Why Products Fail

There is much debate about the failure rate of products. Is it 45%, 85%? Does it matter? The point is products fail. The bigger question is why do products fail?

The simple answer is products fail when they don’t deliver meaningful financial return — but that’s only the surface of the problem. If you were to ask most people why products fail, they would give you some very logical answers: failure to understand customer needs, trying to fix a problem that doesn’t exist, targeting the wrong market, poor pricing, weak team or capabilities, or delayed market entry. All are fair answers that I would summarize as poor “product market fit.”

Marc Andreessen said, “Do whatever is required to get to product/market fit. Including changing out people, rewriting your product, moving into a different market, telling customers no when you don’t want to, telling customers yes when you don’t want to, raising that fourth round of highly dilutive venture capital — whatever is required.”

So how do you know when you’ve reached product market fit? It’s pretty obvious. Sales win rates are extremely high. Churn rate is low. Lead-gen is organic. Adoption and usage is high. You’re hiring sales and customer success staff as fast as you can. In contrast, you haven’t reached product market fit if customers don’t understand the value of the product, reviews are so-so, sales cycles are long or never close, and churn is high.

How do we measure product market fit? A great question to ask yourself is, “How much will it impact my customers if our company shut its doors tomorrow?” What would they do? How easy would it be for your customer to replace your product?

A few mistakes we can make that can prevent us from getting to product market fit:

1. We listen to the HiPPOs, aka, “Highest Paid Person’s Opinion” rather than to the data and people closest to our customers.
2. We are “customer driven” rather than “customer informed.”
3. We build products based on what the competition is doing rather than understanding the customer pain points.

HiPPOs are found in all organizations. They are the “do it because I said so” leaders. They are dangerous because of their leadership status and past experience, giving themselves and the people they work with a false sense of confidence. HiPPOs make decisions based on their gut. They rely on past, outdated experience. Just because something worked five or ten years ago doesn’t always mean it will work now. HiPPOs typically feel like the smartest person in the room. They shoot down unbiased data or insights provided by those in the organization talking to customers on a daily basis who have taken the time to hear, see, and feel the pain the customer is dealing with.

There is, unfortunately, a tendency for a less confident product builder who actually has the data and frontline knowledge to concede to the HiPPO out of fear.

It’s always a best practice to talk to our customers on a regular basis. The problem is we approach the conversation with our customers wrong. We have a tendency to be customer driven rather than customer informed. What’s the difference? When we are customer driven, we build what our customers tell us to build. There is a subtle difference in words but drastic difference in practice. When we ask customers what they want, we will get answers in the form of solutions. That is customer driven.

Customers know better than anyone their pains, challenges, and the jobs to be done. However, they aren’t experts in building product — that’s why they hire you to solve the problem. To be customer informed is to be focused on identifying the outcomes customers want a product or service to do for them or the problems they are hoping the product will solve.

A great example of being customer driven is Kawasaki jet skis. When Kawasaki asked their customers what they could do to improve their jet ski, their customer response (in the form of solution) was to add more padding on the bottom and sides of the jet ski. As a result, Kawasaki added padding to the bottom and sides.

In contrast, Sea Doo, a competitor of Kawasaki, took the correct approach — customer informed approach. Sea Doo product builders worked to understand the root problems and desired outcomes their customers had. What they found was their customers’ feet and knees became fatigued by kneeling or standing for longer rides. The result was to build a product their customers could sit on. Sea Doo innovated by changing the whole approach.

Finally, we build products based upon what our competitors are offering or try to compete on product features rather than product experiences. It’s common, particularly in enterprise software, to compete on a Request for Proposal (RFP). The sales organization comes to product and says, “We are losing deals because we don’t have features x, y, and z.”

This is dangerous because we assume that the features that our competitors are providing solve the customers’ problems. How do you know your competitor isn’t building products based on a room full of HiPPOs or by making the mistake of building features their loudest customers told them to build? There is a danger to competing on features. More features do not equal a better product. Often, less features or options for the customer to choose from to get to their outcome, are much better. Our goal should be simplicity over control and complexity.

Alan Cooper shares a great analogy to prove this point called the jetway test. When we fly on an airplane, all of us have the same goal or desired outcome: move from location A to location B safely. As we enter an airplane, we are faced with a choice to achieve the outcome — turn left into the cockpit or turn right into a ticketed seat.

Turning left puts the passenger into an experience full of hundreds of buttons, lights, and levers. This can be a stressful experience and there is more opportunity for mistakes.

Alternatively, turning right puts the passenger into a comfortable and entertaining experience, restricting the experience only to what the passenger needs while still delivering the same outcome of arriving from location A to location B. Which experience would you prefer?

The product team at Canopy is mindful of the dangers that can lead to product failure. We love talking to customers and understanding how our products can solve their problems and deliver the outcomes they are hoping for. Our goal is to make tax accountants trusted financial advisors for their clients through modern, streamlined products — ultimately saving them time and money.