I’ve heard all 3 of these, and I think they’re all completely wrong.

Customer development and product management are two complementary tools.  Used together, they provide a competitive advantage to any products company.

Customer development is not the secret to creating a great product.  Let me repeat that, because I’ve heard many people claim this: Customer development does not create great products.

Customer development is primarily a risk mitigation tool.

It replaces that uneasy guesswork of assuming there is a market for your idea based on:

• analyst reports
• what your competitor is doing
• the opinions of the highest-paid executive in the room

You start customer development with a hypothesis, which you are trying your damnedest to disprove. If you go in trying to prove that you were right, guess what? That’s exactly what you’ll find.

Instead, if you go in with a high degree of skepticism and a commitment to pushing beyond “yes/no” answers and vague “sounds like a good idea” statements, and still find that people are yelling/anguishing/laughing/cheering over your problem statement, then you’re safe to continue.

At this point, we move into what most of us have traditionally known as product management - envisioning requirements, prioritizing, identifying constraints, pricing, working with engineers to get the thing built.

Of course, the product manager who is also a practitioner of customer development doesn’t stop getting feedback after that initial phase — they continue talking with prospects and customers to refine and to collect more detailed feedback as the product emerges.

Customer development is also an opportunity identification tool.  If you’re a product manager in a more mature organization, you are less likely to be looking for a whole new problem to solve or a whole new product to create — your company already has customers and product lines.

It’s easy to think, “these people are already our customers; we don’t have anything else to sell them: what’s the point?”

The point is, even customers who are happily paying you may not be using the product the way you expected them to.  They may love your product — but also wish they could do X and Y.  They may not even realize that they’re doing something that is time-consuming or expensive or resource-intensive — where you could save them time, money, or people by introducing a new feature or way of using your product.

In traditional product organizations these opportunities usually come through VOC (voice of the customer) feedback.  But customers are often unable to articulate what they need, especially if it’s something they don’t even realize is a problem.  The active “pull” of customer development interviews, as opposed to the passive “push” of VOC, gets richer feedback (and guarantees that you aren’t being unduly influenced by your “squeaky wheel” customers.

Great.  From day 1, you’ll need to:

• understand your market and what problem you’re solving
• differentiate yourself
• validate that customers are willing to use / pay for your solution
• ruthlessly prioritize features
• balance long-term vision with short-term development

These are all product management skills.  This does not, of course, mean you need to hire a full-time product manager from day 1.  This role can be played by the founder, or a part-time consultant (one who works with startups – “big-company PM” skills are VERY different and largely useless to an early-stage company).

“But I can do this on my own…” Probably.  But if you’re trying to raise money or put together partnerships, realistically, you’re going to neglect the product stuff.

“But it’s my vision…” Yes.  And hiring a product manager greatly increases the chances of turning that “vision” into “shipped product.”  (Also, any startup product manager worth their salt will tell you when your vision is off-kilter and bring you the data to back that up.)

“I’ve never worked with a product manager who did anything useful...” If you really think this, there are 3 possibilities: a) you’ve been unlucky, b) you’ve worked with big-company PMs in a small company = bad skillset mismatch, or c) you’re a jerk.

OK, fine, so how do I hire a product manager?

Start with a good job description. Don’t copy from some other site or throw together a list of bullet points.  A sloppy job description is pretty much guaranteed to scare away the best people and attract the desperate and unemployed in droves.

As with any product or feature, you will not get this right the first time.  Draft a description, then show it to some friends and ask for feedback.

Read more at http://www.cindyalvarez.com/best-practices/attracting-talent-the-job-description

Ask good questions. And no, I don’t mean logic puzzles – I mean questions that actually address the candidate’s ability to do the job.  At a startup, negotiation, communication skills, and the amount of “process” that a person requires to do their job are all critical factors.

“Your company uses a customer feedback tool where users can submit product enhancement ideas and vote on them.  There is a specific feature that is by far the most popular idea among your users – but it doesn’t align with your long-term product strategy.  How do you respond to the users?”

Read about this and 7 more questions at http://www.cindyalvarez.com/psychology/8-non-useless-interview-questions-for-product-managers

Ask them to sell themselves. You wouldn’t hire a startup PM who needed to be told what to do, right?  So you probably ought to test out their ability to figure out what needs to be done and do it.

My current role at KISSmetrics started out exactly that way.  “We should work together – why don’t you suggest a project that you can do for us?”

