A Letter from our Founders
Being market-driven is our ethos at Market-Driven Business. It’s even in our name. By aligning your whole organization on the perspective of your market, you’ll find the opportunities that will drive increased return on your investment, quickly identify areas for improvement, and mitigate risk to drive the future of your business and innovation for your markets. A motivated team who understands their market and is driving towards a commonly shared goal is hard to stop.
We wish you the best of luck on your journey to becoming more Market-Driven. Making positive change can sometimes be difficult. We encourage you to keep at it — you can make a difference over time. We hope this little eBook helps you get there!
The Market-Driven Business Team
Problems Need Solutions
Supplylens and the FCube
It is Monday morning in early January and Peter, a Director of Product Management at Supplylens Corporation — a $200 million provider of supply chain SaaS solutions — is preparing for his weekly meeting with Sally, the Director of Product Marketing. The results from Q4 have been finalized; and for the second year in a row, Supplylens has come up short in terms of revenue and EBITDA. Peter is still getting a bonus, but only for 65% of the on-target number.
Last Friday afternoon, Peter’s boss Richard, the VP of Product, tore him up in a one-on-one meeting. “FCube just pre-announced better than expected revenues and earnings, while we are coming up short, again! What are we going to do about this? We have to find a new way to grow revenues and market share. If FCube can do it, why can’t we?”
Peter spent the weekend thinking about the problem he and his peers faced. Last year they executed a number of strategies to improve the efficiency of their revenue generation efforts, but failed to develop any new organic revenue growth strategies. A year and a half ago, his and Sally’s teams had taken a full curriculum of offsite methodology training from a nationally recognized marketing consultancy. While they learned a number of new concepts, they had been having a hard time effectively applying them in their day to day work. Somehow, the generic case studies and exercises had failed to enable the team to develop real competency in solving the challenges they faced in their market with the resources that Supplylens had. After reviewing FCube’s quarterly filing with the SEC, he learned that 40% of their revenue growth had come from a tuck-in acquisition they had closed in February of last year. The other 60%, almost $45 million, had come from a new product line they launched at the start of Q3. At that rate FCube would grow almost $75 million this year, significantly expanding their lead in the marketplace.
FCube’s new product is sold to the same type of buyers as their core product. The solution is a combination of Big Data and artificial intelligence that enables enterprises to identify and act on inefficiencies in their transportation management systems. They had built and launched the product in 18 months. The first release, of the MVP, had gotten traction in over 30% of their installed customer base. FCube had learned that its customers had experienced problems with transportation management system inefficiencies for years, but had no solution to directly address the issues. FCube’s new solution did just that in a way their customers found simple, intuitive and affordable.
When Peter sat down with Sally for their weekly meeting he asked her a question. “What latent problems do our customers face in integrating and optimizing their supply chain management systems with other mission critical systems?”
Sally, answering honestly, said, “I really don’t know.”
Peter said, “How do we go about finding the answer to that question from our customers’ and our competitors’ customers’ perspective?” That question launched them on their journey to becoming a Market-Driven Business.
The Journey to Becoming a Market-Driven Business
Innovation is one of the most exciting, rewarding, and riskiest things companies can do. If you’re trying to build a product or service that a market will want to buy while changing the way people live and work, it isn’t really about the product you build! Instead, it’s about building a solution that the market will embrace by changing what they believe is possible and by showing them that what they can do in the future can be a better way. Innovation is as much change management and internal communication as it is creation.
When delivering a commercial product (software, hardware, service, or widget…), we’re taking a chance which requires changes to how people live or work. This action requires empathy for the people who will need to behave differently, believe in new alternatives, and be willing to work or live differently moving forward, after consuming your product. Market-Driven Businesses work to minimize the risks involved in this new endeavor.
As organizations achieve some level of success, there is a tendency to listen most to the voices inside the company. After all, we’ve achieved some level of success…doesn’t it make sense to listen to Sales, Customer Support, and the like? In fact, many companies were created by someone who had gained insight into a market and had discovered an opportunity. Often because one or many of the founders were from the market — actual potential buyers and users of the potential innovation — the first product is a success, maybe even the second or third. So why wouldn’t we listen to people in the business for ideas?
