Product-Led vs Customer-Led? It's About Balance

 

By JANA PAULECH

It’s no secret that at Brainmates we see product management as the engine of growth in every organisation. This means that we see a ‘product-led’ direction as the path that modern organisations should follow to achieve sustainable and innovative growth.

We talk about product-led thinking, we have a Product-Led Program, and we even advocate to senior executives and boards across Australia and New Zealand that being product-led is the secret sauce of growth.

But, as many executives have in the past, you may ask yourself why product-led?

Don’t we want to be ‘customer-led’?

This gets to a fundamental misunderstanding. Product-led does put customers at the heart of decision-making, but customers are only half of the equation.

Product-Led Is About Balance

Product-led is about balancing customer and organisational value. Creating great outcomes for the customer and delivering great outcomes for the organisation.

-This balance avoids the pitfall of solving the wrong customer problems – ones that aren’t really valuable for the organisation to solve.

If you have ever asked the question “why are we building this”, and the only answer was “because XYZ customer wants it”, you would understand what happens if we don’t have balance when considering customer needs. It makes for products with no realisable market potential as they are built for one customer who yells the loudest.

Balancing both sides of this equation necessitates you knowing a LOT more about your customers than you may think.

Not only do we need to know their problem, but also how painful the problem is.

How many other similar customers (in our realisable target market) have this problem?

Is it sufficiently painful that they will exchange something of value with us to solve it for them?

How much would they exchange?

How often?

Being a product-led organisation means your whole organisation aligns around this balance of customer and organisational value. At a more tangible level for product leaders, it means your teams have the skillsets of customer research and commercial acumen in balance as they discover and communicate product opportunities.

Less than 50% of product teams actually engage with their customers.

Engaging with customers directly, continuously and meaningfully is still the best way to gain a shared understanding of their needs, and is essential to being truly product-led.

Product-Led Is About Customer Research

‘Know your customer’ – or some version of this – is the core tenant of many product practice theories, and most product teams think they do indeed know their customers.

 

In a recent study, over 50% of product teams believed they had a shared understanding of customer needs. However, 69% of them also said that the products and features they released were not consistently well received by customers.

 

This may have to do with the fact that less than half of product teams actually engage with their customers.

 

Engaging with customers directly, continuously and meaningfully is still the best way to gain a shared understanding of their needs and is essential to being truly product-led.

 

But how do we do this?

 

The three best ways are:

 

• Directly – Actually talk to them! Using product analytics, A/B & multivariate testing and other indirect, quantitative measures is important but not a substitute for actually talking to them. The old adage that numbers can tell you ‘what’ but not ‘why’ only scratches the surface of this – the colour and empathy you get from 5 minutes with an actual customer can never be expressed in numbers.

 

• Continuously – Make talking to customers a habit, and part of your weekly process. This ensures you are walking the talk and truly understanding the needs of customers. It also means you aren’t only talking to one or two customers, but many, to not skew research to the ‘best’ or ‘loudest’ customers.

 

• Meaningfully – being considerate of how you engage customers, and being planned and structured is essential to getting meaningful insight from customer research. Unstructured research is good, but a few minutes of effort to put together a research objective and a few questions will make it even more meaningful. Better yet consider an evergreen research plan that harnesses interactions all team members have with customers to gain meaningful insights for all.

Product-Led Is About Commercial Acumen

If ‘know your customer’ is a core tenant of product practice, ‘know your commercial models’ is the poorer sibling sitting in the corner.

It’s no good to generate customer insight without being able to translate that into a commercial model which the organisation can then benefit from.

Unfortunately in many organisations the commercial potential of a product-led approach is never leveraged or harnessed. This may be as simple as a lack of a baseline understanding across the organisation of the numbers that drive it (costs and benefits). It may be a lack of process for making commercial decisions using robust frameworks and commercial value models. Or it may be a fundamental lack of trust in product to make sound commercial decisions.

In a recent study by the Association of Product Professionals which interviewed over 50 non-product (CEO, CTO, VP, GM, EGM, COO) and product leaders, they found that senior executives “doubt the commercial skills of product managers [and therefore], define the scope and solution before handing over”.

Product-led organisations place an emphasis on all areas of the organisation, including product, being bi-lingual – speaking the language of customer value and organisational value.

They balance their assessment of investment opportunities on two fronts:

• Market Assessment – Focusing on who the target market is in detail and what compelling and painful problem we will solve for them.

• Commercial Assessment – Focusing on the value model for achieving organisational benefits, how we will achieve value for the organisation, how much value will be achieved (revenue & cost) as well as the business risks involved in securing those benefits.

Finally, product-led organisations gain alignment across the organisation more easily to sound opportunities (and see-through vainglorious ones) as they are all speaking the same two languages in balance.

https://brainmates.com.au/