This allowed me to:

• ask questions about the current product functionality and target market
• prioritize an appropriate project that would have the highest ‘bang for the buck’
• figure out what and when I was going to deliver
• explain how those deliverables would/should be used to most benefit the product

By the time I was done, I was really excited to join the company, because I’d seen that “you’ll own product” was not just lip-service.

I also really like these articles about startup hiring:

• “T-shaped employees” for early startups
• How to Hire a Product Manager (although I think his claim that PMs are ‘less necessary’ is outdated.  See: http://www.businessweek.com/innovate/content/jan2010/id20100120_303529.htm)

I knew what I wanted: simple setting, small diamond, excellent color/clarity.

I had thought this through – I have small hands, which means a big diamond looks disproportionate (and fake) on me.   I dress pretty casually, which means a fancy setting would look odd.  I’m a designer, so I actually notice those subtle differences in “color” and “clarity”.

And yet store after store basically told me, “You don’t want that, you want this ring.  You’re going to wear this for the rest of your life! Don’t you want better quality? A bigger stone?”  When I repeated what I wanted, they argued with me.  “This is what you want,” they would insist, and then we would walk out.

A recent article in Wired talks about the “Good-Enough” revolution – the shocking discovery that companies who focus on “quality” are losing ground to those who produce simple, convenient, “good-enough” products:

“The stripped-down camcorder—like the Single Use Digital Camera—had lots of downsides. It captured relatively low-quality 640 x 480 footage… It had a minuscule viewing screen, no color-adjustment features, and only the most rudimentary controls. It didn’t even have an optical zoom. But it was small (slightly bigger than a pack of smokes), inexpensive ($150, compared with $800 for a midpriced Sony), and so simple to operate—from recording to uploading—that pretty much anyone could figure it out in roughly 6.7 seconds.”  The Good-Enough Revolution: When Cheap and Simple is Just Fine

The Flip, of course, has been wildly successful.  This came as a shock to video camera competitors – how could this clearly inferior product be succeeding?

The problem is thinking of “quality” as a property that can be defined objectively.  Most megapixels, biggest, fastest, shiniest.   Sometimes this definition of quality aligns with the customer’s definition of quality.  Many times, it doesn’t.

You don’t get to define quality – your customer does.  When they have a need, and you meet it, that’s where quality is created.   And that’s where the Wired article misses the point:

“To some, it looks like the crapification of everything.”

and

“What has happened with the MP3 format and other Good Enough technologies is that the qualities we value have simply changed. And the change is so profound that the old measures have almost lost their meaning. Call it the MP3 effect.”

To be sure, some consumers miss the objective measures of quality. (My husband can hear the worlds of difference between music played on his high-end audio equipment and groans at my cheerful adoption of multiple iPods.)  But most people don’t care – and they never did.

“Good enough” suggests that somehow the consumer has changed due to the influence of technology.  It suggests that consumers are accepting new levels of compromise.

But the consumer hasn’t changed – what has changed is that there are more options, and they includes products made by companies who actually understand what their customers want.

“With the MP3 and the Flip Camera and Zoho Writer (and many others), it appears convenience is a driving attribute. So while all may seem to have less in terms of the type of “quality” that some like to focus on, they ignore what the market actually wants, which appears to be convenience.”  It’s Not The ‘Good Enough’ Revolution; It’s Recognizing What The Consumer Really Wants

It’s about finding the attribute that people care about – and delivering it.  That’s the true definition of “quality”.  A customer has a need, you fill it, they’re happy.

“But wait,” you say, “customers aren’t good at telling you what they need. Henry Ford himself said that if he’d listened to customers, they would’ve told him to sell a faster horse.”  This is true.  It’s not as simple as asking “what do you want?” and writing it down verbatim into a product spec.

In the case of the Flip, if you had shown the average consumer 2 lists of features – one short and one long – and asked which they preferred, people would pick the long list. If you asked a focus group to brainstorm what a portable video camera needed, they would come up with their own long list.  On paper, the Flip loses every time.

The “revolution” in question is not that products need only be “good enough”, it’s a move away from a product development philosophy to a customer development philosophy.  It’s a recognition that you don’t hold all the answers.

You devise the hypotheses, you test them, and from observing and listening and questioning, you tease out “what people need”.  You give them something tangible to react to, watch them and learn, build some more – until you discover what that critical driver is.  Convenience (iPod, Flip). Consistency (Starbucks, Apple UI).  Empowerment/control (Mint, Head First books).   Build it and stay true to it.

