How to Manage Customizations as a Product Company

A common cul-de-sac that startups and SMEs find themselves in when building a tech product is when the line between being a service and product becomes blurred. When customers start coming in, the product shows promise — but then they start asking for customizations and you begin wondering, “Where does this end?”

In my consultancy work, this question is more commonly asked of me than thought - where is the fine line between product & service? Am I a product becoming a service? Founders must tread carefully to avoid veering into either extreme without meaning to.

There are benefits to taking on custom features.

Custom client projects offer several benefits, such as securing key partnerships and gathering valuable customer feedback. However, they also present a few challenges. If you are intent on building a product, you must balance custom features with ones that you’ve already planned for in your product roadmap. To mitigate these risks, careful attention must be paid to how resources are utilized and how the customized features are managed in scope.

When do you need to take on custom features?

Sometimes, obtaining a logo is essential for penetrating a particular market, and in such cases, offering some customization might be necessary to secure the client.

Similarly, if gaining insights from a domain expert market leader client is crucial for educating product and engineering teams about industry intricacies, investing in the process of building these features could be beneficial.

Such tailored approaches ensure alignment with industry standards and facilitate market entry or product refinement to meet specific customer needs.

To make the most out of customization efforts, consider how these features might benefit other clients and see if they are interested in a similar customization. At one point while building our chatbot product (previously known as Articulo), one client asked for a self-service dashboard where they could edit their own chatbot responses. The team had an accidental slip of the tongue when pitching and mentioned we were building such a feature — and to our surprise the client was thrilled and wanted to close immediately. After shopping this feature around a little more, it was clear we’d struck gold. This feature ended up being heavily featured in our product roadmap as we continued to build.

What challenges do custom projects present?

On the flipside, client projects often present challenges and drawbacks that can impact project success.

Scope Creep: Possibly THE most common issue is scope creep, where clients request additional features or functionalities beyond the initial project scope. This can occur when clients compare your offering to competitors and expect similar features, leading to misunderstandings about what is included in the project. To get rid of this problem, managing client expectations tightly and clearly defining project scope in contracts is crucial. I typically recommend startups invest in an experienced project manager hire to nip any scope creeping in the bud.

Need for Additional QA and DevOps: Developing entirely custom solutions for clients may require additional resources for quality assurance (QA) and DevOps to support the custom code base. Testing and ensuring the stability of custom-built features can be more complex and time-consuming than standardized solutions. Allocating sufficient resources and expertise to QA and DevOps is essential to maintaining project integrity and minimizing potential issues post-launch, and this increases costs overall. Make it cost-efficient by quoting for maintenance packages and hiring the right talent to do this - usually a senior tech hire as you won’t have time to train a junior.

The insidious impact of custom work on product development

Custom work can significantly impact the team in ways that are intangible. Apart from the costs and the project management, the more insidious side of custom development is impacting the team’s ability to focus on product development in several ways. Bring awareness within the decision-making team on the following points before deciding on a custom project:

Attention Span and Productivity: Custom projects require the team to switch focus from product development to addressing specific client needs. This constant context-switching can drain the team's attention span, reducing productivity. Code-switching between different projects also takes time and mental effort, further affecting productivity.

Conflicting Objectives: Product development typically aims to create scalable solutions that cater to a broad user base. However, custom projects are tailored to meet the specific requirements of individual clients, often deviating from the scalable model. This conflict in objectives can lead to challenges in prioritization and decision-making.

Impact on Engineering Culture: Custom projects may prompt project managers to prioritize quick delivery over adherence to established engineering standards. This approach, known as “just develop good enough,” can undermine the engineering culture within the team, compromising long-term product quality and sustainability.

Delays in Product Development Cycle: Conversely, engineers may attempt to apply the rigorous standards of product development to custom projects, resulting in delays and conflicts with client expectations. This can prolong the project development cycle and hinder timely delivery.

So.. I’ll just focus on product development.

Teams that choose to laser-focus on product development often have advantages over teams that choose to take on custom work from time to time.

Expedited Time to Market: By prioritizing core product features, companies can expedite the product launch process, gaining a competitive edge in the market.

Easy Tracking and Management of Spending: Focusing on core features simplifies spending tracking and management, allowing for more efficient resource allocation.

Scalability: Core product features lay the foundation for scalability, enabling businesses to accommodate growth and serve a more extensive customer base effectively.

Broader Market Appeal: Well-developed product features enhance market appeal, attracting a more comprehensive range of customers and increasing market penetration.

But focusing on product is not the end-all, be-all.

Taking on any approach to the extreme tends to bring some risks - consider that focusing on product features alone could mean issues like a shorter cash runway. In extreme cases where the product team has reduced interactions with actual customers, it could result in the product becoming a “solution looking for a problem”.

Market Size Considerations: Prioritizing product features requires careful consideration of market size and demands. Product managers must accurately assess market potential to ensure that chosen features align with customer needs and preferences.

Balancing Customer Requests with Product Vision: Companies must balance addressing customer-driven requests and aligning with their product vision. While meeting customer demands is essential for satisfaction and retention, ensuring that changes align with long-term product goals and objectives is crucial.

Find your balance according to your growth stage.

The company typically shifts from custom work to product development when a substantial group of clients necessitates a particular feature. This transition occurs when there is clear evidence of demand from a significant portion of the customer base. The exact timing of this shift varies for each company and depends on factors such as industry dynamics and specific business challenges.

Monetizing and Packaging Product Features

Effective monetization strategies and pricing models are crucial for maximizing the value of product features. By aligning pricing tiers with client needs and perceived value, companies can optimize revenue streams and drive upsells. Thoughtful packaging and positioning of features further enhance their appeal, fostering customer satisfaction and loyalty.

Product development and custom work must be balanced carefully, requiring strategic planning and systematic implementation. At the end of the day, a thoughtful, coherent, and adaptable approach to product planning is necessary to walk the tightrope between developing core features and personalization. Organizations that embrace flexibility and responsiveness will effectively navigate market disruptions and maintain their potential long-term growth.

Processes for Evaluating and Adjusting the Balance

Monitoring Per Client ROI: Implementing a system to monitor each client's return on investment (ROI) helps assess the profitability of custom work versus product development. By analyzing the ROI of individual clients, companies can identify which projects or products contribute most to overall revenue and prioritize accordingly.

Monitoring Profitability of Products vs. Services: Regularly tracking the profitability of both products and services provides valuable insights into their contributions to the company's bottom line. This allows for informed decision-making regarding resource allocation and strategic focus. Companies can balance custom work and product development based on their comparative profitability.

Alignment with Investors on Growth Targets: Maintaining alignment with investors regarding the company’s growth objectives is crucial. This involves regular communication to ensure investors’ expectations align with the company’s strategy for balancing custom work and product development. By understanding investors' desired growth rate, companies can adjust their approach to meet these targets while optimizing resource allocation and maximizing profitability.

Conclusion

Product development and custom work must be balanced carefully, requiring strategic planning and systematic implementation. A thoughtful, coherent, and adaptable approach to product planning is necessary to walk the tightrope between developing core features and personalization. Organizations that embrace flexibility and responsiveness can effectively navigate market disruptions and maintain long-term growth.

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This post is written in conjunction with Quills at Work (Q@W).

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