- Hyundai initially reported sales up 20% in January and closed the month up 14%. And this in an environment of car sales collapse.
- Today, both GM and Ford offered programs with similar intent. It is said that imitation is the sincerest form of flattery. It should be noted that these new programs do take a different spin. Instead of allowing the return of the car, they offer to make payments for 9 to 12 months if the buyer loses a job. Let's see if this helps them too.
Tuesday, March 31, 2009
Clever Promotions Work
In a post back in January, I commented on Hyundai's timely "Hyundai Assurance" program. Well, the early results are coming in: It worked.
Monday, March 16, 2009
Customization leads to failure
What is the leading cause of product failure with startups?
Well, I don't have the quantitative research to prove it, but I would guess that somewhere near the top is over-customization to suit the needs of 'important' customers.
You probably know the drill:
Cultural issues
I've seen several companies go down this path of following the desires of their lead customers. While I'll admit that sometimes this has been the key to finding a 'true path' and corporate success, it seems that more often it leads everyone astray.
Problem 1: You don't sell what you have. When you start customizing for many customers, you breed a culture in the sales organization that they can find any loosely fitting prospect and the company will do what is needed to close the deal. This is not healthy.
Marketing (including PM/PMM) should be working with sales to figure out how to identify and lure good-fitting prospects that align with the business strategy and product strengths. The sales team should be educated in how to effectively screen prospects for fit right up front along with inspecting the prospect's budget.
Problem 2: Lack of focus on the business' strategy. All of the cycles used for negotiating and delivering the customizations takes away from time on the core strategy. It can even make the strategy irrelevant.
It is important for the leaders of the company to constantly evaluate the requests for customization. Sometimes it might be the right answer because of the customer or because of the great new direction it takes you but it should never go against the strategy.
Product issues
You probably know the drill:
- Create vision and product plan
- Try to sell product
- Meet great prospect "Brand X"
- Try to close the deal and learn that they would pay you a gazzillion dollars if only you would...
- Agree to "Brand X's" requirements and incorporate them into product
- Repeat
Cultural issues
I've seen several companies go down this path of following the desires of their lead customers. While I'll admit that sometimes this has been the key to finding a 'true path' and corporate success, it seems that more often it leads everyone astray.
Problem 1: You don't sell what you have. When you start customizing for many customers, you breed a culture in the sales organization that they can find any loosely fitting prospect and the company will do what is needed to close the deal. This is not healthy.
Marketing (including PM/PMM) should be working with sales to figure out how to identify and lure good-fitting prospects that align with the business strategy and product strengths. The sales team should be educated in how to effectively screen prospects for fit right up front along with inspecting the prospect's budget.
Problem 2: Lack of focus on the business' strategy. All of the cycles used for negotiating and delivering the customizations takes away from time on the core strategy. It can even make the strategy irrelevant.
It is important for the leaders of the company to constantly evaluate the requests for customization. Sometimes it might be the right answer because of the customer or because of the great new direction it takes you but it should never go against the strategy.
Product issues
Problem 1: The product plan goes off the rails. Unless you are awash with resources and can carve off core and customization teams, all the custom requests will inevitably push plans off track. This can be better managed in a short-cycle development process like Scrum but it doesn't change the long-term impact.
Problem 3: Your product becomes a muddle. Too many customizations that get incorporated into the product are likely to muddle up the core model of the product. The underlying architecture gets messy. They user experience gets cluttered by special functions, etc.
Problem 4: You never had a strategy to divert. Well, I think you can guess what the problem is here.
Wednesday, February 18, 2009
The other death spiral
I think many of us know about the financial "death spiral" (the most popular version in the Valley these days is attributed to Sequoia Capital - see slide 49 in particular). While this is scary and real, I am referring to a more internal problem to people and organizations. One that anybody involved with the company's strategy should be particularly wary of.
This death spiral is where you start to believe too much of your own thinking. We've all done it to some degree or another. But the best of us see it and work hard to break it.
It often starts with simple statements like:
I think it is important to make a point of continually asking yourself and your colleagues the question you learned as a two year old: "Why?" Why did we do it this way? Why should we keep doing it?
It is quite likely that the status quo is that way for a reason. It really was the most efficient or most popular with the customers or best performing or whatever.