–

As for my engagement ring, we finally walked into a store where I explained what I wanted and the jeweler simply said, “OK.”  I found a ring that was almost perfect – but the stone wasn’t quite right.  “You know what you want,” he said, “here’s what you do, you order the diamond online.  Pick exactly what you want for the stone, size, color, etc., bring it here, and we’ll build you this setting to go around it.”

All the other jewelers had taken the sentence “Since I’m going to wear this for the rest of my life,” and finished it for me, “you want the biggest, most expensive stone possible.”  We’re the experts, this is what you want.  How insulting!

But finally this last guy “got it”; he listened and heard “Since I’m going to wear this for the rest of my life” and then he let me finish, “I want it to be exactly what I want.”   My definition of quality.

The best laid schemes of product managers and sales
Go often askew,
And leaves us nothing but grief and pain,
For promised impressive product forecasts!

With apologies to Robert Burns, I’ve seen a lot of product forecasts go askew, even for fairly mature product/market matches.

The forecasts seemed to have a strong foundation – take data-backed estimates of the addressable and attainable market size, then chop off a good chunk to be conservative.  Working with sales to get their estimate of what they can sell, then chop off a good chunk of that to be conservative.  Make sure that there’s nothing blocking engineering from meeting demand.

And yet, six months later, the actual numbers fall far short of even the conservative plan.

Why?  Because forecasting isn’t all about you and your company.

Even if your product is effective, priced appropriately, and solves a problem for your customer, that doesn’t guarantee a sale.

There are 5 strong decision points that happen on the customer side.  Some of these you can influence; some you just have to plan around.

What’s more important than this product?

Years ago, the Sarbanes-Oxley Act introduced huge delays into the sales of the products I was working with then.  The conversation went something like, “will you help us be SOX-compliant? no, you’re completely unrelated? OK, we’ll get back to you next year.”  This works both ways – I also saw customers speed up purchases and upgrades when we were able to help them achieve ADA/accessibility compliance.  When legal or IT compliance issues arise, customers will have tunnel vision and only see the vendors/products that help them settle those issues.

Product Manager: It’s probably not in your control to make your product help with whatever the critical issue of the moment is, but you can plan for how it will speed or slow adoption.

Whose budget does it come out of?

Is there a clear division owner who will be paying for this product?  If the benefits of your product span multiple divisions within a company, that seems like it would be an objectively good thing, right?   But more than likely, it creates tension over who pays for it and slows down your sales process.

Does their budget have enough “liquidity” to make this purchase?  The division you’re selling into may have a large budget … that has already been allocated to fixed expenses.   It’s not uncommon to see companies spending tens of thousands on contractors but be unable to justify spending half that amount on software.

Product Manager: Understand how your customers’ budgets work.  If there’s a way to restructure pricing to make it easier for them to get a check signed, explore those options.  If there’s a way to more clearly target a single division, do it.

How long will this take to deploy? / How long until we see results?

Like you, your customers have goals and objectives that they are evaluated on.  It’s in their best interest to prioritize projects that they can complete and show success on in time for their performance review.  If it’s unclear that your product will be deployed in that time period, you become a less attractive option to back.

Product Manager: Identify the variables that affect deployment time. Look for places where your company can offer services to shorten that time.  Explore incentives or a guarantee if certain parts of the deployment exceed X period of time.

Who else is using this? What results have they seen?

Assuming you have beta customers, has enough time elapsed for them to see results yet?  Most companies aren’t ready to make a change until they’ve seen it work for someone else.   You may have deployed the product with Beta Customer X, but have they seen results yet?  Cost-saving and time-saving products in particular may require a few months’ ramp-up before the savings are obvious.

You can’t assume that Beta Customer X is a reference customer as soon as their software is deployed; you have to wait until the results are in.

Product Manager: Plan for a delay if it will take 3 months for Beta Customer X to show those awesome cost-savings.  Look for ways to accelerate the time between installation and results.

When is our next upgrade planned for?

At larger companies, planned upgrades are rare and set in stone.  Many of the customers I worked with at Yodlee had 1-2 upgrade releases per year.  If you missed the window, you were on ice for another six months, regardless of how awesome your product was.

Upgrade cycles are getting shorter, thankfully.  But smaller companies who upgrade more frequently are also more likely to constrain the size of each release.  This puts you back to the first question, What’s more important than this product? You may still be in a queue.

Product Manager: Know your customers’ upgrade cycles.  Know their release sizes.  If your product is larger than what they’re comfortable they’re comfortable releasing, find a way to break it up into pieces.  If your customer isn’t going to release for another five months, look for ways that you can help them prepare (training, data migration, etc.) so that you’re set when the time comes.

