What is a Product — A Strategy Perspective — II
In the article, What is a Product — A Strategy Perspective-I, we looked at why a product mindset helps an organization build software effectively. The mathematical equations showed economies of scale are inherent in building products. We also suggested two characteristics for products:
- We intend to provide the same services to a large number of customers.
- We want every customer to realize different value perceptions of the same product.
Counterintuitive, isn’t it?
In this part, we shall focus on understanding the market while building a product. While in a subsequent article, we shall look at how to improve engineering processes for economies of scale.
When to Not Build a Product
The business head or sales organization head sets up an emergency meeting. The discussion is about one potential customer who wants that piece of software application that we never built or built and failed, and we pushed into the arctic vault ages back. Very apt and standard in a startup world, right? Even we load with adjectives like market-focused or incubation-based product management. One customer does not make a market. Second, this is an ad-hoc approach to building a product. Experiments like these lead to point solutions that never give a vision to a product. There is nothing wrong if we support such solutions as professional services. A product must lead to an economy of scale. If it does not, it is not a product.
- Find a common business problem for four or five potential clients.
- Build a single solution that can address all the above pain points.
- Compare in the market to see if someone else is doing the same.
You have a case for a product.
Building a Product that Sales Cannot Sell
Sales teams build relationships and create a ground of communication. They find out the challenges of the customers and pitch their solutions. Most sales personnel prefer to sell technology and product they have already sold. How do you introduce new or intricate technology solutions?
A product manager does not need sales or marketing support for existing customers. If your customer is happy with the existing solution, then the most effective conversation will be talking to them and figuring out what they need around the solution. Such discussions provide the subsequent steps to building products. A product is a group of benefits a customer can get, and hence can be clubbed together as a talking point.
Always build products when you have planned for them. You have dedicated resources for it.
Discovering Product or Suites
Let’s travel back in history. In the early days of computing, there was hardly any difference between writing text for printing or text for programming. You will open a text editor, type in document mode, and use a set of markups that get translated for printing. You will open a file in the non-document format and pass that to a compiler for generating machine code if you are a programmer.
Word processing software like WordStar and WordPerfect followed this process in the late 80s and early 90s. Microsoft acquired Word and launched it with Windows 3.1 OS, on the What You See is What You Get (Wysiwyg) graphics terminals, and the text looked fancy. A secretary in an office shall have a computer with Windows 3.1 with MS Word and a printer to print the memo for office announcement boards. Microsoft's acquisition of Excel will lead to them being used by accountants for note-keeping replacing massive ledger-like spreadsheets.
Point products to suite transition happened when Microsoft realized they need not target office secretariats and accountants. Rather they could target the whole community of knowledge workers of the organization. Emails as a communication medium and the portability of laptops led to one suite of software like Word, Excel, and Powerpoint in one package catering to every knowledge worker in the office. And, they started calling it Microsoft Office. They targeted digital communication for the knowledge workers in the enterprise, added email clients, file-sharing solutions, and every kind of productivity tool you will use in a business environment. Lotus 1–2–3 from IBM also served a similar market. This transition opened up the conversation for the sales teams better. They could walk up to the corporate buyer and explain they provide solutions for all the knowledge workers than explaining individual features and benefits. MS Office also improved the sales of the Microsoft Windows 3.1 operating system being the compatible OS. A product should make communication easier for the target audience.
Unlike Microsoft, Adobe launched Creative Suite for the digital publishing audience, and Novell launched ZENworks IT Management Suite for infrastructure management. Each suite contained smaller point products solving a specific problem for the same audience making the conversation more straightforward.
Licensing the Products
Soon the suite vendors realized that not all the customers were willing to pay a similar price. Some will prefer using some advanced features, while others will use fewer features. Also, competitive products in the market helped the vendors introduce 3–5 licensing levels for their product suites. Today such licensing schemes are standard. They help product sales and communication and spread the selling costs over the customers adding scale. Even bundling and unbundling help sell some slow-moving products that themselves could not find a significant market. For example, Microsoft bundles a base version of the email client in the Windows operating system while an advanced version of the client is part of the Office Suites.
From individual point products, we created suites or platforms. We signaled these platforms would solve all the business needs of all the customers in the domain. We could access a larger audience with customer value-oriented messaging, thus spreading the spending in selling costs and communications. In short, we also created a captive customer audience to engage and communicate consistently to develop the product with their help and support. However, we expect the customer to deploy her infrastructure and manage the software in their environments. And we have not yet achieved economies of scale on infrastructure or engineering platforms. In the next part of the story, we shall explore those aspects.
Note: Sambit Kumar Dash is a founding director of Lenatics Solutions Pvt Ltd, which provides product management services to businesses for Sustained Competitive Advantage. You can reach him at: firstname.lastname@example.org