However, it's also entirely possible that it is not.
Let's take some examples from technology products:
First let's look at the case with a product that has been established and successful for a few years. Over time the technologies that it is built on become old. Or perhaps the model or approach taken five or ten years ago is no longer state-of-the-art.
The natural bias is to see this as the basis of the past success and keep going with it. The team questions why to burn precious development resources reworking what is already done.
Most of the time, this is good thinking. It preserves your advantage and gives you a chance to move ahead.
However, let's consider some cases where it isn't:
Platforms and Technology
What about the case where new entrants into the market have jumped on a new technology/architecture/whatever and are using that to win deals. Your installed base is happy to keep going but new customers get harder and harder to win. The competitor takes advantage of "NewTech" to whip out snazzy new features or just more modern UI elements that make their product feel better to your prospects. Meanwhile, your engineering team is bogged down with "OldTech" and says that those features are hard/costly/slow to implement. Are you spending more on maintaining and extending than it is worth?
Third party tools
How about where you are reliant on some third-party tool - say a reporting engine - for some functions and it is no longer providing competitive functionality. Or worse, it is no longer supported. Again, the tendency is to let it be. It works, it's done. But what about when you need an extension?
I use reports as an example because many enterprise software products are "sold" on the quality of their reports (and other visualizations of information). While it is tempting to say that the information is there and isn't worth re-doing, maybe your competition is out there using the same information to tell a more compelling story. Once again, you have to ask whether the ongoing, incremental costs are really better than a re-do, as painful as that would be.
Architectural issues
Sometimes the decisions made early in a product's life haunt it forever. For example, a lack of multi-tenant design makes it very difficult to even consider business models like SaaS or lack of proper Internationalization makes it hard to properly enter other markets (see post). Often, these are such fundamental decisions that it really never is practical to re-do the work. However, the question should be asked from time to time. Because, as the conditions change, it might become the right answer anyway.
What to do
This death spiral is where you start to believe too much of your own thinking. We've all done it to some degree or another. But the best of us see it and work hard to break it.
It often starts with simple statements like:
- "We've always done it this way"
- "This has been working"
- "Oh, I just know this is the right way"
- "It's not worth changing now"
I think it is important to make a point of continually asking yourself and your colleagues the question you learned as a two year old: "Why?" Why did we do it this way? Why should we keep doing it?
It is quite likely that the status quo is that way for a reason. It really was the most efficient or most popular with the customers or best performing or whatever.
However, it's also entirely possible that it is not.
Let's take some examples from technology products:
First let's look at the case with a product that has been established and successful for a few years. Over time the technologies that it is built on become old. Or perhaps the model or approach taken five or ten years ago is no longer state-of-the-art.
The natural bias is to see this as the basis of the past success and keep going with it. The team questions why to burn precious development resources reworking what is already done.
Most of the time, this is good thinking. It preserves your advantage and gives you a chance to move ahead.
However, let's consider some cases where it isn't:
Platforms and Technology
What about the case where new entrants into the market have jumped on a new technology/architecture/whatever and are using that to win deals. Your installed base is happy to keep going but new customers get harder and harder to win. The competitor takes advantage of "NewTech" to whip out snazzy new features or just more modern UI elements that make their product feel better to your prospects. Meanwhile, your engineering team is bogged down with "OldTech" and says that those features are hard/costly/slow to implement. Are you spending more on maintaining and extending than it is worth?
Third party tools
How about where you are reliant on some third-party tool - say a reporting engine - for some functions and it is no longer providing competitive functionality. Or worse, it is no longer supported. Again, the tendency is to let it be. It works, it's done. But what about when you need an extension?
I use reports as an example because many enterprise software products are "sold" on the quality of their reports (and other visualizations of information). While it is tempting to say that the information is there and isn't worth re-doing, maybe your competition is out there using the same information to tell a more compelling story. Once again, you have to ask whether the ongoing, incremental costs are really better than a re-do, as painful as that would be.
Architectural issues
Sometimes the decisions made early in a product's life haunt it forever. For example, a lack of multi-tenant design makes it very difficult to even consider business models like SaaS or lack of proper Internationalization makes it hard to properly enter other markets (see post). Often, these are such fundamental decisions that it really never is practical to re-do the work. However, the question should be asked from time to time. Because, as the conditions change, it might become the right answer anyway.
