Companies, Strategy

It’s the last mile that counts – Amazon Locker


A few weekends ago, I was catching up on the news and read about the thousands of runners finishing the last mile of the Boston Marathon. Running the last mile was a symbol of respect for the victims of the tragedy in April and the resilient spirit of a city and nation. As I was reading through the runners’ quotes in the story, I reflected on the importance of persevering and running all the way to the finish in my life and in my work.

I have always thought (and mentioned in a previous post) that the creation of great products is more akin to running a marathon than a series of sprints (no pun intended). Truly successful products and services go the distance and make sure that the promised value is actually delivered and realized by the end user. It is this focus that turns a product (technology + ideas + promises) into a solution (tangible value that customers would pay for).

As a product manager living in the San Francisco Bay Area, I have the privilege of meeting a lot of product people and discussing product strategies and challenges. Almost always I see a crisp definition of the problem that needs to be solved and a detailed description of the virtues of the product. However, more often that not, it becomes apparent that the product as-delivered does not really solve the problem unless the customer has specific abilities or skills, which may be difficult to possess or acquire. At this point the conversations get interesting and the big a-has come from working out how to turn capable products into a tangible solutions – charting out that last mile.

So when I stopped to reflect about an example that showed a clear understanding of the importance of running to the finish line, I landed on my recent experience with Amazon Locker. It takes the e-commerce experience literally to the last mile and makes sure that customers receive their purchases without having to worry about someone stealing the package or having to wait around for the UPS guy. Since I live in a condo building in an urban downtown, my deliveries sometimes have a tendency to find legs and disappear. Amazon Locker comes to the rescue; it’s a secure, single-use post office box at a convenient location (half a block from my building) to pick up packages… brilliant! Amazon’s obsession with operations is well known so I am not surprised that they thought about their ‘product’ as being all the pieces that need to come together for the customer to realize the value (quick, secure delivery of the package) of an online purchase.

There’s no doubt that creating amazing products requires an obsessive attention to detail. And, it seems like the most important of these details is the series of events that need to happen for customer to actually realize the promised value of the product… and the probability of these events happening in the real world. A good reminder that at the end of the day, it’s all about customer outcomes not products, and the persistence to make those outcomes happen – here’s to running that last mile.

Companies

Netflix – Flicks directly on the net… at last


Lately, I’ve been running errands to tie up the loose ends of a construction project at home and I keep driving past the now defunct ‘Hollywood Video’ store in my neighborhood. As you might expect, the Product Manager in me looks at this abandoned store and can’t help thinking about the innovation and creative destruction delivered to my neighborhood by… you guessed it… Netflix.

I have to admit that, over the years,  I was only a sporadic member of the videos-by-mail, no-late-fees Netflix service. That’s because I was always able to find time to watch movies in the theater and so waiting for movies to release on video and be shipped to my house didn’t make much sense. However, all that changed recently when I discovered the instant gratification of Netflix’s video streaming service.

Of course, like the rest of Netflix’s instant-streaming customers, I would like the catalog of content to grow by leaps and bounds. The growing rate of adoption of the streaming service is a great win and a great challenge for Netflix – it’s now up to them to turn these buyers and users into vociferous lovers of their service. In the meantime, there is enough geeky PBS and National Geographic content on their catalog to keep me satisfied for weeks, if not months.

I recognize that it might be a little too soon to add Netflix’s streaming service to the annals of buy, use, love greatness but my study of their strategy might interest fellow Product Managers because it reveals the makings of a blockbuster – no pun intended. Here’s what I learned…

  • If the data contradicts your business model, reconsider the business model –

    Over the past few years, Netflix noticed the downward trend in the number of DVD shipments per user and an increase in the amount of streaming content. This unadulterated market data has driven the company’s transition to streaming from the DVD-by-mail business model that built its initial success. As with any transition, there will be challenges – lower monthly subscription fees, higher content licensing fees, heavyweight competitors etc. but Netflix is clearly committing to the future instead of rabidly defending the past. As Product Managers, we’re often confronted with a choice – tweak the parameters of a known model or explore the uncertainties of new ones. To help with this choice, let’s commit to seeking as much true market data as possible. In the absence of data, self preservation drives PMs and companies towards the tried and true instead of risking the path of tomorrow’s breakthrough.

