How Customer Centricity Can Build Better Products
How can customer centricity help startups maintain their high growth rates? One way is to launch new products.
To learn more, I’m grateful for the opportunity to collaborate with Ibrahim Bashir. Ibrahim was my cohort based course instructor. He has a 20yr career in software engineering and product. This includes product leadership roles in global companies like Box, Twitter and Amplitude.
We explored how customer centricity can help companies build and launch great products. This is a complex process but a necessary muscle that successful high-growth companies have built.
This is my second cohort-based course with Sphere. I continue to be impressed by the quality of the experience. The live discussions around real-world experiences made this course unique. I highly recommend people to check out Ibrahim’s (here) and Sphere’s courses (here).
Table of Contents
The Power of a New Product (here)
The Product Org and the Leverage it Creates (here)
Building a Successful Product with Customer Centricity (here)
Customer Centricity and the Second Act (here)
Case Studies with Ibrahim (here)
Appendix – Cohort-Based Learning with Sphere (here)
The Power of a New Product
I love my iPhone. It’s so intuitive to use, yet powerful enough to run many aspects of my life on it. How did Apple create such a well-designed and successful product? Former Apple designer Mark Kawano described how the entire business was involved in the product’s design.
“It’s not just the interface piece. It’s designing the right business model into it. Designing the right marketing and the copy, and the way to distribute it. All of those pieces are critical.”
Mark Kawano, Former Apple Designer as quoted in Fast Company
What makes product so important that it can bring the whole business together? Strategically, a new product can:
Increase growth by targeting new customers or getting existing customers to spend more
Increase retention as using multiple products makes customers more reliant on the company
Increase margins through charging for premium features or economies of scale
As the chart shows, a new product can significantly impact a company’s success. The iPhone’s impact on Apple is a famous case in point.
However, what is the Product Organisation and how does it interact with the rest of the business?
The Product Org and the Leverage it Creates
Unlike most other departments, it’s hard to quantify what the Product Organisation does. However, it can be a force multiplier for the entire business.
In general, the Product Organisation consists of the following areas:
Product: Planning and ensuring the commercial feasibility of the product. For example, ensuring customers will buy it and the business can deliver the product as advertised.
Engineering: Delivering the product. For example, ensuring the business has the technical skills to build the product, maintaining stability etc.
Design: Doing customer research and designing a product that is easy for customers to use.
A business has finite resources and must decide on which department to invest in. Most departments have measurable metrics which are used to justify this investment. For example:
Sales: Investing in sales reps should increase revenue and therefore Growth.
Marketing: Investing in Marketing improves lead quality and generates demand. This improves customer acquisition costs and therefore Margin.
Customer Success: Investing in customer success reps increases Retention.
The Product Organisation does not have any directly measurable outcomes. How can it justify investment and help the business succeed?
As Ibrahim describes in his blog, investing in the Product Organisation can have an outsized impact on the rest of the business. For example, a better product can help every sales rep sell more or make it easier for Marketing to generate demand. This is leverage.
Ibrahim recommends Product Organisations use this leverage to build partnerships with other departments. This should increase collaboration and make them advocate for increased product investment.
Close collaboration is essential to building a customer centric product, as described in the next section.
Building a Successful Product with Customer Centricity
The previous section discussed how the Product Organisation can amplify the success of other departments. However, this requires building a product that customers love. How can a business do this?
I discussed this with Ibrahim after the course ended. From his experience, he suggested the following 3 step framework, which places the customer at its centre:
Step 1: Segmentation
Having a clear idea of the customer and the problem she/he faces. This consists of 2 parts:
Target a specific, detailed customer persona. For example, Bob is in industry (_), works in company (_), has job title (_) and struggles with problem (_).
Validating that there are enough of these customers to create a viable market
Step 2: Insight
Identifying the underlying problem that the customer is facing. In interviews, customers will describe a problem and solution that is specific to them. This can lead to building fragmented or niche solutions.
A deep customer understanding is required to identify an underlying, pervasive problem that can create a reasonable Addressable Market.
Step 3: Environment
Understanding the prospective customer’s operating environment and her/his workflow. For example, what are their daily activities? What other technology systems do they use? How do they collaborate with partners and teams?
Building a customer centric product is all about the detail. Understanding the above will increase the chances of a successful product ‘bet’.
This understanding requires a close relationship with the other departments.
In class, a guest speaker showed us the importance of this relationship. Due to miscommunication, the company nearly lost a client when the sales team pitched a different product to what was being built. After this episode, Sales and Product worked together on client demonstrations.
Working together helps the Product Organisation build a well-considered product that will bring joy to customers and build trust.
This creates a solid foundation for launching additional products.
Customer Centricity and the Second Act
Congratulations! With a lot of thoughtfulness and work, you’ve launched a product that your target customers love. However, any successful product will eventually hit a ceiling- you can’t keep growing at 10x when you already have a double-digit market share. This is especially true in startups which initially target a niche segment to stand out.