What to do
- Make periodic "assumption questioning" part of your routine process - No need to torment yourself or your team with endless 'navel gazing', but when the questions come up, don't just take the status quo for granted.
- Take a step out side of your comfort zone - Ask the tough questions. "Is this right?" "Why is it right"
- Really do a scenario analysis of how the options will play out over time - If you continue down the path what will be the consequences? What opportunities would be opened up downstream if you make changes? While change might not make sense in the short term, the advantage next year might be huge. Then again, this year may be so important that you can't afford to gamble on next year. Your milage may vary.
Monday, January 26, 2009
Choice is good - Make the right ones
I just read another great take on the importance of having a clear strategy and prioritization. (click here to read in a new window).
The author is focusing on the success that Apple has had with focusing on a relatively limited product line. He uses the 'insanely' complex product portfolio at Garmin for comparison. Where Apple has only a handful of products in each of a handful of categories, Garmin has made a different choice to create separate products for every sliver they can find.
I don't agree that there is only one right answer here. The 'Garmin scenario' is partly in response to the challenges of the distribution channels and a fast moving, young-ish market for consumer GPS. However, Apple's successes do show the value that can be achieved by focusing on getting a few things right.
As I mentioned in my previous post (Pick One Thing), I am a believer in the merit of focus. Not that this is easy to do. Personally, I am always tempted to try to 'cover the bases' because there is so much opportunity and often insufficient data. However, while opportunity is great, the reality is that resources are finite. Given that, spending the time to pick wisely and focus can yield the kind of success that Apple has seen.
If you look at Apple's product line, you will find that they have aimed straight for the middle of a couple of segments.
Doing this successfully does require a fair amount of care in deciding what the limited choices should be. I don't have insight into whether Apple makes these decisions based on substantial quantitative research or just on sensible decisions of subject matter experts. However, if you look at the choices made (when the products are fresh in their lifecycle - long cycles are a whole different conversation), I believe that they really hit the "what you really need" target quite nicely.
Compare this to Garmin's approach. I'll take Mr. Burns number that they have 82 products in two of their segments (car and hand held). I think the case that one of the commenters makes about how this is largely to give different channels their special version is probably true. However, it makes purchase decisions a real challenge. They are dependent on a channel that can limit or guide their customers to a decision quickly enough to not look elsewhere.
I consider myself a bit of a GPS geek (I've owned 5 so far not counting phones) and I can't figure out what they are offering. On several occasions I have thought about buying one that I saw written up only to become so frustrated by the options and permutations (at very different price points for slightly different features) that I decided it wasn't worth it. In fact, I ended up buying a less cutting edge one on clearance instead. Oops. That wasn't the goal of the marketing campaign was it?
However, the strategy seems to be working despite itself. Last numbers I saw had Garmin clearly leading the pack in market share in the US. They also have heavy saturation in most channels. While this is achieving the goal of winning the 'slotting' war on retailers shelves (or pages) but crowding out competitors, one has to wonder for how long and at what cost. Remember ten years ago when the PC companies were all about retail (the last time around) and were getting their clocks cleaned by 'on demand' models like Dell? The 'conventional' companies had too many choices, couldn't keep the right ones in stock, etc. As prices came down, they couldn't compete on cost or in having the 'right' choice in stock. Will Garmin face the same problem as the prices keep dropping? Or will the overall market grow fast enough to make each of those 82 products profitable? Time will tell.
Most of us are working with smaller markets with relatively fewer resources to spread around. The real question for us goes back to the headline: Customers want choices. But you have to choose which options you should give them.
The author is focusing on the success that Apple has had with focusing on a relatively limited product line. He uses the 'insanely' complex product portfolio at Garmin for comparison. Where Apple has only a handful of products in each of a handful of categories, Garmin has made a different choice to create separate products for every sliver they can find.
I don't agree that there is only one right answer here. The 'Garmin scenario' is partly in response to the challenges of the distribution channels and a fast moving, young-ish market for consumer GPS. However, Apple's successes do show the value that can be achieved by focusing on getting a few things right.
