Preface

Unchecked, the journey of our lives is defined more by our weaknesses than our strengths. It is why partnerships, properly balanced, can produce extraordinary results. One person’s weaknesses are mitigated by the strengths of the other.

Many parts of our bodies come in pairs. Some pairs of organs contribute redundancy. One kidney is usually enough, but a second one is a good idea. Other organs provide teamwork; eyes, ears, brain hemispheres, and feet, to name a few. It is the second eye and the second ear that contribute a perspective than one eye or one ear alone cannot deliver. Your stereoscopic vision is an excellent example of partnership in action. Even the slightest difference in perspective between your two eyes could, in theory, save your life some day. Take those fine ears of yours. Your ancient ancestor’s ability to sense the direction of a predator, or prey for that matter, may be the reason you’re alive today.

Thus, it is the differences between, not the similarities of, the members of a partnership that make the partnership strong.

In order to make an apple pie from scratch, you must first create the universe.

- Carl Sagan

Not to be confused with the definitive meaning of the word, you could say we live in a binary world. Where there is an up, there is a down and where there is a left, there is a right. It takes both rain and sunshine to make things grow.

You can readily see two opposing forces keeping each other in check everywhere you look. When sunshine alone prevails, a desert ensues. Rain alone produces nice rivers and oceans of course, but without the sun, rain clouds would not exist in the first place.

Look closely at almost any aspect of your life and you will see these binary forces at work. They are at work in politics, religion, physics, weather, love and sports.

Over the two decades I have worked in product management of one type or another, I have tried many different ways to make products succeed. I have made many mistakes and I have made the occasional good decision. Thankfully, the good decisions outweighed the mistakes often enough to send a dozen products out the door and I was rewarded for doing it. However, I did learn many important lessons from the mistakes.

Early in my career, I thought I had all the answers. As the years progressed, I became unsure. Was I like the proverbial rooster who thought he made the sun rise with his crowing, or did I really drive the product to success by will and work? For years, I searched everywhere for the answer to the question of what the drivers of a successful product were; those which, when understood and tamed, would help me steer a product to success.

My quest settled on a driver: conflicting forces and how they work in opposition to decide the fate of a product. A product may still fail for reasons both inside and outside of your control—from earthquakes to conflicting interests, to plain old office politics—but understanding and managing these two forces, I believe, will greatly increase your chances of product success and profitability.

Throughout this book, I refer to a number of product categories in the motor industry. I chose this industry for a number of reasons: (1) many of the products therein are very familiar to most people; (2) statistics are readily available for readers to verify; and (3) it has been around for many decades.

Introduction

I have stacks of books about creating successful products, many of which I’ve hardly opened; others, I have read cover to cover. I have read Geoffrey Moore’s Crossing the Chasm and Al Ries and Jack Trout’s The 22 Immutable Laws of Marketing several times .Over the years, I have come to learn and respect how valuable these two publications were and are. The former, I regard as my Bible and the latter, my Ten Commandments, you could say, at least in terms of making successful products. I have found their timeless principles and assertions to be consistently reliable predictors of the future.

A building block of the 22 Immutable Laws was the Product Category. Ries and Trout clearly understood its significance in the marketplace. Adding to their work, and I say this with humility and respect for their mastery of the art, I will define the term Product Category as a foundation for explaining the principles that follow in this book.

I assume you already have fundamental tactical product management skills: interviewing customers, writing up marketing documents, providing visibility to management, presentation to other constituents, process management and so on. If not, there are plenty of books that can help you with them. This book is about two significant inflection points in the life of a product; inflection points as subtle as the change from autumn into winter – some days it is hard to tell which exact season you might be in – but the long-term trend is there. Plant in the spring, grow in the summer, and harvest in the fall.

You can’t get wet from the word water

- Alan Watts

No book will compensate for the lack of experience in shipping a product. Just as a tour guide to Paris, France can provide useful facts, he will not give you a true sense of what Paris is really like. So too is there no substitute for the experience of bringing a product to market. Consider this book as your guide to a city called Productville, which, unlike your hometown, contains mostly treacherous neighborhoods. At almost every turn in Productville, there are dangers lurking: one-way streets, unlit back alleys, avenues of no return, missing or misleading signposts, and VW Beetle-sized potholes that may swallow you never to be seen or heard from again. In this same city, however, are found extraordinary sights, great new friends, art stores, breathtaking vistas, and perhaps most important of all, thousands of city residents who are happy to assist you on your journey.

This book is a guide to the city of Productville. Having walked its streets for decades, I am familiar with some of the treachery that lies within it, as well as some of the safe streets that afford you safe passage, helping you get a successful, profitable product into the hands of your customers. Over the last fifteen years, I have made four attempts to cross the city. Each time I made new mistakes, and each time, new lessons were visited upon me that allowed me, without a doubt, to progress further during subsequent attempts.

Like many people, I have always been curious about how things really work, and so, the journey of the past fifteen years has also been one of searching for the core principles behind what makes a product succeed, and perhaps more importantly, what makes a product fail. I have distilled this journey down to a few principles spelled out in this book. They will help you understand where you are in your journey across Productville, how you got there, and if you are lost, offer guidance on how to get on track again.

I write this book assuming you already know the product you want to ship, and that you know how to market your product, and that you have a capable production team in place to build the product. You may be working on a late version of your product, but struggling to remain competitive and profitable. You may be wondering how your competitors have gained so much ground when only a few short years ago, your product was the leading solution. Or perhaps you see your product as a late arrival with a real chance to challenge the leading product in your Product Category - by solving the same customer problem in a novel and exciting way – and taking ownership of the Product Category.

Who is the real enemy?

To secure ourselves against defeat lies in our own hands, but the opportunity of defeating the enemy is provided by the enemy himself.

