Don't Lose Sight of Value

“We're not competitor-obsessed, we're customer-obsessed. We start with what the customer needs and we work backwards.”

- Jeff Bezos

Introduction:

I recently met with two senior leaders of a scaleup, they were not doing well as they had recently made a large round of redundancies. Speaking to them, it was clear what had happened, their customers weren't buying their product at scale - but they had delivered every feature requested, and in their world their customers were always right.

During their development process, they had sought to build out features to please customers, engineering in each and every upside requested. But they had lost sight of why their customers were buying in the first place - the key values and the ROI argument - these had been inadvertently engineered out. Of two key metrics identified, in 5 years they had fallen from 72 to 10 (where higher was better); the other from 1000 to 6000 (where lower was better). They had engineered out the core advantage of the technology in search of feature requests. They had spent double digit millions on furthering the development in this period and the new product was the pride of the (now former) CEO.

This may sound like that episode of the Simpson's where Homer designs the car for his brother's company, producing a feature packed family car that exceeds the budget of the buyer and bankrupts the company. I would like to say that it's a fiction, but like a lot of the Simpson's it's actually happening in the real world.

Don't lose sight of value 👊

1. What can we define as customer value?

Customers ultimately gain something from the product they purchase, it can usually be placed in one of 3 boxes 1) financial gain 2) environmental gain 3) social gain

We normally consider financial gain as a key factor, putting forward arguments for ROI (return on investment), but this is not the be-all-and-end-all:

• Environmental gains have been significant drivers for some customers looking to establish themselves as net zero, or sustainable.

• Social gains - Harley Davidson are a good example, a Honda looks much better technologically in most aspects, but Harley brings social gain.

2. Produce and track key metrics that really matter to customers and ROI

Drive your development efforts behind key performance indicators that matter to the customer's ROI and financial model. Continually work these KPIs and understand which ones are important to the customer and which ones your technology provides unfair advantage.

Cost per unit should always be a KPI, although what a unit is could be down to variation.

Consider how you can measure other values, such as social or environmental value, and how you can continually enhance them through iterations in the product.

The answer is simple iterate product to drive improvements in customer centric metrics and ROI

3. Is it a Feature? Does it break barriers? Does it reduce resistance?

Features should drive benefits, benefits should align to these KPIs.

The exception is something that overcomes a documented or well understood barrier to adoption, or reduces resistance to adoption. Weigh these up against changes in cost and other KPIs.

Overcoming barriers is a priority, but ask if this is really a barrier for all customers, or if you're trying to make one size fits all - A 10% rise in unit cost to break down a barrier for only 10% of customers will likely not add up, unless this is an option. Sometimes it's better to find the 20% of customers that will deliver 80% of your revenue for a common product - than react to too many feature requests.

Be very wary of feature creep, especially if it impacts your whole product line and increases costs. Uncontrolled feature creep will kill your business. Failing to tackle barriers to adoption will also kill your business, unless you can target customers where there is no barrier.

4. Reverse brainstorm how you'd destroy value?

Applying the brain trust of creative talent that you have to the imaginary task of how they could destroy value might find some interesting outcomes. Usually I have found it uncovers the ways in which value has inadvertently been destroyed, and encourages the rapid redirect of behavior.

Academic spin outs doing this exercise frequently stop writing scientific papers and refocus on summerised marketing collateral.

5. Work to protect technology that gives you unfair advantages in value.

IP is your friend, especially in the right areas. Spending ruthlessly on IP protecting features is probably not a good use of funds, but building IP around your core value proposition is extremely powerful.

6. Where can I learn more?

Have a look at our reading list

To get your team obsessed with customer value, and focused on delivering success through picking the right customers, then sign up for one of our ValRes® workshops