While it seems to make sense, and most companies evolve to this inside-out approach, it can cause serious issues in the company and the market over time as the business grows and the market evolves. At some point the knowledge of the market fades into historical remnants and not current realities as requirements change and market participants evolve. This drift of the organization from knowing the market to knowing the business and products results in missed business plan expectations, product failures, and reduced effectiveness of all market activities.
Beating the Rear-View Mirror
If it worked before, it must work again. The rear-view mirror approach often results in use of “flat” operational data which focuses solely on the market performance of the business; as the market moves from your operational insights, the drift is hard to see until it is too late. This problem is sometimes masked inside the organization; your people are skilled and confident. Sales talks to buyers every day, and they believe they know what should be done. Customer Support also talks to customers every day, albeit users, and they believe they know how the product should evolve. Executives go to conferences, and they talk to many people — and they believe they know what to do. Every individual inside your organization is motivated to try and figure out what the “market” will want next — but alas, they only have access to their tiny sliver of market information. In lieu of a big picture, each individual begins to believe that their view of the market reflects reality. They reference their past success and the people they talked to, and they each make a compelling case for their predictions. In many organizations, anecdotes, presentation skills, persuasion, and PowerPoint-prettiness drive decisions.
Market insights provide the alignment the whole organization needs to better service the current and future market. When the whole organization knows the actors in your market — both buyers and users — team members can proactively make recommendations to improve processes, systems and products to ensure increased satisfaction for every functional interaction.
Know Your Market Better Than Anyone Else
There Are No Market Insights Inside Your Head
Peter, the Director of Product Management, and Sally, the Director of Product Marketing, continued their discussion about how to answer the question “What latent problems do our customers face in integrating and optimizing their supply chain management systems with other mission critical systems?” They kicked around a few ideas; but after an hour, they realized they had not made any real progress.
Sally noted, “this is just not how we’ve done things in the past. Product Management has always taken the lead in identifying needs and turning them into requirements to be included in the backlog. Product Management defined what needed to be done, and Development determined how those backlog items would be implemented in our solution.”
Peter responded, “Yes, that is true; but in reality, our product releases and even product extensions have failed to generate significant new traction and revenue like FCube’s add-on product did last fiscal year. What are they doing that we are not?”
Peter and Sally thought back to the weeks of marketing methodology training they had taken a year and a half ago. They believed they were executing what they were taught — they had identified personas, defined buyer journeys, produced positioning documents and sales battle cards, and had built what they thought was a great product launch process. Admittedly, they had some challenges. The case studies covered in the training did not really translate into their markets, prospects, and customers. It seemed that something was always missing from their work, but they just couldn’t figure it out.
Suddenly, Sally had an inspiration. She said, “I do not know if this is relevant, but it is interesting. My second-grade daughter Rebecca told me about a project they did at school last week. It involved something they are learning called Design Thinking. It is a different way of solving problems. It is a five step process that includes Empathize, Define, Ideate, Prototype, and Test.
“Their assignment was to help make it easier for seniors at the local senior citizen center to tend to their vegetable garden. The first thing they did was spend a morning with the seniors, weeding and watering the garden. Imagine, if you will, ten senior citizens and fifteen students puttering around a garden. After the session, the students gathered together to discuss what they had learned. Several students noticed that the seniors had a hard time filling up the watering can and then carrying it to the plants to do the watering. A few of them asked the kids if they would do it for them. They wondered if there was a better way the seniors could do this on their own without help from volunteers. One student had an idea — ‘how about we take a hose and poke holes in it. The seniors could easily drag an empty hose, put it next to the plants, and turn on the water. They could then drag the hose to the next row and do it again.’
Sally looked at Peter and said, “When was the last time you actually sat with a shipping clerk to reconcile freight invoices to freight tender requests? You know, the tender request is just a plan — the invoices are the reality. How easy or hard is that to do with our solution?”
Peter looked at Sally and said, “To be honest, I have never done that and I cannot think of a time when one of my team members did it. Sure, we run into customer support cases for that type of an issue, but we have never done it side by side with a user.”
