Are you working in a business where single customer deals are driving priorities in development? Does it sometimes feel like it doesn’t matter what’s desirable for the product and the wider market, the business assigns higher importance to the next customer deal?
We see this happening in start-ups where the next deal results in a ‘pivot’ that sets the business in a new direction (as does the next deal and the next…). But it also happens in mature businesses where the next deal is a big chunk of money, perhaps millions, and it’s oh so tempting to take the money and change development priorities to make sure that the custom solution demanded gets delivered.
Whilst we all want a ‘can do’ culture in which we’re responsive and agile, going down the custom route provides short-term gain whilst storing up pain for the future.
Each custom deal, taken in isolation, might make sense. It means a new contract has been signed which brings in some money and makes people feel good, it keeps a customer happy and maybe even gives you a new reference for future deals.
But it’s too easy to ignore the downsides…
The development of ‘product’ needed for multiple customers (maybe existing customers) gets delayed while the best people are pulled onto building and delivering custom solutions (usually to tight timescales).
A culture of ‘customer-first’ means Sales don’t have to learn what’s possible or best for the business but feel free to sell whatever their customer wants – selling ‘futures’ or ‘the customer wish list’ rather than ‘what’s on the truck’.
Deployment and support must deal with yet another variant which is time consuming, messy and expensive, potentially leading to multiple code streams and a fragmented operating model.
Profitability on these bespoke deals either doesn’t get measured or is measured incorrectly because costs are not allocated properly across commercial deals.
And, product launches start to take years rather than months with costs spiraling out of control.
Over the long-term, these downsides can cripple the company’s ability to profitably serve its markets. For that reason, many companies we work with are making the transition ‘from projects to products’.
It’s a well-trodden path but there are many challenges along the way and the purpose of this blog is to share some lessons learned.
There are 5 key things to get right:
• The culture must change: The culture that allows Sales (or Senior Management) to sell whatever the customer requests needs to go. A key tactic to support this is to highlight and communicate the impact that comes from shifting current plans to accommodate custom projects so stakeholders recognize the ‘pain’ to the business from pursuing custom requirements. This cultural shift needs to be led by the most Senior Management. There has to be a realization that saying Yes to something means saying No to something else.
• Measure behavior: The shift from selling projects to selling products needs to be measured and rewarded. Targets should be set (usually by Senior Management) for moving from projects to products. For example, if you currently do 80% projects and 20% product then set a target to change the balance to, for example, 60% project and 40% product next year (or 20% project and 80% product if you think that’s feasible). It needs to be made harder for the front end of the business to persuade the business to create a custom project than it is for them to sell what’s already available. Review the real costs and profitability of those large complex deals … they may be high revenue, but what about margin and the impact on the wider business?
• Improve your sales training and support: Whoever is doing the selling needs to know the portfolio, to be able to position and sell the value of what’s available. That takes training and it takes sales skills – some of the sales team might not have the skills they need.
The product managers’ role is to instill enthusiasm in Sales to sell the product and then equip them to do so. Yet, in some companies, product information is woefully inadequate with poor descriptions of what’s available, lack of competitive insight, no clear understanding of what customers really value, a lack of clarity on target customers and on the key messages that will get them interested.
• Put product people in the driving seat: A common factor we see in project-oriented businesses is that product managers are bypassed. We often see Salespeople going directly to Development to get an estimate for effort and delivery timescales. Development is keen to help (as they want to build stuff that’s valued by customers). Senior Management then gets told about this great opportunity and that Development is supportive. A margin gets added and the customer gets an offer for the custom work. Product managers might or might not get told what’s happened but even if they are, it’s often too late to influence the decision.
• Get ahead with your market understanding: You should be doing proactive research to try and understand where the market is heading in advance of these customer requirements coming in. This allows you to create the governance where you can say ‘no’ to things that are only relevant to a few customers and focus on things that are valued by the wider market where the opportunity is much bigger.
Product Management can have a reputation for being the ‘sales prevention department’. The implication is that we don’t care about commercial success. Of course, that should not be true – we should care passionately about the commercial success of our products. But we have a longer-term view than sales teams and that means that we should say ‘no’ to individual deals that would delay us from product enhancements aimed at meeting the needs of the broader market.
This might be contentious but sometimes there needs to be a formal block on Development having one-to-one discussions with Sales. A better model is for a salesperson with a custom request to engage with technical pre-sales (if that team exists) who may be able to steer the customer back to a standard offering. If that doesn’t work then they talk to the product manager. The product manager can say if what’s been requested is on the roadmap, can decide if a roadmap item can be pulled forward and can propose alternate solutions. And, they can also say ‘no’ – if what that customer wants isn’t as important as what’s on the roadmap. There are tools that can help with this process – see our blog on Roadmap Prioritization.
Transitioning from a project to product orientation isn’t without pain but it will lead to better long-term outcomes:
- Faster, more reliable deliveries of product
- Better alignment and efficiency across the business by selling what’s available and delivering what’s been sold
- Taking control of the product strategy rather than being led by the customers who shout first or loudest
- Better profits through fully embracing the ‘build once, sell many times’ philosophy
Are you in the process of making this transition? Have you just started?
If you need some help then please get in touch at [email protected]
Director, Product Focus
Join the conversation - 1 reply
Thanks Ian and Andrew. This is the perennial product management predicament. Having been part of product management for over 20 years, to some extent I’ve seen this in every company in which I’ve worked. We have to acknowledge that Sales and Development often wield the big department budget power and while cultures can vary size still matters.
My only workable defence has been the creation of live business cases and product plans (like an on-going business case / plan for a product or product line). Why? Because when a big sales deal comes in, I need a credible document to hand to help my boss understand the quantifiable downside. That is, I need to show him or her (and quickly) that if we take out resource X to work on customer deal Y then product Z will go back 8 weeks. I then need to explain what that 8 weeks does to the cash position. This isn’t always just fiddling with Excel(R) but may need an aspect of allowing our competition to steal the market, so the impact may jeopardise the whole business case.
In brief, it’s our job to show them the money.