- Sun Tzu

A competitor has never defeated me. I was usually able to screw it up all by myself.

A company’s real enemies are not so much their competitors, but rather themselves. The battle is won or lost within the very walls of the corporation, without the help of outside competition. The opportunity is there - the customers wait with purchase orders in hand – all you have to do is execute. If you think you can somehow focus on bringing value to your customers and fight off all the internal corporate distractions, politics and other conflicting interests, success will surely follow. Even when a capable Product Manager has a good feel for how to steer his product towards success, he is often steamrolled by well-meaning peers and superiors. It is often because he has not made a case for the trade-offs required to ship a successful product.

A paper tiger always beats a real tiger

- Chinese proverb

No matter how good something is, a superior one can always be designed on paper. Let us say you and I were to design a car to compete with the highly successful 2007 Toyota Camry. Our new design would provide more space, better performance, and offer 75 mpg in city. It took us only a few days to come up with the blueprints to impress management. We are brilliant! How can we lose!

It doesn’t take a genius to guess that the product management team responsible for delivering the 2007 Toyota Camry has done a superlative job; they made the best possible trade-offs required to dominate their Product Category. If they had pushed hard to get 75 mpg, they would have over invested in fuel consumption research, or made the car too light or small to remain competitive in that Product Category or any number of other problems would have emerged. In addition to the almost perfect trade-offs they did make, they took a long-term product management view, improving the car just enough with each new model. Obvious stuff, you might say, but few companies manage to keep a product in such good balance. This book will help you keep your product in the right balance.

The paper tiger proverb underscores the problem that great new ideas will in theory result in roaring success: “This feature will wipe out the competition,” or “We just have to add this gizmo feature to dominate the market,” or “Let’s make the product bulletproof!”

Twelve years ago, an investor who was considering investing in one of my start-ups told me of a rule-of-thumb he used to evaluate investment candidates: “Liam, your product needs to be about seven times as good as it is now.” He was right. My brainchild was not nearly as good as I thought it was at that time. Funny how when someone tells you something like that, it suddenly appears so obvious. You just needed someone else to point it out.

In most companies that make products, a Product Manager faces countless great ideas about where to take the product. Some colleagues have spoken to customers directly and they have collected grocery lists of features to add to the product. Others have years of high quality manufacturing experience and want to build a bulletproof product. Added to that pressure, the Product Manager’s boss may also have strong feelings about where the product should go. Where the product must be taken to satisfy long term strategic needs is an important consideration, but sometimes suggestions are driven by a boss’s excitement about their or someone else’s brilliant idea, not by critical product management considerations. Everyone is well meaning, and many arguments presented to the Product Manager are sound. Experienced Product Managers understand, however, that ideas are ten-a-penny, and that turning an idea into a successful product is where the art of the craft lies. Thus, a major part of a Product Manager’s job is to set realistic expectations about what a feature might really cost the company, and what the value of the feature might actually be; the cost is almost always a lot more expensive that it appears at first, and the value is usually a lot less.

When you present a clear, defensible, consistent product decision process to your constituents - your team, your boss and your peers – they are less likely to try to drive the product decision process themselves. The important ingredient here is the product decision process: a set of principles by which you make trade-offs during the block-and-tackle work of true product management.

Imagine you had successfully crossed a minefield to reach an orchard on the other side. From the fruits you harvested, you fed your loved ones for years. Somehow, you worked out where not to step on your way across that minefield and perhaps you even have a few scars to show for it. You might want to share your knowledge with others.

Bringing a product to market can be an extraordinarily satisfying experience. It can also be like crossing a minefield. Mistakes tend to be expensive; some of them are career limiting, some significantly reduce a company’s chance of survival and others might be just plain old painful for everyone involved.

I want to share what I have learned so that others might apply these principles profitably.

I intended originally for this book to be an exercise in gathering my thoughts after moving on from my third real start-up to my fourth, but it quickly evolved into something that looked more like a book. So here it is. I do not plan to spend the next two years scrubbing it, or spend any time trying to make the book look bigger and deeper than it is. I have left out all the “…and I’ll like to thank my mother, and my uncle Cornelius for being there when I cried all night” section. In addition, there is no section listing the thousands of hours of research subjects, companies and bibliographies either. Frankly, I can scarcely remember where I learned most of what I learned. I was busy.

Many books end up unread, or half-read, in sitting rooms and on coffee tables across the land. I have a house full of them. This book quickly grew to 400 pages, and so I stripped all the fat out of it. Any Product Manager I have ever met was too busy to get through a 400-page book. If you MUST read only part of this book, then skip straight to Chapter 5 on page 67. If you read that one chapter and nothing else, then my job has been worthwhile. If you do not get something out of Chapter 5, put the book back on the shelf, or in the trash.

I encourage you to take a shot at the questions at the end of each chapter, even if you do not buy this book. If you are reading this book in a library or in a bookshop and you do not want to soil the merchandise as my local grocer puts it, write the answers down on a piece of paper.

I begin with a discussion about what Product Category means. I do that because I now believe an understanding of what a Product Category means is critical to the Product Manager’s job. It is as critical to the job of product management as having a map of the battlefield is to a general who is about to put upon his enemy. For years, I have listened to people bandying about terms like Product Category, “the product market,” segment, niche, sometimes interchangeably in the same conversation. Niche is a quaint little town in France as far as I am concerned. I believe the battle for product success is won or lost within the Product Category, and your life may depend upon knowing your battlefield well.

I invite you to contact me at liam.scanlan@gmail.com. I look forward to what you have to say. I will respond to every email.

Chapter 1. The Product Category – Atomic Unit of the Marketplace

That's the ultimate gratification in any business situation - do customers buy the product? And do they use it and do they come back and buy more of it?

