Why product development companies shouldn’t offer customer development services
Avoiding biased situations and build better digital products and relationships
In the last decade we’ve experienced many changes in the software development industry. Combinations of modern software development standards and startup methodologies have become a new standard for those who choose progress and long term growth over short term money grabs. Product development companies who are not adapting to these rapid changes see small, fast-paced competitors stealing market share, and rightly so. And although most of this change is incredibly fruitful and stimulates innovation and growth, new isn’t always better.
The importance of Customer Development and how it’s causing problems for agencies
During my time at Eli5, I’ve watched many product development companies, ourselves included, offering customer development services for the digital products that they built for their clients. In a lot of ways this has been a huge step forward, since it was increasing the chances of building viable products. From fast paced design sprints to thorough problem identification trajectories, we all aimed on making sure we were building a product that brought great business value to our clients by solving problems for their users and customers. The output of these customer development trajectories results in advice sounding like this: ‘[Client] should consider to build [product definition] offering [proposition] because of this massive [amount of $/€/₿] opportunity we identified’.
It’s not that there is anything wrong with this approach. At Eli5 we’ve been using a wide range of customer development methodologies to ensure we were building the right solution before we wrote a single line of code. The worst thing for product builders is to build a solution which will not be used. Until recently we’ve done this for a wide range of clients. But we stopped doing this. Why? Because it’s creating an incredibly biased situation. At one point I was looking at a competitor’s product portfolio, which initially impressed me. But then by digging a bit further I realised it was actually on the edge of terrible. Slick looking products with cool propositions, which users and customers were not interested in. That’s the point when it really hit me, unless you want to make quick money and short term gains, this way is not the way to go.
Why customer development trajectories should be executed by an independent company
There is an old Dutch saying “The butcher who’s rating his own goods”, and it’s used to indicate people are easily settling for less when it comes down to their own product. At Eli5 we’ve always had the mindset to deliver the highest possible quality and we’ve never continued to build a product that should not have been built. However, although we stayed true to ourselves, we still created a biased situation.
Let me draw you an example. You’re running a product development company, meaning your product development services (design and development) are the core of your business. Prior to the actual product-building you’re carrying out customer development trajectories to ensure you are building the right thing for your clients. In general these customer development trajectories take between two and eight weeks and require one or two full-time employees. Meanwhile the actual building of the digital product takes at least three months for a first version, and requires three to five full-time employees. So in short, there is a lot depending on the outcome of your customer development trajectory.
Do you see where I’m going? If not, let me Eli5 it for you: It’s creating an enormously biased situation which is both bad for the client and the contractor.
I know that most people wouldn’t necessarily think there’s something wrong with this. And yes, it’s better to do it both than not at all. But, how do most of us feel when a sales person in a clothing shop is telling us that the piece of clothing we’re trying out is ‘looking great’? Exactly.
Next to this, I think it sends out a very strong message when the advice to clients is to hire an independent third party to carry out the customer development trajectories. It’s the kind of thing you would do if you advocate long term games and truly want to build the things which need to be built.
The transfer of knowledge and information becomes a crucial point
Now that we at Eli5 do not execute customer development services for our clients anymore, it has become even more important to get the transfer of knowledge and information as precise and effortless as possible. Understanding the business logic and the problem that we’re solving is just as important as it was before. We do this through workshops and design sessions with the involved customer development party and our client. A nice additional effect of doing it this way, is that our team can identify the blind spots and challenge our partner and client on their findings, resulting in an even better outcome.
Focus will bring many opportunities
“You need to be doing fewer things for more effect instead of doing more things with side effects.” — Gary Keller, The ONE Thing
Our range of potential partners has increased
Ever since we decided to hire external companies for the customer development trajectories a world of opportunities opened up for us. The range of companies we were able to partner with has increased and Eli5 has become more interesting to work with for those companies. We are not a threat to their business anymore but instead we became complimentary to each other. We need them to ensure we are building the best possible products, and they need us to make sure that their viable product ideas are actually turned into reality.
Product Development companies often have their preferred technology stack for the products they build. We always advice our clients on what technologies and frameworks they should use for their project. It depends on the product, their company, and the strategy behind the product that we’re building for them. An agnostic approach on the tech used to develop the product would be a good way to describe it.
I think a great way to look at customer development partners is to have variety of them, each with their own unique proposition, character, and angle. Depending on the type of project or type of client coming in, we now can set them up with the best fitting provider.
Increased chances of long term success
By cutting out bias from the situation we are even more likely to make better decisions. Yes, it could be that in the short term our revenue will be affected by this. It could be that the output of the customer development trajectory, which is now done by an independent company, says there is not going to be a project for us because they found out this thing our client wants to build should not be built at all (which in this case should be the advice regardless). These thoughts can make agencies nervous, and I understand. But, by doing it this way it’s way more likely to build a strong relationship with your client. And it is increasing chances of building products that solve actual problems that become a long term success. On top of that, solving actual problems through technology is a massive lever for new opportunities.
Picking the right product/software development company for your project
The world of digital can be a jungle for the not-so-native clients we’re serving. I’ve seen many companies getting screwed over by product development agencies, promoting one after the other ‘this sounds too good to be true’ proposition. You now know it’s better to work with a product development company who’s not the judge of their own projects through executing customer development themselves, but there are a few other things to pay attention to.
Find a company who challenges your ideas
‘You call, we haul’ mentality is a giant red flag. It can be very difficult to give clients the cold hard truth about a thing they want to build. Bad ideas do exist. As a client you should be open to critique, and as a product development agency you should be critical about what your client wants to build and challenge him or her on it.
Look for small but multi-disciplinary teams
The bigger the company, the more politics. This means less agility, more contractual hassle, and talking to project managers instead of someone who actually knows your product. Look for small companies who offer full-stack product development services (service design, user experience and user interface design, back-end and front-end development, test engineering, and solution architecture). Most of these companies have between 10 and 25 employees. These smaller companies have more merit, work faster, and have more skin in the game. Lauren Macpherson has an interesting writing about this, which you can find here.
Search for chemistry
Building a digital product together with a product development company is not a one time transaction and is most likely going to be a bumpy ride. Besides your financial investment and the time you and your company need to put in, you’ll face high costs of opportunity. Choosing one partner, means you can’t all of a sudden switch to another. You need someone you can trust, who you can have a proper argument with from time-to-time, and who takes ownership. Things can go south, good decisions are not always the right decisions over time, and in most cases you will need a great deal of patience before success will appear.
Obviously there are more things to pay attention to when you’re in search of a company who can build your digital product. Enough to deserve a writing on its own. However, I do think that these things are most important (besides a company being capable, of course) to look at.
There are endless ways to approach the projects mentioned above, all coming with their own set of complexities. With us constantly looking for improvements and growth, I will be the last one to say that we figured it all out at Eli5. But, I’m convinced that outsourcing customer development to the right partners instead of doing it yourself should be considered ‘best practice’. Feel free to reach out to me (at email@example.com) if you disagree or if you want to explore this further.
Have a great day!