     

  • Focus on eliminating the pain of change – 

    The triumph of the internet as a means of serving entertainment content seems like a foregone conclusion to folks like me, but it represents a significant transition away from traditional TV for a large majority of Americans (even those with access to high speed internet). Netflix (and the competition) is working feverishly to reduce the pain of this change by offering it’s streaming service on a wide range devices that are already plugged into their customers’ TV screens. Like all good Product Managers, the folks at Netflix know that introducing an innovation that is dependent on a change in customer behavior requires a keen understanding of current behaviors. There are no guarantees of success, but fitting seamlessly into the current ecosystem and eliminating the switching costs will definitely help the odds.

     

  • Customer satisfaction is your best defense – Netflix has been astute about intimately understanding customers’ interactions with the service to drive greater satisfaction. In fact, they even spent a million dollars to crowdsource a better recommendation engine to improve the customer experience. This focus on customer satisfaction will serve Netflix well, especially as their power as a content clearinghouse spurs competitive reactions from content creators. Netflix’s strongest defense will remain it’s ability to offer a service that customers prefer. Competitive pressures are a constant for companies and Product Managers and it’s critical to remember that customer satisfaction (more so than feature wins, pricing or promotions) is ultimately the strongest defense.

     

Netflix is charting a bold course to redefine not only it’s own business but also the larger entertainment industry. I cannot predict today if Netflix will emerge on top but I can tell that it won’t be for the lack of a sound strategy.


Companies

Subaru – Love on four wheels


At the outset, I should admit that I live in the Pacific Northwest and that may be one of the reasons I’m taken by this buy, use, love story. I love our Subaru (technically it’s my wife’s car so I don’t use it as much as I’d like to). When we bought it, it was the lightest, most fuel efficient (for an AWD), tightest-turning little SUV we could find. Even though all cars eventually lose their new smell and sheen, we keep recommending the Subaru to our friends and family.

There is no doubt that Subarus shine in parts of the country that have harsh winters or tons of outdoor enthusiasts. Lately, however, it seems like its core group of self-appointed brand advocates have slowly started turning the rest of the country on to Subaru vehicles. In 2009, the year we bought ours, Subaru saw remarkable success while the rest of the industry was being bailed out or bought up. In fact, they’ve kept up the blistering pace of growth throughout the Great Recession.

It's what makes a Subaru, a Subaru

All car companies have hits and misses and Subaru is no exception; it is also much smaller than some other companies so growth rates alone might not be the correct measure of its success. What is clear, however, is the loyalty of Subaru owners… everyone we know who owns one, loves their Subaru. As you might expect, the Product Manager in me was compelled to investigate the strategies that fuel this (sometimes unhealthy) devotion.

Create a unique identity and stay true to it
Subarus are quirky, all the way from their exterior design and mechanical underpinnings to the way they are produced and marketed. This quirkiness, which aligns the company’s values with those of its customers, makes Subaru’s story and value proposition authentic and sticky. The ubiquitous all-wheel-drive (safety), the smooth, fuel sipping boxer engines (fuel efficiency) and the industry-leading zero-landfill auto plant (eco-consciousness) all make the company’s identity inseparable from the values held dearly by its customers. As a Product Manager, it seems obvious that one would build a marketable value proposition around the customers’ deeply held values (not just near-term needs and desires) but Subaru’s example highlights how uncommon it is to create and maintain this commitment to authenticity.

Focus on customer experience and outcomes
According to their CMO, Subaru recognizes that its core customers (I’m paraphrasing) are the types of people who buy experiences instead of things. These are well-heeled, educated and financially savvy customers who buy Subarus to fulfill their desire to beat the elements, burn rubber (in the case of the WRX drivers) or explore the wild outdoors. Consequently, Subaru’s product strategy focuses on enabling these experiences instead of outdoing their competition with muscle, chrome and technology. All good Product Managers realize that customers care more about dead (or trapped) mice than a better mousetrap… it’s essential to focus on the experience and the outcome not just the product.

Turn sales into relationships
The key reason for its recession-proof financial performance is Subaru’s ability to inspire devoted loyalty and return business amongst its customers. Even though typical Subaru customers are frugal enough to keep their cars for a long time, they keep coming back to buy more Subarus (apparently on average every 7.3 years). The company invests heavily in these relationships by making product improvements to address customer feedback and training dealership personnel to excel at everyday service. They’ve even started a program to let customers adorn their cars with badges to profess their love (free marketing, anyone?). Even with the possibility of occasional harsh criticism, creating a true relationship and dialog with customers is the most valuable and gratifying investment a company and a Product Manager can make.