- Jim Barksdale

An evolutionary path

Metaphors aren’t always helpful; sometimes they can lead to misunderstanding the nature of a challenge by oversimplifying it or otherwise misrepresenting it, leading to failure. They can mask a subtle but significant factor by excluding it from the metaphor. For the same reason, an apt metaphor can aid the understanding of an otherwise difficult problem, not because the problem itself is inherently complex, but because it is obscured by irrelevancies.

Product management is one such challenge; its wheels and cogs are often obscured by many seemingly telling factors that often turn out to be irrelevant. Over the years, I have toiled over issues in the pursuit of product success, only to find a small handful of significant driving factors behind product success. To that end, I have come up with a simple metaphor that portrays the essential elements of a Product Category.

Imagine you are at the edge of a dense forest you wish to cross. Pathways open up and close again over time with the changing vegetation, animals and weather. Where and when do you start your journey? How will you know how far you have gone and how far there is left to travel? How many of your resources may you safely consume, and perhaps more importantly, how much might you be able to forage along the way to sustain you? What path will regularly present the most likely supply of such sustenance, and yet still allow you to cross the forest in optimal time?

When I look at a Product Category, I do not see a stationary challenge or opportunity, but rather a path through a forest; a path which, in its early stages of growth, changes under the very feet of the traveler; or it may have a beginning but no obvious end; or it may have an end, but no longer any beginning. It may even have lost its beginning but the end is not yet clear.

The Product Manager will lead his team down this path. He must make good progress, yet guide his team to ensure optimal replenishment of supplies as they progress. Thus, he must know where the next fruit tree grows while maintaining appropriate reserves. He must negotiate obstacles, inspire his fellow team members, protect against predators, partner with natives, and avoid false and dangerous distractions. Vision regarding where Nature and Climate will open the forest will assist him towards a safe and fruitful journey and destination. Losing his way, on the other hand, will spell loss, pain and perhaps oblivion.

• The path of the traveler is not a straight line through the forest.

Fresh as the morning dew, the traveler may start the journey with a full pack, eating heartily from the seemingly bottomless supply of trail mix, snack bars and sports drinks. At great expense, he might even airdrop supplies to him at various points in the forest, but the traveler who forages as he goes will fare best on this long journey. To live off the forest is to know the forest’s secrets; to know its secrets is to know how to traverse it.

The following pages will help you stay on that path through the forest. It will explain why real customer revenue, the “foraged food” of business, is more nutritious than any foodstuffs you may secure outside the forest.

What is a Product Category?

A Product Category is a list of products from which a purchaser will pick one to solve aproblem.

A Product Category:

• Has an established price range.
• Lasts typically for at least a decade, often decades.
• Consists of at least two competing products.
• Often has one dominant member.
• Is usually distinct from other product categories.

A company can have offerings in several Product Categories and domination in one Product Category does not mean domination in another Product Category.

Let’s parse the above definition into its constituent parts so that it is fully understood.

A list of products…
Your prospect must have a real choice. If your prospect does not have a choice, one of the following may be the reason:

1. The Product Category probably does not exist yet.
2. The Product Category is in the Embryonic Stage.
   The rules governing the care and maintenance of your product will apply to early-stage product development, where prospects don’t fully understand what they should be looking for in your product.

For a Product Category to exist, the list must be of products that are similar, and there must be at least two on the list.

Here is a list that is not a Product Category, although your prospect might have all three written on a piece of paper before they go shopping:

• A table-lamp for under $40
• A Gallon of milk
• A white, button-down business shirt.

A customer is unlikely to be thinking, “Should I get the table-lamp or the gallon of milk…decisions, decisions…”

There will be cases when a person will decide to put off buying that spiffy new white shirt in favor a table lamp, but buying the table lamp does not solve the problem of needing the shirt. Thus, the shirt and the lamp do not belong to the same Product Category.

Purchaser will pick one…
When a customer buys one of the elements within a Product Category, the purchase transaction is closed and he will not purchase another product from the list at this time. The definition of the Product Category is reinforced by the fact that the prospect rejects your offer as soon as he decides to purchase your competitor’s product.

• When your prospect drops consideration of your product when he picks your competitor’s, you know what your Product Category is.

To solve a problem…
When the customer makes the purchase, his problem is solved, at least for the moment. This last element of the definition is perhaps the most important. The customer is trying to solve a problem, which may be practical: e.g., he bought a microwave oven for his new apartment because he could not cook without one. The problem may be emotional: he bought flowers for his sweet Aunt Gertrude because he wanted to satisfy his need to express love. A mix of both practical and emotional considerations drives many purchases. For example, automobile purchases are often driven (no pun intended) by both transport and self-image needs. Whatever the reason, once the purchase is made, the customer moves on from that problem and the remaining candidates on the list are dismissed, at least for the time being.

Product Category Cycle Time is the approximate time before a customer will need or want to make another purchase of a member of the same Product Category, usually because his previous purchase has expired, been consumed or disposed of in some way.

If you smoke three packs of cigarettes a day, you might consume a pack every eight hours, but the average smoker probably gets through a pack a day. Therefore, the Cycle Time for the Product Category to which that cigarette brand belongs might be about one day. The Cycle Time for a Product Category to which the Toyota Camry belongs might be somewhere in the four or five-year range, I would guess, and in the echelons of product management in the Toyota Motor Corporation, someone has that figured out.

If your prospect is “still in the market"[2] after he purchased what you believed was your competitor’s product, it is probably because your product and the one they bought are not actually in the same Product Category.

Consider the following two situations. One suggests a single Product Category; the other illustrates where Product Category boundaries are unclear.

