Dave Heywood, MD & Growth Partner at OX7 Partners (00:00)
we’ve all been part of a project throughout our careers where just getting it launched becomes so important to everyone that we lose sight of what happens afterwards.

It’s off the list, it’s out there, people can buy it, job done. Except buying it is an absolute pain in the arse Half the process depends on someone doing something manually. And the temporary workaround is about to celebrate its third birthday. This is Scale, an OX7 Partners podcast.

And I’m Dave Heywood

This week we’re gonna be having a look at the investment paradox where trying to contain and curtail what we spend can ultimately end up undermining the return on the investment that we’ve already committed. and how can we give an idea a proper chance without signing ourselves up to fund something forever?

I used to work for a global leading publisher

During during the twenty tens where it felt like every single business out there was trying to transform and turn themselves into digital businesses.

And at the time they were launching their first major digital project into the market. and so there was a real urgency to get something out there and show how fresh and modern we were.

And as you can imagine, we were looking across the whole customer journey, how someone would discover it, understand it, take it for a little bit of a test drive, and then move ahead and buy enough licenses for their students.

Sketched out on paper, that journey looked pretty good. But bit by bit, as it started to meet the realities of the business, it got reduced to a set of time consuming handoffs, bonkers, processes, and just a really sluggish and stop start purchasing journey.

and one of the major problems was some really complicated licensing bundling, essentially driven by a publisher using systems

designed for ordering textbooks, not digital licenses. You can imagine how well that started to unfold. what should have felt like a real flagship digital launch ended up just feeling a bit drab. and from and from my perspective, it set a really clear signal here.

Here was a traditional publishing house playing around with digital products, not a bold digital business taking a step forward.

That certainly wasn’t our ambition, but it was the experience we ended up delivering all the same.

And I don’t think everything had to have been perfect from day one. There’s always bound to be compromises and things that don’t quite work as intended when you’re doing something new.

But some of these challenges were around critical touch points. Taking a product for a test drive.

being able to quickly evaluate a product and actually buy the thing, I’d say they’re pretty fundamental things that dictate whether you succeed or fail.

And those sticking plasters just became the way stuff worked. The product had launched, the business was moving on, and increasing pressure was being applied to sales and marketing to work harder to get people over the line. But alongside that there were squeakier wheels. The platform itself had problems scaling, so what little investment was available post-launch.

ended up going there. And we can certainly understand and empathize with that immediate decision. If the platform doesn’t cope, you don’t really have much to sell. So we have to deal with it. But that buying experience wasn’t really recognized as part of that problem.

So those us really in the guts of that customer journey didn’t really have many resources at our hands to make that better.

so I’m aware things have gotten a lot better in the years since. But at the time those compromises had ended up becoming the operating model.

And that’s why I don’t think underinvestment is always a deliberate decision for us to be cheap. Quite often,

We underestimate what it takes to actually build a product that works, bring it to market, help people buy it, and maintain it over time. So that original investment ends up being based on a really incomplete and fuzzy picture. And then as those problems appear, we have to decide in real time where the next bit of money comes from and where that next bit of money goes.

So it’s a bit like saving a bit of cash by not fixing a leaky roof for a couple of years. Yes, we can pop some buckets down and hold off the big investment, but over time the deterioration just picks up the pace. and by the time we realise we actually really need to do something, we’re buying a new roof.

And inside a business we can be paying for those delays in the form of lots of manual effort dealing with frustrated customers and sales that are just harder to get over the line than they really need to be.

And of course, some projects just need to be stopped. You y you don’t keep investing in something just because we’ve already spent money on that.

But we do need to make sure that we’re really, really clear and understand is the problem the idea itself or just what we’ve put around it?

So the central question starts to become how do we approach that investment decision by getting a better understanding of what we’re taking on? And for me, we can sort of peel this back and start with, well, what’s our intended client experience?

What should someone be able to do? How easy should it be? What happens when something goes wrong? and do we have what we actually need to deliver on that?

Interestingly, your nearest and dearest competitors aren’t your only benchmarks here. People bring expectations from their day to day lives.

Yes, buying licenses for an institution does have its own complexities. But if all your other competitors are n needlessly difficult.

You being ten percent better may still equate to a pretty crap experience.

And even sat here in twenty twenty six. I’m still a bit of a fan of walking through this stuff manually first. Take someone through the process, see where they get stuck, see what happens when something doesn’t go to plan.

make sure that the people who really need to understand how all this works actually do. And you can learn an awful lot here before we go and build.

Yeah, a manual process won’t always tell you everything about how something will work at scale, but it will shine a light on some of the requirements you might have missed, and it can also give you a far better feel for actually where are things likely to get stuck? what’s a little bit slower than it should otherwise have been. And we can put that all together to understand, okay.

where are the pockets that might need some of that investment, but we’re deciding that now instead of having six or twelve months of failing to get the traction we wanted in the market

the danger lies in leaving those manual processes in place indefinitely with no roadmap, little recognition of the limits and constraints of that, or clarity around what comes next.

Brings me to the second question that usually crops up around this. What’s the investment range? Now, what I mean by that is what would a credible minimum viable product take? And on the other side, what’s the gold standard?

and that really needs to encompass running it, maintaining it, and supporting that whole customer experience over a sensible period.

otherwise we end up approving spend and launch budgets without really understanding what’s the commitment that we’re signing up for here.

and it’s got the advantage of helping us be a little bit more honest up front about those compromises. If we leave this part manual, how much work does that create? Who does it, and at what point does this become a problem that we need to solve? We might still choose to do that, but we’re making the choice consciously.

And the third question is one I’d really, really like, and one I was introduced to relatively recently. how much money are we prepared To lose, giving this a go?

And this is something that came to me from Matt Watkinson’s book.

Mastering uncertainty. And the way his writing approaches an inherently uncertain world was something that really, really stuck with me. And one of the major ideas that I took from that was around being really, really clear about the downside we’re prepared to accept. So we can make business cases for the potential return

but we can’t guarantee it. So how much money are we actually prepared to lose finding out whether this opportunity will deliver the goods?

And I think if we have that conversation beforehand,

it gives us a little bit of a helpful boundary while we’re still exploring.

Which leads us quite cleanly to the fourth question around this. What are the kill conditions? What tells us to stop? Perhaps customers don’t want it enough. Perhaps customer feedback tells us that there’s this limited value here. Even if they can properly buy it and try it and accept it.

And perhaps to just delivering it reliably turns out to cost far, far more than the whole opportunity can support.

Whatever those conditions are, explore them and agree them before the sunk cost fallacy, but we’ve already spent so much, starts to take hold. And you might even decide to stop before you reach the loss you’re prepared to accept.

there’s nothing compelling you to spend the whole amount just because you allowed for it.

but on the flip side, if there is a credible opportunity here, we need to recognise what give it up giving it a proper chance really, really entails.

that’s where I’d ask you to start with any investment you’re considering now. What experience are you trying to deliver? What will it take to deliver and maintain it? How much are you prepared to lose? And what would make you stop? Walk through those questions before you make any hard and fast commitments. Understand which of those compromises you’re willing to make and

If there are any temporary fixes, at what point are they reviewed and fixed? Because yes, getting something launched itself is a great achievement. But if that becomes a point at which we declare victory and move on to the next thing, we’ll end up leaving an awful lot of the opportunity behind and costing ourselves far more money in the long run. I hope you found that useful.

This is Scale an OX7 Partners podcast. I’m Dave Heywood and we’ll see you next time.