Sally said, “Maybe it is time to get outside the walls of our office and actually empathize with our users and non-customers. Perhaps we will learn some things that will make our ideation and prototyping efforts actually productive. If eight-year-olds can do it, certainly we can as well.”
Becoming Market-Driven Requires Critical Self-Examination
- A market-driven organization systematically favors the market’s perspective over its own opinions.
- Market-driven organizations create a system and programs to constantly be iterating on their understanding of the market.
- The decisions inside a market-driven organization are fundamentally driven by an understanding of the market and their business plan.
- Market knowledge provides the organizational confidence to better engage the actors in your market.
- A market-driven culture provides the clarity and alignment needed to exceed the business plan.
Problem-First Thinking Gels the Team
Once you turn from internal opinions toward the market, you realize that you can’t just ask the market what they want. Customers will provide an answer, but their answers are often misleading.
First of all, your customers already made their major purchase — so they don’t necessarily share information that will result in new sales. Secondly, they are not designers of your product! They’ll try to tell you they want a specific feature, a button here or a lever there — and then, after you’ve studiously built what they asked for, they will politely explain that it’s hard to use or doesn’t do what they expected. Customers don’t understand design; they just understand the job they’re trying to achieve.
To effectively inform and set expectations inside your organization and out in the market requires domain expertise and a constant willingness to learn. We move incrementally forward, learning at every step from ideation to design, implementation, and test — using market knowledge to drive the product all the way to a successful implementation for your customers. Whenever we have interactions with the outside, with our market — each person should be watching for and talking about problems in the market.
That is the nature of market-driven. As an organization, we systematically observe and discuss problems our market is experiencing. We write down those interactions, so they become market facts that we can analyze to drive our decisions. In the process, those market facts pull our team together. Rather than working against each other, the team works together to discover which problems their market will be willing to pay to solve — and then, to create the right solution so users will love the product. And finally, to create a message the market is ready to hear.
We’ve all had that cross-functional partner who has trouble seeing things in the context of now. They already know why customers buy, what they buy, and when they buy. They don’t need to back it up with current market facts. They’ve been doing this for a long, long time and they know, instinctively, what the customer wants at all times. Also, they shout louder than everyone else and they get their way because of it. Year after year — whether their ideas succeed or not.
No Excuses. Talk With Your Market!
No matter how long you have been in business, there are no current market facts in your head or in the office. Internally-focused organizations like this are operating blind. They’re guessing. They’re making it up.
In the process of making those inside-out decisions, undue pressure is put upon management at all levels. Managers are expected to “be creative” and come up with the next great revenue generator.
To be market-driven, teams need to get out and speak with the market. They need to watch for relevant, current problems and explore what impact a solution might have on buyers and users. These teams need managers who cut through egos and create an expectation of fact-based decisions.
People inside the organization need to methodically study the target users and buyers, which means they can’t spend all their time sitting at their desk. Your product solves a problem relative to what your customers want to pay. They want to pay for the right product for their processes, their beliefs, and their preferences. We can’t sit in the office and imagine what that might be.
Part of the market-driven manager’s job is to create a system that enables individuals to consistently learn from the market. Examine the market segments you want to serve. Ensure ownership of understanding the representatives from this market — both buyers and users. In one company, Product Management owned users while Product Marketing owned buyers. Together, they understood both perspectives in the target market segment.
Market-driven managers encourage and incent their teams to be in the market, honing their research skills. When it comes time to make decisions, these managers ask probing questions about the data — and when the team presents their methods and analysis, market-driven managers accept, believe, and support the math. When the organization is observing for unsolved problems, trends appear fairly quickly. It is the job of market-driven management to support the research, allow time for analysis, interrogate the data, and help the team interpret trends.
Considering the Competition
Stay On Top of Changing Markets
A few weeks later, Sally said, “I think it’s outstanding that we have started adopting a market-driven perspective; but in reality, it is hard for product marketers to get opportunities to speak directly with customers and, more importantly, non-customers.”