1. Company X has decided to create a software solution “in-house” rather than buy an equivalent off-the-shelf software product.
2. Company Y has decided to create a software solution “in-house,” but continues to consider the equivalent off-the-shelf solution, even after committing resources to the in-house solution.

In the first example, Company X’s objective was to solve the same problem that the external software vendor’s product solved. Once it was decided to do the work in-house, the “problem was solved” in management’s eyes, so that Company X could dispense with further consideration of the off-the-shelf product.

Company Y, on the other hand, was actually trying to solve a different problem by developing the solution in-house: they were trying to learn more about what their true requirements were before purchasing and committing to an off-the-shelf product, which means Company Y was trying to solve a different problem (gathering requirements) to the problem solved by the off-the-shelf product. This second scenario is often a symptom of an immature or non-existent Product Category. The prospect might not know enough to be able to jot down a list of solutions to choose from, and that should warn the product vendor that the market might not be ready for their product.

• If your product is still competing with homegrown solutions, you may have arrived at the market early.

Being told by your prospect that you are “still in the running” might get your team excited about how powerful your solution must be, but it is usually bad news. As painful as it might sound, it is often better to lose a race to a competitor early, learn why and stop wasting money on a prospect that you were never going to close in the first place.

This book is a member of a Product Category: Non-fiction, under-four-hour publications for less that $15 relating to product management. Not as crisply defined as the Product Category to which the Toyota Camry belongs, but nonetheless, all the criteria of Product Category membership apply. Its Cycle Time might be as short as 4 hours (the moment you finish reading this, you will buy another publication), but it is probably measured in weeks or months.

Examples of Product Categories:

• Four-door, 25+mpg cars (around $25k)
• Walkman ($100)
• MP3 Players ($300)
• Small SUVs ($25k)
• Large SUVs ($35k)
• Luxury SUVs ($50k)
• Pack of high-tar filtered cigarettes ($5)
• Centralized data backup software programs ($1k+)
• 100-passenger jets ($Ms)
• Low-function mobile phones ($100)
• Desktop word processing programs ($100)

Figure 1 – Product Category: Small SUVs

Figure 2 – Product Category: Luxury SUVs

Figure 3 – Product Category: High tar cigarettes

Each Product Category has its own list of members. Many of them are so familiar that you could list their members.

Product Category Erosion

All good things come to an end and the sun will set on even the strongest Product Category. This happens for many reasons:

1. Technology shift: Ever notice how few public telephones there are these days? You can thank the ubiquity of mobile phones for that.
2. The problem goes away: For example, some years from now, low-cost gene therapy may eradicate diabetes. This will spell trouble for the synthetic insulin Product Category.
3. One player becomes too dominant: A monopoly will hasten the demise of a Product Category because customers will resist making a purchase in the absence of real choice, creating opportunity for others to compete from outside the Product Category, perhaps even spawning an entirely new Product Category. As long as there is an Avis, there will be a Hertz: you need competition to keep you on your toes.

• Real competition is good for you.

Why must you know your Product Category?

If you do not know where you are going, any road will take you there

- Lewis Carroll

Your Product Category:

• Defines whom you compete with.
• Indirectly defines your customer.
• Tells you approximately, how much you can charge and suggests a pricing model.
• Helps you differentiate your product.
• Restricts your potential feature set.
• Tells you how big the market is for your product.

Before a Product Category has matured, a lot of time and resources can be wasted experimenting with prices, pricing models, pitches, outbound marketing programs, and endless meetings about how the pricing universe is structured.

You cannot know what the correct price or pricing model is at this stage. When the Product Category is immature, spend less time on theorizing about pricing models and focus instead on what value you can give to your customer and determine where the perimeters of your Product Category might lay in the future. Your objective during the early stages of the evolution of your Product Category is to build a solid customer base. In time, they will teach you all you need to know about the pricing model that works best.

Your Product Category defines the length and breadth of your product’s opportunity in the market. Your Product Category will give you an indication of how much to invest in your product, how to sell it, how to recognize a true prospect, how much they will pay, what you should add to your product, and when you should make changes to your product.

Perhaps most importantly, your customers will tell you what not to add to your product; you won’t get paid well for adding product features that lie outside the Product Category to which the product belongs.

The size of the high-tar cigarette market has no impact on the sales opportunity for the Toyota Camry. This is because the sales opportunity for the Toyota Camry is constrained by the perimeters of the Product Category to which the Toyota Camry belongs, which is Compact, well-appointed sedans getting 25-30 mpg in the $20k - $30k price range. You can easily identify other members of that Product Category.

Regular, Extra or Premium?

As stated earlier, a Product Category determines a price range for the products within it. More often than not, as the Product Category matures, one or more of the products within it are regarded as “Premium.” These Premium products may command a figure in the upper end of the price range within the Product Category, while others may be relegated to the lower end of the price range. The anointed leader within a category does not necessarily command a premium price. A product with a small share of the Product Category can be regarded as the premium player.

What is your Product Category?

Imagine for a moment that one of your prospects has a list of products written on a piece of paper, one of which is your product. They will purchase one item on the list to solve a problem. Jot down the list of products you believe is on that piece of paper. If your prospect has done his homework, that piece of paper contains a list of the members of your Product Category.

It is not good for a product to belong to no Product Category. At least, if your product does not belong to any, know that it does not. A Product Category exists because there is a problem that needs solving--a problem that customers are willing to pay money to solve. If your product does not belong to a Product Category, it may not solve a problem that folks are willing to pay for. It is possible, of course, that your product solves a very tough problem that has been around for eons and only recently has a viable solution been possible. Even in this case, though, you should be able to come up with some weak or primitive members that could belong to your Product Category. It is rare for a prospect to be limited to a single source for a solution to his problem. There are a few examples like that out there, such as Microsoft Windows, but it is more likely that your product does not solve a problem folks are willing to spend real money on.

