If you were interested in moving to San Francisco (or pick any city), would you pack up your bags, hopefully find a friend’s couch to crash on, and then find a job? Or would you wait until you secured a job there before even thinking of moving out of town? And would your response change if you were asking this as a fresh university graduate in your twenties versus an experienced professional in your forties? Or if you were single versus in a relationship? Or if you have dependents? This layer of “personal life” is just one of many factors that would likely go into the decision of how/whether you would move.
In a similar vein, when asking ourselves, “What comes first – the product or the customer,” there is really no right answer. Not surprisingly, it’s dependent on each individual/company’s situation, such as what are the company’s short and long-term product and corporate strategy, current and aspirational position in its market, and organizational structure. Awareness of these areas can provide guidance to more appropriate courses of action because many times, it’s not just executing on the decision, but how the execution occurs that can make the difference. A typical illustration of this are all the companies that benefited from “second-mover advantage” or being a “fast follower.”
Below are three sample scenarios. There are obviously many variations that happen in the real world, but this post is meant to provide a perspective and food for thought for when we find ourselves asking this “what comes first” question. The reality is that not everything is within a product manager’s control (yes, it’s true). As a PM, one of the many things to consider is whether it makes sense to deliver our products within the situation we are in, or do we need to effect change in some areas and turn them to our advantage.
“Would you like fries with that?”
Do you already have an established client base and the company strategy is to sell more to them? Cross-selling (and up-selling) is pervasive across industries. In particular, transactional Industries like fast food (“would you like fries with that?) and retail (“don’t you want to protect your new tv with a 3 year warranty?”) excel at trying to maximize their customers’ transactions at the time of sale. With many companies experiencing the 80/20 rule, that 80% of their business comes from 20% of their customers, it’s not surprising that so many companies are trying to increase their share of wallet. For example, insurance companies offer bundled discounts the more lines of coverage you insure with them. Banks encourage their banking customers to apply for credit cards and loans with them by offering more competitive rates.
Cross-selling is low-hanging fruit when you already have an established customer base. New customer acquisition costs can be pretty high. But with an established base, there is an assumption that you are already aware of your clients’ wants and needs and hopefully are already addressing those. So, to increase your share of wallet, you might need to get creative in what else they could need (enough to pay for it). There is more opportunity in this situation to allow for risk-taking in developing something your clients don’t already know they need. But it’s critical that you still keep an eye on churn as you want to keep your clients happy so that they will want to buy more from you! Some clients love being used as sounding boards and testing early releases. But there are many industries that are more comfortable with mature, widely-adopted products. Trying to release beta and v1 releases to them may take convincing. In that situation, it is important to consider who are the visionaries and early adopters among your clients who can help you vet out the product idea and design.
And let’s not forget about the costs side of things. In this scenario, you also have room to “play” because you may not need to be as concerned about paying bills at the end of the month. The more mature product(s) are presumably contributing to the bottom line. It would also be important to recognize whether the new idea will require fundamental changes to supporting teams – would it require new sales expertise, a different fulfilment, training, or support approach, and much more. Are you (or is your company) ready or able to make the needed adjustments?
Same product; different skin
A variation of the above is cross-selling within the same client, but to different buyers. Do you have an established platform that requires little to moderate effort to update for a different audience? Selling to the sales team but now want to sell to the finance team? It’s not usually as easy as just updating terminology. But companies can leverage what they do have (a product that works, delivery or implementation infrastructure, etc) can provide offerings that are tailored to different groups within the same company.
Atlassian, known for Jira and targeting developers and project managers, also expanded their reach in organizations with Confluence. The buyer may still be within IT, but the types of users greatly increased beyond the traditional developer/project manager functions. Salesforce.com utilizes its platform to deliver many different views of a client to the various teams within the organization ranging from sales to support to finance.
As mentioned above, cross-selling within the client base is cost-efficient. But while these are the same clients, they are potentially different buyers. What makes their lives easier? Saves them time? Makes their stakeholders happier? If you haven’t sold to these buyers yet, then it may be worth considering whether your current products could be leveraged to meet their more immediate needs.
“People don’t know what they want until you show it to them”
This scenario encompasses a wide range of situations like new entrants to an established market, companies creating a new market, inventors and passionate product people trying to disrupt a market, and much more. Perhaps one of the biggest followers of this approach is Apple, which I’ll condense into Steve Jobs’ quote, “People don’t know what they want until you show it to them.” If you fall into this category, it’s certainly not an easy road. But the rewards can be huge (as can be the downfall).
While many start-ups fall in this category, it’s important to balance the reality of trying to create something new (which often takes time) with available funds. Some of the more traditional companies have seen the importance of R&D and taking risks, and so they have built their own research areas (Google X, Amazon Lab126) and also acquired the IP and talent from scrappy start-ups.
For many products/companies under this scenario, they fell under the “they were ahead of their time” and unfortunately couldn’t get the market to recognize the value of the product in time. So while a customer isn’t always required to start the design of the product, it is still important to consider some level of market research/testing to see if it has legs enough to spend the effort in bringing it to market. As mentioned at the beginning of the article, sometimes, having a product before the customer isn’t the issue. It could be the way it goes to market. iRobot’s popular Roomba, the robotic vacuum that managed to make vacuuming a spectator sport, was launched a year after Electrolux launched their Trilobite product. But Trilobite was short-lived, presumably because it was 10 times more expensive than the Roomba! With the popularity of the Roomba, it’s clear that this was a product that was well-received, but it just needed to be at the right price point (and of course needed to work). There are many more cautionary tales such as this. So if research indicates something like pricing is the issue, perhaps the company thinks it’s important enough that it can be a loss leader. Or considerations can be made to determine how to help address costs. That’s why it’s important to know what your company’s goals and strategies are as well.
Product managers have to consider so many internal and external factors when working on a product. If you find yourself in the situation where you are asking yourself whether you should find a customer or develop the product first, consider what is the situation in which you find yourself. Know your context; it’ll hopefully help guide you to the path you want to take.