When you’re a product manager joining a new organization, you inherit a whole slate of existing customers. However, you’ll be the one responsible for building a product that creates contract renewals and new customers.

So it’s critical for you to push beyond asking “Who are our most important customers?” and ask “Why are they so important for us?”

Potentially misguided answers:

They’re a huge revenue source (B2B):

What percentage of our revenues does [Customer X] contribute?  While a contract with a lot of zeroes on it means money in the bank, it also means risk.  Does the company rely too heavily on that single source of income?

Having one or a few customers providing a large percentage of your revenues gives them a lot of power over you – power that translates into demanding new one-off features, hours of customer support time, or hefty discounts on professional services rates.

Speaking of professional services: does that represent a big chunk of how these customers spend their money?  ProServe can be a great money maker, but it’s also harder to scale and can be hefty on opportunity costs.  If your best people are doing custom work for this “great customer”, they’re not concentrating on the product improvements that will bring in the next twenty or fifty customers.

They have a great brand name (B2B):

But do they have enough in common with other potential customers?  A recognizable name gives you instant credibility, but it doesn’t necessarily translate into the next sale.

“[Company X] is definitely our best customer,” said our beaming sales rep.

“Great! How much are they paying us?”

“Well, they aren’t. But we have the opportunity to put together a revenue sharing deal with them in the future – as long as we can improve performance–”

“Wait, what’s wrong with their performance?  Isn’t the product working for them?”

“Of course! They’re very excited about us.  It’s just that they probably didn’t deploy it in the best way…”

In this case, having this big-name customer got us initial meetings, but once those prospects took a closer look, we didn’t get a second one. Time spent keeping the “big fish” happy would’ve been better spent finding a more appropriate reference customer and making everything work beautifully for them.

I’ve also heard “you’ve done a great job with [Customer X], but we’re totally different” many times.  For example, a solution that worked for RyanAir – a successful but definitely non-traditional airline – may actually deter a high-touch, full-price airline like Singapore Airlines.

They’re so easy to work with (B2B, B2C):

How, exactly? This often means one of two things: a) they never bother us, or b) they tell us exactly what they need and we do it.  Neither one is good.

When you don’t hear from customers, it doesn’t mean they’re fully satisfied. It means you’re not that important to them: you’re not mentioned in internal meetings, they aren’t worried about incorporating you into their next release, they forgot that you’re there solving whatever problem you solve.

“Ugh, stupid gym bill!”

“I didn’t even know you belonged to a gym.”

“I hardly ever go – the cardio machines are always full, and the classes start way earlier than I get off work.  Then I feel too guilty to complain. I should just cancel my membership.  Whatever you do, don’t join [Gym X].”

When customers tell you exactly what they need and you build it, you’re missing an opportunity to understand a wider market need.  Customers who work with you to articulate their problems provide great insight into where to look for the next killer feature; customers who tell you what to do keep you tunnel-visioned.

They’re obsessed with our product (B2C):

What’s the ROI on these customers?  Are they profitable enough to compensate for the additional attention they require?

Most companies would love to have rabid fanatic customers like Apple, Harley, or Starbucks, but don’t realize how expensive those customers are.  They generate more customer service calls. They demand more features. Their expectations are sky-high … and they don’t hesitate to spread the word if you let them down.  In some cases, their presence may even “scare off” more mainstream and lower-maintenance customers.

Answers You Want to Hear

We solve a big problem for them (B2B, B2C):

When your product/company solves a painful problem for a customer, you create more partnership opportunities.  You’re empowered to ask more questions, and they’re happy to provide you with information in the hopes that it will further diminish their “pains”.

Just make sure that the “big need” you’re filling is, in fact, something that you’re good at and can charge enough for.

They always want to know what more we can do for them (B2B, B2C):

When you can be integrated into multiple points within a company, or within a customer’s life, it’s hard for them to un-integrate you.  That equals revenue security, and increases the chances that they’ll look to you when they have a new problem that needs solving.

“We have an RFP from [Company X] – this product is on your roadmap, isn’t it?”

“Yes – but it’s not ready yet and our competitors already have an offering.  Are we really in the running for this?”

“Definitely.  Since we’re already providing them [Product X] and [Service X], they’d rather stick with us than integrate another vendor.  This could be a great partnership opportunity – we’d learn from them and they’d fund part of our product development.”

They represent exactly the [industry/demographic] we’re targeting (B2B, B2C):

The most reference-able customer will always be one where future potential customers look at them and say “they’re like me!”  Brand-name recognizability is trumped by situation-type or industry-type recognizability.