You might hear “We’ve got the only solution available,” or “The customer really has no alternative.” If you truly find yourself in that situation, enjoy it; it will not last. Customers always like a choice, and if a choice is not available to them, they often postpone their purchase rather than risk buying the “only solution”. Either you are ahead of a tidal wave of customer demand, or you have a product few people want to pay for.

Understand this: the existence of competitors is necessary for your success. As counterintuitive as it may be, losing deals to competitors can be good news; it is often proof that the market for your product exists. You just have to make sure you get most of the good deals.

Chapter exercise

1. What problem does your product solve? __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

2. List other products that you are sure your customers considered before selecting your product? __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________

List three ex-prospects that considered your product, but bought a different product and dropped further consideration of your product in the last year? (If they did not drop consideration of your product, it does not belong to the same Product Category.)__________ __________ __________ __________ __________ __________ __________ __________

Write the names of the top five products in your Product Category, including your own product, and their equivalent price [3].

Product name - Equivalent price

_____________________________________________

_____________________________________________

_____________________________________________

_____________________________________________

_____________________________________________

---

[1] If you provide a service to your customers, that service may also be considered a product in the context of this definition. Often, companies “productize” their service and hire Product Managers to manage delivery of that service.

[2] They are still considering your product.

[3] Equivalent price means how much you would spend on roughly the same amount of product. Example: The base model of a Toyota Camry might be $20k. How much would a similarly equipped Honda Accord cost?

Chapter 2. Customer Migration

The Epic Voyage of Microsoft Word

Remember WordStar? (Well at least, my spellchecker remembers it). WordPerfect, anyone?

What about Microsoft Word?

In its quest to dominate every important Product Category on the desktop, Microsoft has had the superlative advantage all along; they owned the platform. Still, deft strategy, relationship management, bundling, packaging and marketing all played a role in how Microsoft eventually came to own the desktop word processor program Product Category that included Word, WordPerfect and WordStar. As of the year 2006, the feature set and price tag have been decided for this Product Category. It is woven so well into the fabric of customers that most Word users probably do not know how much it costs.

Most people will agree that while Microsoft Word has its faults, and I would struggle to list the improvements the product has delivered over the past half-decade, it is good enough.

I remember being introduced to WordStar in the mid-1980s. At first I was suspicious of the product, having relied on a previous-generation, minicomputer-based word processing program called Nixdorf DETAS (my spellchecker has never heard of that one) for years. It was, however, a quick customer conversion to this new way of creating documents. WordPerfect was soon available, but Microsoft Word came with the $10,000 laptop (luggable) my company had supplied. I have to say the sexiness of WYSIWYG[1] in Winword (as Microsoft Word was called at first) was at the time fresher looking to me than WordStar. Whatever my opinion was, the market embraced Word in the package of Microsoft Office[2], Windows and everything else, blazing a trail for Microsoft into history.

WordPerfect and a few other lesser-known word processing programs still nibble at the edges of this Product Category. Clearly, Word will be around for many years to come, but over the past few years, new technology has empowered a few potential challengers to Microsoft Word’s dominance, not necessarily in the same Product Category but rather from an emerging one. Remember that a significant indicator of Product Category is price. Sun Microsystems has been giving away a competitor in the form of OpenOffice for several years. There are also several open source alternatives available of late.

God said “And I think Writely”

Recently, Google acquired a product called “Writely,” an online word processor that supports many Microsoft Word standards, targeting Microsoft Word users directly. Google also recently released a free, online spreadsheet package. Clearly, they have Microsoft’s customer base squarely in their crosshairs. Google will be successful not by making their software “better” than Microsoft’s but by keeping the battle outside the existing Product Category (desktop word processing programs), where they would have no chance of success, and inside the embryonic Product Category (free, online word processing programs[3]), where Microsoft is loath to compete.

Figure 4 – Google competes from outside the Product Category

Sometimes one Product Category reaches the end of its life as a different one moves in over time to solve essentially the same problem. Remember, products rarely move from one Product Category to another.

Microsoft is not about to give away its Office products for free to compete with OpenOffice or any other software. It may do so in the future, but it will happen only when a new Product Category has already stolen its customer base. A product with a price of zero exists, by definition, in a different Product Category than a product with a price that is not zero. For Microsoft to give away Microsoft Word would be an attempt to migrate its product from one Product Category to another. I do not know of a single example of such a move that has been successful.

• More often than not, a company is unable or unwilling to address a threat coming from a different Product Category.

In the normal course of business, a certain segment of a customer base shifts its reliance back and forth from one product to another within a Product Category. One year you buy a Toyota Corolla, a few years later, you buy a Ford Focus. Shifting to a new Product Category is different. Once a customer moves to a new Product Category to solve their problem, they rarely revisit the old Product Category again. The third car you buy is an SUV or a minivan because you now have two kids, and an SUV meets your transportation needs better than a compact sedan.

As the members of the new Product Category improve, more and more customers shift over to it. The loss of the customer base “creeps up on you” as Al Ries and Jack Trout note in The 22 Immutable Laws of Marketing, referring to the gradual nature of how customers shift from one Product Category to another. By the time the established vendor realizes it has a problem, it is usually far too late to respond effectively. Of course, there is no reason a vendor cannot have products in the old and the new Product Category. Toyota has done a fine job of delivering competitive products in the compact sedan, small SUV, large SUV and minivan Product Categories.