Peter said, “I agree, but my product managers have a few more opportunities than your team does. In the past three weeks, four product managers went on sales calls with account executives. Joe, one of our best guys, had a chance to go on a tour of Amazon’s Tillsbury Fulfillment Center in Essex England. They use hundreds of Kiva robots to shuttle items from the stacks to the stations where they pack and ship orders. One of the challenges they faced was integrating the robots with the pick subsystem of the order management system. They ended up writing the integration themselves. Joe thought that we should offer an integration bus for our pick management system to enable customers to integrate robots whenever they’re ready to adopt such technology.”
Sally commented, “We cannot depend on random site visits by product managers to find repeatable inspiration for innovation. One idea I have is to institutionalize win/loss analysis at Supplylens Corporation. We often do post-mortems on big RFPs when we lose, but it is more of a one-off than a consistent practice. If we did formal win/loss analysis every quarter, like we were taught, we would have a consistent and statistically valid sample of market facts to base our work on. Hearing what customers and non-customers actually value is critical to not only our product roadmap, but also our messaging, demand generation, and ongoing customer satisfaction initiatives.”
Getting buy-in for a formal win-loss analysis program is not easy. The reality is that marketing and sales teams do not enjoy hearing how their efforts are not working. It is easy to listen to customers who have made a million dollar bet on your technology say great things about it; it is hard to process feedback that says your messaging, positioning, pricing, and customer stories are not differentiated.
Peter suggested the following: “There is a Supply Chain Management Association conference in Chicago next month. I know that five customers who bought from us last quarter will be there. There will also be about ten other firms that had RFPs in the past year, where we didn’t even make their final list. Let’s set up a ‘listening center’ away from our booth and invite people to talk with us leveraging our win/loss questionnaire format. In three days we could talk to twenty or thirty people. We could use the information we gather for not only product innovation ideas, but also to justify the investment in a formal win/loss program at Supplylens.”
Win-Loss as Competitive Intelligence
We all have opinions of what is cool and what isn’t about the competition. Your Buyers have opinions about the competition too. All of our Win-Loss interviews include a section probing the Buyer’s opinion of the competition. Yours should too. Build on, clarify, and update the existing knowledge your organization already has about your competitors — this time through the lens of the Buyer, rather than that of internal experts.
You’d be surprised how much your customers are willing to share with you about your competition. Your Buyers can be quite candid, especially if they prefer you over the competition. The best conversation, though — that rare unicorn — is the Buyer who did not buy from you and will still tell you why the competition won. When you have this conversation, print out a couple quotes from the call and put them on your wall. You can then point to these quotes when a colleague tries to argue with you armed only with internal opinion.
Craft Messages That Better Resonate with Your Market
Now, that’s not to say you should entirely ignore the competition. Do monitor their movements, but also look at your market data to ensure you’re monitoring the right competitors — and don’t forget solutions created in-house, which are a formidable competitor for some organizations.
Market-driven organizations monitor the competition, but they’re not usually affected much by the competitor’s movements. Instead, they place higher faith in their own pool of market facts, gathered through observing and interviewing their own intended buyers and users. Market-driven companies know that the secret to leap-frogging the competition is to know the market better than they do.
Focus, Focus, Focus
Reduce, Align & Be Real
At the quarterly meeting, Dick, VP of Product, opened the meeting. “We did marginally better in the 3rd quarter, but still fell 17% short of our revenue and profit numbers. We did exceed the customer NPS target. Somehow our customers felt we were listening to them more than we had in the past. From our perspective, I am happy to report that FCube’s stumbled a bit on revenue growth. Evidently, the company they acquired had a 5% decline in comparable year over year revenues. Buying a revenue wedge like they did can work for a while, but it is no long-term solution to growing revenues organically.”
Peter responded, “I have seen that our efforts at becoming more market driven are having some results. The new robotic API was delivered from Development in just six weeks, and gained quick attention in the marketplace; Ben, from Gartner, noted that it was the fastest innovation, concept to implementation, that he had seen in quite a while.”
Sally countered, “That’s all fine and good, but my team is getting burned out. Between inbound marketing work, content creation, sales campaigns, and events, my average team member is logging over 50 hours a week. They simply do not have time to do strategic work, in light of tactical demands. Their bonuses and performance reviews are heavily based on NPS assessments from the sales force, consulting services, and corporate marketing. Given the choice between spending eight hours on a sales campaign or eight hours on reviewing transcripts of win/loss interviews, they will go for the sales campaigns every time.”