Local credit unions have all heard of Bank of America, but they’re more likely to look at other local credit unions when deciding what technology decision to make.  Diet-conscious users have all heard of Jillian Michaels, but they’re more likely to ask their friend who lost twenty pounds what online tools they used.

They use our product really well (B2B):

Did they deploy it well? Anyone who has worked in enterprise software knows that 50% (or more) of a customer’s success with your product depends on how they use it.  If your product is not integrated into their processes, or their employees are not trained, or usability guidelines not followed, it will look as though your product is ineffective.

Even if the customer is satisfied with their results, they’re unlikely to look impressive enough to win over a new prospect.  At best, you’ll win another deal… but risk having this new customer go through the same shoddy deployment process that guarantees them mediocre results.

They love to talk about us (B2B, B2C):

You can usually convince a satisfied customer to be a reference for you, but there’s nothing more valuable than one who evangelizes you on their own. A company who mentions you in their press releases or marketing, or a user who blogs about you and recommends you to friends — gives you credibility and authenticity.

In short, benefits need to go both ways.  It’s easy to get so caught up in providing value to your customers that you don’t stop to analyze what value they’re providing to you.  Cash is great, but when you’re building a business, it’s not enough.

If your “best customers” aren’t, look at other existing customers to see if they’re a more strategic fit.  Figure out who would be the “ideal customer” – and check with your sales team to compare that with their prospects.

Anatomy of a bad user experience – step by step:

1. Read an article about Hunch, remembered that I had a beta account.
2. Thought of a question that I wanted an answer to.
3. Went to hunch.com and tried to type it in – you CANNOT ask a new question.  If what you typed doesn’t match a pre-existing topic, there is no call to action to create one.
4. Logged in – maybe only logged-in people can create a topic?
5. Clicked on “Create new topic”
6. Got the above image – basically “no, you can’t do what you want until you jump through these hoops.”

I understand that the system needs to be “seeded” with information.  This is not the way to do it.

Any product where the first user experience actually uses the words “Come back when you’re done” needs an immediate rethinking.

Silence is deadly.  Lack of information leads people to imagine the worst-case scenario.

This is why, even if your new strategy is humming along beautifully and you’re hitting your early risk-reduction milestones, you can be derailed by FUD.

A customer writes a lengthy blog post theorizing that the lack of updates to the old site means you’re going out of business.   Sales reports that existing clients are getting conflicting messages from the company.  Internally, some teams feel like they’re doing a ton of work and haven’t heard about any payoff yet. Competitors are gunning for existing customers, planting the seeds of doubt that you may not have a long-term strategy.

This can all be avoided by Momentum-Building Communication.  Very simply, make it your practice to share updates at minimum:

• Once a week internally
• Twice a month externally

It takes time to put together a meaningful update.  But I’ve found that for most product managers, it’s not the time so much as figuring out what to say!

Here are some ideas for information that is memorable, useful, and builds excitement:

Share with Internal Teams, External Customers:

• User Quotes – every time you send out a simple survey, include an optional free-form question about how customers use your product.  (Tip: “How do you use” will get more interesting responses than “What do you like”)
• % Successful Registrations – set up a simple “funnel” in Google Analytics to see how many people made it past your landing page to the “registration success” page.  (Don’t be depressed if this number isn’t near 100% – a “good” percentage for many types of services is 40-50%!)
• % Successful Conversions (upgrades, purchases, completing a core action)  – hopefully these metrics were built into your product.  If not, get thee to a change request spec, stat.  (Again, remember your comparison points – the cart abandonment rate was around 40% industry-wide, last I checked.)
• Login Frequency - Are people coming back more often?  For internal sharing, be sure to take the next step to explain how more usage -> more revenues.
• Analyst or Tech Blog posts that validate your concept – You probably already have Google Alerts set up for your company name and product name.  Add alerts for your “concept” (i.e. “recommendations technology” or “personal financial management” as well to help find trending articles)
• Spotlight on a customer suggestion that was implemented - Spread the credit around! Recognize the customer(s) who made the suggestion, talk about why it was a great idea, and show off some screenshots of the newly-implemented piece.  It will prove that you listen to customer feedback, and tying it back to the “why” will implicitly remind customers that their ideas are evaluated in terms of the whole business.
• Spotlight on a problem that was fixed – We screwed up, here’s how we fixed it.  Honesty (sadly!) amazes customers because of its’ relative rarity.

