are kind of like the furthest apart in kind of mindset, in, you know, kind of this idea of, like, product teams are very often sort of sitting there in a little bubble, you know, desperately trying to focus on certain metrics that are, you know, easy for them to track to, these kind of leading metrics that they like to look at. And, you know, they kind of just throw it over the wall. But then, of course, then whenever anything comes in, like last minute or there's a big deal or something like that, the sales team are, they don't care about the roadmap or the vision or the strategy or anything. They just want this thing done to get the deal across the line. And neither of those are wrong, in a sense. And I think, you know, they're both kind of doing their jobs, right? And I think that from my perspective, if you, again, I often say that if you were to bonus and incentivise a product person in the same way that you did a salesperson, then they would behave exactly the same as a salesperson. So, like, let's not, let's not pretend that these people aren't doing their jobs. But in the best organisations I've worked with, there's a really strong relationship between the sales, the customer success, the kind of the account management and the product team versus everything just being kind of a last-minute escalation. Because, you know, if you're just talking to each other when you're in a panic, then, you know, you're going to get probably suboptimal results. Yeah. I think I really agree with that. You know, it's got to be, it can't be an afterthought. You've got to know from the outset what you're both working towards. And that communication and alignment is really important. And communication, I think, you know, that is one of the really negative things that has happened post-COVID. People are just around less. So you've really got to make time to make sure that you're having those conversations. Because we all know that when we get on meetings with people, sometimes we are going, you know, we've got to nail a few things in a meeting. And actually, sometimes you just have to make sure that you're spending time together so that acute stuff that's not necessarily on your agenda gets discussed and, you know, that you're both pointing in the right direction. No, absolutely. Communication is key, right? But yeah, I mean, there's this kind of idea of, like, you kind of want to be communicating just enough. Like, you know, don't communicate too little because then people know one knows what's going on. Don't communicate too much because otherwise you're spending too much time communicating to actually do your job. So you're trying to find that balance in point. But talking of, well, kind of talking about communication, your final takeaway is that you have a CPO readiness index that you can use to score the question, not just to read the analysis. So you've got an index that you've created either off the back of the report or alongside the report that looks at commercial mandate, operational integrity, personal capability, GTM coherence, timing fit, and AI durability. So lots of impressive sounding words. But what is the Smithfield CPO readiness index? And who should be using it? And what should they expect to do with the results? I mean, that's a quick and dirty outline. Definitely created from some of the data that we have covered in the report. And that is by and large a sort of launch point. And it's for investors, CEOs, and product leaders who want a sharper way to think about the role of product in value creation. I expect to use it as a conversation starter. I don't think that is enough to go away and find that person or to, you know, it's an additional thing when you're looking for a hiring lens or a way to test whether a business is set up properly. I had a few people say it's a real launch point for them to look and assess at where their skills are at or where their businesses are and find ways to navigate what needs to be fixed. So it's not lengthy. It is just a kind of launch point, a starting point, if you like. Does it mean you're focusing on assessing, for example, the qualities of a candidate to be a CPO or does it also touch on the kind of the capabilities and the maturity of the organization, all of the above, other stuff? Like what are you trying to assess effectively? Like what comes