How can one recognize whether a product company has a chance to be truly successful, or well, it's doomed for a somewhat vegetative existence? If I had the decent answer to that problem, I'd probably be crazy rich already - so the fact is: I don't. But I think I can clearly recognize some symptoms indicating that the company's getting on a one-way highway to mediocrity.
The whole idea of the healthy, promising online platform is to (1) create something your customers want and (2) to keep the transactional cost (of adding & operating yet another customer) as low as possible, preferably near-zero-ish. If you keep the 2nd condition met, the whole point is just (well, it's easier said than done, of course ...) to adjust all the knobs of your value proposition (the 1st condition) for your business to take off.
However, here's what happens in many companies: a salesperson enters the stage ...
"There's an opportunity. The customer X wants a new summary view, a custom way of aggregating data, modified labels, and a dedicated sales report with XYZ format export option. That's a bit of work, but they indicate it's really important, so please estimate the effort needed - we'll add some margin on the top, charge the customer, and everyone will be happy."
And everyone should be happy indeed, correct?
- we are the ones crafting the invoice, so we can assure that the income surpasses the estimated cost (effort)
- we're addressing the need brought up directly by the customer - it's certainly an excellent way to maintain or even improve the relationship with that customer
- we're keeping business running - turning effort into jingling coins
Well, such a way of thinking can secure company's existence over the profitability line, but:
- such changes rarely (if so - by chance) contribute to the product vision - actually - quite the opposite, they have a significant chance to water it down; it's the customer who designs your platform (by expressing WHAT, not WHY) - do you remember what Henry Ford has said about what would happen if he just followed what his customers wished for?
- you may end up with a positive P&L, but you're adding more liabilities (stuff to maintain) & even if the cost of maintenance is covered in the calculation, you need to scale the organization for the sake of something only marginally beneficial (scaling is very expensive in non-tangible ways - communication, knowledge mgmt, etc.)
- it's one of the surest ways to increase the complexity of your solution
- such features and featurettes are harder to scrap (deprecate and decommission) later (the liability is "stronger")
- and at last but not least - your key people waste time on horseshit that does not contribute to your org's mission, doesn't contribute to the competitive advantage, doesn't tackle critical problems and constraints - time is always the most critical resource: you are wasting it!
Why do the the companies fall into such traps? For two main reasons:
- because the organization is very sales-driven - the goal (most crucial KPI) is to bring revenue and worry later (about the cost/liabilities); such an organization doesn't have a strong product leadership and/or vision - this is purely project-oriented, not product-oriented thinking
- because the organization's financial situation is unsafe and it looks for the low-hanging fruit - implementing a requested feature is always easier than evolutionary shaping a market-fit product; in the end - they sacrifice the product's coherent vision just to keep financial fluidity; or in other words - they put mere survival & vegetation over plans & ambitions - this is frequently a path of no return
I'm not any platform business's owner, so you may find my suggestion naive and idealistic. Nevertheless, IMHO the answer should be to maintain the laser-sharp FOCUS. It's the only way if you want your product to succeed.
Keep your product portfolio small & simple, your offering clear and self-explanatory. Ensure the identity of the product leaves no area for misinterpretation (it has to solve a particular, real-life problem!).
I realize that not doing what customer asks us to may seem counter-intuitive: you're rejecting easy money, you're denying opportunities, you're disappointing customers ... but service (project) and product companies require a drastically different way of thinking:
A typical service company ...
- ... can afford thinking only about the direct project outcomes (fulfilling the goal set); complexity, maintenance, long-term consequences: these all are the purchaser's concerns
- ... is paid for ... conducting a service, not for how fruitful it turns out to be
- ...'s revenue is proportional to effort made (of course rates depend on specialties, seniority, risks, etc.)
- ... is a finite game business
While a product/platform company ...
- ... requires understanding (and careful planning) of the liabilities, commitments and maintenance efforts/costs - including which ones are fixed and which ones are variable
- ... should build its business upon of a replicable value proposition (create once, profit repeatedly)
- ... has virtually unlimited revenue potential (with a wide-enough target group and when addressing common-enough needs) - the income should NOT scale linearly with cost/effort
- ... is an infinite game business