If you know where you want to go, the next logical question is: how do I get there? When businesses decide to improve one of their key metrics, such as revenue or customer retention, they ask themselves the same question.
Could a digital product roadmap be the answer? More importantly, is it even possible to use a digital product to achieve a specific business outcome? I sat down with Chris Pegg, Director of Business Analysis at GoKart Labs, to find out.
Interview with Chris Pegg
What business outcomes are typically associated with a digital product?
Pegg: Business outcomes from the viewpoint of internal stakeholders are commonly identified in high level impact areas, like additional revenue, adding customers, decreasing operating costs, entering a growing market, or gracefully retiring from a shrinking market.
Businesses in any category will value one or more of those outcomes. The problem is that many stakeholders would not consider a confluence of positive impacts on customer experience to be a business outcome.
This creates a difficult conversation because at GoKart Labs, we start with the customer and work backward. The idea is to move toward the market instead of pulling the market toward us.
This is what happens when you offer the customer emotional engagement through a digital product. They’ll enjoy using it and give the business a chance to capitalize on that engagement.
Ward: You’re saying that digital products aren’t an immediate path to business outcomes. If that’s the case, why do companies go after digital products in the first place?
Pegg: They’re compelled to do it. As Marc Andreessen puts it, “software is eating the world.”
The reason that companies with little industry experience can succeed in well-established industries is that they approach it with the mentality of a software company, coupled with a strong orientation to customer needs. They’re able to tap into what customers really want, which is usually less stuff and more experiences. This helps them focus on customers instead of thinking about what category their company fits into and how they can compete using a traditional model.
Why don’t products achieve the desired business outcome?
Pegg: Because they start there. The high-level business impacts are trailing indicators. They’re not reverse engineering their way towards achieving those trailing indicators.
On a former product team, we observed that our customer retention was starting to slip quarter over quarter and our revenue was following this trend, as well. But we also observed data that suggested if we were able to retain a customer through their first three quarters, they were significantly more likely to become and remain a long-term customer.
Interviews with new customers revealed that they were very excited about our service, but wanted to feel a stronger connection with other customers. And after a deeper dive into data for trends around our long-term customers’ behavior, we saw a pattern: new customers who participated in the community forums 3 or more times in their first month were nearly 90% more likely to remain a customer after the first 3 critical quarters. So the hypothesis emerged: we believe that actively encouraging new customers to participate in community forums will increase quarterly retention.
In this example, the product team didn’t have to invent and deliver a new feature from the roadmap. We already had the solution to the business problem, we just needed to improve our customers’ awareness of the feature. A feature-over-time roadmap approach doesn’t give a team enough flexibility to find solutions in this manner.
Ward: If your starting point is discovery and not the road to revenue, then how do you forecast the impact?
Pegg: There’s a maturity lens that comes into play here. Not every digital product will be directly connected to revenue. There’s value other than revenue that businesses can get from a product. Sometimes it makes strategic business sense to pursue a new market or go up against a competitor even if the revenue impact isn’t immediately obvious.
You can also think of your digital products in terms of stopping the bleeding (business losses) to be healthy in the future. Figuring out how to operationalize business behavior around user behavior is the hard part. Because in many cases the operational mindset of the core business model can be at odds with what’s required to support a new digital product.
What is a digital product roadmap?
Pegg: This is one of my least favorite concepts in digital product, because there are so many forces that reduce a strong strategic intent down to a laundry list of features over a very long period of time.
This would be like treating a road atlas published many years ago as an accurate source of truth today. Some of it is probably the same, but new roads have been developed, and old roads have been retired or rerouted.
When creating a “roadmap” for a digital product the keyword is agility. Let’s set a strategy that defines points a and z, but let’s assume that points b-y are fairly unknown. Good or bad things could happen in between. And let’s commit to learning what we don’t know, so that we can base strategic direction on the insights gained along the way. We wouldn’t ignore a ‘Road Closed 5 Miles Ahead’ sign on the freeway, and the software medium affords us the tools and methods to achieve real-time learnings and insights. A 30-year-old road atlas just isn’t the same.
Ward: If a road atlas is a bad analogy, then what would you recommend instead?
Pegg: I’m a fan of using a Now>Next>Future mindset. Here’s how it breaks down.
Now. What is happening right now? These are your real-time status updates. For example, right now we’re 20% through a planned release and we just solved an obstruction.
Next. Once we finish this release and deliver this value to our customers, what did we recently learn is the next most important thing we should be doing?
Future. This is almost everything else in software development. Human beings have a tendency to value the comfort that comes with absolute clarity so much that we fabricate it even when it’s not there. The best product teams value discovery as much as delivery, and know when to focus on learning and when to focus on shipping code.
Treating the Future as a list of experiments can help to gain confidence that what you want to achieve is possible. Think of it like planting carrots in a small plot to make sure the soil is healthy before you plow 500 acres.
A new way to think about digital product roadmaps and business outcomes
Thinking about a road atlas again, you can’t get from point A to Z without first passing through everything in between. The same goes when creating a digital product.
A better mindset for product development is to focus on leading indicators. These can be dismissed by leaders as not being business results. But, we need to remember that leading indicators will create the trailing indicators that leaders care about. In other words, to get to Z or your business outcome, you need to make decisions based on customer empathy. This way of acting doesn’t always produce revenue, but it will get your company to where it wants to be.
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