So far, we have used customer value and business value interchangeably. It’s now time to establish the right definitions.
Customer Value refers to the perceived benefits, advantages, or utility customers and users receive from a product, service, or overall experience a business provides. It focuses on meeting or exceeding customer expectations and addressing their needs, desires, and preferences.
Business value refers to the benefits or advantages a business or organization derives from its activities, strategies, or investments. It encompasses the positive impact on the company’s financial performance, operational efficiency, competitive advantage, brand reputation, and overall business goals.
Customer value can be measured in various ways, such as through:
Customer satisfaction
Loyalty
Repeat purchases
Referrals
Businesses must understand and deliver customer value, which contributes to customer retention, market competitiveness, and long-term success.
Business value can be measured through various financial metrics, such as:
Revenue growth
Profitability
Return on investment (ROI)
Market share
Shareholder value
Business value focuses on the outcomes and results achieved by the business as a whole.
While customer and business value are related and interconnected, they represent different perspectives. Customer value primarily focuses on meeting customer needs and creating a positive experience, while business value concentrates on the company’s benefits and outcomes. However, successful businesses recognise the importance of aligning customer and business value, as delivering superior customer value often leads to enhanced business performance and sustainable growth.
Customer and business values are the north stars on the map of operational excellence in software development. They are the centre of mass around which everything else gravitates.
While such a fact seems fairly obvious and does not need further elaboration, the reality is more complex.
For starters, not all departments in an organisation are in touch with the customers and may not immediately see the product of their labour. In this case, they might take pride in the sophistication of their work, its quality, or its aesthetics but not in its utility to the business or the end user.
Secondly, compartmentalising organisational effort, a necessary mode of operations in large and complex projects, focuses the commercial and financial pressures on specific departments (sales, project management, finance) while shielding others (engineering, production, customer support). In such cases, we again observe other (localized) goals that might, in some cases, be antithematic to the overall business effort.
These complications manifest themselves in constant arguments between departments on whether to build the right product, the best product, or the one that is easiest to launch in the market. While these discussions might be healthy in some cases, there will be instances where different units pull the cart in opposite directions. Rather than zigzagging towards the ultimate goal, they get stuck in vicious loops.
To remedy this problem, the role of a product manager was established. However, looking after a software product from a commercial and customer value perspective is insufficient; technical considerations must also be considered to sustain the product. This leads us to conclude that every resource involved in a software product must understand why this software is built (customer value) and why it is important for the organisation (business value).
II. Product Management
Product management encompasses the end-to-end process of conceptualizing, developing, launching, and managing products throughout their lifecycle. It involves a multidisciplinary approach, combining:
Marketing
Technology
Design
Business strategy.
Product managers act as the orchestrators, aligning customer insights, market trends, and organizational goals to deliver value-added solutions. Their roles typically include the following activities:
Roadmap Development: A robust product roadmap guides product development efforts. Product managers create and communicate roadmaps that outline the product’s future direction, including feature prioritization, release timelines, and resource allocation. Roadmaps are one of the top things organisations look for when assessing a software product for their next purchase. A poor roadmap means the product is neglected and might risk being sunsetted before their investments come true.
Cross-Functional Collaboration: Product managers bridge the gap between various teams, including engineering, design, marketing, and sales. They facilitate effective communication, ensuring that all stakeholders are aligned and work collaboratively to deliver high-quality products.
Product Development and Launch: Product managers oversee the product development lifecycle, collaborating with engineering teams to transform concepts into tangible products. They coordinate testing, iteration, and quality assurance processes, culminating in successful product launches that meet customer expectations.
Many things can go wrong when managing large software products in complex ecosystems. However, the following are the top pitfalls encountered:
Feature Overload: Incorporating too many features or functionalities into a product can result in complexity, confusion, and diminished user experience. Product managers should adopt a user-centric approach, delivering core value and prioritizing features based on customer needs and market demands.