Share Internally:

• Customer/Prospects Quotes – What a great excuse to talk with your field sales team!  Ask them how existing customers and prospects are responding to the new direction.  If customers are excited, pass that along.  If not, share that news – as well as how you’re going to work with them to turn it around.  Either way, give credit to your sales folks and help build that relationship.
• Efficiency Improvements (by % or number of hours) – Talk to your engineering and QA teams to understand the progress they’re most proud of – and then explain how that helps the entire business.  Increased automation of test cases, shortened time to bug resolutions, or creation of standard libraries may not sound exciting – but they translate into faster turnaround of revenue-driving products and happier customers.
• Ratio of Positive to Negative Comments – Whether this is a “good” or “bad” number, report on it so that you can show people the trend over time.  (Immediately after any launch, comments are often skewed negative; it’s exciting when six weeks later you can show a big turnaround.)  You can get this number from a combination of customer surveys, VOC from customer service reps, and your customer feedback channels.
• Spotlight on customer suggestions/issues that will NOT be implemented (and why) – You won’t build everything that everyone asks for – and that’s a good thing.  Highlight some ideas that are not core to your business and why they won’t increase revenues/customers/deals closed.   This helps keep everyone focused.
• Summary of resolved issues / outstanding issues - Again, the beauty of this is trending over time.  The first time you report on this, it may sound like an uphill battle – but in a few weeks you’ll be able to show significant progress.  When everyone is heads-down working, it’s hard to realize how much has been accomplished.  It’s your job as product manager to make that tangible and share credit with everyone.
• Net Promoter Score – best as a standalone survey.  I prefer to extend this to TWO questions, the default “Would you recommend this product to others?” as well as “WHY would you recommend/not recommend this product to others?”  You can make the latter optional, but I’ve found people with strong opinions usually answer it – and those are the people either attracting or repelling new customers for you.

You’ll notice that the “share internally” list includes some bad as well as good.  That’s an important part of building the momentum – giving everyone enough of a “big picture” vision that they understand the good and the bad.

If you only cheerlead, you’re setting folks up to be blindsided by bad news later.  You want them to know the bad, be able to refute the bad or explain how it’s getting better, and counter it with some good.

So, pick 2-3 of the above.  Write a SHORT update now and share it.  Then set up reminders on your calendar so you’ll remember to do it again.  And again.  And again.

At some point you can decrease the frequency to once a month.  But there’s really never a finish line, is there?  That’s the fun part.

This post is the final part in a series.  Missed the earlier posts? Go back and read part 1, part 2,  part 3.

You’ve got questions, answers, metrics.  You’ve picked the changes you’re going to make and defined how you will evaluate their success.  Your product management organization is excited and you’ve got executive buy-in for moving full speed ahead.

But wait – no one likes change.  The other teams in your company are going to have objections.  Existing users are going to complain.  You’ll be tempted to refine your vision under the radar for awhile, but that’s a recipe for failure. 

Your job as a fast-failing product manager is to frontload the “no’s”.

Here’s how you start:

Internally, Bring Everyone in on the Story

After you’ve been planning this product strategy shift for weeks, it may feel like it’s “old news” throughout your company.  It’s not.

The majority of the cross-functional teams  have no idea that what they’ve been working so hard on is not putting the company on the path to success.   If you don’t share the “big picture” with them, your changes will seem arbitrary and disconnected.  Most people won’t actively try to sabotage your plans, but working with teams who feel undervalued or excluded will still doom your product, albeit more slowly.

You don’t need (or want) a long PowerPoint presentation.  Here’s what you need to cover:

• Here’s what we set out to do (Build X and sell it to people)
• This is what we built and what’s good about it (X is a great product that does these things and has thousands of happy users)
• Here’s why this isn’t enough to make the company successful (Thousands of happy users isn’t enough, even if they paid us 5x as much.  We need millions of users.)
• Here’s what we’re doing to do next (If we build Y and Z and change our sales strategy in this way, we will be able to attract millions of users.)
• We’re still working on the “how” (I will be meeting with teams individually to get your feedback, answer questions, and get you to challenge the assumptions I’m making)

(Some similar thoughts on another blog, from a testing perspective: How to Get Traction in Your Team)

Externally, Invite Customers to Be Part of Change

Even if your customers can’t see any changes to your product or website, they are likely to sense that something’s going on.  Maybe bugs that used to be fixed overnight are lingering a bit longer, or maybe they notice that the “feel” of your marketing newsletters has changed.