I am typing these words using Microsoft Word 2003. Every week or so, I open this same document in OpenOffice[4] and then use that application’s Export-to-PDF feature to create a working copy for my editor. To my knowledge, Microsoft Word does not have an export-to-PDF feature. While I was using OpenOffice, I noticed it had strong handling of word wrapping, which I have been struggling with in Word. For that reason, I moved a few of my other documents over to OpenOffice. I am still a lot more familiar with Microsoft Word than I am with OpenOffice, and I will use both for some time, but I have become, for Microsoft, a customer at risk. I have also started using Google’s word processor.

Sometimes, a company’s very presence in one Product Category precludes them from making a play in a different Product Category, even with a new product.

In 1999, my friend Cory Bear and I left Legato Systems to start Bocada. Our product was BackupReport, which supported Legato Systems’ own NetWorker product and five of Legato’s closest competitors. Legato NetWorker belonged to the networked data backup program Product Category. BackupReport belonged to an embryonic multi-vendor data protection information Product Category. They solved completely different problems.

At the heart of our product offering was the ability to support multiple vendors’ products. One could argue (and often was) that BackupReport was just an improvement on Legato’s product in their Product Category. This argument was wrong. For years, Legato, with greater resources at their disposal, tried to compete with us by improving their NetWorker product to support reporting for their own product. So too did Veritas, whose NetBackup product we also supported. Other companies did likewise to various degrees. It was imperative that our BackupReport product remained steadfastly true to its cross-vendor character, not setting so much as a toe outside the perimeters of our embryonic Product Category. To move away from it would mean exposure, with significant risk, to a different Product Category. Without going into excruciating detail, the essence of this story is this:

• It is difficult for a product to compete outside its Product Category.

Worth repeating: know your Product Category.

A product, to the degree that it is established in a Product Category, grows “roots” in it, making it more and more difficult to transplant. For it to become established in the first place, it needs those roots.

Any experienced horticulturist will tell you: the bigger the tree, the riskier it is to transplant.

• A product quickly becomes confined to its Product Category.

Albert Einstein often used “thought experiments” to help his audience understand what could happen in a given situation, without having to perform an actual physical experiment. He would begin with some easily understood and accepted facts; he would ask everyone to imagine something happening, and to hypothesize what the result would be.

McDonalds’ serves the fast food Product Category; the company is synonymous with the burger. Subway, another company joined at the hip with its product: the sandwich, belongs to the deli sandwich Product Category.

McDonalds has been around for a long time. Recently, Subway has tried, successfully I might add, to woo McDonalds’ customer out of the fast food category into the deli sandwich category. Products competing with each other within the same Product Category present a completely different challenge to that of products competing from two different categories. The former is a “We do it better than they do” approach and the latter is a “What we do is better than what they do” approach. A subtlety, but one that can make a big difference. When Subway set about to compete with McDonalds, it challenged the very value proposition of the fast food Product Category with the claim that, “You shouldn’t eat burgers.’ If effective, such cross-category challenges can do serious damage to the challenged Product Category. Quiznos, on the other hand, says its sandwiches are better than Subway’s. With this more benign strategy, Quiznos, with its premium prices, is trying to slice off (no pun intended) the high end of the price range within the deli sandwich Product Category.

It must be fun to switch

Customers will give a product in a new Product Category a chance just for the fun of it, even if the new product offers less functionality. Google Writely (or whatever they choose to call it) has a fraction of the functionality of Microsoft Word, but it is a fun new way to create and store documents. That is the biggest reason I use it.

SUVs of one type or another have been around since World War II, but when they became popular in the 1980s, they were more difficult to maneuver, had worse fuel economy, and were a lot more expensive. Customers buy SUVs because they are fun.

If you want to steal customers from an old Product Category and bring them into your new one, you would do well to make your new product fun to use, even if it has a fraction of the functionality of products in the old Product Category.

• Products in a new Product Categories have a much better chance if they are fun to use.

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[1] WYSIWYG – What You See Is What You Get – It was the first time I saw an onscreen representation of a document that closely matched what the document would look like when printed.

[2] I proffer that Microsoft Office is not a Product Category. It is a group of Product Categories. Each product within Office solves a different problem, has a well-understood price-range and can be bought separately. Microsoft Word, however, won its own is a comprehensive entry in a Product Category.

[3] As the Product Category matures, it will become better defined

[4] Sun Microsystems’ OpenOffice suite

Chapter 3. Product Footprint vs. Product Category

As mentioned earlier, a product’s footprint is the set of working features contained in it. It should be a subset of a Product Category, but sometimes a product will have a feature that does not belong to its Product Category. For example, Pontiac released a sedan some years ago with a single, continuous rear light across the entire rear of the vehicle. It was funky looking and had no discernible function. No one copied it. An ideal product’s footprint matches the area of the Product Category to which it belongs exactly. Let me illustrate this.

Figure 5 – the feature area covered by a Product Category

Just as it is hard to imagine a country without any people, a Product Category cannot exist without products.

The image in Figure 5 represents the entire set of potential features that a mature Product Category covers. In a mature Product Category, where by definition the required feature set is well understood, a successful product covers a substantial portion of that area.

• Once a Product Category has reached the Mature Stage, only incremental changes to the Product Category footprint should occur.

Figure 6 – The footprint of a high Function product in its Product Category.

The light gray area of the image in Figure 6 represents the product footprint of a successful product within its Product Category. This is not to say that the product dominates the market, or that it is a quality product necessarily. It does mean, however, that the product probably looks superior to others in the Product Category that do not cover as much of the Product Category, such as the one illustrated in Figure 7, below. The product in Figure 7 might be a masterpiece of quality, but scarcely covers 50% of the Product Category. A smart product management team grows their product’s footprint as fast as it is safe to do so, but not so fast that they add functionality outside the product category.

