Our conversation from last week continues with Flip VP of Product Sourabh Gupta on evolving product-market fit (PMF). After getting context on Flip’s latest developments in its product journey last episode, we dive into a discussion on the practical implications of PMF evolution — leveraging B2C advantages in B2B sales, orchestrating product development with problem statement-driven teams, and the hidden costs of product experimentation, maintenance and scale. 

TLDR

5 Hidden Costs of Finding Product Market Fit from the VP Product of Flip

Cost isn’t just about the cost of inputs — there’s time, experimentation, maintenance, future scale, customer service, etc. that need to be factored in when growing the business, and these costs may not always reflect in the unit economics of a product but still affect profitability. 

(1) Cost of customer service: How does customer service factor in the value for money? Regardless if you’re in B2C or B2B or both, differentiation in value proposition can come in heavily through aftersales, especially with entry products or services that are commoditized or very similar across the competitive landscape. 

“It’s not always in terms of the product features you have, if you work with B2B, a lot of time it’s about the service that you’re getting after sales services…”

(2) Cost of communication and decision-making: Centering organization around problem statement / objective-based lean teams, as opposed to pure functional teams, can unlock more diverse inputs on pricing strategy. 

“So we believe in building lean, small teams, but with a very clear focus. So each of our teams have their own problem statement defined, right?”

(3) Cost of experimentation: Experiments need to start with the right context and question (will the result lead to a decision? Or are there more efficient ways to learn, like analyzing data or case studies). 

“Experiments can be inconclusive and there have been cases where experiments tell you one thing, but when you actually full scale it, you get another thing, right? So if there are such key business decisions to be taken, we rely on experimentation only where we know this experiment’s results will add value to the decision that we have to make.”

(4) Cost of maintenance: Factor in cost of maintaining products vis-a-vis their ability to generate healthy unit economics and the team’s ability to develop these products further (that or adjust the team). 

“There’s always a cost to maintain products. So focus on one or two key ideas where you think there is potential to make money and where you understand the consumers more.” 

(5) Cost of scale: Pricing needs to evolve at scale, or adjusted to meet costs of scaling. 

“If you don’t factor in a revenue model or a pricing plan…you will find it really hard to be financially sustainable and have a longer term viability for your business. And also your product will find it hard to scale because when you need to scale, you need more money.” 

Timestamps

(00:00) Catch up on episode one

(01:13) B2C Advantage in B2B Fintech;

(05:14) Streamlining Cross-Functional Productivity;

(07:40) Managing the Cost of Monetization;

(09:23) Redefining Product Market Fit;

(12:46) Rapid Fire Round;

About our guest

Sourabh Gupta is VP of Product Management at Flip. With more than 14 years supporting the growth of very large organizations and bootstrapped startups across Product Management, Consulting, and Engineering roles, he brings to Flip his expertise in leading cross-functional teams consisting of product managers, analysts, and engineers across India and Southeast Asia as he leads Flip’s product and design functions. He was previously Head of Product International Expansion and then VP of Payments Platform at Gojek before joining Flip.

The content of this podcast is for informational purposes only, should not be taken as legal, tax, or business advice or be used to evaluate any investment or security, and is not directed at any investors or potential investors in any ⁠⁠⁠⁠⁠⁠Insignia Ventures⁠⁠⁠⁠⁠⁠ fund.

Transcript

B2C Advantage in B2B Fintech

Here is the proofread transcript with corrected spelling, grammar, and punctuation:

Paulo J: You did talk about starting to talk about the business side, how you ported that Flip Globe into the business sort of feature as well. But I wanted to get deeper into that and also bring up the competitive aspect of it as well in terms of how we talked about how, when it comes to fintechs and banks, the lines are blurring.

You have a lot more rebundling of fintechs into more complete product stacks. I think the same is happening for business finance.

How are you viewing this evolution of business finance, and where does it stand in terms of — given how you only this year really started to look at it and try to put more effort into building this out.

Sourabh: So on the business side, what we used to offer earlier was more of a disbursement product. As a FinTech, you are a regulated entity. So you are bound by regulation to the services that you offer. 

So we could only offer our disbursement offering because we are a PJP3 company.

So the point is the market there is very big when you talk about business. The market there is very big. How you approach B2B is also very different from how you approach B2C, where the pricing models are very different.