As I read this post, I keep wondering if I’m describing a company’s product strategy or the secrets to individual success. Creating an authentic identity, focusing on positive outcomes and building rich relationships can definitely make us the best versions of ourselves; as it turns out, these principles also help make the best products.

Companies

Method Home – Going for a clean sweep


If I were to make a list of exciting market segments that beckon innovators, the home cleaning supplies segment would probably be at the bottom of the list. For most of the late 20th century, this segment was a yawn-generating, environmentally tone-deaf, behemoth-dominated doldrums. Enter the intrepid folks at Method Home – who decided that this market was ripe for disruption. Thanks to them I have a sparkling home and an awesome buy, use, love story to tell.

Mandarin Mango by sciondriver

Method products stare back at me in all our bathrooms and our kitchen. They’re easy on the eyes so we leave them out in plain sight instead of hiding them in cupboards. There’s even a Method tote bag lying around that’s a conspicuous reminder that my wife and I are in plastic bag rehab. It’s safe to say that Method products have taken over the households of many people we know.

To me, Method is a great example of a company built on an opportunity that could not have been quantified or justified before the fact. During the early days of Method, the simplest SWOT analysis would have made it clear that taking on Clorox, P&G and SC Johnson is nothing short of suicidal. Surely, I thought, there are some great Product Management lessons lurking in this story…. here’s what I learned.

Fortune favors the differentiated
Method disrupted a well-consolidated market segment and stirred up some really powerful giants. This, predictably, provoked a response like the GreenWorks product line and litigation threats from Clorox. In this hyper-competitive environment, Method survives and thrives because they differentiate along many independent axes with superior fragrances, earth-friendly formulations and chic bottle designs. As Product Managers, we’re always seeking a defensible competitive position. The Method example reiterates the need to strive for multiple differentiators that independently make the products more appealing to the target customers. Individual differentiators might be easy to replicate (setting a new normal in the market) but it’s the combination of independent differentiators that buys the disruptor enough time to establish a foothold.

You don’t have to do it all
Method’s large competitors employ scores more people than Method and own the entire value chain from the research labs to the bottling plants and distribution. However, Method manages to stay ahead of these competitors because of it’s ability to stay nimble by subcontracting work to many different vendors. This gives them the chance to iterate often and react quickly when a product fails to generate demand. Many Product Managers juggle build or partner options all the time and Method’s example points to the benefits of delegating some effort to trusted partners. Of course, this needs to be done carefully making sure that the competencies that create perceptible value to the customers are kept in-house and that partners have shared principles.

Balance innovation with practicality
The aesthetic and functional genius behind Method’s product packaging is a major draw for their customers. However, they’ve been more than willing to roll back design innovations to improve customer experience. For example, they discontinued an ingenious yet unloved self-dosing cap for laundry detergent because customers preferred to control how much detergent they used with every load (the detergent itself was a big hit). Creating the right balance of functional and cool is an unending challenge for all Product Managers. It doesn’t hurt to pay close attention to customer behavior and to adapt without regret when new information presents itself.

Method’s belief that everyday people would pay a premium for high-quality, earth-friendly products in eye-catching packaging is an important reminder about taking risks and learning quickly. We can’t control the vagaries of luck but, hopefully, we can hold our nerve long enough to make educated bets.

Companies

Kindle – Firing up a revolution


Transforming an industry that has been incrementally improving on a business model and technology for over 500 years is not for the faint of heart. Although it might still be too early to compare the impact of ebooks to that of the mechanical printing press (invented by Gutenberg in 1440), the Amazon Kindle seems up to the task.

I ordered my 2nd generation Kindle as soon as it was released in early 2009 (yup, I paid the premium) and it has fundamentally changed how I read. I read a lot more now than I used to, I never lose my page, I always have a dictionary at hand, I can carry a whole slew of books on every vacation, I beam with pride (at least I used to, back in 2009) when people ask to take a closer look and I try to sell a Kindle to everyone who cares to listen. Yup, you guessed it… the Amazon Kindle far exceeds my buy, use, love threshold.