It doesn’t matter why.  What does matter is that they’re likely to stop recommending you to friends, log in less frequently, or surmise on their blogs that you’re going under.

You can easily avoid this by giving customers a heads-up that some things will be changing, that you’ll keep them informed, and that you will be asking for feedback.

In my experience, even a customer who disagrees vehemently with every change you make can be retained as a customer if they feel that you have kept them informed and given them the chance to preview what’s coming.

You’ll need a little bit of prep work before you go public:

• Figure out how much feedback you can realistically respond to. For example, if you have 10,000 active users and 1% take the time to send you a freeform email, that’s 100 emails – a manageable number to read and respond to. If you have 10,000,000 users, you can’t possibly read 100,000 emails or messageboard posts – so you’ll need to ask for feedback in a more structured manner such as surveys or polls or risk looking unresponsive.
• Create an announcement-only mailing list that customers can subscribe to. This is not for general-purpose discussion – it’s a one-way list for you to announce updates, solicit participants for usability testing, send out surveys.
• Draft your “things are changing” message and test it out on 2-3 hand-picked customers. Make sure it addresses their concerns (“will my data go away?”, “if I have to start paying, how much warning will I have?”, etc.) and adjust as needed.
• Create a new home for the new product changes. Set up a dedicated, separate URL for announcements and later, mockups, prototypes, and the beta.  This gives you the freedom to “play by different rules” – restricting access or providing more access, setting up test databases or just having more downtime.

Validate as early and often as possible

It’s probably not a good idea to post your entire roadmap and requirements online, but that doesn’t mean you shouldn’t get feedback from the very earliest stages.  Use that contact information you have to invite a small sample of users to preview your earliest mockups.  The most secure method is to physically bring them to your offices and show them hard-copy sketches, but the easiest way is to send them a URL to look at, give them a call, and ask some questions.

This doesn’t have to take more than 30 minutes per person – and even listening to just 2 people can provide a valuable external perspective.  Every product manager has an hour to invest in validating their product.

What I did at Yodlee, which worked incredibly well, was to put together a click-through demo of how we envisioned the new product, and present it via webinar to a group of existing users.   It gave them something visual to react to, which resulted in them asking excellent, challenging questions.  As that click-through demo was refined, I turned it into a Flash movie that we shared with more and more users.

And remember – it’s not just users!  Many product managers are hesitant to share their early prototypes with sales or customers, for fear they’ll be committed to rushing something up the roadmap.  But it’s an invaluable source of feedback (remember, you’re front-loading the “no’s”).

So don’t hand off your prototypes to sales – volunteer yourself to give presentations to a few key customers.  Since you’re a product manager, you can set the tone as “you’re a valuable partner to us” vs. “here’s what we want to sell you”.  I’ve learned about a lot of potential dealbreaker/dealmaker features early by doing this.

Plan for transition

I cannot stress enough how important this is.  There are lots of questions – internally, start asking them now.

• What are the deltas between the user experience now and what they’ll experience with the new product?
• Are there reductions in functionality?
• Does data need to be migrated?
• Are there customizations to the old product that may not translate seamlessly to the new one?
• Will new features require additional bandwidth/processing power/database hits?
• If you’re providing a SaaS or B2B2C product, how will the upgrade affect the customer in the middle?

The mistake many product managers make is thinking, build the product first, then we’ll worry about upgrades.  Wrong!  If you don’t think about upgrades, you may never get to show off that awesome product you built.  For enterprise customers, the upgrade is the product.  Treat it as such.

This post is Part 3 in a series.  Read Part 1, Part 2. (Stay tuned for Part 4 next week!)

You’ve seen the signs and know you need to change direction in order to have a successful product.  But how do you select the best possible next experiment?

There’s no sense in failing fast if you aren’t able to learn from your failed experiment.  And that’s another rathole that well-intentioned product managers fall into.  Everyone wants to learn “as much as possible” from a failed project; what they don’t do is follow a rigorous checklist designed to shine a light on the specific critical elements that stand in the way of success.  Postmortem meetings generate a lot of opinions.  Non-focused user surveys generate a lot of opinions.  Neither of these are likely to generate the right next step.

This is a checklist of questions to ask based on my experiences in product strategy changes.   Is this a lot of questions?  Yes!  And you should know the answer to all of them.  I can’t guarantee it’s complete, but it’s a good framework for documenting and challenging your assumptions.  As you answer these questions, it will become clearer what user and market research you need in order to map your next move.