The sales cycles are very long. In terms of the [pricing] that you have, you can have pricing which is there on your website, and then there’s pricing which is there for a customer. It depends on what sort of value that account can get you over a long-term. And at times, you also might take a hit on your margin just to think from a long-term perspective.

So for the business vertical, where we see the maximum growth coming is in payments acceptance. That’s the focus for us on how we grow. The market is big. It’s about how you offer a great experience to them. And it’s not always in terms of the product features you have. If you work with B2B, a lot of the time it’s about the service that you’re getting: after-sales services.

And we have spoken to a lot of clients who are already partnered with one or another company, and their biggest gripe will always be, “When we have issues, there is no one responding to us. No one is talking to us. We need to wait one or two days.” 

And that can be a factor to switch as well. So for B2B, that’s why the approach is different. We, being a very consumer focused company, always give a lot of emphasis on customer services. People are getting direct responses from our teams.

Our product team will jump in if there are any issues. So we see that will act as a differentiator for us, and we think that besides the products’ superiority that we’ll have better customer service.

We want to create that differentiation for us. Obviously, the pricing angle comes into that, but that’s how we are looking at growing.

Paulo J: I think it’s interesting how you’ve been able to pour over one of these best practices from growing this B2C business into the B2B side as well.

And I did want to ask as well, how experimentation or iteration differs between B2B and B2C segments. Is there anything that you’ve been able to port over from the B2C product experimentations that you’re using now with the B2B side as well, or is it completely different?

Sourabh: So I think even the whole disbursement piece was like we were able to port, in terms of how we structured it, the same integrations. 

So how we function is there’s a core team, which is responsible for all these core pieces. And then out of that, we have service teams. So let’s say it goes into B2C, and they are servicing a different user segment.

The same thing can be ported to B2B as well. You obviously need to do a bit of orchestration, build small features on top of it, but the core engine remains the same. So our general strategy is to build once, use multiple times. So even for disbursement, we did that for international transfers.

We did a reverse one for payment acceptance where we put payment acceptance on B2B first and then we used that on our consumer side through what we will build a product called “receive money”, so we keep on doing that actually using product components and reusing it. 

For example, the subscription product that we have uses a component of our own payment acceptance. So we didn’t build it from scratch. So that’s generally our product strategy. We keep on iterating on that.

Streamlining Cross-Functional Productivity

Paulo J: How do you work with the engineering teams in terms of, especially this past year where you had to focus. More on the B2B side as well, and then there’s also a shift in terms of the experience and all that.

Sourabh: So I think the first thing is the way we have structured it. We build independent teams, So in each team that was built, it was very clear in terms of what their scope is, what is the long term roadmap, what are they going to focus on.

It wasn’t like the model which I see a lot of companies where they have a pool of engineers and everyone is just coming to them with their own requests. And then there’s always that alignment that needs to happen. So we believed in building lean teams, small teams, but with a very clear focus. 

So each of our teams have their own problem statement defined. So when it comes to working with engineering, it’s basically working with one team. The PM and the engineering manager or the tech lead of the team are sitting together to solve that common problem. 

It’s not that this is a product problem or this is an engineering problem. It’s a team’s problem.

Sometimes the best ideas come from the engineering team because they are the ones who are most close to understanding how the code base works, and how things work. So that’s how we in general operate. 

We have multiple smaller teams. Each team has their own goals. Each team has their own deliverables, their own roadmap, and together this team comes up with the plan on how they’ll be achieving whatever the goals for the team are. 

So we have in general never found any kind of misalignment while working with engineering because the idea is that it’s a team job. It’s not one person’s job. It’s not a product manager’s job or it’s not an engineering manager’s job. 

Paulo: You did mention how some ideas for improving the product came from the engineering team. Do you mind sharing an example?

Sourabh: Recently, we were thinking of how to [upgrade] our subscription feature? What sort of models do we use there? So one of the examples actually came from the engineering team, [where they said], “Okay, this is the algorithm that we should use or the startup subscription we should use because we’re seeing more conversions over there.” 