Eventually, leading indicators for growth, retention or margin will deteriorate as the product expands further away from its initial core customers. At this point, it’s time for a second act.
A successful second product complements the first. This creates a virtuous cycle that can increase growth, retention and margins.
Customer centricity is key to achieving this. The same 3 step framework of segmentation, insight and environment is used. However, there is a focus on understanding the workflow or ecosystem around the initial customer. Why?
Most products are part of a larger ecosystem of adjacent customers and workflows. For example, most customers collaborate with co-workers or use multiple systems to complete tasks.
A successful second product simplifies the workflow for these customers. I.e. allowing customers to skip a step in one of the following ways:
Automating a previously manual step for the user. Box provides secure content collaboration to enterprise customers. Users can store their documents in Box’s cloud platform. Box automatically takes care of security settings (e.g. selecting the right sharing permissions), greatly simplifying the user’s workflow.
Unifying two different products into one solution. eSignatures create the digital equivalent of handwritten signatures. This allows digital documents to be legally binding. Box customers were using DocuSign’s eSignature product as part of their workflow. Following customer feedback, Box added its own eSignature offering. This means their customers have eSignatures included in Box’s content management platform.
Collaborating between users. Figma is a collaborative design tool. Figma’s browser-based solution provides great design tools. However, its unique insight is that design is larger than just designers. It has collaboration between designers, product managers, engineers and others involved in the process as a core goal. Doing so brings these adjacent users into their product. This increases the visibility of the designer in the process and elevates her/his position in the company.
As discussed, customer centricity is key to launching great products. In the next section, we’ll go through a few examples that Ibrahim has seen during his career.
Case Studies with Ibrahim
Ibrahim is a former product leader at Box. This is a great example of a company that has launched multiple products as shown below.
Box Investor Day Presentation
Our class benefitted from his real-world experience. Box’s product launches were used as examples for discussion in class. Some of them are featured below:
Box Governance – Where it all worked
Box Governance helps clients manage sensitive documents to comply with regulatory policies. At that time, this was one of their most successful product launches, with most clients taking up the solution. How did they achieve this? By fulfilling all three steps of the framework.
Segmentation: Box worked closely with administrators who reported to Chief Security, Risk and Compliance Officers.
Insight: Their underlying problem was a lack of visibility and control of the use of documents.
Environment: Box developed an understanding of how these administrators worked. At that time, customers used fragmented solutions. This required content to be moved across different systems. Box Governance had user-friendly alerting and monitoring tools and allowed administrators to manage documents on one platform.
Box Skills and Box Platform- Multiple products is hard
Like most new ventures, there is a degree of experimentation in launching new products. Half of new product ideas don’t work to expectations. Here are some examples and key learnings Ibrahim has seen:
Starting with a product: The idea behind Box Skills was to use available machine learning technologies to discover insights in content. I.e. start with a product and work backwards. However, the technology was still immature. There was no customer segment that was interested in the limited insights Box Skills could derive at that time and initial take-up was limited.
Selling to a different customer: Box Platform allows developers to build an ecosystem of products which work with Box. However, developers were a different customer group from the executives that Box typically sold to. Box’s go-to-market (GTM)/distribution teams lacked the expertise to sell to developers at that time.
A key takeaway from these examples is that launching multiple products is hard. Guest speaker Adam Whaley described how companies needed to do 10x the level of marketing and customer education to get the same level of acceptance with the customer. The complexity increases as the company’s product suite grows larger. Guest speaker Jon Fan described how Box’s GTM teams could only handle 2 new products per year.
Building products that customers love can have a huge impact on a company’s growth and profitability. However, building customer centric products isn’t easy. It requires:
Determining a strategic objective for the product such as increasing growth, retention and/or margin.
Leveraging the Product Organisation’s force multiplier effect to build relationships with other departments like Sales, Marketing, Customer Success etc.
Following a 3-step process- Targeting a specific customer segment, understanding their underlying problems and understanding the environment they operate in.
Founders should be aware of the growing complexity of launching multiple products. Even large organisations like Box can only do 2 new product launches per year.
However, it is well worth the risk. Successfully building this muscle will enable startups to maintain their high growth rates by continuously expanding their addressable markets.
Appendix – Cohort Based Learning with Sphere
This is my second cohort-based course that I’ve completed with Sphere. I continue to be impressed by the quality of the experience.
My live cohort based learning class. Interacting with global practitioners was well worth the 1am start-time!
Ibrahim thoughtfully illustrated the content with real world examples, class discussions and breakout sessions.
These spontaneous discussions are the best part of the experience. My cohort consisted of real-world practitioners. It was insightful to hear about the problems they faced. These discussions and the practical solutions we came up with made the course unique.
The course also gave me the opportunity to collaborate with an experienced global practitioner like Ibrahim on this article. The learning never ends!