“It is our job as leaders to create the environment for our teams to succeed and maximize the potential of each team member,” noted Dick. “I believe that this shift towards market-driven strategy is going to payoff. The initiatives you have completed in the past two quarters offer tangible evidence that there is real potential in this approach. I also realize that this is a long-term journey — innovation is not something that just happens overnight.” Peter and Sally nodded in agreement, but wondered what practical effect this pronouncement would have on achieving their bonus targets.
Dick continued, “Being market driven means a willingness to experiment. I am going to implement the following experiment for our team for the fourth quarter of this year and the first quarter of next year. Each product management and product marketing team member will devote one day a week to “market-driven” activities. Our primary responsibility is to understand the market and customers’ needs, and to translate those needs into product capabilities and effective sales support. It is hard to argue with spending 20% of our time to formally understand the market. I will take the heat from the other departments. I have a feeling, however, that tactical work will become more effective as the teams focus on “have to have” items versus “nice to have” stuff. I will also change the bonus plan for the next two quarters. Fifteen per cent of the total bonus will be allocated to the impact each team member makes on incorporating market driven discoveries into their work. The four of us will subjectively assess the degree to which each team member achieves that goal. Later, if this experiment is a success, we will determine a formal set of metrics that can be used on an ongoing basis.
Peter and Sally looked at each other and smiled. On the one hand, they were glad that Dick had removed some obstacles to implementing market-driven strategies at Supplylens. On the other hand, now they had to produce some tangible results.
Don’t Succeed by Accident
It’s important to be strategic with your time and efforts. Don’t succeed by accident. If we do enough things, something will work, right? Eventually someone wins at roulette, right? Right? While those are all realities, they’re probably not going to happen. You could win the lottery and solve world peace too, but your business plan can’t be made of hopes and dreams and thoughts and prayers. Some people get hit by lightning, but also get eaten by a shark. Hope is not a strategy.
Some companies never really make a decision about strategic focus, instead pursuing many opportunities — thereby spreading resources too thin, under-investing in everything, and never really succeeding at anything.
Other companies have a process for creating strategy and roadmaps, but it’s top-down in addition to being inside-out. In these organizations, leaders form their idea of vision and strategy in a closed room. They spend hours or even days talking about options, trade-offs, and targets. Once they’ve got the strategy down, they wrap up the meeting and someone sends an email to the organization. They announce the strategic intent, summarizing their involved discussions and pushing those ideas out to the rest of the company.
I’ve talked with many of these executives as they begin to ask their teams, months after that great strategy session, “How’s it going?”
Unfortunately, they often realize that the vision was missed or misunderstood. For years, we’ve understood that you can’t just throw requirements over a wall and expect Development to build the right thing. Strategy is no different! We can’t just expect to articulate the vision once and have everyone jump immediately onto our bus.
If you’re doing strategy from the top down, behind closed doors, you’re missing an opportunity. In market-driven businesses, there are people whose job is to gather that market data and analyze it. Generally, these are Product Management and Product Marketing people, but the titles vary widely and could include Product Strategist, Market Manager, and Product Owner.
Market-Driven businesses understand that Product Management types must be integrally involved, even leading, the strategy process. Picture an environment where executives and product management work together. Executives help drive an understanding of the core distinctive competency of the organization. They also bring long-range input based on the overall market environment and macro-economic trends. Product management (whatever titles you use) is constantly examining the market data. When they spot an opportunity that fits within the strategic intent of management, they can elevate the idea for consideration. Imagine executives and product management reviewing those business plans together, applying a consistent method for comparing various opportunities. At the end of the day, these two central groups would carry the same idea of “what’s next” and be enabled to communicate and execute the plan across the organization.
And Work Together
We match the market trends we’ve discovered to our skills and aspirations as an organization. Where’s the overlap? We need to have a system to help trim down the list of possibilities into something that’s more focused and aligned with corporate goals.
Legacy processes, different product lines, and geographic teams often do things slightly differently. These differences in methods, analytics, timelines, and fact-sets can make it hard to figure out where to focus your efforts. Teams need common processes, common methods, and a common snapshot of the market to help drive strategy.