Read More Books by Brother O'Mara

It was pretty obvious to me that there are some key lessons in the Kindle saga for Product Managers like me. And, I’m glad to report that I was not disappointed… here’s what I found.

Going the distance matters more than being first out of the gate
With all the profiles that I’ve written, it’s become clear that creating great products and services is a marathon, not a sprint. It doesn’t really matter who gets out of the gate first; the winners are prepared to go the distance and this is truly the case for the Kindle. The Sony Reader hit the shelves at Borders in 2006, well before the first Kindle was released. However, today the Kindle leads the ebook market because Amazon optimized the whole customer experience. Amazon went beyond the device and obsessed about the size of the catalog, the buying experience, the ability to share content across different devices, etc. All good Product Managers want to take the long view, but we all know that short term pressures are real and endless. When in doubt, redouble your focus on the entire customer experience and barter speed for stamina.

Identify and beat the real competition
Regardless of all the iPad talk, the primary competition for ebooks today is… you guessed it… good old paper (this will likely change in the future with greater adoption of ebooks). And, today the Kindle does an exceptional job of matching or beating a paper book when it comes to the buying, carrying and reading experience (and lately they’ve been working on the sharing bit as well). As Jeff Bezos put it during an interview with Charlie Rose, “You think Hemingway is going to pop more in color?” Understanding the target market and customer behavior well enough to accurately identify the real competition is key for all Product Managers. No amount of competitive feature/functionality wins can make up for confusion about the target market and customer needs.

Sometimes innovation demands brand new skills
It’s pretty normal to think… “but, Amazon is an e-commerce company not a hardware company.” The Kindle is a great example of a company seeking to understand their customers’ needs and then learning new skills to meet those needs. Amazon started up a subsidiary called Lab126 to build the hardware expertise it needed and based the group in the best place on earth to find the talent, Apple country – Cupertino, CA. For businesses and Product Managers, it’s pretty easy to pigeonhole oneself and one’s product into a well-defined category. However, innovation often happens at the fringes of existing domains. If success lies in creating a new domain or radically redefining an existing one, then obviously being a customer and market expert (by being humble and observant) is more critical than being a domain expert.

The ebook market is relatively new and very dynamic so it is likely that, a couple of years from now, I’ll look back at this post and wonder what I was thinking. For now, I love my Kindle and the more I read on it, the more I am inspired to listen to my customers, push the accepted boundaries and focus on the entire customer experience.

People

Agatha Christie – Murder, She Sold – Two Billion and Counting


Over the past week, I have been mulling over a post by Scott Anthony that in innovation, there are no points for difficulty, it’s all about results. So I went looking for other lines of work where it’s all about success and not effort. One profession that came to mind, is writing; it does not matter how many books an author writes, what matters is that they come up with a bestseller every once in a while.

Agatha Christie's The Mousetrap by http://www.flickr.com/photos/aroberts

So I looked at great authors in history and found one that has sold over 2 billion copies in over 45 languages. Her success, in sheer numbers of books sold, is beaten only by the Bible and Shakespeare. I’m talking about Agatha Christie, ‘The Queen of Crime’, the creator of Hercule Poirot and Miss Marple.

Agatha Christie’s products, her 80 novels and several plays, are prime examples of the buy, use, love ethos. So, as always, I had to investigate her life and work to see if there were lessons for Product Managers like me who are striving to create their own bestsellers.