As I mentioned in my previous post (Pick One Thing), I am a believer in the merit of focus. Not that this is easy to do. Personally, I am always tempted to try to 'cover the bases' because there is so much opportunity and often insufficient data. However, while opportunity is great, the reality is that resources are finite. Given that, spending the time to pick wisely and focus can yield the kind of success that Apple has seen.
If you look at Apple's product line, you will find that they have aimed straight for the middle of a couple of segments.
- iMac => Just give me a good machine to work on. Very few choices, it just works and while having a premium price, it is 'in the zone' of expectation.
- Mac Pro => I need more. Power, flexibility, etc. and I'm willing to pay for it.
- Mac Mini => Cheapish, simple. I just need a Mac. No flexibility.
Doing this successfully does require a fair amount of care in deciding what the limited choices should be. I don't have insight into whether Apple makes these decisions based on substantial quantitative research or just on sensible decisions of subject matter experts. However, if you look at the choices made (when the products are fresh in their lifecycle - long cycles are a whole different conversation), I believe that they really hit the "what you really need" target quite nicely.
Compare this to Garmin's approach. I'll take Mr. Burns number that they have 82 products in two of their segments (car and hand held). I think the case that one of the commenters makes about how this is largely to give different channels their special version is probably true. However, it makes purchase decisions a real challenge. They are dependent on a channel that can limit or guide their customers to a decision quickly enough to not look elsewhere.
I consider myself a bit of a GPS geek (I've owned 5 so far not counting phones) and I can't figure out what they are offering. On several occasions I have thought about buying one that I saw written up only to become so frustrated by the options and permutations (at very different price points for slightly different features) that I decided it wasn't worth it. In fact, I ended up buying a less cutting edge one on clearance instead. Oops. That wasn't the goal of the marketing campaign was it?
However, the strategy seems to be working despite itself. Last numbers I saw had Garmin clearly leading the pack in market share in the US. They also have heavy saturation in most channels. While this is achieving the goal of winning the 'slotting' war on retailers shelves (or pages) but crowding out competitors, one has to wonder for how long and at what cost. Remember ten years ago when the PC companies were all about retail (the last time around) and were getting their clocks cleaned by 'on demand' models like Dell? The 'conventional' companies had too many choices, couldn't keep the right ones in stock, etc. As prices came down, they couldn't compete on cost or in having the 'right' choice in stock. Will Garmin face the same problem as the prices keep dropping? Or will the overall market grow fast enough to make each of those 82 products profitable? Time will tell.
Most of us are working with smaller markets with relatively fewer resources to spread around. The real question for us goes back to the headline: Customers want choices. But you have to choose which options you should give them.
Friday, January 9, 2009
Clever promotions
This one is a little off topic but since most of us have at least partially marketing based jobs, figured it's fair game.
Hyundai Motors has announced a promotion that is targeted at these times. Given that many people who are capable of purchasing a new car are sitting on the sidelines due to uncertainty, they decided to attack it head on with an "Hyundai Assurance" program. This program says "buy a car now and don't worry". If you lose your job, drivers license, life, go bankrupt, etc., you can bring the car back no harm, no foul, no obligations. They'll cover up to $7,500 in negative equity on the loan or lease.
This just strikes me as a very clever way to address an unprecedented lack of demand. It's a potential game changer like the long warranties they've been offering to counter the old concerns about quality. I can't wait to see how well it works for them.
Full disclosure: I have none. I don't work for, invest in or own Hyundai shares or product (for now at least)
Hyundai Motors has announced a promotion that is targeted at these times. Given that many people who are capable of purchasing a new car are sitting on the sidelines due to uncertainty, they decided to attack it head on with an "Hyundai Assurance" program. This program says "buy a car now and don't worry". If you lose your job, drivers license, life, go bankrupt, etc., you can bring the car back no harm, no foul, no obligations. They'll cover up to $7,500 in negative equity on the loan or lease.
This just strikes me as a very clever way to address an unprecedented lack of demand. It's a potential game changer like the long warranties they've been offering to counter the old concerns about quality. I can't wait to see how well it works for them.
Full disclosure: I have none. I don't work for, invest in or own Hyundai shares or product (for now at least)
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