Together, the team should examine market data, and use a common method to reduce the target set of opportunities. Everyone should feel comfortable being honest about what you can do and when you can do it and who will be doing the work. Too often, teams try to do everything and end up doing nothing well. Ultimately, efforts are misallocated to initiatives that should have been lower priority.
Clarity about priorities is key, so we can drive executable chunks from planning into the build teams. We need both a way of seeing strategic intent and managing daily execution. Strategic thinking needs to mesh with agile development approaches, so we and our teams can see both the forest and the trees.
Market-Driven: Strengthen your Core
When you think of products as a guessing game, a prediction that we choose to gamble on, it simplifies the key to success. All strategy is about reducing the risk and increasing our odds of winning the gamble.
The market-driven philosophy gets to the core of winning the product risk game. Unless you’re focusing on bringing outside data into your conversations, chances are that decisions are being driven by emotions and opinions formed on fractured market data. Bad data in, bad data out!
To solve the root issue, leaders must create a methodical, consistent method for bringing current market data into the decision making process. These leaders must expect and interrogate the market facts, rather than being unduly swayed by the personal opinions of individuals on the team or in the market.
When people are enabled to bring current market facts to the table, it creates an environment for true agile decision making, even at the strategy level. When we truly understand the market, executives and product management professionals make collaborative decisions that make a real difference to the bottom line.
Market facts, then, are carried through to execution. We use market data to create the right positioning, and we motivate internal teams by sharing the data and math-based method that drove our decisions. We excite the team, enabling them to execute in the best way possible.
Eventually, those same market facts are used to drive our outbound communications, garnering excitement in the market and setting Sales up to win.
You can do this! The market-driven methodology drives true cultural change, creating a cohesive environment where you win by doing the right thing for your buyers and users. When you enable your teams with logical plans based on math and facts, they succeed beyond your wildest expectations.
Ask for market data. Send your teams out of the office, then hold them accountable for regularly capturing the current market facts. Allow the teams to help the company succeed, by funneling the market into all our decisions. This doesn’t have to be a blind guessing game; market-driven methods reduce risk and increase success.
One More Thing
Market-Driven Business’ Experiential Learning Approach
How do you incorporate Market-Driven Business into your daily work? Traditionally, product teams have enrolled in offsite, multi-day seminars. These seminars teach methodology fundamentals and use generic case studies to help students master the concepts of being market driven. This is the traditional approach to corporate learning that most enterprises are familiar and comfortable with; unfortunately, while this approach gives the students a theoretical understanding of the concepts, it often falls short of producing results. Three months after completing typical seminars like this, 63% of attendees state that they have significant challenges in applying what they have learned in their day to day jobs. As a result their journey to becoming a Market-Driven Business is longer than it needs to be and subject to more stumbles and false starts.
From millennials to boomers, best-in-class companies are 76 percent more likely to incorporate modern techniques that make learning more engaging and effective for multiple generations. Market-Driven Business’ Experiential Learning System is a new approach that produces superior results for organizations that are driving to fundamentally improve business performance through a market-driven approach.
The Experiential Learning approach consists of:
- Recruiting a cohort of product professionals — product managers, product marketers, product owners, customer success managers, etc. to participate in a process that yields pragmatic results for the organization.
- Employing an Agile-friendly approach that focuses on producing a valuable deliverable from each week-long sprint.
- Developing a “release plan” that identifies the goals, scope, and size of the project, to serve as a guide for how we’ll approach things like daily stand-up meetings, progress metrics, roadblocks, and sprint reviews.
- Leveraging micro-learning techniques to deliver advanced educational content in a just-in-time manner.
- Utilizing contemporary collaboration technology, such as videoconferencing and groupware, to allow participants to join learning and execution activities when and where it’s convenient for them. You can avoid the shackles and expense of traveling to remote locations for training events!
- Focusing on your business. Deliverables are personalized for your organization. Rather than utilizing generic case studies, participants focus on their own firm’s markets, customers, products, and services. The learning process is more effective, more easily remembered, and often produces deliverables that can be put to use immediately.
Also published on Medium.
Also published on Medium.