When to hire a CPO (Chief Product Officer) for your startup?

This article is the first of a four article series focused on senior product leadership topics most relevant to growth stage startup founders/CEOs. Please email me (eric.steege@gmail.com) if you would like me to send you links to future articles in the series. Also check out the second article in the series How to find a CPO for your startup?

You are a founder of a growth stage startup who recently raised a Series A or B round with significant revenue growth milestones. You have an established product and a growing set of customers. As your startup grows, you know that your role as CEO will continually evolve. Now may be the critical time to hire your first VP of Product or Chief Product Officer (CPO). But how do you know if it is the right time?

Below are common challenges growth stage startups face that hiring a VP of Product or CPO could help overcome:

·A CEO who has been setting strategy and acting in the product manager role up to this point but is getting too busy. You are good a great product manager and have done a great job carrying the baton this far but as a CEO, it is important to free up time to focus on other aspects of the business — e.g. making important company decisions, recruiting and developing a top-notch c-suite talent, managing your board, pitching to investors etc. A senior product leader can provide expertise, focus, and peace of mind to advance your product and product function forward in the next phase of your company. As a CEO, if you hold on to the product manager role, your product road map, expansion plan, and growth could be negatively impacted.

· Successfully reaching product market fit and now moving from a single product to a portfolio of products. This could include broadening your product portfolio by acquiring or merging with another company. Either way this transition from one product to several is tricky and requires more senior product leader and experience.

· Expansion by selling your products in new channels and geographies. This transition is difficult due to the inherit complexity expending from one geo to more than one geo brings — a unique product strategy, different sales motions, and new tax implications for each geo are likely. If your company is ready for expansion, this means it is also ready for a Chief Product Officer.

· As your startup grows, it is important to begin to balance investing in existing revenue and customer retention focused features with “upstream outbound” features that will allow you to acquire more new customers and accelerate growth. In addition to new growth features, adopting new pricing and customer acquisition strategies should be expected to drive growth. This strategy and prioritization discipline to balance between retention and acquisition feature investment is hard.

· Financial impact and product execution tradeoffs become increasingly more complex as your startup grows. You and your leadership team will need to balance critical business strategy and delivery tradeoffs for major product decisions. This could also include assessing tradeoffs for build/buy/partner product decision. A strong senior product leader should be able to help you assess these critical business and delivery tradeoffs by translating key product and technology decisions (and most importantly the financial impact of these decisions) into language that you, your c-suite, and your board can understand.

Signs that you need to hire your first CPO:

· Increasing development costs without increasing growth. Your development costs have been going up for the last 2–3 quarters, but your revenue growth or customer NPS has plateaued or dropped despite knowing that there is still a high growth ceiling in the market. This could signal it is the right time to bring in a senior leader who is going to better help evaluate product and growth strategies and opportunities. As part of this evaluation, your company needs to better use analytics and the data analysis associated with evaluating those next opportunities that are going to meaningfully drive that next wave of growth. This requires a different level of skill and experience that a senior product leader could bring to the table.

· Disjointed customer experiences and business strategies across product functions and life cycle. Teams spanning product management, design, new product development, customer success, and sales functions are not aligned on the product vision and in some cases have contradictory KPIs. A CPO could develop a unified customer vision and lead these previously separate functions to improve the end-to-end customer experience and value flow.

· After recently acquiring or merging with another company, your company is struggling to combine and consolidate a product portfolio, product strategy, and product-operating model.

· To date you have only hired generalist product managers and you are noticing key strategy, data, and product operations skill gaps. Use this opportunity to define a mature product function within your company that combines strong and clear strategy (the what) with strong and clear execution (the how).Hiring for and developing specialized product expertise like pricing, inbound and outbound growth strategy, product operations, product layers (i.e. foundational platform, integrations, customer facing UI) will be critical to continue to drive growth.

· What the development team built doesn’t resonate with your customers. This could signal the opportunity to bring in a senior product leader who can be that dedicated and accountable translation between business strategy (the what) and the execution (the how).

Parting thought: be open to building an understanding of the CPO role and what makes a strong CPO candidate. Numerous CEOs have shared “If I would have known then, what I know now about the profile and benefit of a good CPO I would have hired that role over a year sooner.”

Author note: I’m currently in a product leadership role at Amazon AWS and previously led product functions at F300 enterprises and seed stage startups. I am passionate about helping large enterprises and growth stage startup companies (and their founders/CEO) exceed their revenue goals by writing and advising on senior product leadership and product strategy topics. Please email me (eric.steege@gmail.com) if you would like me to send you links to future articles in the series. Also check out the second article in the series How to find a CPO for your startup?