Lack of Iteration and Adaptability: Failing to iterate and adapt and lacking Agile design approaches can result in outdated products or failing to address evolving customer requirements. Successful product managers embrace feedback loops, encourage experimentation, and continuously monitor market dynamics and changing user preferences to refine and improve their products.
III. Minimum Viable Products
The Minimum Viable Product (MVP) is a strategic concept that focuses on delivering:
A functional version of a product
With the minimum set of features required to satisfy early adopters and gather valuable feedback.
A Minimum Viable Product (MVP) is like a usable prototype put into active service and monitored for insights. An MVP provides the following advantages:
Rapid Validation of Ideas: By releasing an MVP, software teams can efficiently test assumptions and validate product ideas early in the development cycle. As Snowden puts it, users don’t know what they want until they understand what the technology can do for them, and the latter may only happen when they start interacting with the product. Developing multiple MVPs or multiple versions of the MVP aligns with the idea of conducting safe-to-fail experiments to probe a complex system.
Accelerated Time-to-Market: Developing and launching an MVP reduces the time required to bring a product to market. By focusing on the core functionalities that address mission-critical customer needs, teams can swiftly deploy an initial version of the product, gaining an early foothold and competitive advantage while continuing to enhance and expand its capabilities.
Cost Optimization: The MVP approach helps optimize development costs by focusing resources on essential features and reducing unnecessary expenditures. Once the product generates revenue, elaborate functionalities based on customer feedback can be implemented. This is again aligned with Agile design concepts.
There is, however, one common pitfall in working with MVPs regarding interpreting user feedback. Misinterpreting user feedback or relying solely on anecdotal evidence can lead to misguided decisions. Teams should leverage robust feedback mechanisms like user analytics and surveys to extract actionable insights and make data-driven improvements.
Future-proof products while preserving valuable functionality and data.
Modernizing legacy software requires a significant initial investment and immense leadership support for the following reasons:
Firstly, the organisation has optimized its processes, structure, and commercials over many years around a successful product, which has also raised many of its leading figures to prominence. A significant pushback will be expected when a novel idea or product suddenly threatens to dethrone existing products and reshuffle the power hierarchy.
Secondly, customers would rather buy old (and perhaps obsolete) products than act as guinea pigs for a new platform despite any obvious advantages the latter might possess. In such cases, purchasing managers might prioritize their job safety over what’s best for the organisation. This dynamic raises the market entry barrier for new products.
Thirdly, there is no obvious and risk-free method to migrate existing customers without impacting the bottom line or risking customer turnover. It is wise not to cannibalize a successful and mature product for a young and unproven one.
Finally, organisations must recognize the difference between upgrading legacy software because of its inherent limitations or the presence of imminent threat from competition on the one hand and the need for technicians in the organisation to switch to the latest and greatest technology stack on the other. In the former case, we are correctly focusing on business value and its future. In the latter, we are succumbing to hype.
IV. Guidelines for Prioritizing Business and Customer Value
Following are powerful guidelines that organisations can apply to ensure they always focus on customer and business value.
Have an experienced product manageron board who understands the business, the product, the customers, and the commercial aspects of running a business organisation
Data-driven decision-making on features prioritisation. This facilitates the maintenance of a product roadmap that guarantees success.
Subordinating technology to businessvalue. Major investment decisions should have a clear business objective that is easily explainable at any management level.
Take the time to bridge departmental gaps and silos through informal networks that allow intergroup communication and awareness. DevOps is a great attempt, for example, to bridge the gap between those who create the software and those who run it. People could then rely on their informal networks in times of need, thus giving everybody the feeling they are genuinely in the same boat.
Ensure that local objectives on a departmental level do not seek to maximize the unit’s performance regardless of the cost to the business. This would be difficult in a culture that thrives on departmental feuds or management styles that overestimate the utility of key performance indicators, performance data, and statistical analysis methods.
When novel ideas can be turned into viable products, a new organisation should be set up to develop and promotethe new product. This helps remove the friction with old products and existing structures, processes, and powerful stakeholders.
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