  1. Play to a big audience: Over the years, Agatha Christie’s style of writing has come under criticism for being… sub-literary. However, I believe it is this very style that underpins Christie’s wide appeal, wrapping universal themes (murder and intrigue) in heart-stopping plot twists using simple, approachable language.  Her commitment to her style and her subsequent commercial success is an important example for Product Managers. All PMs seek lucrative problems (many potential paying customers) to solve but, we can all recall products that amazed the experts and underwhelmed the actual customers. To emulate Agatha Christie’s success, PMs must ignore the ivory tower long enough to seek, find and understand the largest possible market. And, with market success, the ivory tower does eventually come around.
  2. The solution must be innovative not the problem: Agatha Christie’s novels were formulaic whodunits centered around a murder in parochial settings; typical for the Golden Age of Detective Fiction. The basic structure of the stories was pretty consistent, however, she delivered each story with an uncanny finesse. Christie’s ability to create magic while staying within the bounds of a genre hold great insights for a Product Manager. Most PMs, who spend enough time listening to customers without prejudice (focusing on the ‘whys’ not the ‘whats’), stumble upon a familiar set of problems and needs. The challenge then, is to create a solution that meets these needs in new and innovative ways without being too alien and unfamiliar to the customer. Let’s not conjure up innovative solutions to innovative (read irrelevant) problems that never get off the ground.
  3. Creation is a process of discovery: Writing books seems like abstract, creative work that can only be done by uniquely gifted individuals who are wellsprings for fully-formed masterpieces. At least in Agatha Christie’s case, this is anything but true; the recent discovery of her secret notebooks reveals her non-linear process of writing. She used her deep understanding of the readers’ state of mind to iteratively refine her work till it was ready to publish. In the technology and software world, there is similar mythology that some people just ‘get it’ and can create market-dominating products through the power of sheer genius. Studying Christie’s process makes it pretty clear that, in most situations, the winning solution lies amidst a myriad sub-optimal options. The only way to discover the winning solution is having many possible approaches and then weeding through them with an intimate understanding of the problem, the customers and the market environment.

I am intrigued by the parallels between the world of writing and the world of innovation; including the low success rates in both fields. Agatha Christie’s life and work reiterates a recent post by Vijay Govindarajan, “Innovation is not creativity” – innovation is creativity multiplied by execution. Her success is testament to her ability to consistently execute; here’s hoping we can bring that execution excellence to our work.

Companies

Costco – Making card carrying fanatics, one deal at a time


I never thought I would need a 4-pack of shave foam and a 6-pack of toothpaste. That was until this past August, when some friends made one of the best breakfasts I have ever eaten while camping. Our discussion about this culinary delight quickly turned into an earnest testimonial from them about the food at Costco. Needless to say, my wife and I signed up for a membership the next weekend and I am delighted to report that we’re now happy Costco ambassadors. To paraphrase the writers of Modern Family, “It’s big, it’s not fancy and it dared us to not like it.”

To some, Costco will always be a beacon of conspicuous consumerism. However, I believe that Costco has built it’s reputation by offering something much simpler than vulgar consumerism… an honest deal – great quality products at unbeatable prices. And, Costco does this while facing fierce competition from companies that are several times its size.

As always, the buy, use, love sleuth in me had to investigate to see if Costco’s ways hold any lessons for Product Managers like me. My search was not in vain, here’s what I found…

  1. Better instead of more: The number of products carried by a typical Costco warehouse(about 4000 SKUs) is fraction of the number of products carried by competitors. This makes it easier for Costco to reinforce the value proposition and attract discerning customers with deep pockets. I bet all Product Managers have felt the need to do more – more features, more options, more tiers. For some reason, it always seems like it’s easier to sell when one has more, but guess what, doing better is almost always stickier and it drives return business and word of mouth (free marketing!). It also makes it easier for PMs, marketing and sales to succinctly explain what your product and business does and stands for.
  2. Build a community of customers: Everyone who shops at Costco, including me, is a card carrying member. Expecting shoppers to pay(billions of dollars annually) for the privilege to spend more money seems laughable, unless your brand generates massive goodwill, trust and word of mouth like Costco’s. And once in the club, members stay loyal. Most software and web Product Managers can’t expect their customers to carry membership cards (or maybe they can) but there is ample evidence that communities of passionate users can drive massive adoption and success. Spend the energy to make it easier for customers to connect with other customers and with you. If they love your product, there will be a constant stream of success stories to drive more business and if they hate your product, you’ll learn earlier to change course.
  3. Nobody wins unless everybody wins: Costco is constantly criticised by Wall Street for being too generous to their employees. At the same time, Wall Street is bullish enough about Costco shares to drive up its Price/Earnings ratio(~23 at the time of this writing) much higher than rival Wal-mart’s(~13). Not surprisingly, Costco’s ability to retain and motivate its workforce is a primary driver of growth and success. As Product Managers, we interact with a large and diverse set of people in our organizations. Being forthright, respectful and attentive to the various interests on the team is essential to build a common vision and to deliver exceptional value quickly, efficiently and joyfully.

I started writing this series with a belief that there are some universally applicable ideas, cultures and personality traits that drive outstanding product success. My endeavor is leading me in many different directions(domains, companies) but I feel like everything I learn is somehow vaguely familiar. Let me know if these ideas align with your own experience as a PM.