Style over substance

A poor quality product can look superb on the surface. It may have a lot of functionality but little quality to back it up. When the customer has had some experience with it, they realize just how faulty it is, by which time they have invested too much in it to switch. Still, by the time the market discovers that fact, it may be too late for competitors to catch up, and the vendor in question may have cleaned up their act. Where product switching is difficult for a customer, securing a good customer base early has an added urgency to it.

An example of where product switching is difficult: desktop operating systems; lots of folks might talk about their next laptop being an Apple instead of a Windows-PC, but it is a difficult switch to make considering the investment many of us have made in our original Windows purchase.

An example of where product switching is easy: moving from Starbucks cafes to Tully’s cafés; a simple change in the weather, or a new café opening up closer to my house, and I can switch loyalties at no cost.

Figure 7 – A product footprint covering approx 50% of its Product Category.

Figure 8 – a product footprint covering a fraction of its Product Category

Early in the evolution of a Product Category, it is more difficult to know what to add to the product. After all, no one knows yet exactly where the perimeters of the Product Category lie, and an aggressive investment in product development might be wasted on improvements that will never provide a return. You can always ask your customers what they would like added to your product, but you must be careful that your customers do not drive your product development directly. Not knowing the perimeters of a Product Category that does not yet exist, the visionary Product Manager will balance customer requirements with strategic needs, technology opportunities and an instinct for where roughly those perimeters might lie in the future. Sometimes that means making changes to the product in a way your existing customer might not have suggested, but are required to satisfy the needs of a maturing Product Category.

Chapter exercise

1. How many significant product releases/versions has your product experienced since it began? __________
2. How many more versions/releases that are significant do you expect to see in the remaining life of your product? __________ (Please write down your best guess even if you find the question difficult to answer.)
3. List all the possible features that your product could have in its ultimate, final version, even if that is in the distant future: __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________ __________. (Continue on a separate piece of paper if needed.)
4. List features of competitors’ products that one of your prospects showed interest in: __________ __________ __________ __________ __________ __________

Chapter 4. Creating and Growing a Winning Product

The wastebasket is a writer's best friend.

- Isaac Bashevis Singer

How many babies will you take across the river?

Deciding what goes into a particular product version (or model) is more often a question of what you don’t include rather than what you do include. From rivets to dropdown list boxes, every tiny addition to a product costs money, but a feature that is of questionable value to a customer will cost more than average because a customer will spend a disproportionate amount of time trying to figure out the feature. This results in more service calls, more engineering cycles, and more distractions from the real value of your product.

There is a fable about a boatman transporting babies across a river. In addition to the weight of his own body, his boat can carry four babies. If he loads more than four babies into the boat, he increases the risk of sinking and drowning everyone. Wolves will quickly devour anyone who remains, including himself if he dallies long enough, so he can make only a single trip.

He is faced with a choice of (a) staying, in which case he and all of the babies perish, (b) taking all or most of the babies, which is just as calamitous, or (c) taking four babies across the river, leaving many behind to die.

Clearly, (c) is the only viable option in this, thankfully, theoretical set of options.

The fable illustrates the need to make a tough decision when one needs to. The boatman must look at those sweet little babies and decide which to leave behind. And there is the pressure of time.

The Product Manager as boatman

Let me offer an adjusted model of the boatman’s dilemma to make it a more applicable metaphor for the challenge facing the Product Manager:

You can make repeated visits across the river, and there are no wolves. Your competitors face the same challenge. The winner is the boatman who gets the most babies, alive of course, across the river within the time allotted.

There is still plenty of time pressure, but there is clearly an optimal path available: Transport four babies at a time across the river, making as many trips as necessary; paddle as fast as is safe, without burning up too much energy too early.

The inexperienced Product Manager will often yield to the pressure to “take many babies.” The boatman, at least, knew that four babies was his absolute limit. For the Product Manager, it is a little murkier; it is difficult to determine how many, and which, additions, a particular product version (or model) can support. Add too many, and the version may become unstable; add too few, valuable time and opportunity are lost. Features tend to be less valuable than believed, and more costly than predicted. As obvious as this might sound, a core objective of the Product Manager is to pick just those right product additions, but not too many, to include in a given version or model, and to hope and pray that the competitors’ Product Managers make poor choices.

• Features are less valuable, more costly and take more time to create than predicted.

Sorry, sir. That was the demo model

Many of life’s experiences turn out to be less exciting than they appear in the brochure. Additions to a product are no different. You thought a feature was going to “send the competition running for cover,” but when did it ever turn out that way? It was also more difficult to add the feature to the product and it took longer than expected. Consequently, it cost more to make.

It’s all in the trade-offs

Let us do another thought experiment. Picture a Product Manager looking at the list of additions he is considering for a product release. The list has twelve different additions ranking in value from most valuable to least valuable. He does not yet know how many of the twelve he will add. It almost certainly will not be twelve, nor is it likely to be one.

Figure 9 – Product additions are usually less valuable than believed

The chart in Figure 9 contrasts what someone might believe the value of an addition to the product to be with what the actual value turns out to be.

The Product Manager also knows that the more he adds to the release, the more costly the production will be; there is good sense in biting off only enough to minimize production risk. For the same reason, if he does not add enough, the product release may fail because there is not enough return on investment, or not enough quality to support the feature additions; there is a different risk in adding too little. All obvious stuff, you might say, but most Product Managers get this wrong.

For each of the twelve additions, he associates an incrementally larger risk to represent the geometric increase in risk for each subsequent addition. He also wants to represent the increased risk of adding too little; hence, there is a higher risk associated with the first few additions.

