The FIRST Thing You Need To Know Before Launching a Second Product

So today we're going to answer the question, when should you create your second product and what are tips for doing it well? So let's first answer the question of when. And in order to do that, we have to first answer the question of why. Why are you considering creating product n equals 2 when right now you have product n equals 1? And there are several buckets or kind of motivations you might have. The first one is You've been successful with product 1, and sales have been getting easier and easier. As your market share grew, more people know about you, more people trusted you. But now you're seeing this kind of flattening out. Not that you're completely saturated, but most companies have either bought your product already or have decided not to buy your product for whatever reason. And so not that things have stalled completely, but you can kind of see that it's getting harder to make sales now. Maintaining the growth rate that you've been accustomed to is getting harder because you're kind of hitting that upper limit on your existing category that the first product is in. So that's kind of reason motivation number 1, is you're kind of hitting that ceiling. Motivation number 2 is that the category that product 1 is in is itself declining. So things were going well for a while, people bought the product, you were having great growth, but now that category has often been supplanted by a new category. And so the existing product is just not selling as well. It's not delivering the growth rates. So that's kind of motivation number 2. And motivation number 3 is when you have a natural adjacency where there's another product or product category that fits really, really well with your first one. A good example here is HubSpot itself, my company. So when we started, we started in the marketing software category. And there was and is a natural adjacency to sales and CRM software. Those 2 things go really, really well together to the point that most customers that buy marketing software will have a CRM system in order to put those leads in. And so we made the decision that that adjacency was strong, so it's better for customers, but it's also strategically important for us that in order for us to achieve our long-term ambitions, we couldn't just stay in the marketing software business because over time, Whichever company was providing the CRM software would win over time because they would expand into marketing, and that's essentially what happened. So those are the 3 reasons. By the way, there's a big difference going from n equals 1 to n equals 2, and then from n equals 2 to 3+, right? That first jump is a really, really big jump. Going from exactly 1 product to 2 products is non-trivial. It adds an entirely new dimension of complexity to your business because every decision from the point that you launch the second product, then every decision, every discussion gets harder because now when it comes to resource allocations, like we hired this new engineer, do we have them work on product 1 or product 2? When we add this new feature, should we add it to this product or that product? When we decide to go international and we want to localize, which product do we do first? So it becomes a very— every chart that you have in the business, every metric that you look at, then you're going to now want to break break down into, okay, this is the growth rate, but what's the growth rate for product 1 versus product 2? And then the growth rate, of course, of the company itself. So anyway, everything gets harder, so you shouldn't be too quick to jump into kind of creating product number 2. But, and this is going to sound kind of contrarian to what I just said, or contrary to what I just said, is that you can't wait too long. So the time to launch product 2, if you've identified that there's this adjacency, or if you identified that your category is declining. The worst time to actually go out and try to build a second product is at a time of desperation, that you have no other choice but to kind of build the second product because the first product is dying or, you know, someone else is taking over the kind of broader category. So you shouldn't wait too long, and you definitely should not wait forever. Just statistically, there are a vanishingly small number of companies that get to breakthrough scale with exactly one product and sticking to that one product, you know, for their entire history. So you will, in most cases, if you're successful and you're continually growing as the company matures, as you get to scale, you will likely find the need to go to product N equals 2, N equals 3, and so on. So here are some tips in terms of when you decide to launch product 3. Tip 1, we've already been over as to know why you're doing it, what the reason is. Number 2, as you're building out that second product, try to figure out what points of leverage you're going to get. And there are multiple dimensions of leverage. You could say, hey, I'm going to solve the same sort of use case, but for an entirely new market. In that case, you're getting leverage from your existing domain expertise, possibly even your existing code, but you're just taking it to a new market. Awesome. It may be that you're going to sell a new product, a new set of use cases to the same kinds of customers you're already selling to. So in that instance, you're kind of leveraging your go-to-market and your market presence with your existing customers, but you're just giving them something new to buy from you, a new product that solves a new issue and solves a new use case. So find those kind of points of leverage. What do you have today that can help you increase the odds of success of product number 2, whether it's your market, domain expertise, code, whatever it might be? And number 3, don't be too patient in terms of how fast you expect that product to grow. When you launched your first product, it was likely, hard to get going because that kind of initial, you know, the universe is working against you getting that motion going, getting the flywheel spinning is really hard. When you launch product 2, I'm not saying it's going to be super easy and a walk in the park, but it should be easier because you've kind of leveraged some of the things that already exist. If it finds— if you feel like it's as hard, if not harder, to break into this kind of product 2 category as it was with your first product, then chances are you haven't found enough points of leverage. So to recap, yes, you'll probably need product N equals 2. Yes, it's going to be painful, probably 5 times more painful than what you think it's going to be. And know why you're doing it, the motivations, make sure your team knows, here's why we're doing, you know, product N equals 2. And then look for points of leverage so that the build-out of the product 2 and building that market share is easier than your first one. Hope that was helpful.