Be Market-focused, not Customer-focused

When developing or enhancing software products as a product manager or product leader managing a portfolio of products, it’s critical to avoid falling into the trap of following a customer-focus. Unless your company employs a services model where each customer is directly charged for all work performed on their behalf, you want to build your product or feature once and sell it hundreds, thousands or millions of times over, delivering value to many with one solution.

Sales-led, or customer-driven, product development, where products are tailored to individual customer needs, comes at the expense of scalability and long-term growth. Rather than listening to the needs of one customer and building to solve their problems, it’s essential that product management teams follow a market-focused approach, solving pervasive market problems, with the objective of delivering value to many customers in a target market.

Following a vertical market strategy enables your company to solve common challenges pertinent to a market vertical. This may fly in the face of demands from stakeholders, but it’s usually the right strategy for the company, long-term. One of the most successful products I’ve created in my career initially received executive sponsorship as a customer-led solution. Seeing an opportunity in other companies that had similar challenges, I steered the product strategy to one that focused on a market, not one important customer. The result was more than three times the revenue than would have been generated from that one customer, just six months after the release of the product. That product lives on today, generating millions in revenue from many customers.

When you build a product for a customer and try to sell it to other customers, you end up with a Frankenstein’s monster of a product that customers do not love. This is because you’re considering the needs of one customer at a time and “enhancing” the product incrementally, according to the needs of customer #2, #3 and so on. If you do your homework up front and understand the common needs of all potential customers in a target market, you can build a product that gracefully meets everyone’s needs.

As a product leader, we had one such product in our portfolio and it needed to be rebuilt in order to scale into the market and generate the revenue for which it had the potential. This product had an excellent young product manager, who with some helpful coaching from me, was able to design the new version of the product toward four specific addressable target markets. The result was a more streamlined product that better met the needs of users in the target markets.

Sometimes, especially in the early days of a company, it may be necessary to build a product for a single customer. Even then, I advocate identifying an ideal customer profile (ICP) that exists across multiple target customers. Understand the job-to-be-done by the users at your target customer. Look for commonalities with users at other potential customers. This practice will position your product to be more successful at scale.

Ultimately, chasing individual sales with product development is a risky endeavor that can quickly derail your long-term product strategy and endanger profits. At one of my former companies, a decision was made to build a custom solution for a $600,000 sale opportunity. All other development stopped for a quarter as the division’s full resources were diverted to this initiative. In the end, nearly $1 million was spent in developing the custom product.

When you adopt a market-focused approach, your product development efforts are guided by a clear understanding of common pain points shared by customers in a vertical market. This ensures that the product roadmap is driven by scalable solutions, allowing you to serve many customers efficiently. Moreover, building for the market enables product teams to align with the company’s long-term goals of profitability and market leadership, rather than being swayed by short-term revenue goals.

As you grow your product or portfolio, keeping a market-focused mindset ensures that you’re building sustainable, high-impact solutions. You’ll not only achieve broader market penetration, but you’ll be building a foundation for continuous growth and success.

If you’re looking for more insights or support with your product management practice or strategic planning, feel free to reach out. I'm always happy to chat and exchange ideas.

And for those in Southern California, there’s a great opportunity to join us at OC Product on Thursday, September 26. We’ll be hosting a discussion led by John Mansour of Product Management University on 'How to Deliver Strategic Customer Value Guaranteed.' It's going to be a great chance to network with fellow product leaders and explore new ways to create value. Hope to see you there!

Register here: https://OCPMsep2024.eventbrite.com/?aff=LinkedInPost

#productmanagement #leadership #strategic #planning

Please see the other articles in this five-part series of my guiding principles in product management:

Protect Your “Yes”

What Problem Are We Trying to Solve?

Seek and Study Dead Bodies

Product Readiness is More than Just Launch Readiness