Questions About Customers

• If you acquire 100% of your target customer base at your current monetization per user, would you have a profitable product?
• Are your current customers generating profits?  (If they are generating less revenue than it costs to support them, the answer is “no”.  If they are not generating revenues, the answer is “no”.)
• Have your customers paid for your product?  (If the answer is “no”, continue to the next, vastly less reliable question)
• Have your customers demonstrated willingness to pay for your product?
• Are your customers able to pay for your product?
• Is there room for your customers to “grow” into more committed, profitable customers by using more features or premium services?
• Have your customers demonstrated loyalty via low attrition rates, word of mouth recommendations, referrals?

Questions About Product

• Does your product solve a problem that your customers are motivated to solve (and have demonstrated this motivation through investing time or money)?
• Can you continue to offer your product with the people you have and the money you’re making?  (Or does “something” need to happen to convert people into profits?)
• If your customer base doubled/tripled/grew exponentially, would you be able to continue offering your product without fundamentally altering the features or pricing?
• Is your product winning more customers away from the alternatives? (Alternatives are not always other products – “live with the problem” and “do it manually/offline” are entirely valid alternatives)
• What percentage of people convert to customers? (Complete registration, purchase your product, begin using)
• What percentage of customers successfully complete a desirable “advanced” action? (For example, in a bill pay product, you want customers to complete the full process of adding a biller and making a payment.)
• Have you watched users successfully complete the key tasks in your product? (Analytics may show that users are completing an action successfully, even when watching them in a user testing situation reveals that it takes them too many clicks and they are getting progressively more frustrated.)

Questions About Pricing

• Do your customers have limitations which may affect the way in which they are able to pay for your product? (For example, paying in one lump sum may be desirable in order to zero out a specific budget line item; or paying monthly fees may eliminate the need to get management spending approvals)
• Is the amount you are charging adequate to cover sunk costs such as one-time deployments?
• Is the amount you are charging adequate to cover ongoing costs such as customer service?
• Do your customers have variable needs for services and/or features such that tiered pricing would make sense?
• Have customers expressed interest in a different pricing plan (subscription vs. one-time, base plus usage, etc.)
• If you are not directly charging customers, is your revenue dependent on a third-party factor? (For example, ad-supported models are dependent on ad CPMs)

Questions About Distribution

• How many customers have found out about your product?
• What is your acquisition cost per customer?
• What percentage of your customers have referred a customer, blogged or twittered about you, or invited friends?   (For a viral distribution strategy, each customer must share the product with > 1.0 people)
• What incentive do your customers have to talk about your product?
• Are there obstacles to people finding your product?  (For example, site downtime, required to register before any preview, open by invitation-only, hard-to-remember URL?)

Questions About Brand

• Can your customers spell and pronounce your product name?
• Are you free from trademark issues so that you can market under that product name?
• Does your product name “match” your intended customer audience? (This isn’t always a blocker, but having a “fun-sounding” name when you’re selling to enterprise customers can be another obstacle to overcome.)
• Does your product look-and-feel “match” your intended customer audience?  (Hard-core computer gamers don’t trust a white-background website with calm blue accents; investors shopping for a new brokerage don’t trust a black-background website with red text.)
• Are your customers able to articulate your value proposition?  If you ask them why to use your product, does their answer match your pitch?
• Do the associations that people (customers and non-customers) have with your brand name and look-and-feel match the “feel” that you want the product to convey?

This post is Part 2 in a series.  Read Part 1. (Stay tuned for Part 3 next week!)

This morning on Twitter, @cheeky_geeky complained that it was too much hassle to reset the password on his Washington Post account.  @washingtonpost ‘s reply was basically a defensive, You have to log in on other sites too, why are you picking on us?

Is that productive?  No.

The truth is, they need logged-in users because having some demographic data makes you a more valuable audience member to sell ads to.  I think most users are okay with that – we know you have to sell ads.

So the question might be, how else could we get information about this user?  Maybe, instead of logging in, you ask the user to answer 3 quick demographic questions.  Voila! Now you know something about them, your advertisers know something about them, and they can proceed to read your content without a lot of hassle.

@washingtonpost could propose a solution like this over Twitter, and get real user validation within minutes.  It would take time to put this into action, but it would be a step in the right direction.

It might even go further: what if their loyal users were willing to share more demographic data about themselves?  Faced with the very real threat that their favorite publications will go away entirely, at least some visitors will be willing to share their zip code and profession.  Is it enough? Who knows?  But no one will know unless someone starts asking.

Related articles:

The Arrogance of Newspapers is Amazing

5 Companies that are Re-inventing Media