Figure 10 – additions to a product are more costly than predicted

The chart in Figure 10 contrasts the believed costs of the same twelve additions (illustrated in Figure 9) to the product with their actual costs. Consider each column, or point, to represent an addition to the product. The first addition or two have high costs associated with them because (a) a “light” product release may cost more to market and (b) there are fixed costs with every release no matter how little you include. Beyond the first couple of additions, each incremental addition to the product release adds increasingly more cost. In other words, as you pile more and more into a given product release, the more expensive, and at a certain point, prohibitively expensive, the release becomes. Everything costs more than we thought it would cost because, well, c’est la vie.

“Big deal”, you might say, “so it costs a bit more than we thought it would. It’s still great stuff to add to the product so we should add it anyway.”

For a given product release (or model), the value of an addition to the product must exceed the cost of that addition, or we should not make the addition. Note the cut-off point in the next two figures: As long as costs remain below value for a given addition, it makes sense to add it to the release.

The mind that is wise mourns less for what age takes away; than what it leaves behind.

- William Wordsworth

Figure 11 – Optimistic scenario – we invest in 50% of our candidates

In Figure 11, we look at the top twelve most valuable candidates for inclusion in the next year’s model of our product. (Addition 1, on the x-axis, offers the most return while addition number 12 offers the least return.) We compare the expected return to the expected cost. The costs climb with each addition to a product release. The more we add to the product in a single release, the more complex the release becomes which adds cost in the form of risk and management beyond the addition itself. In other words, when you double the size of the release, you more than double the cost. The size of the release is sometimes referred to as “project scope”, and experienced engineers and managers will tell you that costs increase geometrically with project scope.

From the chart in Figure 11 we might assume that the top six additions are worthwhile, because they cost less than the expected return; thus we decide to invest in six (50%) of them in the next release of our product.

However, when we discount for optimism and compare actual return with actual cost, we see a different result. Only the first two or three additions are worthwhile.

Figure 12 – A more realistic scenario – we invest in only 25% of our candidates

Figure 12 illustrates the notion that when value and cost estimates are slightly discounted, the data suggests significantly fewer additions be included in the product release. Addition 1 (on the x-axis) is considered the most valuable and addition 12, the least valuable.

Therefore, the optimal number of additions to make in our theoretical release should be three, not six. This 25% investment promises about 50% of the return from all twelve candidates.

ë When we are conservative about return-on-investment and its associated costs, we make significantly different decisions about how much to include in a product release.

If we were to include six additions in the product release, as suggested by the optimistic scenario in Figure 11, the benefits from the first three additions may be wiped out by the next three less worthwhile additions.

The lazy man’s load

My mother points out that a lazy person will overload their basket in an effort to minimize the number of runs they will take. A diligent worker knows that there is an optimal amount they can carry in a single run, and that amount is considerably less than what they are theoretically capable of. They pace themselves, and save a little wear and tear on their body in doing so, avoiding backache on the later runs.

The lazy man’s load might also be described as the young person’s load or the inexperienced person’s load.

The hare and the tortoise

In 1994, I took it upon myself to walk the Wonderland Trail that circumscribes Mount Rainier in Washington. It is almost one hundred miles long, and comprises of mostly inclines and declines the whole way round. At least, that is how it seemed. Before I started, I checked in with the park ranger to pick up my permit. As I stepped out of the ranger’s cabin, a group of perhaps six young hikers was stepping in to the ranger’s station to pick up their own permits. I had perhaps a five-minute lead on them. An hour or so later along the trail, I heard them approach from the rear, getting closer and closer until they reached me. I stepped aside for them to pass, as they were moving considerable faster than I was. They were full of excitement and youthful energy. They had the latest professional hiking gear from the best hiking stores in town and they were not going to waste time by going at the old man’s pace. They quickly disappeared into the distance ahead of me on the trail.

Another hour passed as I inched my way along the trail. I turned a corner to see my six fellow hikers stopped on the side of the trail. A full three of them were nursing blisters. Two hours into a 50-plus-hour hike, they were in pain.

Just as there is an optimal amount of gear to take with you on a hike, there is also an optimal speed. Getting it right means keeping your strength and power for the long haul ahead of you.

In product management, there are no short hikes of any real interest or value.

Remember, there is always another release. If you get the right amount included in a given release, you can provide a satisfactory return and kept costs and risks at an optimal level. In addition, you are less likely to exhaust a future release by spending resources making repairs from its preceding release. From your experiences of the just-released product, you will have an updated and expanded list of candidates for the next release, and in time, you can slice another 25% off the top of that list in the same way.

The cumulative effect of several solid, timely releases in a row can put your product far ahead of the competition. It is better to ship a solid improvement every year than an ambitious release every two years.

• The longer you wait to ship a model or a version, the higher the bar your customers expect you to jump over.

Often, companies try to stuff too much into a given release, or go to the opposite extreme, adding little that is new to a release, opting for “perfect product quality” in an attempt to protect what they have already achieved.

Boring as this sounds, the Product Manager should be playing a wait for the other guy to get this wrong competition, rather than an I will add something brilliant to steal the market competition. In my experience, strokes of brilliance are rarer than hens’ teeth, but getting five optimal product releases out in a row is doable and gives you a real chance to make your product a success.

Everything for the long term

I

It’s rarely do-or-die in a single release. I have heard variations of the doomsday scenario where, if we “Don’t stuff such-and-such…” into a given release, the competition will wipe us out. If that truly is the case with your product, I suggest you invest your life energy elsewhere. Real products with real futures and possibilities support many releases over a decade or more. A Product Category with a lifespan measured in decades is infinitely more valuable than one measured in years. Long-life Product Categories reflect pervasive, persistent and reoccurring problems that customers need to solve repeatedly. When you invest money and time in solving these problems, you will be rewarded repeatedly for your efforts. Only long-life Product Categories can provide such a return. Continue to invest as long as you can foresee at least ten more years of sales.

• Invest only in Product Categories you expect will last for at least another ten years.