So these kinds of things keep on happening. So in fact we have regular cadences where everyone is involved. So the way we work is not that there will be a business call or something. So there will be a call for an objective. There will be people from business, from product, from engineering. And we put updates on that. Everyone is free to comment, give suggestions, and give ideas. So it’s a very bottom up approach that we use to build products. 

Managing the Cost of Monetization

Paulo: How have you approached managing the costs of experimentation as well? Because I understand that you try to experiment, iterate, de-risk sort of products as they go out to market, but even that process itself has its own costs. So how have you managed the costs of that whole process?

Sourabh: I think a lot of people say that, experiment with everything that you can, but we don’t believe that. So a lot of times because, as you correctly said, there’s a cost to experimentation, the cost could be in terms of development. 

You need to do the costing. It could be in terms of time. The cost could be in terms of the delay in that decision-making. We are very selective in terms of what we want to experiment with because in the end, the goal of an experiment is to validate the hypothesis. 

So we always look at other alternate data available to validate that hypothesis. For example, something similar has been done by another company or there’s a market study available, which says that doing XYZ helps. 

Then no point doing the same thing if we have a similar construct. So that’s why we are selective on the experiments that we are doing. There are times where we say that because a lot of times people use experiments as a tiebreaker. We don’t believe in that. When one person has a view A, another person has a view B, and they’ll say, okay, let’s do an AB to figure out which is right. 

But we don’t believe that’s the right approach because sometimes you need to take a decision irrespective of whatever the experiment says, because experiments can be inconclusive and there have been cases where experiments tell you one thing, but when you actually full scale it, you get another [result].  

So if there are such key business decisions to be taken, we don’t simply rely on experimentation. We rely on experimentation only where we know this experiment’s results will add value to the decision that we have to make.

Redefining Product Market Fit

Paulo: I think a lot of themes have emerged from our conversation today. A huge theme was being not just top down but bottom up as well. Being open to the inputs, especially of employees from different teams, I think was a huge theme. Being very strategic and selective about how to approach pricing strategies and all of that. And not taking a cookie-cutter approach as you mentioned and being nuanced in terms of approaching different products. 

I introduced this episode as a conversation about product-market fit. And that term has been around for many decades already, redefined and redefined by different people over time.

How would you define product-market fit in this current state that we’re in and maybe even for the Indonesian context?

Sourabh: One part that I want to add is that a lot of the time when people talk about product-market fit they forget about the monetization part of it as well. And in my view, product-market fit without a clear monetization plan is meaningless in the long term. 

I know a lot of companies have got a product-market fit, but they are not making any revenue. And if you’re not a nonprofit, then there’s no point to it. 

So monetization is definitely an additional dimension to product-market fit. It always was. I think it’s just that. In the last few years, people forgot about that, that you can find a product-market fit, but you need to be able to figure out how to make money in the end. 

Because working on borrowed capital is a very different thing versus working on the revenues that you generate. If you don’t factor in a revenue model, your pricing plan, or how you’re going to monetize, then your PMF is going to have issues. 

You will find it really hard to be financially sustainable and have a longer-term viability of your business. Also your product will find it hard to scale because when you need to scale, you need more money. So that’s, in the current context, how I look at PMF.

Paulo: And for the product managers listening in and for the CEOs listening in, what advice would you have in terms of making that shift, what’s maybe the first few things that they should do as an organization?

Sourabh: First, in my view at least, we didn’t face this problem in Flip. It was very easy for us, but I can understand for organizations who have just focused on PMF.

One of the things which end up happening is people end up building a lot more than they should. So when you have built a lot more than you should, and these are all different service lines, right? You should be very selective on what you should keep and what you should cull. 

So from a product manager’s perspective as well, you should be very clear. If you have built something with an idea that “Okay, I’m going to eventually make money out of it through whatever, right?” If that doesn’t work, kill the product. 

No point in keeping it alive because there’s always a cost to maintain. We think that, “Oh, we are not putting in people there.” It doesn’t matter. There’s always a cost to maintain products. So focus on one or two key ideas where you think there is potential to make money, where you understand the consumers more. 

And follow simple fundamentals like understanding your users, keep on iterating, have those feedback loops in, take data-driven decisions, keep on experimenting, figure out what is the price point, what value you are giving and what is the price you can charge for that. Once you know that for one product, try to replicate it for others. Trying to do it for everyone together is something which will be very hard to do.