Scale-up Gap Challenge - Kony's optimized Product/Market Fit unlocked new revenue and customer growth leading to the company’s acquisition by Temenos.
In a recent post, we explored the topic of Why do startups “get stuck” as they grow and evolve, and why keeping Product/Market Fit isn’t a given once you reach that initial milestone. Product/Market Fit is not a one-time milestone you can simply achieve and move past. Instead, we often need to repeatedly optimize P/MF to keep pace with changes in the market and/or our business. I experienced this first-hand while leading the product and engineering teams at Kony, a software startup in the mobile application development platform space. This blog post is about telling that story…
INITIAL P/MF: Kony thrives in Mobile App Dev Market
In the early years at Kony (circa 2009-2014 before I joined), the mobile OS market was still relatively immature and was fragmented across many vendors (Apple, Google, Blackberry, Nokia, Microsoft to name but a few). Given the many mobile operating system choices it was a challenge for most enterprises to build and maintain in-house skills to support all these mobile OS platforms. Kony provided an application development platform and tools with an abstraction layer that allowed developers to code a single mobile app and then automatically generate multiple versions of the final compiled apps that would execute on each individual mobile OS. This lowered the cost of development and accelerated time to market significantly as you could reduce the duplicate engineering teams and efforts.
Kony successfully found its initial Product/Market Fit and was a classic rocket ship startup – growth during this period was exponential and we were able to capture some of the largest consumer and enterprise brands in the industry (including many Fortune 100 clients). Based upon this initial Product/Market Fit, Kony experienced not only significant sales and customer growth, but also achieved accolades as a leader in the market by industry analysts (including being a top ranked vendor by both Gartner and Forrester).
DISRUPTION: Markets shift from Mobile to Digital
Following the old adage “the only constant is change”, the mobile market then went through several fundamental shifts as it rapidly matured over the next 5 years (2014-2019). The mobile app dev market was consolidating, and better solutions were becoming available in open-source, low-code tools and on all of the major cloud platforms. Instead of being viewed as an emerging and specialized technology, mobile soon became “table stakes” for any modern development toolset or platform. The focus for most customers also shifted from striving to be a “mobile first” company to instead being a “digital business”. Yes, mobile continued to be relevant and omni-present, but not in isolation – it was assumed to be part of a much larger digital transformation. This led customers, and the market more broadly, to look for mobile app dev capabilities from the larger technology platforms which would be the foundation of their broader digital initiatives.
This kind of market shift doesn’t happen overnight, of course, and we saw it play out over a number of years. We responded initially by executing on a set of incremental product line expansions into adjacent markets, including the mobile Backend as a Service (BaaS) and enterprise mobile security markets. I also led a rather significant pivot to introduce low-code and visual development capabilities (which was part of the “Tachyon” release I described in my first blog post). However, while these efforts slowed the commoditization of the Kony platform and expanded the addressable market, it continued to be harder and harder to compete as a general-purpose horizontal platform against the larger competitive landscape. We saw declining sales growth and increasing customer churn. The Product/Market Fit that had once enabled the company to grow quite successfully would not continue to be sufficient, nor would it yield a successful exit for investors. A significant overhaul of Product/Market Fit was required…
P/MF OPTIMIZATION: Kony launches Digital Banking eXperience (DBX)
In late 2017, we undertook a company-wide strategy to pivot into a focused vertical market - banking - and create a suite of pre-built solutions to sell into regional banks and credit unions who compete for market share against the much larger “money center” banks (like Bank of America, Chase and Wells Fargo). The money center banks were all providing increasingly sophisticated digital and online banking experiences to their customers, leveraging immense development resources to invest significantly in these strategic areas. In contrast, the credit unions and smaller banks could not afford to build and maintain competitive, bespoke digital banking apps on their own.
To address this unmet need we incubated and launched a complete suite of pre-built, Kony Digital Banking apps over a period of roughly 3 years. These apps were all built on top of the Kony platform and could be configured and deployed vs. built from scratch. The initial “hero” application was Kony Retail Banking which we quickly extended to target adjacent workloads accruing to a family of apps for Small Business Banking, Consumer Lending, Real-time Chat, and more.
But Rome wasn’t built in a day... the identification of and focus on Retail Banking took a fair amount of iterative experimentation over a few years; and several of the earlier efforts to focus on different Kony vertical solutions were explored and rejected as we iterated through identifying the Product/Market Fit that had the most compelling results.
It’s important to observe that this was much more than just a changeup in the product portfolio – it was a full optimization of Kony’s Product/Market Fit to address an entirely different ideal customer profile (ICP) and industry segment, and required adjustments simultaneously across sales, marketing, professional services, alliances and channel strategy in addition to adjusting our Product Investment Mix and Solution Roadmap. If each of the changes had been applied independently it would not have proven effective; it was only when all of these efforts were aligned and optimized together in support of the new Product/Market Fit strategy that we once again achieved the needed accelerated growth.
OUTCOME: Accelerated Growth through recaptured Product/Market Fit
This adjustment to Kony’s Product/Market Fit to pivot to a banking-led strategy was the key to unlocking new revenue and customer growth. After the shift, we experienced new product growth of 80-100% YoY as we more clearly focused on addressing an urgent and material need in the market – it was a “do or die” type of moment for most Credit Unions and community banks, and they were willing to invest more aggressively to retain their position in a highly competitive market. The new strategy was also highly “sticky” – there were marked improvements in both retention and subscription length, given the mission critical nature of the digital banking experience in serving their customers. The shift not only increased the size of the initial sale but provided a natural opportunity for Kony to land-and-expand once inside a bank. It also created new opportunities for packaging and bundling products into a comprehensive suite of related and adjacent SaaS services. Finally, it’s important to underscore the importance of this optimized Product / Market Fit for the Kony shareholders, as the Kony Digital Banking apps also directly setup the company’s acquisition in 2019 by Temenos (one of the market leading European FinTechs); this ended up roughly tripling the valuation of the company due to the strategic value and market relevancy it provided.
I feel fortunate to have seen the full lifecycle of this journey… and to have been part of the highly talented Kony team when we had our successful exit. This type of experience teaches some amazing lessons that you simply can’t get from an MBA or the best product management textbooks. It’s instead a real-world, pragmatic view into both the challenges and opportunities associated with Product/Market Fit in a rapidly changing market.